Money and Its Economic and Social Functions: Simmel and European Monetary Integration

Article excerpt

JURGEN G. BACKHAUS [*]

ABSTRACT. This essay tries to put Georg Simmel's The Philosophy of Money into the context of current monetary discussions in economics. Part I looks at the contribution of Georg Simmel in context and offers remarks about the changing structure of economics as a discipline composed of many different subdisciplines. It is argued that Simmel is able to transcend subdisciplinary borders, to great benefit for today's scholar. Part III explains Heinsohn and Steiger's recent contribution to monetary economics in terms of transactions and property rights; although the contribution has been made more in the context of post-Keynesian economics, this is the only way to comprehend and integrate it into the mainstream of scholarly discourse. This examination shows that Simmel's approach, transgressing interdisciplinary borders, has merits even today. Part IV looks at the perplexing phenomenon of European monetary integration with a similar interdisciplinary perspective in mind. In this case, it is not monetary economics b ut constitutional political economy which is the unifying concept to explain the peculiar features of European monetary integration.

I

Money and Its Economic and Social Functions [1]

IN ECONOMICS, WE TYPICALLY EMPHASIZE three functions of money: money as a unit of exchange; money as a unit of account; and money as a store of value. However, there are clearly other functions which money can perform in an economy and in society at large. The issue thus arises as to how to deal with the particularly economic functions just mentioned and with the other functions within the same theoretical framework or, if different theories have to be invoked, how to delineate those different theories from each other.

I would like to give a few examples here of other functions of money. During a demonstration against the regime of President Milosovic, the angry crowd in Belgrave threw Dinar bills onto the street near the presidential palace, protesting with a currency which, like the government, had lost the public's trust. Meanwhile, the printing presses of the central bank were turning out new bills with even higher denominations.

In Tehran recently we noticed the disdain with which people treat their money. There are now six thousand Rials to the U.S. Dollar, with the most common bill being a five thousand Rial note. However, people do not quote prices in Rials -- the population has developed a parlance in terms of its own denomination of ten Rials or one Tuman. In oral dealings, all prices are quoted in Tuman, as if the general population were collectively ashamed and engaged in a cover-up of the inflationary policies of its religious leaders and government. At the moment, the highest denomination is a bill of ten thousand Rials, an otherwise attractive (and big) bill; when I first saw it, I wondered bow I would feel as the head of state to have my portrait favourably depicted on such a worthless bill. [2] When routine transactions require carrying valises of money around, the stage is set for strong sentiments toward money.

These instances of anger, shame, and pride are not necessarily and closely related to the basic functions awarded money in economic theory -- its use as a unit of exchange, as a unit of account, and as a store of value -- although, of course, they somewhat refer to these three functions. The function of unit of exchange is clearly impaired if valises of money have to be carried around. [3] When the population changes the colloquial denomination on its own central bank, this is clear evidence for the loss of its function the currency has undergone as a unit of account. Throwing bills on the street in protest similarly reveals a complete disappearance of the function of store of value. Yet anger, shame, and pride, while connected to the basic functions of money depicted in economic theory, go far beyond those matters discussed in economics treaties, having eminently economic but also social and political repercussions. …