The shadow of value: money theory and the roots of economic anomie

In the West, our ambiguity towards money is expressed deeply in religion, politics and art. We have been beholden to the institutions that provide it as a necessity of life, but desired liberation from the corrupting influence of our dependence on our authentic nature. Through money we have both experienced the possibility of living pleasurably, and recognised its power to lead us astray. That ambiguity, and a measure of hypocrisy, is not merely historic, but pervades our society today: while we expect a decent standard of living, there is anger at gross inequalities of wealth, particularly in developing countries, although we may be ambivalent about their economic advancement; closer to home, our desire for personal wealth is often coupled with disdain for the foibles and vulgarity of the rich. This Janus-like relationship with money seems implicit in the nature of money itself. It may not be resolved, but this ambiguity might be explained and mitigated to some degree by understanding the roots of our economic anomie in the philosophical intertwining of the existential and monetary notions of value.

As with much thinking on any issue, the ancient Greeks thought about the problematic nature of money first, or at least mythologised it in this case, in the story of king Midas. The existence of money as a metal coinage was a relatively new invention, but already both its properties of great convenience and the temptation to excessive accumulation were appreciated. Midas desired that everything he touched be turned to gold and the gods granted him his wish, literally. Realising that he could no longer eat or touch those he loved, Midas begged to have the gift removed. This timeless fable teaches us that there are things that cannot be bought with money or gold, and suggests that the modern belief that everything can be monetised hollows out the very things we find valuable.

It is a feature of the word ‘value’ that it has two distinct meanings, that of moral worth and that of monetary worth, a distinction rooted in a common etymology which runs through most European languages, indicating that at some point they have been considered to be closely related issues. In fact, in two worldviews they have been and still are: Thomistic theology derived from Aquinas, with its notion of the ‘just price’ and the Marxist ‘labour theory of value’. Both theories have been superseded by market economics, in which prices are determined by supply and demand in the marketplace, yet continue to inform areas such as business ethics, the honouring of contracts and the critique of exploitation or capitalist excess.

My intention in this article is to explore the relationship between monetary value and existential value, which underlie, respectively, the prices we assign to goods and services and the values that shape our lives and institutions, and in this way attempt to understand the role of money in institutions and how this might inform economic life and our relationship to money. Clearly, to do this systematically would be a massive undertaking and here I am only developing some of the philosophical framework to underpin this project. In particular, I want to take issue with theories of intrinsic value, particularly Locke’s view of natural value and the labour theory of value, and to present a hypothesis that the moral dimension of monetary value exists at an institutional level rather than at a commodity or service level.

Money and monetary value

For an everyday reality that pervades our lives and our society, money is actually something of an enigma, at one level tangible and obvious, but on closer investigation something whose nature is surprisingly elusive. Clearly money cannot be identified with the notes and coins we carry around with us, firstly for the superficial reason that the currency we identify most readily with is not transnational and can only with some difficulty and cost (and even here the equivalence is not always transparent) be converted into another. Then, although we are not quite there yet, it is possible for us to conceive of a cashless society, in which all financial transaction will take place electronically, through the transfer of information in binary code. However, even more than these reasons, if we stop to consider it, the source of the agency that money confers to enter into economic transactions appears to be wholly mysterious.

The emergence of the digital economy and electronic money has popularised the notion that there has been an evolution in our economic transactions, beginning with barter, passing through the money economy, and now moving into the era of credit largely carried out invisibly. This view is based on what we could call the commonsense view of money, first advocated by philosophers such as Locke and Adam Smith, who drew on Aristotle’s and Homer’s observations in the ancient world two millennia previously, and it is the view still propounded in the majority of textbooks on economics (Graeber, 2011). However, it is demonstrably wrong. There is no evidence that any culture that relied on a barter economy ever existed (Humphrey, 1985). The alternative view, previously at the margins but gathering momentum in the aftermath of the global financial crisis, is that human economic activity has always in its foundations been about credit and debit.

