Money and Evolution

Abstract: 

We have previously focused on the business model as an organisation category for understanding the organising of humans around purposes / goals / outcomes. This explains that progressively over time the driver of human organisation becomes what is labelled ‘the economy’, a putative system focused on accumulating wealth in the business model of that era.

The modern business model depicts the method of ‘making money’ in the industrial era and onwards. Thus, the modern business model is already adapted to a commodity form organisation concept and at times this is a purely financial category. This already highlights that money as a commodity does not accommodate evolution at the species level but addresses the parameters and priorities of the business model. As already indicated, this ignores the species interests or recalibrates some species as expendable categories / phenomena.

It is not a new theme to address how money works in different business models, and further what issues are resolved by the particular form of money and what challenges are presented if any. It is also clear that money is not a measurement of an underlying value but an indexation of relative subjective value across space and time and involving multiple classes of commodity [product / service].

The intention here is to address money as a species variable and ask what evolutionary value it has in developing human organisation.

Historical

As said above we are considering money as an evolutionary concept, and there is a rich tradition of historical assessment of money dating back at least to Aristotle. This ‘history’ is a narrow cognitive activity selecting variables according to pre-dispositions defined by technical interest such as trade economics or even accounting. Sociologists and anthropologists have offered alternative insight, Mauss, Levi Strauss, Graeber.

Human time is dated in different ways as we are not all the same human in precise genetic terms. Thus, our antecedents were not homo sapiens but were a hominid of some form. Alden or Alvarado or Graeber go back 5000 years in his history of debt. They  make the argument that debt is older than exchange systems based on tokens / coins/ money. Mauss or Levi Strauss highlight the relationship of reciprocity that sustains ancient societies, and promotes the value of social bonds as underpinning any technical system of exchange.

These writers offer insight to pre-money systems primarily gift systems and debt. However, the relevance here is their analysis acts to introduce money in the exchange / reciprocity process of simple exchange/ markets. Over time more restricted and technical money systems bring the narrowness to human cognitive categories for exchange and markets.

Thus, money is not a way to account for energy and energy use, nor the sustainability of human organisation within a money system. Indeed, the money system increasingly disallows an expanding list of non-financial categories through law and fiscal / monetary policy management. Money does account for the species asset value but in a contextualised manner of the time space involved. Over human time this is a system that appropriates the species asset value to a subset of humans at the ‘expense’ of other humans and all other species.

For theorists of money who advise within the money system, money is treated as a technical variable and at present is dominated by monetarist / neoclassical thinking. These positions propose that inflation is the primary goal of the central banks who manage the money system. However, some analysis from White or Chancellor, suggest this is a error and that the prevailing thinking ignores the role of credit and debt. Irrespective of this debate these theorists reinforce that neoclassical, and classical economics do not treat money as a human phenomenon and thus do not assess its evolutionary value.

Money as part of evolution of the human organisation depicts the manner in which humans have chosen to devise methods of managing increasing complexity called civilisation. Money is embedded in the rapid expansion of the human alongside human cognitive function with language, writing, arithmetic and counting systems. This supports / stimulates the ancient empires, the European colonial system project under the label ‘civilisation’, the global gold standard and the dollar system. These innovations are central to facilitating greater use of some energy forms, increased capability and capacity from human social relations, investments in technology and collective infrastructure. A money system was necessary to support this development especially over the past 4 centuries accelerating in the 20^th century. It must be said that there were concomitant wars and global conflict through the 20^th and now 21^st centuries and these are part of that human organisation history.

It can be said there are many problems with money, but it is equally recognised money cannot easily be dismissed as un-useful or unnecessary. The proposition here is that we need methods of accounting that addresses human social organisation holistically and thus captures all our inputs and outputs if we are to have a means of measuring and sustaining progress. Money or an alternative system must therefore be aligned to the 4 Guidelines.

The Guidelines:

• SPECIES

• ENERGY

• CATALYST

• SOCIAL

Species:

A complex species such as the human requires effective ways to interact in relation to interdependencies generated by collaborating / sharing. Gift giving, debt and token systems enable this to develop. This basic organic social mechanism is stimulated by trade which requires more robust systems to sustain social relations across time and space. A reason for this mechanism is that humans are distinct individuals and thus while only viable as a species the mode of existence allows for solitary space and unique interpersonal relations. Thus, bonds must work at the individual level.

