Money is an Attention Allocation Technology (Part 4)
Asking yourself "What is Money?" is the 1st step into a philosophical rabbit-hole that could prove to be the most fascinating intellectual journey of your life…
The question “What is Money?” is deceivingly simple. One would expect the answer to be abundantly clear given its prevalence in daily life, but upon further reflection, most find money to be mysterious. Money is pervasive economic phenomenon, an interpenetrating field of energy influencing human perception, thought, and action. Yet despite the all-encompassing nature of money, its deepest truths remain hidden in plain sight. Here, we explore yet another answer to this curious question—money is an attention allocation technology.
Prices, Money, and Attention
“Freedom is not procured by a full enjoyment of what is desired, but by controlling the desire.”—Epictetus
At the intersection of supply (or satisfaction) and demand (or desire) we discover the price—a communication signal which (unsurprisingly) commands the most attention in the world! The price is a constantly adjusting appraisal of the social relevance, or value, of each and every thing available in the marketplace. It’s important to understand a price is not just “ the dollar price” as it ist popularly conceived. A price is a ratio of exchange between any two assets—the numerator and the denominator. Like language, pricing systems are tools humans use to rationally resolve conflicts over scarce resources, and to perceive the world.
Money-expressed pricing is an economic way to scale human attention because it reflects the results of human action in a single, actionable variable. Using money as a common frame of reference is one of the most effective ways to allocate attention productively, and peacefully. In mathematics, to add or subtract ratios (or fractions) a common denominator is necessary. The same is true in trade, and money fills the denominator role for exchange ratios. The numerator (the top number) is what you’re evaluating; the denominator (the bottom number) is your chosen frame of reference. Numerators and denominators can be chosen arbitrarily—you can price anything in terms of anything else. For instance, you could price apples in terms of oranges by asking “how many apples does it take to trade for an orange between two willing people?” But pricing in this way is a pain, and there are great economies to be realized by pricing in a common denominator—aka money.
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Money is an instrument that makes pricing less painful. By denominating prices in money (the most liquid asset) a virtually infinite constellation of exchange ratios are compressed into a single common denominator, or a common frame of reference. By using money, we can all “speak a common tongue” of pricing, so we can all allocate less of our attention to arithmetic, thus freeing our attention for greater focus on more value-additive activities. In this way, prices emerge to signal the dynamic interplay among aggregations of human desires and our capacities to satisfy them. Like actions, prices speak much louder than words. Whereas talk is cheap, prices communicate real risks being carried by real actors in the marketplace, as producers strive amongst themselves to best satisfy consumer wants—with originality, efficiency, and consistency. This is why the money-expressed price is a primary focal point for waves of attention washing through every market economy.
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Roughly speaking, prices signal to producers and consumers how to best to direct their attention in acts of production and consumption, respectively. Considering most of our lives are spent engaged in either production (work) or consumption (leisure), the price signal is of unparalleled importance in allocating attention toward those activities deemed most desirable by other people. Since we can look at most of the world through money (almost everything has a price), it is one of humanity’s most fundamental frames, or denominators. Pricing, denominated in money, is the system with which we allocate our attention toward those desires that most ardently seek satisfaction. This is why money and attention go hand in hand: precisely because money is used to direct attention! Anyone with a lot of money is effectively holding the potential to command a lot of attention toward the satisfaction of their desires. For these reasons, famous people tend to become rich, and rich people tend to garner at least some fame for their vast accumulations of wealth.
Thank you for reading Money is an Attention Allocation Technology (Part 4).
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This has been an excellent series so far. Thanks Robert.