Why do we have money? Where does it come from? Do we need it?
When it comes to money, there are as many theories as there are kinds, and it is as tangible and hands-on as it is mysterious. The most common myth, from Aristotle, via Adam Smith to various schoolbooks, is the one concerned with how it came to be in the first place; people got together to exchange different goods, and they needed some way to compare their respective value and something that could facilitate the exchange. But this explanation hasn’t been thoroughly backed up by empirical evidence, and it is very likely that the reality was more complex and diverse.
Anthropologist David Graeber has studied this subject, and found that many societies had some form of debt before they had actual money. Exchange in those days, many thousands of years ago, often happened within highly egalitarian communities, in what is often referred to as gift economies. People would give something away, with a vague expectation of getting something in return at a later time. In many societies this formed an important social fabric, and it was considered as rude to return something of roughly the same value as what was earlier received – for this meant that you didn’t want any further relation with the recipient! Sometimes no return was expected, and giving a lot was a symbol of status and prestige. We can find examples of such cultural expressions even in our own time, for instance within research. Often, it is the dream of a given scientist to contribute as much as possible to their own field – by all means more than they have received. A similar tendency can be observed in the free software programming community. This clearly indicates that our propensity for being generous, as opposed to being egoistic, is often contingent on environmental factors rather than biological ones. In short, we seem to be capable of both, and how we shape our societies will affect which behavior will thrive. If early hunter-gatherer societies are anything to go by, our biology has been well suited for egalitarian forms of organization where mutual aid, rather than competition, is the operating principle.
Money as an actual tangible representation of value was thus predated by this type of socialized debt, and its early appearances can instead often be traced to armies, as a means to pay the soldiers. In this way areas where armies set up camp turned into ad-hoc markets. But it wasn’t until capitalism — with commodity production, wage labor and the division of labor — forced itself into the lives of the late feudal societies that money came to dominate almost all exchange between people.
The Arcane Obviousness
As we can see, not even the origin of money seems to be a simple and straightforward matter. Meanwhile, one of the big problems today is that we take money for granted without contemplating what it represents and how it affects society. We’re so used to being surrounded by it in our every-day lives that it becomes an inevitable – and therefore near invisible – fact. We say that money can’t buy happiness, or that money is freedom, but at the same time there are occasions when we’re delighted to get our hands on some of it, or feel trapped despite having a fortune. We often talk about money, but we rarely talk about money.
The significance of money and commodities, how they appear and what they hide beneath the surface, was something Karl Marx took great interest in, and he called this the money- and commodity-fetishism. This is not to be understood as a consumerist worship of money or commodities, but rather as the observation that the attributes we usually ascribe to these things aren’t really their own to start with. When we’re confronted with different commodities at the store, and compare their prices, what appears as relations between commodities, are really relations between the workers involved in the production and the work required for it. We can say that one is more expensive than the other, but we don’t know how the people behind these commodities relate to each other. The social relations appear as relations between commodities, not people. What is worse, this realization in itself doesn’t help dispel the appearance – even though we’re aware of it, we’re nonetheless faced with prices and commodities, not the people, both in our roles as consumers and producers, and thus we can’t easily rid ourselves of this appearance.
Another way to put this is to imagine a game of chess, with the pieces all set up and ready, on a computer screen. We ask the computer how to most quickly remove all the pieces from the board, and the answer is that we need to perform an intricate series of moves to achieve this desired state. The computer is here under the fetish-like influence of the rule set of the chess game, and according to those rules, the explanation is reasonable. But we, intellectually unbound by these rules, realize that we could just remove all the chess pieces immediately without performing the tedious moves. The difference between this fictive chess world and our own reality is that, for us, the rule set is not just in a computer, but exists and manifests itself as the society we face as soon as we walk out our front door. We can thus, if we examine them, claim that these rules or relations between commodities are not universal, but we cannot escape relating to them in our everyday lives. We have to play chess, whether we like it or not.
But already this theoretical realization that the economy is not quite what it seems, hints at some interesting consequences. Imagine if, when justifying some economic consideration, instead of saying “there’s not enough money” for such or such important project, we’d have to say that the societal work was put towards golf clubs instead.
The first task of any serious discussion concerning money is thus unpacking this fact; money is a social construct, not a necessary prerequisite for a society. Consequently, an honest assessment must in turn begin by asking not how we best use money, but whether it is the right tool for the job at all.
Generally, such a discussion about money, to the limited extent it ever takes place, falls into two categories; money as an incentive for performance — the proverbial carrot and stick — and money as a means to signal what is needed and what is to be produced in a society.
