Money: The Unauthorised Biography

Economists have long been dangerously wrong about the nature of money, says Martin. In Money: The Unauthorised Biography, he argues that money is not, in essence, currency, used as a “means of exchange”. It is, on the contrary, a unit of value, a system of accounts and transferable credit. Indeed, “whilst all money is credit, not all credit is money: it is the possibility of transfer that makes the difference”.

Felix Martin, a World Bank economist, opens with a quote from A. H. Quiggan: “Everyone, except an economist, knows what ‘money’ means.” After 260 pages of heavy-going argument, Martin concludes that money is: “not a thing but a social technology – a set of ideas and practices for organising society. To be precise (!) … [money] is a concept of universally applicable economic value.”

The accepted means of payment, as his many examples illustrate, can be physical, or abstract (or virtual). Economic value is a social construct, fixed by human beliefs and desires; money is essentially a social institution rather than an actual object.

Martin claims to have identified an unconventional and more relevant understanding of what money is. He goes as far as to suggest that a flawed definition of money, with intellectual roots in Locke and even Aristotle, explains the economics professions’ failure to foresee the financial crisis.

This is a thoroughly absorbing account of the evolution of the concept of money, placing the central question – essentially an economic one – within a historical, philosophical, political and social framework that hugely adds to the pleasure of the reading experience. From the primitive tribe using an enormous thick stone wheel lying at the bottom of the Pacific ocean as a form of money to the credits used by modern-day babysitting circles, taking in along its way profligate Dauphins, sixteenth century vampire squids, rituals of sacrificial feasts in Ancient Greece and the credit crisis in Ancient Rome (and its eerie resonance with our own modern-day equivalent), Martin’s examples and analogies both entertain and illuminate his thesis, identifying the common threads in economic crises throughout history that are highly pertinent to our contemporary financial tribulations, and ultimately showing a possible route out of them.

He gives a spirited explanation of why the recent crash happened, and puts forward some challenging ideas about how democratic politics must tame the banks and retake control over the nature of money.

Some of his proposals, involving debt-waivers and deliberate high inflation, seem to have obvious drawbacks in terms of perverse consequences for future behaviour. However, I don’t doubt that Martin has answers to each such objections.

Money: The Unauthorised Biography
by Felix Martin
3.74 · Rating details · 514 Ratings · 92 Reviews
What is money, and how does it work?

The conventional answer is that people once used sugar in the West Indies, tobacco in Virginia, and dried cod in Newfoundland, and that today’s financial universe evolved from barter.

Unfortunately, there is a problem with this story. It’s wrong. And not just wrong, but dangerous.