Much of this reassessment is based on the century-old writings of Mitchell Innes (1913) and William Furness (1910). Innes pointed out that the earliest recorded notion of debt, found in the Code of Hammurabi, predates the earliest coinage by 2000 years, and that the repayment of a debt was considered to be a sacred duty. The foundations of economy have always been about the agreements between creditors and debtors, in which the origins and function of money is no more than a marker of that relationship and agreement.  Furness recorded the highly unusual money system on the Indonesian island of Yap, which consisted of stone wheels of various sizes known as fei. He noted that even when transactions were concluded the fei were rarely moved; change of ownership was merely acknowledged. In the most remarkable case a fei which had sunk to the bottom of the sea while being transported was still recognised as valid currency. In other words the currency functioned as markers of credits founded on trust. This view eventually won the approbation of economists as diverse as John Maynard Keynes and Milton Friedman, though is still largely ignored in macroeconomic theory (Martin, 2013).

The reason for this misunderstanding lies in the seventeenth century in the period when the Bank of England was being set up. Prior to the establishment of the bank, the ultimate source of the authority for the English currency was the British sovereign. Coins were stamped with the monarch’s image and minted in silver, theoretically to the value as stated per denomination. In fact, it was long recognised that the face value of coin and the price of silver frequently diverged, silver being more valuable that the actual coinage. This led to huge amounts of money being melted down and sold as bullion and the stock of coinage being vastly depleted as a result. The Bank of England, which had in the meantime emerged as a mercantile counterbalance to the monetary authority of the sovereign, saw the obvious solution to lie in debasing the metal in the coinage, alloying the silver, and thus lowering the actual value of the coins to or below their face value, thereby removing the motive for destroying them. Unfortunately, this pragmatic solution was overruled by Parliament on the advice of John Locke, the pre-eminent philosopher of his age and a hugely influential figure. Locke, a fierce republican, wanted the Bank to break entirely with the notion that the value of the currency was based on authority, such as the authority of the king, and instead base it on the intrinsic value of nature, such as that of silver. Locke’s suggestion was followed and the nation’s supply of silver coins was replenished, with both predictable and unforeseen disastrous consequences.

Locke clearly believed, or at least wished to assert for political reasons, that money has an intrinsic value, and the modern capitalist economy, whatever private reservations people individually may harbour, continues to function on the basis of this belief, using gold as the most common standard rather than silver. It is necessary, though, to analyse what the ‘value’ is that is the object of such a belief. The Lockean argument from nature can be dismissed out of hand. Value is not a property of nature, but of human judgement. Even if our currency were ‘worth its weight in gold’ (which it is not, by a significant margin), this would not constitute its value any more than it were worth its weight in manure, because the value of gold or manure is not ‘intrinsic’, but arises fundamentally from their utility, a distinction Pepper (1970) refers to as ‘value proper’ and ‘utility value’, the latter which we could also refer to as social value. The different social value ascribed to gold and manure arises from their relative rarity, flexibility and aesthetic appeal. Gold is almost universally considered beautiful due to its colour and lustre, and useful due to its malleability and ductility, qualities which obviously cannot be ascribed to manure. However, gold’s social value depends to a large degree on the technological capacity of the culture in which it occurs. Primitive cultures in regions in which it was naturally relatively abundant had little use for it outside decoration, and were happy to trade it for coloured beads. Unlike manure which is a good fertiliser and building material, useful in settled agricultural communities, gold perhaps had only marginal social value. This point does not seem to me to be undermined by any subsequent retrospective reassessment by post-colonialist critics.

