Money, Social Ontology and Law

Angela Condello, Maurizio Ferraris, John Rogers Searle

• Publisher: Routledge
• Year: 2019
• Topic: Law
• eBook ISBN:
  9780429575587
• Subtopic: Monetary Policy
• Index: Law

Presenting legal and philosophical essays on money, this book explores

the conditions according to which an object like a piece of paper, or an

electronic signal, has come to be seen as having a value.

Money plays a crucial role in the regulation of social relationships and

their normative determination. It is thus integral to the very nature of the

"social", and the question of how society is kept together by a network

of agreements, conventions, exchanges, and codes. All of which must

be traced down. The technologies of money discussed here by Searle,

Ferraris, and Condello show how we conceive the category of the social at

the intersection of individual and collective intentionality, documentality,

and materiality. All of these dimensions, as the introduction to this volume

demonstrates, are of vital importance for legal theory and for a whole set of

legal concepts that are crucial in reflections on the relationship between law,

philosophy, and society.

1
Money

Ontology and deception¹

John Rogers Searle

I hold in my hand a United States $20 bill. It is, like most things we take for granted, philosophically astounding. (One mark of a philosopher is to be amazed by what any sane person takes for granted.) The bill contains a lot of writing, much of which is the repetition of the number twenty, eight times in numerals and three times in words, “Twenty Dollars” twice and “Twenty” once under a seal. It contains only two sentences: “This note is legal tender for all debts public and private” (How do they know?) and “In God we trust” (What happens to those who do not trust in God? Is it not money for them?). It also contains pictures of Andrew Jackson and the White House, and various seals and serial numbers as well as the words “Federal Reserve Note”. “The United States of America” occurs on both sides. This chapter is primarily concerned with the question: What fact or facts make this a piece of paper money? To understand why it is money and what it means to be money you have to understand a whole civilization. I will not explain the whole civilization, but I will explain some of the money part. In writing this text, I discovered a series of deceptions (illusions, systematic falsehoods) in the institution of money, and I will try to identify them.

I also have on my computer screen a photograph of a Confederate $100 bill. It is even more amazing. It says “The Confederate States of America will pay the bearer $100 on demand”; all of that is in large print. But in much smaller boxes on each side of a picture of an unnamed woman, it says, “two years after the ratification of the treaty of peace”, then in the next box, “between the Confederate States of America and the United States of America”. Though both bills are supposed to function in the same way, as money, their status as speech acts is quite different. The American bill is a Declaration. By Declaration, this piece of paper counts as $20 in the United States. The Confederate money is a Commissive, a complex conditional promise. It says the government promises to pay the bearer on two conditions: first that there is a ratified treaty of peace between the Confederate States of America in the United States of America, and second that two years have passed since the peace was ratified.

1. The functions of money and the definition of money

What, then, is money? It is not easy to find explicit definitions of “money”, but textbook accounts of the function of money, I think, implicitly contain a definition. Money performs two functions, and on some accounts, three. First, money is a medium of exchange. Second, it is a store of value. And third, on some accounts, it is a measure of value. These characterizations are not as clear as they might be, but examples will give them more substance. “I bought this shirt for $20” reports the use of money as a medium of exchange; “I have $1,000 in my bank account” reports the use of money as a store of value; “My car is worth $10,000” reports the use of money as a measure of value.

Are these sufficient to define money? I don’t think so. First off, the money when I buy a shirt, is not a “medium” of exchange. It is an object of exchange. So I gave one object, a $20 bill, and I got another object, a shirt. No “medium” was involved. Furthermore, when I buy something, I don’t need to give a physical object. With debit cards, for example, you can just transfer money from one account to another with no physical objects actually being exchanged. In order to clarify the definition, we would have to explain what exchange is, and what value is. Exchange is not hard because it involves giving one object for another object, as when I trade my $20 bill for a shirt. With the giving of the objects, deontic powers of ownership are transferred. Value is harder because it involves desire and one can knowingly and consistently hold inconsistent desires in a way one can knowingly and consistently hold inconsistent beliefs. I will not discuss exchange and value further, but assume that we can use both notions. We can take “store” more or less for granted because it is not specifically tied to human civilization. Squirrels store nuts for the winter. Furthermore, this “medium of exchange” talk leaves out one of the most important functions of money, payments where no exchange is made, for example taxes. You have to pay taxes in money, but you get nothing by way of “exchange”.