The Carrot (and the Stick)
The more vulgar proponents of the current system sometimes indirectly refer to money as a carrot or stick by defending inequality on the basis that it spurs people to self-improvement. But even if we don’t start at inequality, there’s usually an intuition at play regarding reward mechanisms; surely, money-rewards motivate people to perform better? This was the question Daniel H. Pink asked at the outset of his meta-study on motivation. What he found was that not only does the research in this field tell a quite different story, it in fact often reports results diametrically opposed to this initial intuition.
In short, Pink argues, people are generally motivated by a number of intrinsic factors; autonomy – to be self-directed and have control over their own work; purpose – to perform something that is perceived as meaningful; mastery – to get better at and eventually master tasks. These factors are contrasted by extrinsic ones; the carrot and the stick. What the research showed was that the intrinsic factors were significantly stronger for any task involving above rudimentary cognitive skills (creativity, problem solving, abstract thinking). In fact, when we add extrinsic rewards for such tasks, the performance actually drops! When we’re no longer doing something because of our intrinsic motivation to do so, we tend to lose interest. And if the extrinsic motivator, in the shape of for instance a profit motive, gets even further decoupled from the intrinsic motivators, we get results that Pink succinctly characterizes as “just… not good stuff”.
The exception to this involved tasks of mechanical nature where extrinsic rewards worked as expected, and this is probably where that false intuition of how rewards work comes from. Anyone familiar with the production industry knows that pay-for-performance used to be quite common, and that this could be shown to cause an increase in productivity (not worker health though, of course). In these cases, with repetitive, mundane and alienating jobs, there is little or no intrinsic motivation to start with, and thus extrinsic motivators work as expected. Money can also act as a motivator in a somewhat different way; if people get paid too little, for instance in relation to co-workers, they feel like they’ve been treated unfairly. If they are paid enough not to experience such feelings, money loses its appeal as a motivator, and the intrinsic motivators take over.
When we think about all this, it shouldn’t really be that surprising. Most people we ask, even those that earn very much or work very hard, don’t do it for money. If we ask a doctor, an engineer or a scientist, we’ll usually get an answer that can be reduced to a combination of the intrinsic motivators; autonomy, purpose and mastery. And we don’t even need to ask nurses, teachers or various service workers to realize that they don’t do what they do because of the money reward, unless it is in the form of a stick – out of necessity to survive. Amusingly, the occupations where we might find people that do it for money, or at least claim so, usually include those that concern money in the first place, like finance. Or to quote Noam Chomsky answering this question during an interview: “You’d never get anyone from the university saying that [they wouldn’t work unless paid], except from an economics department.”  Inversely, there is ample evidence of how extrinsic motivators in large quantities can produce results of not only poor performance, but of a nature detrimental for society at large. Ted Nace explores some such examples concerning stock options for CEOs in his book about the rise of corporate power, called Gangs of America.
We can draw some practical conclusions from these findings. Jobs that pay a high wage are generally not jobs where extrinsic motivators work very well. Jobs where they do work are often low-pay. This would indicate that our remuneration system has more to do with a social expectation of what a job is worth, than with actual pay for performance. Further on, it’s easy to see how the carrot often turns into a stick. Since within a capitalist system there’s always people in desperate need of jobs to make ends meet, and because in that they are at the mercy of any job opportunity coming their way, they don’t have to be paid well, and there is no incentive to make the job interesting or agreeable to start with. This starts a vicious cycle where such jobs are frowned upon and get stigmatized as even less valuable. Not only do we feel above jobs such as cleaning toilets, despite the fact that it has to be done, but we also build up this social expectation that is later transformed into (even greater) differences in remuneration. One example is the degradation of the status of physical labor throughout history, despite the fact that our society still depends on a lot of it being done, and despite that it is both physically and psychologically beneficial to perform some such labor for most everyone. Instead, we look down on manual laborers, while hurrying to the gym to burn some calories on a treadmill. This devaluation of some professions is often also justified by unconsciously appealing to the fetishism described earlier. We point out that the product of someone’s labor is worth very little in the economy, and triumphantly explain that they thus have to receive a low wage. Instead of having to look said person in the eyes and take full responsibility for our entirely subjective opinion that they simply deserve less than someone else, we hide behind seemingly objective economic conditions; in other words, we refer to the rules of the chess game. Checkmate, minimum wage workers.
There are of course other mechanisms at play as well, but that doesn’t detract from the findings regarding how money, motivation and social expectations are tied together. Without money, the stigma surrounding many present-day jobs could be removed, and we’d have all the reason to improve, simplify, diversify, redistribute and generally make them more agreeable to start with.
