The Philosophy of Money (1900; German: Philosophie des Geldes) is a book on economic sociology by German sociologist and social philosopher Georg Simmel. Considered to be the theorist's greatest work, Simmel's book views money as a structuring agent that helps people understand the totality of life.
Money and value Simmel believed people created value by making objects, then separating themselves from those objects and then trying to overcome that distance. He found that objects that were too close were not considered valuable and objects that were too far away for people to obtain were also not considered valuable. What was also considered in determining value was the scarcity, time, sacrifice, and difficulties involved in getting objects. In the pre-modern era, beginning with bartering, different systems of exchange for goods and services allowed for the existence of incomparable systems of value (land, food, honor, love, etc.). With the advent of a universal currency as an intermediary, these systems became reconcilable, as everything tended to become expressible in a single quantifiable metric: its monetary cost.
Money and freedom A fundamental point of The Philosophy of Money is that money brings about personal freedom. The effect of freedom can be appreciated by considering the evolution of economic obligations. When someone is a slave, their whole person is subject to the master. The peasant has more freedom, but if they are to provide the lord with payments in kind, such as wheat or cattle, they must produce exactly the item required, or barter it at a great loss or inconvenience. But when the obligation takes a monetary form, the peasant is free as to whether to grow wheat, or keep cattle, or engage in other activities, as long as they pay the required tax. Freedom also arises because money enables an economic system of increasing complexity in which any single relation becomes less important and thus more impersonal. As a result, the individual experiences a sense of independence and self-sufficiency. There is another sense in which money is conducive to freedom, and it originates from the observation that the owner is truly entitled to its possessions only if he takes care of its upkeep and of making it bear fruits. Money is more flexible than land or other assets, and thus it frees the owner from those activities that are specific to real entities. Since monetary possessions no longer ties the owner to a specific type of work, money leads to increased freedom. Consequently, monetary ownership enables the position of a purely intellectual worker and, by the same line of reasoning, it also implies that a wealthy man can lead a modest life. As for workers and managers, they only contribute work for wages and only deal with an impersonal market, and thus their personality is separated from specific work activities. In the case of civil servants, they are paid a fixed salary that is largely independent of any specific work performance, and see their personality freed from work activities. The same hold for artists, such as a musician who is paid the same fee regardless of how well he plays. Although the monetary system enhances individual freedom, it can also lead to consequences that are questionable. An employee does not necessarily have better living conditions than a slave does, as a precise amount of money corresponds imprecisely to its effective purchasing power. In a money economy, individuals will tend to put their financial interests above the goals of society or of the state. If a peasant sells his land even for a fair price, monetary freedom differs from the personal activity afforded by possession of the land. More generally, freedom from something does not necessarily equate with the freedom to do something else because money is "empty" and flexible, and does not direct the owner toward any specific activity. Although monetary payments can free from the obligations of specific in-kind contributions, it has also the effect of removing the involvement of the individual from a broader context. For example, when the Athenian vassal states had to contribute with ships and troops, the tributaries were directly involved in Athens's foreign and military policy, at least to the extent that drafted soldiers could not effectively be deployed against their home states. Once the military contribution was replaced by a monetary tribute, no such constraint could be placed on Athens's policy. The natural evolution of this state of affairs is that despotic regimes tend to favor a monetary economy.
Personal values Personal values can be quantified in terms of equivalent money amounts. An example is the weregild, the monetary value that must be paid to a family if one of his members is killed. The weregild was truly a reflection of personal values, in this case of a lost life, rather than the compensation for the income stream that the deceased would have provided to the family. Similarly, personal values are also quantified by the practice of marriage by purchase and of prostitution. However, the historical trend has been toward an increased awareness of individual distinctions whereas money is intrinsically fungible. As a result, money has been progressively considered as an inappropriate equivalent to personal values, and most of these practices have fallen into disuse. When these practices survive, the amount of money is so large that it introduces an affective element in the transaction. A wife purchased for an exorbitant amount is especially dear to the heart. Money is fungible and, as such, it stands in sharp contrast with the idea of distinction, according to which an entity is set apart from and incomparable with a majority. Distinction is a property of nobility, or of some works of art, for example. Simmel takes as a case in point the House of Lords, which functions as the sole judge of its members and at the same time refuses to sit in judgment of any other individual. In this sense, the Lords value distinction to the extent that even the exercise of authority on other people would be seen as a degradation. The quantitative aspects of money has the potential to threaten and debase the qualitative notion of distinction.
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