Dear Fil,

The idea that Academia or any business should be run *solely* for the purpose of paying employees and growing the business doesn’t make sense. These are two purposes for any business. There are other legitimate purposes. Everyone involved in a company has a right to benefit from what they put into the company — investors as well as employees. Profit compensates for the risk of investment. If there were no profit, the best place to keep money would be a safe or a bank. The shareholders of Academia would not have invested millions of dollars *solely* for the purpose of paying employees and growing the business. Neither would you.

Let’s get serious. Have *you* told your pension fund to invest *your* money in businesses that exist *solely* to pay employees and grow the business? Such an investment can yield no returns. Your pension would be locked in shares that can't support you when you retire. There is a reasonable chance that you’d even lose the money, since many companies shrink and grow less valuable. Some pension funds would shrink rather than grow, and others would not keep up with inflation. 

In a thread involving economic arguments, statements require careful reflection. You can't shrug off a statement by saying, “I’m weird.” A research list deserves better. 

In reply, I propose a serious look at money. Money is a liquid medium of exchange. It allowed human beings to move out of the barter economy by exchanging the *value* of what their labor could produce for goods and services produced by other people who sell those goods and services for the value of *their* labor. Money brought about many useful innovations. Without money, most human beings would be obliged to do all of our own work. The industrial revolution would have been impossible, so we would most likely have been working on farms or fishing. We’d have to make our own tools and occasionally trade a sheep or chicken at a local market using barter exchange for something from another farm. There would be a tiny industrial economy that introduced hand manufactured goods. This worked, more or less, when 97% of the human race worked in the primary economy. It was not the best way to live, even then. Nobel Laureate and economist James Buchanan started life as a farm boy. He recognised the that life on the farm leaves something to be desired — he titled his autobiography Better than Plowing. 

The only advantage I can imagine to a world without money is that it would likely be a world without anthropogenic climate change. It would also be a world where life is far shorter and less pleasant for all but a few members of the upper class and the nobility. 

The invention of money was a social technology that played a significant role in freeing a great deal of the human race for other purposes than working in the primary economy. There are many other factors involved, to be sure, but money, banking, and finance were key enablers of the industrial revolutions that ushered in the modern world. 

Money is an abstract form of information established by convention to represent the flow of energy. The energy begins as physical labor or material goods. The medium of exchange is abstracted and distilled by representational conventions. These conventions make it easy for farmers, physicians, computer programmers, publishers — and engineering professors — to exchange goods and services. Money is a message that makes the exchange of value possible by storing the information value of labor or of physical objects. The distilled and abstract energy in money becomes physical again when it is applied to the world of services and goods.

Until relatively recently, money was represented by physical artefacts — sea shells or stones, gold bars or bank notes. Even so, money has never been truly physical. Today’s information technology makes it obvious that most of the world’s money is represented by the flow of information among financial institutions such as banks, credit card companies, and national treasuries. It is less clear that this has *always* been the case. Different kinds of  tokens represented money — value storage units — in the days before digital technology. 

By permitting the ready storage and transfer of value, money also creates value. It does so by expanding markets. Long distance trade began long ago. Today, it extends farther than ever. Money allows human beings to exchange goods and services over wide territories without coming together in a physical space to exchange goods or services. A vintner in Chile can sell wine to the Swedish Systembolaget. The Swedes pay with money. The vintner’s family can then buy a sweater from Canada made with wool from New Zealand sheep and cheese from France. The sheep farmer in New Zealand can purchase a car manufactured in Sweden for a Chinese-owned company. The French dairy farmer can buy bread from the local baker or take a trip to London to see Les Miz and drink Old Speckled Hen. You get the idea. There are good ways to manage an economy and bad ways — money plays a role in all of them, good and bad. 

To say that money is “one of the worst ideas humans have ever had” ignores the real benefits that money brings to humanity. It also ignores the reality of social and technological change made possible over the centuries since different forms of money first came into use. Even such innovations as accounting and banking have created enormous good. The problems associated with money are not a result of the useful technology that allows us to store the representation of value. They are a result of the way that some human behave with respect to value.

While banking and finance are social goods, not all bankers or financiers are good people. A reporter once asked renowned criminal Willie Sutton why he robbed banks. Sutton answered, “Because that’s where the money is.” Greedy people are attracted to banking and finance because that’s where the money is. Some folks have how to rob people by working at a bank or a hedge fund rather than to rob them by breaking into bank. This is not because money is bad. It is because money is a source of power. Predatory finance is a way of life in a financialised world: money is the medium, not the cause. 

In the days before the money economy, predators used swords and spears to achieve the same goals. Rather than bankrupting economies and creating debt slaves, they conquered by physical force what they wanted to own and control. There was little need for debt slaves in a world where predators captured and owned human chattel slaves. For that matter, there was little need for slaves in kingdoms and empires where great lords controlled lesser lords, and lesser lords controlled everything in their fiefdoms. There was no need to own slaves when powerful men with swords could force tenant farmers to work the land simply to feed their families. In some places, they did so peril of being evicted should they fail to farm and pay the required goods. In other places, those who left the land could be imprisoned or killed. The story of humankind is not a narrative of the good life interrupted by the brutal use of money. History is a sad and brutal story of the powerful and the weak. Money has actually had a role in reducing the brutality of life in an imperfect world. 

Woody Guthrie wrote a song about the outlaw Pretty Boy Floyd. One verse reads:

“... as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.”
  
Guthrie was criticising bankers — but the verse reminds us that the world was once ruled by men who took what they wanted with swords, and later with guns.

The key distinction here is the distinction between *money* and the *love of money*. There are many ways to carry out the evil that human beings carry out with money. It is not money itself that is evil, but the power and control over other human beings that one can achieve through the liquid medium of money. The best known expression of this distinction appears in 1 Timothy 6:10 — “For the love of money is a root of all kinds of evil.” The problem is not money, but greed.

To explain why money is useful would require a long discussion of basic economics and economic history. That isn’t necessarily beyond the scope of this thread, but it would take more time than I can give it today.

Money is a useful invention. Most tools have both creative and destructive capacity. The behaviour of those who use tools gives rise to good or evil.  

Yours,

Ken

Ken Friedman, PhD, DSc (hc), FDRS | Editor-in-Chief | 设计 She Ji. The Journal of Design, Economics, and Innovation | Published by Tongji University in Cooperation with Elsevier | URL: http://www.journals.elsevier.com/she-ji-the-journal-of-design-economics-and-innovation/

Chair Professor of Design Innovation Studies | College of Design and Innovation | Tongji University | Shanghai, China ||| University Distinguished Professor | Centre for Design Innovation | Swinburne University of Technology | Melbourne, Australia

—

Fil Salustri wrote:

—snip—

On 27 January 2016 at 18:06, Ken Friedman <[log in to unmask]>
wrote:

> When it comes to Fil’s views, I disagree. When you say that Academia
> should operate as a Yunus-style social business, you are indeed saying that
> they should not make money.

Well, yes & no. A social business "makes" money, but they use that money
only to pay employees and maintain and grow the business.
And that's *exactly* how I believe *every* company should be run, because I
think "money" is one of the worst ideas humans have ever had.
...but then again, I'm weird.

And that's also well beyond the scope of this thread.

More on topic: I would argue that to preserve the integrity of academe, we
should stay as far as possible from circumstances where money may sway
decisions against evidence and rational thought. As such, I would suggest
that academe as a microcosm should maintain itself wherever possible in the
most financially... neutral? way possible.

—snip—


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