Monday, January 30, 2012

Eight Functions of Money

Money has eight different purposes. The first three are the ones already mentioned [means of payment for buying and selling, means of barter for other money, currency trade]. The fourth is to display one's riches, showing it to everyone or putting it in the marketplace where it is dealt with or exchanged. The fifth is to use as medals and clothing decorations. The sixth use is to cheer with its presence. The seventh use is to cure some illnesses with its broth as, they say, is one of the properties of gold powder. The eight use is as security for a debt. For these last five purposes, it is possible not only to lend and exchange money but even to rent it out.

[Martín de Azpilcueta, Commentary on the Resolution of Money, Chapter 3 in Sourcebook in Late-Scholastic Monetary Theory, Grabill, ed. Lexington Books (New York: 2007) p. 34.]

This is why it's a delight to read the scholastics. The function of display has in past years become more commonly discussed by economists as they catch up to something that the Doctor Navarrus recognized as obvious in the 16th century. But I still have yet to come across an economist giving due credit to how our use of money to cheer ourselves up affects how we use it; and while we don't go around like bedouins with gold coins sewn to our veils and belts, it's clear from any look at how money functions in such a society that the jewelry use is clearly distinct from both display and storage of value, and also clearly operative. And I don't think it would cross any modern economist's mind to try to think through the complications that arise from renting money for use in folk remedies. Some of this, of course, is that these things are more obvious in a monetary system that is based on a precious metal standard. But part of it is that economists often don't consider all possible cases, and, without making it explicit, really confine themselves to carefully contrived artificial markets or assume rather substantial conditions that are not universal.

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