Modern [20^th/21^st century] organisations are included or excluded from the money system, rendering rewards differentially distributed. Within the money system rewards are differentially distributed raising issues of technical stability and also of social relations. As a species therefore the human produces waste and the money system is part of that production.

Some organisations attempt to reduce instability through alternative ways of rewarding, measuring and accounting. Voluntary organisations demonstrate the gift giving tradition in a modern society. In the 21^st century most developed and developing economies are beset with conflict around access to and the distribution of money. That reference to a voluntary organisation, indicates that irrespective of inclusion in the money system, all sociological phenomena, affect the overall human organisation.

The challenge is not to have no money or all organisations to be included in the money system, but to sustainably affect the species level impact for humans as a whole.

Energy:

Energy is the source of life on earth, as such money can only express how well we as a species perform in managing the energy available to us. The money system emerged with the homo sapiens as a dominant sub-species. Solar flux has been only recently addressed by humans as a source of energy for human organisation on earth.

Keen, Ayers & Standing [2019] demonstrate to us that energy is the only source of value, following Quesnay and to some degree Ricardo, the natural resources of the universe can be the only source of value. Quesnay and Ricardo in their own limited ways, attribute value to land. As Keen states, “without energy labour is a corpse, and without energy capital is a statue”.

Mill, Smith and Marx amongst others proposed the ‘Labour theory of value’ arguing that labour is the only source of value. This is the classical political economy argument of the late 18^th and 19^th centuries. Keen dismisses this because he argues capital over time creates a capability and capacity that labour does not possess, therefore capital must be a source of value. However, his overriding thesis is that both capital and labour are forms of energy.

The neo-classical argument and the Monetarist argument within that, is that only capital in the financial form creates value. They do not explain how the labour comes to exist or how the resources on earth come to be freely available and only the cost of discovery / harvesting is relevant. Neo-classicals, and Monetarists in particular, cannot explain much at all as their argument is totally dependent upon complete acceptance of the primacy of financial interests, which in themselves require historical explanation. Their models are completely idealist without reference to actual existing energy and social organisation. These assessments are also ahistorical and in that ‘labour’ is an historical category and is already defined by the money system. Labour generates value only within a money system. Labour is an ‘8-hour’ worker concept, but a human is ‘24-hour person’ concept. 

In simplest terms without the solar flux there is nothing to discuss as no life, especially human, would exist. The neoclassical production function [Cobb-Douglas] and therefore the money system cannot account for energy except as a marginal commodity that assumes away what it regards as externalities.   

The current business cycle expansion of AI and related tech sectors- data centres…are directly enabled through the abstract category of money in the form of debt. As Erald Kolasi points out there will likely be a catastrophic failure of the expansion phase resulting in new assets and possibly brands, but AI will remain. The crisis will likely result from the clash of rentier interests and physical limits generating social costs and conflict within the human social organisations of regions / nations and communities. The impact of AI on electricity and water costs to the public is severe generating outcries and demands for a rethink.

Catalyst:

The development of money systems follows the broader phenomena of gift and reciprocity but is particularly stimulated by and energises exchange. If we consider that these developments are facilitating exchange at local and contemporaneous points, and then progressively at larger temporal and spatial dimensions. The earlier systems have been regarded as systems of obligation through exchange of ‘products / perceived value’ [personal debt]. The modern version is a system of price equivalence / debt [financial] exchange, expressed in monetary terms.

There is no doubt money, as various authors indicate, Simmel, Hilferding, Schumpeter, McWilliams, is a technology / innovative mechanism that catalyses human organisation into a production system that for some is more productive. Hilferding goes further theoretically; by arguing money should be considered a ‘law of motion’ thus he is broadening the role and effect of money. Being more productive is harder to assess, as it is a marginalist / partial view, generated by the narrow confines of the money-exchange system. The epistemology of this position is corrupted by the failure to account for all energy dynamics. Smith and Marx both applaud the productive power of capitalism but fail to address that this measurement is a narrow one based on excluding potential energy use, including unused / under used humans or other energy sources, plus unmanaged pollution that is generated. Smith and Marx both acknowledge the deprivation caused through the land clearance / property based human organisation, but they also promote the productiveness of the industrial age and the forces of production unleased.

The modern money system is a political system, often referred to as fiat money, however, today it is also a digital system. Physical coin-based money is almost irrelevant and metal backed currency is theoretically no longer necessary. Thus, pure digital systems often referred to as cryptocurrency like Bitcoin offer an alternative, in concept. The progression to pure digital is a political question not a technical one. This highlights that the money system is a political construct and thus ideological.

