Money is an item accepted as a payment for goods, services and repayments of debts. But what exactly is money, and is it real? After all, you can put a coin, check or dollar bill in your hand, and touch it. Credit cards on the other hand have monetary value and we can’t exactly see it, but we know it’s there. Behind it all, money is, in some way, real. Whether it’s ours or we’re borrowing it.
Is money a figment of our imagination? In this episode, Samantha hopes to answer this question and more by speaking to Jacob Goldstein. Jacob is a journalist who spent time at the WSJ. He then went on to host the popular Planet Money podcast by NPR. He is the Author of a Book called Money: The True Story of a Made-Up Thing which was published in September 2020.
A surprising idea: Money isn’t real
As an item that is needed for survival in most parts of the world, Jacob said in his case, he takes money as a given, as many people do. “I just assumed that it existed in the world, right? It kind of does. You go about your life and you get money, and you spend money and you worry that you don’t have enough money.” People do not always think about the underlying mechanisms behind money and to the extent that you do – it just seems like a fact in the world, like water or gravity.
Money seems like it’s just a part of nature, but for Jacob, he expressed that this is not the case – money is a thing that people make up once and people have been making up in an ongoing way. Reinventing as technology has changed, as society has changed, as power has changed. While it looks different depending on which part of the world you live in, money has been reinvented again and again, though is used similarly throughout such as for shopping and making payments.
Profound crises lead to dramatic regime changes
Though money was created by man, it makes you wonder if we could ever stop using or believing in it as a society. Jacob expressed that an analogy to consider when talking about this is law. “There are laws, there’s enforcement of laws. Law doesn’t exist in the natural world.” Humans create laws, which are enforced to be followed by individuals in a society more or less. There are times when there are revolutions, there are times when power within regime changes, and laws change. With money, there are somewhat analogous things that happen. So, it seems quite hard to imagine a world without money, the way we cannot see a world without laws.
A world without money Jacob said, would be profoundly poor relative to our world. If people stopped using money that would be a catastrophe. Though there are times when the monetary system changes, Jacob expressed that the most recent big dramatic shift came during the Great Depression, when one country after another essentially abandoned the gold standard. In some way, you can say there was a gold standard until the 1970s, though the action came in the 1930s. Today, Jacob thinks more than ever, people are attached to our monetary regime. The gold standard was a problem during the depression, and going off the gold standard caused a profound monetary shift.
David Chaum, Dossier Societies and why we don’t really care about privacy
Even in a digital world, cash is a non-trackable and essentially, private form of payment, and the amount of cash in the world keeps increasing. Jacob believes that now, there is more paper money in the world than ever before. “It’s the most anonymous transaction you can imagine.”
According to Jacob, David Chaum is sort of the intellectual “godfather of crypto,” a generation or two before Satoshi. Chaum was a cryptographer, and in the 1980s, he wrote a paper where he talked about how we were moving into what he called a Dossier Society. He foresaw that cash was going to be replaced by digital transactions and he believed that digital transactions could be tracked in a way that cash could not. So, this idea of the Dossier Society is what some people now call surveillance capitalism.
This idea is what he was looking for in the 1980s, saying, “In the future, everything’s going to be digital,” which means, everything can be tracked. Jacob said Chaum wanted to take the anonymity of paper money and bring it to the digital era, and he came up with this very complex, clever way to do it.
Essentially there would be a bank and there was sort of a complicated technological idea he had that would let the bank verify to a merchant that a customer had enough money to buy something digitally, but the bank wouldn’t know anything about what the customer was buying. This way, it’s not disintermediated and it’s not peer-to-peer. There’s an intermediary, but it is anonymous. At first, this was his big idea. He was an academic, and a professor at Berkeley, and later quit teaching to start a company. It was called DigiCash, and was written up in the New York Times and Wired. Interestingly, his business did not stir up too much interest, Jacob believes partly because the main selling point was ‘privacy.’ A big observation Jacob has is that in the 21st century, people may say they want privacy, but billions of people use Facebook and Instagram, indicating they may not care too much about their privacy. The same goes for digital currency, because fewer people use cash as opposed to credit cards which are more trackable, though convenient.
While money is a man-made item, accepted as a payment for goods, services and repayments of debts, some debate whether or not money at its core, is real. After all, you can put a coin, check or dollar bill in your hand, and touch it. Credit cards on the other hand have monetary value and we can’t exactly see it, but we know it’s there. Behind it all, money is in some way, real.
This episode covered how for Jacob, money at its core purpose is crucial to survival in most parts of the world. A world without money Jacob said, would be profoundly poor relative to our world. If people stopped using money that would be a catastrophe.
Next time we’ll speak to Jacob about how our transactions are being tracked — either by the government, demanding our banks share our data with them, — or by companies, in so-called surveillance capitalism. Perhaps crypto can help us in that? We’ll also touch on whether crypto is another ‘made-up thing’ for us to participate on a more even playing field. Or is its transparency going to be the future?
Find out more about Jacob Goldstein here.
Follow Jacob on Twitter here.