Money – A Formula for Perceived Value, Reward and Punishment
In the first post of this series, I started by claiming that money doesn't exist, and proposed a new definition.
We will start our journey towards a new definition and understanding of money by claiming that money is just perceived value of the interactions of a given population of actors. A more formal definition will follow soon, but for now let’s look at the simple stuff.
If the perceived value of a given interaction is “high”, then reward ensues.
If the perceived value of an interaction is “low”, then punishment ensues.
Reward and punishment are not to be taken as physical, immediate consequences, but more like vested trust.
So when we say that “rewards follow high perceived value interactions”, we’re just saying that the involved actors are investing more trust in a potential continuation of that interaction, or in the population of actors in which that interaction takes place. Trust is vested both in the individual at the other end of interaction, and in the group to which that individual belongs.
Subsequently, if “punishment ensues” we’re just saying that the trust invested in a potential continuation of interaction, or in the population of actors in which that interaction takes place, will decrease. We will “spend” less trust in these areas.
As you can see, the base ingredient of perceived value is trust.
If in a given group the trust is higher, then the value of interactions inside that group will tend to be perceived as high. If trust dwindles, then the perceived value of the interaction decreases.
Even if, and I find this fascinating, even if, from an “objective” standpoint, interactions across groups are similar.
For instance, in an economy with a high level of trust, a certain item will be perceived as more valuable than in an economy with a lower level of trust. Houses tend to be more expensive in “developed” economies. If we compare two identical houses, one in the United States and one in an Eastern European country, the United States house will be more expensive.
There is no intrinsic value of a house, it’s just what a potential holder is believing it’s worth of.
A very simple critique of this assumption will come from traditionalists saying: “well, the house in Europe is cheaper, because the labor used to build it was cheaper”.
Hmm, but why that labour was cheaper? Why a worker accepted to spend the same time and energy on the same types of tasks as a colleague in the US, but at the end of the day he settles for less than the other one?
The answer is always a function of trust, no matter how deep we’re going down the rabbit hole of the economical processes. At every level, at every interaction, the reward / punishment balance is shifted by trust.
All the other metrics are subsequent to this trust vesting.
I’m not saying they’re not useful, these other metrics, like cost, labor, resources, etc, or that the “economy” with its rules and strategies is entirely false. I’m just saying it’s a form of learned hallucination, which tries to give meaning to the consequences of an everlasting flow of trust-based interactions.
The main modulator of money is trust.
If we go further and try to formalize these observations related to perceived value, trust and interactions, we may use the following formula:
Money is a function of Perceived Value over a Population of Actors, in a Continuum of Interaction, modulated by Trust.
PV for a PA = Trust / CI
in the next posts we’ll take them one at a time.
Initially published on DragosRoua.com.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
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Interesting post and I do agree with some of your views, but it seems that trust is overvalued in your presentation.
I don't know what EE countries you have had in mind, but in most European countries comparable houses are MORE expensive than in the United States. Even in some Eastern European countries to build a comparable house might be more expensive than in the US, as due to taxes materials and land are more expensive. In Central and West Europe also labour is either comparable or more expensive than in the US.
Trust alone does not explain why houses in London are much more expensive than houses in Newcastle.
interesting that you use the concept of "value" (as in "overvalued") to describe something. It might prove my point, at least partially: all value is perceived value, not "intrinsic" value.
Intrinsic value we both agree is a myth, but value is quite a strong concept, for example c value is ~ 299 792 458 m/s.
I think you are going in good direction, however concepts like trust and perceived value are not strong / well defined enough to build upon... a good theory.
Wow. This is great. Really love how you really explained the concept of trust in this your post
I agree with what you are saying so far!!
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I like what you write. Resteemed and up voted. ..
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Money is a Perceived Value that is accepted by a group of persons for the settlement of debts . It must be agreed by all for its to have value as a medium of exchange @dragosroua
Resteemed my friend
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