What EXACTLY is money ?

We have all heard this countless times, “Money is not everything”. All right so it is not everything. But it is definitely something. Unfortunately we don’t adequately understand what it is. And this incomplete understanding often comes in the way of making Money and enjoying it.

So what IS Money then? Well, here is one viewpoint.

To begin with, it’s a medium of exchange. When we say that apples cost 60 rupees a kilo and oranges 30, it means that apples are twice as expensive as oranges. Money offers a facility to compare the value of various goods and services. Or if you get paid 10,000/ - rupees a month for working, that is the exchange value for your labour. So far so good. But then what is a rupee? And why should apples be 60 and not 120 (or 10) rupees a kilo? Who decides the price? Now this is a more complex situation.

To say that price is determined by the demand-supply situation is only a part of the answer. The remaining part is that Money also represents a store of value. So we can say that ,at a time and a place, (say today in bangalore) apples have twice as much value as oranges. In other words, at a certain point of time and in a certain place, human society perceives twice as much value in apples as in oranges. The relationship between apples and oranges may be different in another place, say kashmir, where apples will be cheaper than oranges.And the important phrase is the perception of value by society. For in the end, Money represents the perceived value of human effort. This effort can be in terms of manual labour of the person digging holes, or mental labour of the programmer writing code or the acting ability/ effort of a film star.

Some other, not so common, examples of Money representing the perceived value of human effort are

· The value of an artist’s work. Now while you may not like MF Husains style, remember it is the “perceived” value.
· The value of an idea or brand (think of Bill Gates) · High salaries of business managers. Their effort is to manage companies.
· Stock market gains are value for risk-taking effort.
· A car priced 5 lacs represents one year’s salary for someone.

So now, coming back to the apples, if I get paid 60 rupees an hour, I am exchanging one hour of my labour for the apples. Or, to put it another way, when someone steals your Money, or cheats you, what the thief is actually stealing is your effort. If I am paid 10,000/ per month and a thief steals that amount from me, it means that he tricked me into working as a bonded labourer for him for a month.

Money (and wealth) therefore are an indication of the contribution one makes to society. I am talking legal money making here. So that’s what Money is. Now would you like to make a small contribution to society or a big one?