The Philosophy of Money

What is meant by "The Philosophy of Money"?.....Simmel assesses the impact of the money economy.........Money is, therefore, a fundamental aspect....

In "The Philosophy of Money", Simmel assesses the impact of the money economy on the inner world of actors and the objective culture as a whole. Simmel saw money as linked with social phenomena such as exchange, ownership, greed, extravagance, cynicism, individual freedom, style of life, culture, and the value of personality. In general, he argued that people create value by making objects, separating themselves from those objects, and then seeking to overcome distance, obstacles, and difficulties. Money serves both to create distance from objects and to provide the means to overcome it. Money provides the means by which the market, the economy, and ultimately society, acquire a life of their own that is external to and coercive of the actor. Simmel saw the significance of the individual declining as money transactions became an increasingly important part of society. A society in which money becomes an end in itself can cause individuals to become increasingly cynical and to have a blasé attitude.

Simmel argues that, economic exchange can best be understood as a form of social interaction. When monetary transactions replace earlier forms of barter, significant changes occur in the forms of interaction between social actors. Money is subject to precise division and manipulation and permits exact measurement of equivalents. It is impersonal in a manner in which objects of barter, like crafted gongs and collected shells, can never be. It thus helps promote rational calculation in human affairs and furthers the rationalization that is characteristic of modern society. When money becomes the prevalent link between people, it replaces personal ties anchored in diffuse feelings by impersonal relations that are limited to a specific purpose. Consequently, abstract calculation invades areas of social life, such as kinship relations or the realm of esthetic appreciation, which were previously the domain of qualitative rather than quantitative appraisals.

Just because money makes it possible to limit a transaction to the purpose at hand, it helps increase personal freedom and fosters social differentiation; money displaces “natural” groupings by voluntary associations, which are set up for specific rational purposes. Wherever the cash nexus penetrates, it dissolves bonds based on the ties of blood or kinship or loyalty. Money in the modern world is more than a standard of value and a means of exchange. Over and above its economic functions, it symbolizes and embodies the modern spirit of rationality, of calculability, of impersonality. Money levels qualitative differences between things as well as between people; it is the major mechanism that paves the way from gemeinschaft to gesellschaft. Under its aegis, the modern spirit of calculation and abstraction has prevailed over an older world view that accorded primacy to feelings and imagination.

Thus from above we can conclude three components:

1. The historical transition from simple barter to a complex monetary system corresponds to a transition in society from gemeinschaft to gesellschaft;
2. The dominance of money is a reflection or representation of the prominence of impersonal,abstract social relationships; abstract money is the symbol of abstract social relations;
3. Money creates greater interpersonal freedom through impersonal exchange relations, but at the same time makes human life more subject to bureaucratic, quantitative regulation.

Money is thus consistent both with individuality and individuation. In terms of Simmel’s historical argument, a simple system of barter or exchange gradually gives way to a situation in which some third element of measurement enters into the exchange of commodities. The value of two commodities in exchange is measured in terms of some other commodity which is held to be precious, such as shells, cloth or metals. Money, as a measurement of value, develops from precious metals, to coins of silver or gold, to leather money and finally to paper money. In this development, money ceases to have a face value and also becomes increasingly detached from a bullion backing. That is, money increasingly assumes a pure function as the mere symbol of value rather than itself being of value. This development is made possible by the changing nature of society and in particular by the growth of trust. The essentials of the argument are contained in the following quotation:

A certain comprehensiveness and intensity of social relations is required for money to become effective ... and a further intensification of social relations is needed in order to intellectualize its effects. These conspicuous phenomena illustrate clearly that the inner nature of money is only loosely tied to its material basis; since money is entirely a sociological phenomenon, a form of human interaction, its character stands out all the more clearly the more concentrated, dependable and agreeable social relations are. Indeed, the general stability and reliability of cultural interaction influences all the external aspects of money. Only in a stable and closely organized society that assures mutual protection and provides safeguards against a variety of elemental dangers, both external and psychological, is it possible for such a delicate and easily destroyed material as paper to become the representative of the highest money value.

The expansion of the society, backed up by state, law and custom, in association with an expanded social division of labour are the necessary preconditions for money to lose its intrinsic value and to acquire a purely functional significance. Above all, money presupposes inter-social trust, which in turn requires social stability. Without these conditions, money could not become a depersonalized phenomenon detached from intrinsic value. For Simmel, the centralization of social power in the institution of the state and the individuation of citizens are symbolically represented by the growing abstraction and impersonality of paper money.

The existence of a stable monetary system means that exchange can take place between persons or groups which are not related or connected socially or physically. Money makes exchange at a distance possible. It also means that every minute detail of human endeavour can have a price fixed upon it. Because of the divisibility of money into small change, there is in principle no limit to the quantification of human activity. Money is, therefore, a fundamental aspect of what Weber regarded as the process of rationalization in modern societies.

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You can visit some significant Theories by some Great Theorists:
Voluntaristic Theory of Action (Voluntaristic Action), Generalized Media of Exchange, Four-Function Paradigm (AGIL Model in Systemic Model), Cynicism (Circulation of Elites), Hierarchy of the Sciences (The Classification of the Science), Organicism, The Laws of Three Stages, Order and progress (Interrelation between Social Statics and Social Dynamics)

Reference:

• Bryan S. Turner, Classical Sociology.
• George Ritzer, Sociological Theory.
• Lewis A. Coser, Masters of Sociological Thought. 

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Related Questions:

Simmel's interpretation of money economy.

The theory of Philosophy of Money.

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