What Is Money? From Aristotle to Socially Responsible Investments

A month ago, I started working at a bank as a summer job. I figured it would be nice to see something a bit different. Indeed, I have never really been interested in the financial and economic world. As I study philosophy and literature, I thought it didn’t matter so much that I didn’t know about these subjects. But I was quite wrong, I admit.

In a very short time, I had to understand things I had never tried to learn. I was taught about bonds, hedge funds, macro-economy and how investors choose the assets they put in their clients’ portfolio. All of this was very new for me, but I was aware that if I wanted to understand better the world we live in, I needed to understand how the « money world » worked.

I realised soon that my main problem could be expressed in one single question: What is money? That is where philosophy gets involved, and it gave me food for thought. The nature of money is something that is really hard to understand, but we never question it although we use it everyday.

Aristotle wrote about the nature of money in the Nicomachean Ethics. He stated that money has three functions: it stores value; it is a measure of value and a medium of exchange. The interesting fact is that money is still defined the same way by modern economists.

Aristotle already identified that one of these functions was dangerous for ethics. Indeed, the fact that money has the capacity of storing value means that it is possible to grow a capital and to get richer. If getting richer becomes a goal, both the seller and the buyer want to generate a value-added product, which creates money from money. Money becomes a goal in itself, but it is only supposed to be a medium. Aristotle calls the accumulation of money chrematistics, and opposes it to economy. Indeed, economy etymologically from oikos (house) and nomos (rule, law), is supposed to be the art of maintaining a household. So in an Aristotelian philosophy, adding value to products only to get richer is opposed to economy (in its original meaning), where money is used for a good and necessary end. Aristotle goes even further: for him, chrematistics should be illicit because it leads to greed, which is opposed to moral self-improvement.

So the fact that money stores value is dangerous, but the fact that it is a medium of exchange might cause problems too. Let’s speak about currency for example. Currency works as a medium of exchange only if the person in front of you believes (just like you) that the piece of paper you give to them has value. It means that we believe in the value symbolically stocked in currency as long as people in the same society trust each other and moreover trust their state. Indeed, governments define currency, and their decisions can be more or less reliable.

What really gets my attention is that currency has no intrinsic value. If you give it to people in a society that doesn’t accept its symbolic value, it is worthless. Currency replaced barter because it was easier to store, easier to count and easier to exchange. But barter has other advantages: it is a direct exchange that takes place between individuals or concrete groups of people. The exchange is physical for the seller as well as the buyer. Contrarily, with currency, the seller receives a paper stocking symbolical value in exchange for what was bought, and that paper is supposed to keep the same value until it can be used to buy something else. But who knows if the value stocked in the banknote will still be the same after some time? Who knows if the next seller will recognize the banknote as valuable or not? Nowadays, we all think that currency is pretty stable and that we can trust what it represents. But it is becoming more and more abstract, and I feel like it doesn’t represent anything anymore. Digitally, in the traders’ computers, billions and billions are being exchanged everyday. Can we even grasp what a billion is worth?


More than that, the fact that money is becoming digital implies that we have no idea who we are exchanging with. Everything can be bought on the Internet and this is what our future will be made of. I think that we are losing the social value of exchange, the relationship that should be created between the seller and the buyer. There is something that sounds ironic about it, because we need to trust the money we’re using more than ever, as it is not physical anymore, but in the same time we have little regard for the value of trust, as we do not care buying things without having a concrete entity in front of us.

I think society gave so much power to money that people are starting to fear the economic future, because they know it is out of their control. It is known that in times of crisis, barter and other more direct mediums of exchange come back in the spotlight because people tend to trust easier in each other than in abstract entities.

Of course, even though Aristotle would cry about it, people want to make money. The world works like this. But more and more, we realize that accumulating money should not be considered a goal in itself, because it is absurd. Many studies concerning Millennials (the generation of people who were born between 1975 and 2000) showed that they are willing to direct their investments toward social and environmental good (as well as a little financial return). It is called socially responsible investments (ISR), and it keeps growing and growing. People still want to make money, but they also want to do it well. And it is already a good change of mentality. “A 2013 U.S. Trust report found that 64 percent of high-net-worth Millennials said that they were more comfortable investing in physical assets than stocks. Interestingly, despite their reservations and skepticism about stock markets, they are actually willing to accept a higher risk profile or receive lower returns to invest in companies that create positive social or environmental impact.”[1] Moreover, the Deloitte Millennial Survey 2015 found that “Millennials overwhelmingly believe (75 percent) businesses are focused on their own agendas rather than helping to improve society”.

I think the fact that our generation gives more regard to social and environmental issues shows that the greed feared by Aristotle might be overcome in the next decennials if we keep making small steps toward social consciousness. If we believe that we have the power to change the economic and financial trend by making our relationship with money healthier, we might build a brighter future.

[1] Millennials Will Bring Impact Investing Mainstream, J. Emerson and L. Norcott, Stanford Social Innovation Review, http://www.ssireview.org/blog/entry/millennials_will_bring_impact_investing_mainstream, 2014

The Dilettante