At present fiat systems are predominant in relation to political control but innovation is not within control of the money system. The money system generates extensive instability and is beset with flaws and denial of accountability for waste and social pathology such as endemic and widespread poverty. However monetary collapse does not end innovation. Technology and innovative human organisation can overcome purely monetary failures.

The earth can supply sufficient resources to meet standards of living that sustain human life, but the human organisation of earth does not achieve this outcome, essentially due to the money system. Humans have solved material challenges creating productive capability. Productive ‘efficiency’ requires agreement on what the inputs and outputs are. Today this debate is corrupted by excluding many inputs and outputs. Money as a catalyst is like a narcotic addressing specific material goals in local spatial and temporal conditions. The money system is trapped in the cycle of highs and lows as a narcotic might affect a user.

Social:

Humans as a species are a social species in an ecosystem of species which are of varying sociality. This factor alone gives us an insight that is relevant to innovation and human organisation. The ecosystem is not a digital environment but an analogue one; it is a continuum of relationships it is not a collection of isolated objects and autonomous life-forms. This raises questions for the epistemology of AI thinking and the philosophical basis of theories claiming to envisage the future.

Thus, we require some form of interpersonal dynamic to facilitate commensuration of understanding and acceptance across populations to achieve effective outcomes that sustain the species. Since multitudes cannot be in the same place at the same time and therefore have the same experiences there must be a method of resolving these different experiences to allow some form of harmonisation and heterogenous order.

Gift giving, reciprocity and money systems have supported the increasing socialisation of the human population though facilitation of social organisation, primarily through obligation and exchange management. Money and monetisation intensify the segmentation of the population into those with property and those without. Land being the original property class and the landless being an expanding number engenders a direct conflict between the money system and the social requirements of the species.

Money displaces the trust aspect of gift giving and reciprocity. Thus, exchange is a legal and mechanical act performed by those legally allowed to do so. The token/ abacus / ledger is a method to establish a form of confidence, but it is devoid of trust. What is achieved is confidence that there is contractual law behind the ledger, this means that the contract can be enforced in law.

As Kolasi, highlights, people are asking who benefits from AI and related investment cycles. Private equity, banks and other private asset owners are generating mistrust in the model of human organisation as a result of the expansion of AI. This is challenging the role of money and the financial system.   

Concluding observations:

The paper does not advocate abolishing money; money has been essential to human development

The argument here is that that money has been indispensable in enabling:

• Civilisation as understood within historical limits

• Infrastructure appropriate to the commodity form of organisation

• Technological advance focused on increasing financial return and progressively less on useful value

• Globalisation as a means to expand accumulation of financial wealth

• Socialisation at a large-scale within this mode of organisation

The strongest practical conclusion is that modern financial systems account for only part of human reality. This makes the current money systems incomplete as a basis for human species advancement

They often fail to incorporate:

• environmental depletion,

• social costs,

• inequality,

• long-term sustainability,

• species-level outcomes.

Emerging technologies will increasingly reveal weaknesses in existing monetary and economic systems because no human organisation is a static asset not any attribute of specific technology, such as money. Thus, changes to the human organisation are embedded in the evolutionary dynamic as the species evolves.

Humanity's difficulties are not primarily technological but how humans organise themselves around incentives, ownership, accountability, and collective purpose.

What is a leader to do?

·         money is a means not an end, it is there to advance the species

·         think at system level; managers are responsible for the system and its enhancement over the longer term avoiding silos and narrow optimisation

·         energy is the primary source of value; abstract financial efficiency is close to meaningless as it achieves low resonance with humans unless enriching their lives and produces a constant stream of waste

·         trust is a high value human asset easily discarded by money systems in short term

·         measure what matters, not simply what’s measurable; money measures nothing, the money system is a construct with declining resonance

·         technology is not  progress it is a means towards progress. narrow interests cannot sustain progress and are usually consumed by catastrophic events

·         think in species and generation terms not business cycles

·         build for human capability

As communities we are richer' in many aspects of life over millenia. That history is one of constant paradigmatic change with expanding voices recognising that narrow interests are a social pathology that destroy the asset value of human organisation.

Communities are responsible for developing leaders and supporting those chosen. Passive participation in human organisation hides conflict and achieves low resonance leading to unhealth social relations and conflict. The leader is chosen by the followers, the followers choices affect the outcome as much as the leaders actions.

If we have a money system it should be supported by the whole population and serve the interests of the species over the long term.