The main objective of this paper is to discuss a complex and yet not taken in consideration global public good: money. Money is a social convention created and accepted by people in order to facilitate economic transactions, being a symbol, without an intmoney, global public good, social and psychological value

Popescu Alexandra-Codruta

English

Research Papers in Economics

517 
 
MONEY AS A GLOBAL PUBLIC GOOD 
 
Popescu Alexandra-Codruta  
West University of Timisoara, Faculty of Economics and Business Administration, Eftimie Murgu 
Str, No 7, 320088 Resita,  alexandra.popescu@feaa.uvt.ro, 0746.236.324 
 
The main objective of this paper is to discuss a complex and yet not taken in consideration global public 
good: money. Money is a social convention created and accepted by people in order to facilitate economic 
transactions, being a symbol, without an intrinsic value (fiduciary money). It is universally used and it has 
value only in connection with the products and services that can be acquired, based on people’s consent 
and their psychological acceptance. In other words, its value lies in the purchasing power given by the 
quantity of commodities and services that can be bought with money. The authority that warrants the value 
of money is the central bank by supervising the money in the economy. Moreover, money can be regarded 
as a continuum, a constant throughout history: changeable over time and yet the same, of vital importance 
in people’s lives.  
 
Key words: money, global public good, social and psychological value  
JEL: E40, H41, A14 
 
1. Introduction 
“Money is anything that is generally accepted as payment for goods and services and repayment 
of debts”. 
[1] Generally speaking, a global public good is a good that has three properties: it is 
non-rivalled,  non-excludable  and  available  worldwide.  This  means  that  any  consumption 
individual consumption does not reduce the quantity of the good available for consumption for 
other individuals and is not destroyed by over-use in any way.; that no one can be effectively 
excluded from using the good; and is non-rival and non-excludable throughout the whole world, 
as opposed to a public good which exists in just one national area. The first two properties of 
global public goods make this type of good hard to find (almost impossibly) in the real world, as 
there are no absolutely non-rivalled and non-excludable goods. But there are some goods which 
come close to defining these concepts. Recently, in connection with the context of globalisation, 
the global public good was brought forward, as an extension of Samuelson concept of public 
good.   
During history, as people began to become fully aware of the importance of money for their own 
survival, economic growth and development, institutions were created to manage and pass the 
necessary rules and regulations to grant stability to the financial intermediation process. The 
entire process was possible because money were always perceived as a particular “asset”: to 
society as a whole and to each individual as well. The strength of each currency reflects the 
strength of the public authorities that contribute to its creation (the central banks, the government, 
the society by its own economic behaviour and customs) as well as the strength of the economy it 
reflects. Besides its social value, money also bear psychological value for each individual, as they 
serve in facilitating the fulfilment of necessities, dreams, of all that people could need or want in 
their lives.  
Money may be seen as a global public good, because the concept has the same meaning and 
importance to everyone in the world, where all countries have their own money and benefit from 
them;  in  case  a  country  witnesses  difficulties  with  its  own  currency  it  is  likely,  in  the 
globalization context, that by contagion those problems are spread all over the world, causing 
crisis,  sufferings  and  hardship.  Obviously  the  financial  flows  move  freely  through  the 
international  markets  contributing  to  the  contagion  effect.  The  management  of  money  has 
become  nowadays  a  problem  of  global  interest  regarding  the  public  benefit  and  welfare, 
supporting the statement that money can be considered a global public good.     518 
 
