( Part 1 in a series on articulating the ontology of money, from first principles. )
Money and currency are used synonymously below.
Axiom 1 : a category of fungible units can function as a symbol of value ... the category can be called a currency ; currencies are subject to property rights
Axiom 2 : a market for a currency, is any context in which property rights over a unit of currency may be consensually exchanged for property rights over other entities ; for simplicity, when we mean that property rights are exchanged, we simply say currency is exchanged
Axiom 3 : the value of a currency unit, in a market, is whatever the market is willing to exchange for that unit ... the value can be called an exchange rate
... In a market, at different times, a currency may have different values in the same denominator. E.g. today 1 Xcoin may be exchanged for 1 apple, tomorrow 1 Xcoin may be exchanged for 2 apples
... in a market, at the same time, a currency may have different incommensurate values based on different denominators. E.g. today 1 Xcoin may be exchanged for 1 apple, or 1 orange, whereas there may be no other way to compare apples and oranges ; other ways to compare apples and oranges would be deemed other markets ; markets may be in disequilibrium at a given time, allowing for arbitrage across times
Therefore : a currency has value at any time, where anyone is ready, able, and willing to create a market for that currency, by trading it for something else.
---
Moreover, it may be hypothesised that a currency has value in the future. For example, we may guess today that a US dollar has value tomorrow, meaning that we establish a falsifiable hypothesis that ( tomorrow there will be a minimal market for 1 USD, meaning that someone will be ready, able and willing to give us something for 1 USD ). We may further nuance the hypothesis by saying what will be traded, and we may also detail the legal environment about that market.
In this way, it is demonstrated that the legality of a currency market is a secondary, non-essential property of money. Legal money is simply money used in an environment where no one asserts regulatory breaches against that use. Legal and illegal money are both special cases of money in general.
---
Furthermore, it may be thus shown that the common understanding that money has value because some government has military force to enforce a legal environemnt is a secondary, non-essential property of money. Regardless of the existence of an enforced set of rules about the market, as soon as anyone is willing to trade money for something else, the money becomes valuable.
---
Part 2, should address the ontology of 'money supply'
No comments :
Post a Comment