Interesting quote about money and economy in general:

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Kazohinia is my favorite hungarian book and #2 on my all-time favorite books list ever. It was writen in 1932, translated to english in 1941, and here you can read the whole translated novel for free!

A brief synopsis of the book: It tells the story of a doctor who serves on a ship in England, who winds up on a mysterious island, where he finds a society which is far beyond the technical level of the civilization of that day (the novel was written in 1932). The people of the island have no money, no art, no history, but somehow have a working society. I won't spoil it any further though [smile]

I have known this book for almost a decade now (I first read it when I was 15 or 16), and I love it ever since. Recent events in global economy prompted me to share an interesting quote from the book with you, that I have always found fascinating and very true:

I related in full detail that money is issued by a central bank in various denominations, from which everybody receives according to his merits, and which is at the same time a licence enabling its owner to take his due share of the fruits of common work. I spoke about the advantages of money; that it can be exchanged for anything, thus ensuring a free choice of goods; that through money it is possible to convert the countervalue of the articles we sell, at any time in a lump sum or in instalments, to other articles, and so on.

He expressed the view that exchange was possibly not easier if we doubled the work by involving the exchange of money, but, as he said, it was not important either. He preferred to know in what way money furthered production.

I explained that it made it possible for many people with small resources to join forces and establish a factory by purchasing shares.

"What are they?" he asked.

"Another wonderful invention of the human mind. Another type of paper, which is given in exchange for money."

"And if the work of exchange is treble what is the factor which facilitates?"

"That these papers enable work to start."

He looked at me in suspicion.

"What would you say," he asked, "if I told you that I can get up from this seat only after handing over a page of my notebook to you? It has nothing to do with reality, it is a non-existing thing, isn't it?"

I was astonished by this naivety but tried to stifle my laughter. However, I explained in vain how money sets work in motion. He stubbornly replied that he understood this, but it seemed that we did not understand at all, as according to anyone with any sense, the starting of work had only one prerequisite, the starting of work itself, and not the exchanging of papers, which did not even exist in reality, and which it was a pity to invent.

I asserted that money did exist and an eloquent proof of how true it was had been the world crisis which almost blocked production.

"And why?" he asked.

"Because there was no money."

At which he asked again why we invented such a thing that did not exist.

If you liked/agreed with this quote and/or are curious of how the story advances to this point and how the conversation continues, follow the link at the beginning of the post and read the book! I recommend it very much, it's a great philosophical book on the subject of society is illogical if you examine it. And so is economy.

I also find it a nice touch that (referring of course to the 1929 economical crisis) the main character tries to explain the concept of money by citing recession as proof that money exists. Absurd, isn't it?

What do you think about the quote? Do money and economics exist at all...?
"We have done the impossible and that makes us mighty." - Malcolm Reynolds
2 Qeise4th Aug 2011 05:32:51 AM from sqrt(-inf)/0 , Relationship Status: Waiting for you *wink*
Professional Smartass
Sure money exists, and it's an ok way of handling things.

However it's not essencial or the optimal way of distributing goods.
Laws are made to be broken. You're next, thermodynamics.
[up] Also, it's a bit irrational, isn't it?
"We have done the impossible and that makes us mighty." - Malcolm Reynolds
4 Madrugada4th Aug 2011 06:17:25 AM , Relationship Status: In season
Zzzzzzzzzz
The problem I see is that the explanations of "money" and "stock" are really bad. Defining them as "pieces of paper" is sort of like defining a "pet" as "an animal that wears a collar". It's defining the thing in terms of an aspect that is so superficial as to be pointless.
...if you don’t love you’re dead, and if you do, they’ll kill you for it.
Micromastophile
Money is and has always been a rough approximation of life expenditure, converted to an arbitrary unit for portability and ease of trade. That's why wealth redistribution by force is so horrible.

edited 4th Aug '11 6:31:55 AM by deuxhero

It Makes Sense in Context, so I recommend reading the book.

The explanation is not the best, I admit...
"We have done the impossible and that makes us mighty." - Malcolm Reynolds
@ Madrugada: The main character of the book had to use this explanation, since nothing related to money exists in the other society. So first he had to define money as "pieces of paper" to put it in some kind of Real Life context...

And ultimately, money really is pieces of paper, its value being virtual and all...
"We have done the impossible and that makes us mighty." - Malcolm Reynolds
8 feotakahari5th Aug 2011 03:08:27 AM from Looking out at the city
Fuzzy Orange Doomsayer
So what, would you prefer gold currency? It's damn inconvenient to trade cows for corn.
That's Feo . . . He's a disgusting, mysoginistic, paedophilic asshat who moonlights as a shitty writer—Something Awful
Loli Hitler
Besides, gold itself doesn't really have much intrinsic value anyway. Iron is much more useful than gold, for example.
Raven Wilder
I'd describe money as a promise to do someone a favor. It's just that instead of a promise made from one person to another it's a promise made by everyone to everyone. The numerical value of money is just a way of measuring how large a favor you're due.
"It takes an idiot to do cool things, that's why it's cool" - Haruhara Haruko
11 MasterInferno5th Aug 2011 05:06:24 AM from Ideal City , Relationship Status: With my statistically significant other
All Pop, No Culture
[up]That's about how I see it. It seems to me that money started as sort of an institutionalized form of IOU.
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@feotakahari: I don't prefer anything. I don't know the answer. I only know that right now economy is irrational...

edited 5th Aug '11 6:32:01 AM by Sati1984

"We have done the impossible and that makes us mighty." - Malcolm Reynolds
Is that bad?
14 Madrugada5th Aug 2011 09:13:34 AM , Relationship Status: In season
Zzzzzzzzzz
Sati, I see that, but it's still a really bad explanation of the concept. "Money" isn't "pieces of paper", it's a token with a designated value used in exchange of goods or services, with the value set by agreement of the people who use it. He explained the thing, but not the concept.
...if you don’t love you’re dead, and if you do, they’ll kill you for it.
15 feotakahari5th Aug 2011 09:16:12 AM from Looking out at the city
Fuzzy Orange Doomsayer
That's Feo . . . He's a disgusting, mysoginistic, paedophilic asshat who moonlights as a shitty writer—Something Awful
@Master Inferno:

The general concept of M Oney in general, is that it is a store of value. Thats it. It holds no power uness people have faith in its power. This is true of all Fiat currencies. (Including gold, which much like the dollar bill, has little value outside people valuing it)
Going Forth!
Raven Wilder
Well, nothing has value outside of people valuing it. Though I do admit the only additional benefit of gold currency is that it looks pretty.
"It takes an idiot to do cool things, that's why it's cool" - Haruhara Haruko
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