Signal and Distribution
Money, in the form of prices on a market, can act as a way to allocate production. When supply is high, prices tend to drop, and this deters producers from further production. Inversely, high demand drives prices up, and attracts new producers. This is one way to manage the question of production, but it is not the only one. When discussing supply, demand and prices, a lot of people visualize a real-time scenario where these variables continuously affect each other. In fact, most prices are not set in this manner.
Let us look at a producer of sports souvenirs – shirts, hats etc. Each product is available for a number of teams, and the price will be the same. But the teams will not be equally popular! Some will sell better than others. These differences are usually counteracted by stock and production adjustments, not with price increases on the most popular team’s souvenirs. We can thus already identify a decoupling of the expected market forces, and can point out that such an arrangement could work entirely without prices, just by gauging demand and adjusting stock and production accordingly. 
An objection might be raised at this point; we may be able to adjust our production without price information in this isolated example, but how many items is it reasonable to produce? There might be a need for other things, maybe more important ones, as well. How do we prioritize?
While it is not the aim of this text to present a full-fledged alternative, but rather to point out that what we often see as inevitable is far from it, it might be worth hinting at how this could work. Before doing so, however, we might want to investigate how the production is currently allocated. First off, it is important to remember that demand in the context of a market is not simply a human need, but a human need that can be backed up by money. Specifically, this could for example mean that a rich person desiring some luxury good can signal a demand, while a poor person in need of food, medication or some other urgent and fundamental necessity cannot. But the consequences go far beyond such individual examples and are structural as well. Since money is not evenly distributed throughout society (doh!), and thus some groups have far more than others, these groups will have a bigger influence on how production is allocated within society. When there’s some specific product or company we have an issue with, we’re often told to “vote with our money” and go elsewhere with our business. This is an unwittingly honest assessment of the system, in the way democracy and money get mixed up. If a group of people voluntarily come together to resolve common matters, and we deem that democracy could be a useful tool to do so, shouldn’t it be one vote per person? Of course it should. But there’s nothing democratic about our economic system.
We’ve already seen that money is generally not a reward for performance in the current system. But even if we wish that this was the case, how would we assess the performance in the first place? Does the surgeon, who just saved a life, have a rightful claim to a larger portion of the social production than the miner that risked his own deep underground? Does the computer engineer, eagerly coding in a creative trance, have a natural right to greater material wealth than the librarian, who is partly on sick leave due to chronic pain, and for whom every work day is an endless torment? Why does household work, still predominantly performed by women, lack any value whatsoever? If we are primarily concerned with needs – which is what allocation should be all about – the current system leaves a lot to be desired.
Now back to the question of priorities, for which an answer has already been implied above. We already utilize tools such as democracy or consensus decision making in many areas of societal organization. There is nothing unique about the economy in this regard. What, how and in which quantities things should be produced ought to be the result of the different needs and preferences of those involved, and there is no better way to discern those needs and preferences than letting those involved speak up. Then we won’t risk producing golf clubs when we in fact need medicine, housing, schools or medical facilities.
This text has primarily dealt with money, which is just one part of what we know as the capitalist mode of production. Much more could be said about the detrimental effects of that system as a whole, but there is a time and place for everything.
Money is a materialized form of social power. It is part of a system that hides the actual relations in our society, and deprives us of the possibility to rationally allocate resources through deliberate community decisions. We’ve seen that our motivation for being creative and productive is not dependent on money rewards, but that such rewards in fact often hamper our intrinsic motivation. Human needs are entirely separate from our different economic capabilities and always vary between individuals, both qualitatively and quantitatively. Often, it is those that cannot accumulate much wealth that have the most urgent needs. Each and every one of us is their own best judge of how to contribute in a society, and what needs that ought to be fulfilled.
This is not just a matter of rich and poor. It is a matter of perceiving the social aspect as second to none, and creating a society for human beings, instead of human beings for a society¹. Can we imagine a society where decisions are taken democratically, by the people whom they concern, whether it is a matter of what to produce or how we organize our neighborhoods?
If we think we can, then I don’t think we need money. It doesn’t offer us enough to merit its price; our place as social beings in a social context.
1) An example from the US: The 40-hour work week of 1950 can be reproduced today in around 10 hours. However full-time workers work on average 47-hour weeks – which is more, not less, than they used to. What would people from 1950 say if they had the chance to jump to a hypothetical future where they could choose to work 47-hour weeks at an unknown, but better, standard of living, or work 10-hour weeks at their current standard? What would we say about the same alternatives today?
David Graeber – Debt: The First 5000 years
Daniel H. Pink – Drive: The Surprising Truth About What Motivates Us
Karl Marx – Capital, Vol 1
Ted Nace – Gangs of America [PDF]
 Interview with Noam Chomsky, September 2011, Oslo:
 The Left-Libertarian, Critique of Austrian Price Formation