One of the functions of money in monetary theory is reckoned to be to store value (Nesiba, 2013), which seems a not unreasonable proposition; that is, until we start to interrogate its exact meaning, whereupon it slips rapidly from our grasp. The way in which money stores value is like the way in which the sun rises, that is, metaphorically. Since money has no intrinsic value, either as a physical or digital currency, it cannot store value either. And since, with the exception of some hobbyists or collectors who may fetishize the physicality of money, we do not value money as such, but only its instrumentality, the idea of storing value is really just shorthand for the ability to exchange it in denominated amounts for the things that we deem actually valuable, or vice-versa, to receive it in denominated amounts for goods or services. What is ultimately valuable is that which makes human life liveable, bearable and pleasant, so it is in the social agency of money that its source of value is found.

To pursue this thought further, value does not inhere in money itself, but nor can it in the goods or services which are exchangeable for money, at a price determined by the market, as the same objection which was raised against the intrinsic value of money can similarly be raised against the intrinsic value of any commodity or service, that is, value does not exist in the state of nature. The question this denial poses, then, concerns the ontological foundations of the economy in which money plays such a crucial role. Marx (1859)advanced an alternative view of value: rather than arising from nature, the intrinsic value of a commodity represented the ‘congealed labour time’ of the industrial proletarian whose sweat and toil had manufactured it. Although this view, referred to as the labour theory of value, is disparaged by mainstream economists, and although I believe it takes too narrow a view, nonetheless, I will develop an important insight which I believe Marx had, which is that value is inherently social and that it is generated in the world of work.

Marx was motivated to blame capitalism for the dreadful conditions of the industrial working class which sprang up in the newly growing cities created by the industrial revolution. He identified the profit generated in the manufacturing process as an ‘excess’ derived from the exploitation of the workers who had created the value of the commodities, that is by paying them insufficiently for their labour. A clear objection to this idea is that the price – even the marketability – of any commodity is a function of its quality and the demand for it. If a manufactured item is shoddy or faulty it cannot demand the same price in the market as one which is made to high standards, regardless of the labour invested in it, while if there is no demand for an item, it will not sell. Price is determined largely by these two factors, quality and demand, and any business in order to be profitable, has to identify a market where a certain demand exists and strive for quality that meets the market’s expectations.

Money, then, neither has value nor stores it. As we discussed, according to Pepper there are two types of value, value proper and utility value. Money has utility, clearly, though it is a very specific type of tool, one whose usefulness is in being exchanged for things that are in turn useful or pleasurable to us, and therefore to that extent valuable. It has neither value nor utility intrinsic to itself, only as a medium of exchange. Money, though, is unique in that it is denominated and acts as a scaled measure of wealth. Unlike value, which is a function of judgement, wealth is a function of a social process; moreover, it is a social process in which existential and social values play a critical role. As already mentioned, economic activity can only take place on the basis of trust, and money itself exists as a place marker for relationships of credit based on trust. For much of history this was the common understanding of how money worked. It is only in the past few hundred years that this seems to have been forgotten.

Institutional wealth hypothesis

Rather than value, a nebulous term at best, I suggest it is wealth which both money measures and that links money to the value-driven activities of institutions.  By ‘institution’ I mean any human grouping that has some sense of a common purpose, some shared values, a degree of organisational structure however informal, perhaps some rules, and a boundary demarking inside from outside. This would include businesses and all manner of organisations and even individual family units. It would not, for example, include neighbourhoods as geographic entities, but would include neighbourhood associations. Wealth is generated by and accumulates around such institutions and their activities. We tend to think of wealth in opposition to poverty, but what I have in mind is relative wealth, wealth that can be an indicator of the relative performance of institutions. Rather than engage in a diatribe against the perception of poverty created in our society by gross inequalities of income, I suggest that wealth be thought of as a neutral term that can employed evaluatively across all cultures and historic periods and that poverty be restricted to its more ethical connotations, by which I mean a culture-dependent term of disparagement for lack of aspiration.