I develop my arguments that money can be considered global public goods, as follows. Firstly, I 
briefly state the importance of considering money as global public goods. Then I review the main 
aspects  of  Simmel’s  work  on  the  axiology  of  money  from  its  two  perspectives:  social  and 
psychological. Finally, I suggest how some of Simmel’s assumptions have shaped forever, the 
study of money, from a sociological point of view.  
The paper concludes that giving the large range of impact that money has nowadays, all over the 
world, affecting communities, individuals - society, in general, - money is a global public good 
that  should  be  managed  by  a  global  authority.  The management  of  money  and  of  monetary 
policies worldwide is proven by the stability/ instability of national financial systems, which 
affect the global stability in the end, as proven by the current crisis. The crisis started in the US, 
and then through the contagion effect, the instability travelled overseas affecting other countries 
were in state of precarious stability. The support the IMF grants countries in need, is a reality in 
many countries whose money and stability towards imbalances and instability were very week 
and weaken by the crisis. This crisis emphasises how closely interlinked money and financial 
systems worldwide are, reason for which money should be treated as a global public good, whose 
turmoil could affect us all, financially, socially, psychologically.  
 
2. The importance of considering money as global public goods 
The first issue to be tackled in this  part of paper is the fact that no money in this world is 
controlled by a global monetary authority, authority that would perform the essential functions of 
medium  of  exchange,  store  of  value,  and  unit  of  account  at  the  global  level.  Some  money 
(currencies) used throughout the world such as Euro, US dollar, Japanese Yen manifest a double 
quality  being  both  national  money,  for  their  countries,  but  also  international money  used  in 
international trade and financial transactions. The exchange rates and the movements of these 
currencies have global impact and widespread effects, fact that supports the statement of the 
character of global public good that money have. Nowadays it has become a pressing thought to 
develop  a  monetary  institution  that  could  observe  and  control  international  money  and  their 
impact on other countries.   
Giving this situation, it is inevitably that national monetary policies have an impact at a global 
level, as they have an effect beyond national borders. Characteristic to globalization is also the 
ease of transport among various countries. Once in a foreign country, a non-resident is obliged to 
use the national currency of that country, and uses the benefits of the exchange rate, which is the 
relative price paid to acquire that money with its own. The correspondence between the two 
currencies is affected by both countries’ monetary policies.  
Even in the case of major currencies, monetary policies are thought firstly at national level, 
promoting  national  economic  and  financial  stability  and  interest.  Presently,  it  is  highly 
recommended that monetary policies are conceived regarding their international impact as well, 
when stability of the national price level is one of the most important objectives of monetary 
policies. According to this objective, monetary policies support sustainable growth and stability 
of the financial system.    
In this world, where the contagion effect has proved to be severe, as the current crisis has taught 
us, and for that reason, the economic and financial instability in some dominant economies of the 
world  spread,  affecting  the  stability  and  prosperity  elsewhere.  Recent  experience  proves  the 
importance which has to be paid to the international consequences and specifically to exchange 
rates, in the management of economic policies in the dominant economies with beneficial results 
for the countries in question as well as for the rest of the world.  
The international effect of the exchange rate mechanism is shown also in the latest cuts of official 
interest rates, in Europe, USA, and Japan, where officials used this method in order to send 
positive signals to the markets, encouraging the recovery of the financial system.   519 
 
A second issue to be referred when discussing about money as global public good, is the money 
used by countries for handling their external payments. The IMF has a paragraph on this subject, 
mentioning its support towards countries which experience difficulties with external payments 
and has the role: „To give confidence to members by making the general resources of the Fund 
temporarily  available  to  them  under  adequate  safeguards,  thus  providing  them  with  the 
opportunity to correct maladjustments in their balance of payments without resorting to measures 
destructive of national or international prosperity.”  
This paragraph refers to the assistance given by the IMF when a certain country encounters 
external  payment  difficulties  that  could  have  an  international  effect,  encouraging  the  open 
policies toward international trade and bringing public goods benefits to the global economy.  
 
