Posts Tagged ‘money’

As a management student, I was looking forward to the introduction class on economics. I was hoping to learn about money there, for two reasons. One was to satisfy my intellectual curiosity on how money became such a powerful force in modern times and the second was to find out how to make lots of it. I was disappointed on both counts.

1. Economics is not about money.

2. Money is not what this is all about.

Before you start abusing my education, you might want to check it out yourself. There are several books explaining principles of economics, including a good one written by the current Fed reserve chairman of the USA, Ben Bernanke. The topic of money gets introduced only in page 616.

Economics is about scarcity and choices.


To be precise, it is about how we try to satisfy our endless set of wants and needs with finite resources (skills, natural resources, time etc. ) at hand – in our role as individuals, businesses, society, countries and the world. We make choices. These choices have consequences.

The role of money in this is mainly as a medium of exchange; something that can be used to achieve your goals. It has no intrinsic value of its own. Its value lies in the belief that it is valuable to others; otherwise it is no more than a piece of paper with good artwork of (mostly) dead people. If you do not believe this, try taking your currency note to the reserve bank and asking them for something valuable, like Gold, in exchange for it. Or ask people in Zimbabwe who have to pay 160 million Z$ to buy a bag of potatoes.

Money is neither the beginning, nor the end of economic activity.

Then, what is?

All economic activity is a process with the goal of pursuing economic activity.

I am not trying to mock the system here, so let me pose a rebuttal to my own question.

If we do not engage in economic activity, what else would we do with our limited life time on planet earth?

The only incentive for the population of 6 and a half billion people on earth to engage in economic activity is the belief that

1. Their wants and needs are worth pursuing endlessly

2. Their wants and needs can be fulfilled with the finite set of resources available in the world during their lifetime

I guess the logic here is compelling enough for all the people on the planet to get out of bed every day!!!

It is this belief that has created skyscrapers out of glass and sand, cars with sunroofs, pills for gastric ulcers, hair dryers, mp3 players, scuba diving equipment, genetically modified tomatoes, waterproof watches and multi-port USB hubs, to name a few.

We didn’t really need money to make any of these. In fact, at no point in history have we ever needed it to create or consume the things we did.

We built this city on belief.

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