Unit 6: Indirect Exchange
In unit 6 we discuss the concept of money, and how it emerges on the market as a solution for the problem of coincidence of wants. We discuss Menger's concept of salability and why it is the most important property of money. We explain how money is different from all other goods in that its quantity does not matter. And explain how money helps us economize on our time: it increases the extent of the market, allows for complex economic calculation, and enhances our ability to save for the future.
Completing this unit should take you approximately 3 hours.
- Upon successful completion of this unit, you will be able to:
- Describe the problem of lack of coincidence of wants across its different dimensions.
- Explain why gold emerged as money during history using the concept of stock-to-flow ratio and its chemical properties.
- Understand why money's supply does not matter.
- Understand the difference between money, capital goods, and consumption goods.
- Explain how and why money raises productivity of human action, allowing for complex economic calculation and transferring value to the future.
- Explain why money is not a "social construct" or a "shared hallucination".
6.1: Money Lecture
- The reason humans need a form of money is so they can avoid having to trade things directly, which is massively inconvenient and economically inefficient. Individuals are unlikely to find someone looking to sell them the exact thing they are looking to sell. Money emerges as a market solution, not through anyone's planning, but through people's actions. Watch this video lecture to understand the dimensions of the problem of coincidence of wants.This is a concept that can be understood as a tool humans use to increase the productivity of their time. Topics covered include: The dimensions of the problem: across goods, across time, across scale, across space. • Why gold? • Gold's high stock-to-flow ratio • The emergence of gold as money historically • How money raises productivity of human action • Distinction between money, capital goods, and consumption goods. • Money as the good with the least diminishing marginal utility • Extent of the market
6.2: Money Discussion
- Since you have watched the video lecture for unit 6, it's time to watch Dr. Saifedean moderate a discussion on the unit's theme by addressing questions asked by your fellow classmates. As you watch the discussion unfold, take notes to help you retain information. Make sure you watch the entire discussion seminar video, otherwise you may skip over important points. To get the best learning experience and mastery of the major concepts covered in this unit, you'll want to watch all videos in their entirety,
6.3: Money Review
This resource contains a summary of some of the key concepts discussed in unit 6. Don't skip ahead - the information on this page is easier to understand if you have watched the video lecture and discussion seminar video in their entirety. Bookmark this resource to keep it handy during studying.
Consider these two phrases:
- Money is a social construct
- Shared hallucination
What is wrong with these statements? Given everything we have learned about money, compose a 1000 word essay explaining what is wrong with these statements. You will post your completed essay in the next section.
This activity does not count towards your grade.
- Money is a social construct
- Post your finished essay here. Make sure you respond to another student's essay.