3. Money a particular public good 
The  development  of  real  and  monetary  transactions  requires  a  stable  financial  environment. 
Although, activity is considered to be primarily private, in the modern world today, a country’s 
financial markets, its fiat money and real economy contribute all together in terms of assuring a 
most needed stability.  By postponing consumption and investing in productive activities, finance 
creates efficient substitutes for fiat money, and so a more appropriate allocation of economic 
resources between people, activities, and in time. Liquidity problems may arise when claim of 
fiat money is above supply, when financial contracts are not honoured, on time and failures may 
be  massive.  As  the  current  crisis  has  proved  only  the  market  forces  left  alone  do  not  lead 
automatically to the most efficient outcomes. Being a public good, money can also be under - or 
overproduced. Asymmetric information facilitates disequilibrium. Only a public institution may 
manage money and monetary policies properly in this case, because private parties would not 
have the appropriate means to do that.  
The mismanagement of money would then lead to the loss of financial stability, with negative 
effect towards the real economy, to an inadequate report between demand and supply. In contrast, 
appropriate management is the presumption of a healthy, stable financial system where there is 
an accumulation of wealth for all parties involved in an economic cycle - individuals, businesses 
and  governments.  These  processes  are  not  risk  –free,  and  money  can  easily  flow  to  other 
countries or parts of the world, in case a country does not have a healthy financial system. An 
important  characteristic  of  financial  system  nowadays  is  called  resiliency,  and  it  means  that 
public  monetary  policies  have  to  own  the  capacity  to  adapt  quickly  to  chances  in  the  most 
appropriate way possible, and lessening the harmful effects. 
Well  developed  countries  have  diversified  both  public  and  private  risks  enough  to  reduce 
financial losses to manageable levels. For emerging countries this process is only gaining shape 
and has not reached the resiliency necessary to face collateral damages in case other financial 
systems are experiencing problems. 
In order to fulfil these requirements, money as the raw material of transactions can be considered 
likewise. Money has three main uses:  
a) as a medium of exchange – the usage of money as an intermediary for trade, so as to avoid the 
inefficiencies of a barter system 
b)a unit of account – standard numerical unit of measurement for the value that goods, services 
and transactions have on the market. This property implies that money can be divided into small 
units without losing value, are fungible, have a specific weight, measure or size that can be 
verified.  
c) a store of value – saved money must maintain their predicted value in time.  
Money is a mean to an end, not an end in itself.  Money is used in order to achieve other 
objectives. Being an intermediate, not a final product, one can assume that money is not a public 
good, or a global public good.  520 
 
Nevertheless the use of money has an international dimension. For that reason, money can be 
considered global public good for three reasons: 
-Firstly, money is important to the international community.  
-Secondly, in this world of globalization, of money and monetary policies one should think in a 
national, but also international context, as they are closely interdependent.  
-Thirdly, emerging and already developed countries lately address this problem on multinational 
basis, as the crisis affects them all. 
Money  like,  Euro,  Dollar  and  Yen,  is  a  common  denominator  used  by  the  international 
community in order to fulfil numerous global public goods. Money can be considered a global 
public intermediate good or part of an infrastructure used in the creation of global public final 
goods. 
This  approach  of  the  global  role  that  money  has  contributing  to  the  fulfilment  of  multiple 
objectives  has  two  major  points.    All  the  countries  in  the  world  benefit  or  suffer  from  the 
stability/instability,  first  of  national  money,  and  secondly  of  currencies  used  in  international 
trade. Second, it is difficult to asses the effect that certain money thought at national level have in 
international context, as not all currencies have global impact.  
 