Again, before explaining money, we should note that the textbooks identify three types of money. First, there is commodity money. This is the use of a commodity as money. The commodity can be gold, silver, squirrel pelts, seashells, or whatever the community decides. In its simplest form, commodity money is like barter. You trade one type of object for goods and services. Not all trade involves money. If I give you a piece of silver for your shirt, so far no money has changed hands. If pieces of silver or shirts are standardly used for the purposes of such exchanges then they become money for reasons I hope to make clear. Second, there is contract money. Here, the object used as money is a contract to pay the bearer such and such on demand. Paradoxically, many such money contracts promise to pay the bearer so much money, as was illustrated by the Confederate $100 bill. How can money consist in a contract to pay money in return for the contract when the only money you could get would be another contract? As we will see later, this is one of the common forms of deception involved in money. It still says on British currency, and until fairly recently used to say on US reserve notes, that the Treasury promises to pay the bearer so much money on demand. But of course, in the United States and the United Kingdom there is no such thing as money with which they can pay you in addition to the sort of thing you are holding in your hand when you have the currency. So the promise to pay is, in effect, meaningless because what you would be paid in is exactly what you already have. I will say more about this later. Finally, and most commonly nowadays, there is fiat money. Such and such a type of entity is money because some authority, such as the State, declares it to be money by fiat. But now, our puzzlement increases: What facts about these three different kinds make them all money?

One way to answer that question is to tell the story about the evolution of money. The point is not that the story is historically accurate. Presumably it is not, but it illustrates the logical relations. In the beginning, there is only commodity money such as gold and silver, but it is inconvenient to carry gold and silver around, so one leaves it with a man who sits on a bench called a bank. The man is called a banker. In return for the gold and silver, the man gives you a set of documents that constitute promises to pay the bearer in the gold and silver in the bank. This is much more convenient and safer than carrying actual pieces of metal. But as long as the banker honors the contracts, the contracts are as good as gold. The contracts now replace the commodity as money. Another form of flexibility, and a form of deception that is easy and really inevitable, is to issue more contracts than the actual amount of gold and silver in the bank. As long as everybody does not run to the bank all at once, the contracts function just fine. However, for any number of reasons it becomes historically tempting to forget about the gold and silver and just have the “contracts”. The story goes that this money then becomes fiat money because it is only really money because some authority says it is money. Typically, the old promises are verbally repeated on the fiat money: “The Bank of England promises to pay the bearer on demand ten pounds”, but the promises are meaningless because the only thing they can pay you with is what you already have. In the United States, this step is known as “going off the gold standard” and it occurred in two stages: first, in 1933 when the government announced that they would not redeem paper currency in gold to individual citizens, and second, in 1971 when the government announced that they would not provide other governments with gold in return for US dollars. The move from contract money to fiat money is supposed to illustrate how the same functions can be performed even though the underlying ontology is quite different.

The notion of a “fiat” seems to imply an explicit act of performing a fiat. This is not necessarily the case. The point is that something might gradually evolve as money through general acceptance. The point, however, is that it will turn out that some assignment of status function is essential to performing the functions of money. This always requires a Declaration whereby some representation makes it the case that it is money. This is normally called a “fiat”, and it will turn out that all money, in this sense, is fiat money. The interesting distinction is not between commodity money, contract money, and fiat money but between commodity money, contract money, and what I will call baseless money, money which is not backed by anything.

But, if it remains money all along, then we have to ask, what exactly are the functions of money which will serve to define it? What are the functions that money serves?

Here is a list:

• 1 The possessor can buy goods and services with money. For this reason, money is power. The person who has money has more power than the person who does not. The power in question is deontic, having to do with rights, obligations, etc. When I have a $20 bill, I have a right to buy things with that money and I have the power to pay my debts up to $20 worth. This will turn out to be the essential feature of money.
• 2 You can make payments, such as debts, even those that have nothing to do with buying anything. Taxes are an obvious example, but all sorts of transfer payments would be included: payment from parents to children, blackmail, extortion, cash gifts, and countless others.
• 3 Money is a store of value. Because of 1 and 2, you store something of value when you save your money, either in cash or in a bank account.
• 4 Money is a measure of value. The question “How much is it worth?” is typically answered by stating a money value.

What else is there? Here, more or less at random and pre-theoretically, are some further features of money that I hope to explain:

