Money    What is value? How do we measure it?

Citing the great italian professor Giacinto Auriti, value is the ratio between two different time phases.

As a pen has a value because I foresee to write with it later or a knife has a value because I anticipate to cut, money have value because I foresee to buy. The value therefore is the relation between the time of the forecast and the time of its implementation.

From the above description we understand that value it is not built in the good itself but instead it is in the forecasted utilization. Therefore value is not a three dimensional form or space. In order to have value I have to introduce a fourth dimension which is time.

Often we confuse the object with the subject which means we confuse the matter with the person using it, as if an object would have a soul or persona. Mistakenly confuse the two will cause great damage.

It comes now the question of measuring value.

Money are widely accepted to “measure value” or wealth as Aristotele already defined few thousand years ago. However in every phrase there are always two meaning: the first is the explicit one and the second the implicit meaning.  If money is measuring value than what is the value of money? As in every measuring unit the unit itself has the quality of the thing it measure: the kilogram has the quality of weigh, the meter has the quality of length and so on. Are money possessing the quality of wealth? Money themselves are only paper or most of the time is just a numbers in a computer. Money start to have value because we all agreed for them to have it and by accepting them at the moment of the emission.

We are inducing value to money by accepting them or otherwise they will be worthless.

Once gold was used to backup paper money. Since 1971 this is no more but as we have seen, it is now our “faith” that other people will accept paper money that induce them value.

Once we accept this it make no difference for all of us to have in our pocket 10g of gold or two pieces of paper money. By defining the value of money as a legal value, it is as if we had made the discovery of a goldmine, which can be exploited without cost.

That is why there is a saying “that a state cannot pursue its aims because there is no money, is like saying that an engineer cannot build roads, because there are no kilometres.”

But what happen is we confuse money with credit?

Follow on the next post about Money.