4. The social value of money 
Money  does  not  have  only  an  economic  meaning,  with  effects  only  on  financial  stability. 
Throughout  history  money  has  developed  greatly  reaching  a  very  complex  definition  that 
includes the effects they have on social level, for each individual. In order to analyze the impact 
that  money  has  on  society,  I  would  refer  to  Georg  Simmel‘s  work  (Simmel,  Georg  (1989) 
Philosophie des Geldes, 2nd enlarged edn. Frankfurt: Suhrkamp), “Philosophie des Geldes”. His 
work  brings  a  totally  innovative  perspective  on  money,  as  he  reveals  a  broader  social 
significance, as there is no social phenomenon in a modern society that has no link, with money. 
Simmel believes that the essence of money transcends the economic approach and it is important, 
when  thinking  of  money,  to  include  culture  and  society  in  order  to  fully  understand  their 
psychological  value.  This  is  why  the  value  of  money  should  be  analyzed  from  a  double 
perspective: both objective (at a non-individual level) and subjective (on individual level, value is 
distorted by believes, expectations, previous experience).  An interesting thought is the fact that 
throughout money the subjectivity can be eliminated, as there is nothing in the world that cannot 
be obtained (connected) through a monetary exchange relation. Each good has a subjective value 
towards individuals and can be measured in the strength of desire, of need that the individuals 
manifest, in obtaining that good.  
Money transcends individuals, they are perceived at a global range, as they affect communities, 
countries… they depict the world through the multiple social interactions they are symbolic to. 
Money has a double dimension: in itself (multiple ways of use) and for itself (a quantity of 
money grows to a certain quality).  
 
5. The psychology of money  
The value of money in this modern world grows to new and complex meanings: it facilitates 
relationships;  it  makes  possible  a  permanent  flow  of  goods  and  services.  Before  having  a 
psychological value (attributed for the goods and services that can be bought with them) money 
had intrinsic value (gold, silver), but now the substance of money has purely psychological value, 
being only a symbolic mean that helps people to buy whatever they want. Quality is thought now 
quantitatively.   
In connection to the world, the culture and the society of an individual, money is a source of 
freedom, of personal liberty. Money allows free movement of property, of capital, of labour, of 
goods and services, and leads to forming new relations, enlarging the circles of social interaction, 
in the end, attributing a monetary dimension to everything. Distance is potentially diminished as 521 
 
money are worldwide transferable, and yet is risen by the perception that people have on each 
other, when they are valued and themselves value others in terms of money and when the sole 
axiological criteria to analyze a relationship are gains or loses involved. In the modern world 
today, axiology leaves place to calculability. Things are treasured more that people are, monetary 
reason rules everything and intellect is a subject of commerce (has a price-tag), everything is in 
motion and driven by fluxes. 
 
6. Concluding remarks 
In conclusion, money is a complex issue that could be considered a global public good, as it has a 
worldwide impact on financial, social, psychological level. In this modern world everything is 
interlinked, and money plays a huge role in the global society, for there is no human action that 
hasn’t got, even a distant connection with money. There is a global market and money is the key 
to every transaction. The problem is that, these transactions involve multiple risks, which, if not 
properly managed, accumulate, and finally lead to crisis…personal, national, global. 
 
Acknowledgement 
I would like to acknowledge the help of PhD Professor Liliana Donath, from the Faculty of 
Economics and Business Administration, West University of Timisoara, in data collection and in 
commenting on early drafts of this paper. 
 
Bibliography: 
1. Camdessus, M. -  International Financial and Monetary Stability: A Global Public Good?, 
International Monetary Fund, Research Conference, Key Issues in Reform of the International 
Monetary and Financial SystemWashington, D.C., May 28, 1999 
2. Deflem, M. -  The Sociology of the Sociology of Money: Simmel and the Contemporary Battle 
of the Classics,  Journal of Classical Sociology  3, 67, 2003 
3. Schinasi, G. – Preserving Financial Stability, IMF, Economic Issues, No. 36, 2005 
4. Simmel, G. - Philosophie des Geldes, 2nd enlarged edn. Frankfurt: Suhrkamp, 1989 
   

International Financial and Monetary Stability: A Global Public

Philosophie des Geldes, 2nd enlarged edn.

Preserving Financial Stability,

The Sociology of the Sociology of Money: Simmel and the Contemporary Battle of the Classics,

MONEY AS A GLOBAL PUBLIC GOOD

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MONEY AS A GLOBAL PUBLIC GOOD

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