• 5 Money is essentially social. There are lots of valuable artifacts that can be used either privately or socially, works of art for example. But money can only function between people or institutions. Robinson Crusoe, alone on his island, has no use for money. Money requires society and collective intentionality between members of the society. As far as I know, money is unique in that it is believed to be valuable by each individual only on the assumption that everybody else believes it to be valuable, and believes that everybody else believes it to be valuable, and so on up in a potentially infinite, but non-vicious, hierarchy.
• 6 Money is essentially digital. You cannot have an analog form of money because, in order to perform its functions, money has to be countable. You have to be able to give a numerical value to answer such questions as how much the object costs, how much the object is worth, and how much you have saved. Whether squirrel pelts, gold ounces, or dollars, there has to be a numerical answer to the question, how much?
• 7 Money, when functioning as money, is not valued for its own sake. People may use gold as jewelry or tooth fillings, but when used as money its only function is to buy, sell, pay, store, and measure. Its possession is always a means to an end, not an end in itself.
• 8 Money has to be exchangeable or transferable. It is essential to the functioning of money that quantities of money must be transferable from one agent to another. It is easy to see that this is essential for money to perform its functions as an object of exchange. It is said that at some points in ancient Sparta money consisted of huge iron bars because the authorities did not want money to be taken out of town. So the transfer need not involve a movable physical movement, but it must involve a recognizable transfer of rights. If a community uses mountains as money, then paying with a mountain must involve a transfer of the right to use the mountain as money from the payer to the payee.
• 9 One helpful, anonymous commentator pointed out that money needs to be easily movable and transferable and that it has to be nonperishable. With the qualifications like the Sparta example, I agree with these points, so let us add them collectively as another condition.
• 10 Only animals with human or humanlike cognitive capacities can have money. Dogs, for example, are very intelligent social animals, but if I leave a pile of dollar bills next to my dog’s bed and train him to bring me a dollar bill every time he wants to be fed, even if I feed him only on receipt of the dollar bill, all the same, he is not buying anything with the money and it is not even money to him. Why not?

2. Social ontology

I think one of the reasons that the accounts of money I have seen are so inadequate is that they do not rest on an adequate account of social ontology in general. So, before I get into the special problems about money, I want to say something about social ontology.

We need a distinction between the epistemic sense of the objective-subjective distinction and an ontological sense of the distinction. So, for example, in the epistemic sense I can say that Barack Obama was president of the United States in 2015 – that is epistemically objective because it can be established as a matter of fact – but I can also say that Obama was a better president than George W. Bush – that is a matter of subjective opinion. Epistemic objectivity and subjectivity are always features of claims, statements, assertions, etc. Underlying that epistemic distinction is a distinction in modes of existence. Pains, tickles, and itches, as well as beliefs, hopes, and desires, have a mode of existence that depends on being experienced by a subject. They are ontologically subjective, whereas mountains and tec-tonic plates, electric charges, and avalanches exist no matter what anyone thinks. They are ontologically objective.

Related to that is another crucial distinction between those features of reality which are observer-relative, which depend for their very existence on being observed, thought about, attended to, or regarded in a certain way, and those that are independent of anybody’s attitude or observation. Money, government, property, and marriage are all observer-relative phenomena, whereas such brute physical entities, such as mountains and planets, are observer-independent. Part of the interest of this distinction is that many phenomena, and it will turn out that money is one of them, which have a mode of existence that is observer-relative and therefore ontologically subjective, nonetheless admit of characterizations that are epistemically objective. It is, for example, an epistemically objective fact that I have a$20 bill in my hand even though the existence of $20 bills is observer-relative and thus contains elements of ontological subjectivity. It is an important point that the ontological subjectivity of a domain does not by itself imply that characterizations of phenomena in the domain must be epistemically subjective. All of this is going to be important when we get to money.

All functions are observer-relative. In general, we can say that function is a cause that serves a purpose and the purpose has to come from some intentionality, human or animal. Many species of animals can assign functions to objects. Think of birds’ nests or the use of a stick by a chimpanzee to dig out ants for food. Human beings have a special capacity which, as far as I know, is unknown in other animal species, which is that they can impose functions on objects and other people where the function is not performed in virtue of the physical features of the person or object, or at least not the physical features alone, but it is performed in virtue of the fact that a certain status has been assigned to the person or object, and with that status there is a function that can be performed only in virtue of the collective acceptance or recognition of that status in the community in question. So the fact that Donald Trump is now president gives him a status, and with that status a certain set of powers, but these status functions, as I call them, can be performed only in virtue of their collective acceptance in the community in question.

Status functions are the key to understanding human civilization because they provide reasons for action that are independent of inclinations and desires. They provide deontic powers, which are rights, duties, obligations, permissions, and authorizations, etc., and those provide reasons for action which are independent of the other inclinations and desires of the agent in question. We live in a sea of status functions: marriage, universities, private property, nation-states, summer vacations, restaurants, organized religions, and cocktail parties are all status functions.

Among the status functions assigned by Status Function Declarations are certifications. I am physically able to drive a car no matter what anybody thinks, but to drive a car legally I have to be certified as a licensed driver. Such certifications are very common. For example, in the building where I have my office, the elevators are periodically inspected and certified as safe. Certification will be important when we consider certain kinds of money. Often, status functions are accompanied by status indicators, epistemic devices that enable anyone to perceive that the person or object has the status function. Driver’s licenses, wedding rings, and police officers’ uniforms are all examples.

With the exception of the values attaching intrinsically to certain mental phenomena, all values are observer-relative. Therefore, gol...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• Acknowledgments
• Introduction
• 1 Money: ontology and deception
• 2 The color of money
• 3 Socio-legal reality in the making: money as a paradigm
• Conclusion
• Bibliography
• Index