The hypothesis, one that does not seem implausible, is that wealth is generated in successful institutions. To emphasise, by wealth I am not talking about vast wealth, but wealth as a relative quality; some institutions, such as banks, are required to process huge quantities of money (leaving aside for the moment structural anomalies in the banking sector that governments are attempting to address), but others, such as voluntary or community-based organisations, might run on a shoestring but be fully functional in achieving their nominal purpose. All institutions need money to function and this has to be considered integral to the institutional ontology not as an add-on. It is also a necessity in a comprehensive theory of value to be able to offer explanations of economic value and explore any underlying unity between economic value and social value/values.

The great monetary settlement of the seventeenth century never fully resolved the issue of the nature of money, and Locke’s intervention saddled us with an erroneous concept, which has had consequences to this day. According to Martin (2013) the final authority for a currency is the people in democratic society, who invest their authority in the government of the day to make sensible decisions regarding the economy for the benefit of the people as a whole. Money is like language, in some sense, in that it pervades our culture and is ultimately controlled by no one (ibid); it is above all a social phenomenon, and always has been, although this has been forgotten by governments, the banking industry and by most economists, with rare exceptions like Keynes. Nevertheless, the current financial crisis has led to government intervention, some reforms in banking and some reassessment of economic theory in line with Keynesian thinking.

Wealth goes hand in hand with success in any venture, and that success is built by gradually building relations of trust around that venture. Building a successful venture requires a range of skills and the ability to work hard, for example, but the focus here is not on this range of skills but on the fundamental ontological requirements of institutional success, which requires the creation of multidimensional trust, both within an organisation and outside in relation to other relevant organisations and constituencies. As I have argued in a previous essay on values and institutional structure, relationships within any organisation are strengthened and organisational conflicts between different constituencies are ameliorated when shared values are sought and promoted alongside core values and organisational goals; in fact, the discovery of shared values in the context of the organisation is one of the fundamental responsibilities and ‘people skills’ that a leader of any organisation needs to manifest, as it demonstrates attention to the particular and the individual rather than just to the general and the abstract.

Trust is not something that can be established at once, and not necessarily easily, and it is something that can be rapidly destroyed. However, as Fukuyama (1995) has argued, trust is the fundamental value of social capital, one which enabled the growing prosperity of Europe through the early modern period. If this is true I suspect it is because, unlike other values which are (or run the risk of being) etiolated when they are monetised, it has the property of self-replenishment. The building of trust, therefore, should be a fundamental goal of every organisation. First, everyone feels happier when they are in an environment in which they feel trusted. When people feel happy they willingly contribute to the good of the whole and invest themselves, their efforts and time for the success of the whole. There is a common interest that whatever goods or services they provide should be to a high standard of quality, and when they are to a high quality the recipient of those goods or services will naturally be satisfied. Those who fund the activities of the organisation, whether consumers, shareholders, banks, or donors should be treated as extended constituencies of the organisation, common values discovered and a basis for trust and satisfaction established. This is the basis for success and wealth in any organisation. The same reasoning can also be applied to an individual and a basic social institution such as a family.

Potential objections to the hypothesis

An objection to this hypothesis would be that many organisations seem to function, even function well, while not adhering to this strategy. I would say that this is due to the dampening effect of society; changes rarely happen suddenly, but usually there is a cumulative effect before something becomes apparent. The economic crisis was building up and was predicted by some many years in advance, as indeed the recovery is many years in manifesting itself. When any institution fails, whether it be large or small, there are always underlying reasons, and those reasons invariably come down to human problems: the arrogance of a leader, the disaffection and even sabotage of those mistreated, greed and eventually dishonesty undermining trust. Even failure to adapt to a changing environment can be laid at the feet of systemic failure to seek common values, because that is a failure to draw upon the variety of skills, to discover and to exploit those skills, that any group of people bring with them. Edward Freeman (2010), in his writings on stakeholder theory, asserts that any business that is not seeking to keep all its stakeholders – such as investors, shareholders, banks, employees and customers – happy is a failing business. I have used the term ‘constituency’ rather than stakeholder, but the logic is much the same, although I have attempted to give a more theoretical underpinning to what stakeholder happiness actually comprises.

