The Money is the Message
9th September 2022
The global economy is a biological system, and money is its nervous system. This is more than a mere analogy. Money is not just important; it is a system that conveys complex information that enables billions of actors to do what the world needs them to do in order to get what they want from the world.
As I wrote in Visible Capital, “At their core, economics and biology are the same science. And the actions observed by economists are, in essence, biological processes — organisms interacting selfishly with their environment in order to survive.” Money helps coordinate the actions of these organisms. It has always done so, but more forcefully and efficiently over the past few hundred years.
But money’s role is under question from several directions. Some question money’s ability to serve its original function. And some question the social cost of allowing money to continue to serve that same function — to serve as the preeminent driver of human action.
The price system is the information network that allows a complex economy to function. The first sin of socialism and other totalitarian systems is that, under such systems, prices (when they exist at all) are set artificially and so don’t reflect real-world conditions and preferences, hence such economies sooner or later (usually sooner) crash and burn. Semi-totalitarian wage and price ‘controls’ have the same flaw and suffer the same degenerative effect.