A second objection would be that wealth simply means the accumulation of money or its equivalent in assets. This is a commonly held view and it arises out of the mistaken understanding of the nature of money and economic value. This view justifies the moral view (not that I am saying that everyone who shares this understanding of money shares this view) that gaining money is a justifiable end in itself, and it does not matter the means by which one acquires it. Clearly, such a view underlies criminal acquisition, whether that be corporate crime, gang-related crime or street robbery. I have advocated the view that the acquisition of wealth should be understood as a reward for, or a consequence of, institutional strengthening. Theft short-circuits that process; it does not represent the justly deserved reward for valued activity, which reinforces the values of social institutions, but leaves the basis of social chaos in its wake: mistrust, fear and loss. Moreover, the empowering function of money cannot be fully realised; its power to purchase is always accompanied by fear of exposure, fear of punishment, mistrust of others and the knowledge that one is not truly worthy in that one has not been rewarded. As a society we are left to take effective measures to counter the increasing prevalence of this sort of activity and its social fallout, whereas we should be establishing as a norm the correct understanding of money and of wealth, that people can police themselves more effectively.

Money is a token that represents the wealth which is generated in successful institutions. In some respects it has similarities to Austin’s (1962) idea of the performative speech act, in that an exchange of paper, metal or electronic tokens effects a change in ownership and the conferring of rights. Money is effectively a symbol, which exercises symbolic power throughout society, for all social institutions. Externally it has the nature of a tool that quantifies wealth, which can switch between a physical format (currency and perhaps its bullion equivalent in extremis) and a digital format (as an entry in a ledger or perhaps now even as a digital currency, such as bitcoin). In this sense it is proper to speak of it having utility or use-value rather than value proper, in the same way that all things that can be defined as tools have utility, and only have value proper if they enter the sphere of our personal experience in the sense of evoking a (usually) positive emotional response. But as a symbol money also represents things that we recognise as social universals such as freedom, both freedom from want and freedom to choose, competence in earning a living and supporting oneself, and also things like moral obligation, such as to pay one’s debts, to care for one’s dependents materially and to contribute to the common good through supporting enterprise, inspiration and endeavour, supporting the needy, and paying one’s taxes.

Money has been one of the most powerful tools for liberation, as it has freed the masses from excessive social control and opened up the way for individual decision-making, risk-taking and enterprise, which has contributed to the emergence of economically vibrant and democratic societies. A further step is now needed to correct the social injustices that the wrong understanding of money has perpetuated, by a new consensus on its nature.


Austin, J.L. (1962). How to do things with words. Oxford: Clarendon Press.

Freeman, E. R., Harrison, J. S., Wicks, A. C., Parmar, B. L. and De Colle, S. (2010). Stakeholder Theory: The State of the Art. Cambridge, UK: Cambridge University Press.

Fukuyama, F. (1995). Trust: The social virtues and the creation of prosperity. London: Penguin.

Furness, W. (1910). The Island of Stone Money: Uap of the Carolines. Philadelphia, PA: Washington Square Press.

Graeber, D. (2011). Debt: The First 5000 Years. NY: Melville House Publishing.

Humphrey, C. (1985). ‘Barter and Economic Disintegration’. Man, 20(1), pp. 48-72.

Innes, A.M. (1913, May). ‘What is money?’. Banking Law Journal, pp. 377-408.

Martin, F. (2013). Money: The Unauthorised Biography. London: The Bodley Head.

Marx, K (1859). A Contribution to the Critique of Political Economy. Moscow: Progress Publishers.

Nesiba, R. F. (2013). ‘Where did “money” come from?’ Western Social Science Association (WSSA) News, 42(2) (Fall 2013).

Pepper, S. C. (1970). The Sources of Value. Berkeley: University of California Press.


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