What money can teach us about social constructs
A lot of people, from all locations on the political spectrum, sneer at the idea that there are many genders. Are they right to do so?
Here’s an argument that they’re not. Assume gender is socially constructed. This is a pretty common view, and is notably to be distinguished from the question as to whether sex is socially constructed (I won’t consider that question at all). If gender is socially constructed, then we can get an idea of what it could be like by looking at other social constructs. If other social concepts seem to proliferate and play off each other the way gender concepts seem to have (think of the way the gender concepts available for self-identification increased on facebook in recent years), that would be evidence that those who think there are many and proliferating genders are on the right track. If they don’t, it’s reason to think those people are wrong.
Money is the most widely-recognised social construct. In philosophy, a go to work on social construction, John Searle’s The Construction of Social Reality, uses money as its go to example. And just put “social construct money” into the search bar on twitter to see people — rightly, in my opinion — repeatedly and recently fend off the idea that something’s being socially constructed implies it’s less real by pointing to the example of money. Money, then, is a great test case — let’s ask what money’s like, and see if that can help us with the more heated question about gender.
And here’s what money’s like: money is super super weird, entirely different to what we most of us think. To see this, let me concentrate on two central features ofmoney, at least as it has been understood by those who understood it since the beginning of banking in the 17th century: fractional reserve banking, and (later) financial derivatives.
You might think that money is something solid. It’s something you possess, like your books or your toothbrush, that you can do with as you wish. It’s gold coins, or at least notes that you can, or at least could back in the day, exchange for gold coins. For the most part, though, money is not substantial in this way. And if it were, it’s arguable that the economic progress that has so changed the life of mankind in the past several hundred years would never have happened.
Here’s a picture: you get given money by your boss and you deposit it for safe keeping in your bank account, so that it doesn’t get lost or wet or whatever. The bank takes your money, and puts it in its massive, very dry safe where it remains, well, safe. When you want it back, you go back to the bank, and the teller retrieves your money for you.
This picture is fundamentally wrong. Not only in the incidental details, like that your boss deposits the money directly, and you don’t get the self-same notes or coins back but just coins or notes of the same value. It’s wrong in that when you deposit your money you’re really doing no such thing. Rather, this is what happens:
You give your money. The bank keeps a small amount of it, but loans the rest out. That means that at any given time, a bank only has on hand a small fraction of the money it owes its customers (hence the name ‘fractional-reserve banking’). And that in turn means that if all its customers were to want to get their money back at the same time, they wouldn’t be able to: the bank doesn’t keep in reserve enough to satisfy a hypothetical situation in which all customers simultaneously asked for all their money. Banking works because this hypothetical seldom happens. But sometimes, and to mass collective horror happened: what is called a bank run (admittedly, our horror should be somewhat tempered by the existence of deposit insurance, but we need such insurance precisely because to deposit is, despite what we might think, to take a risk).
There are two immediate consequences of this. Say you receive your $10 salary. You deposit in on Monday, a fraction of it (say $1) is kept aside and a loan is made with the remaining $9 on Tuesday to person B. On Tuesday, you decide you want to buy a sandwich with your salary, and go to the ATM and withdraw the $10 credited to your account. You try to do so, and because things are normal and there’s no bank ran, you succeed. Now both you and person B are each walking around with some money, $19 — the money circulating (in one sense of money, economists use several) has increased by 90%! Money, it seems, has literally been created out of nothing. (I owe this example most proximally to Niall Ferguson, The Ascent Of Money, although you’ll find it in most any book about money.)
Except, not really. It’s created out of trust: trust that person B will eventually restore the money they own, at some time in the future, and trust that before that time not everyone will seek their money from the bank, and that in turn depends on trust that there are no disasters in the economic future, that the central banks can be trusted, and so on. If those conditions can be trusted to be met, what has just described can work, and work it does very neatly too: all this extra money in the system can be used for productive purposes, and so countries’ economies can grow faster than if everybody hid their money under their mattress.
So the first thing to note is money being created out of nothing, or out of trust. The second thing is that money only really virtually exists: it exists, one might say, provided there is no future bank run. It has a sort of weird, conditional existence (incidentally, cryptocurrencies also have this feature — one’s bitcoin balance is dependent on certain very unlikely events — 51% attacks — not happening in the future).
The story can continue. If the bank fears that person B won’t repay their loan, then they can sell the right to reclaim the money to some other lender. Say the bank had initially agreed to receive $10 on repayment of the loan (the original $9 and $1 interest). Worried about B, they might decide to sell it for $9, thinking that $9 in the hand now is better than possibly never getting the $10 agreed upon. The buyer is more optimistic about B: they think B will eventually give them the $10 back, and they’ll have made a smart $1 profit by buying that loan.
This can, and famously does, continue. The bank can in turn deposit the $9 they receive, it can be loaned out to someone else, and the first bit of our story can be replayed, and then so can the second, indefinitely.
We can make these endlessly complicated financial products derivative of an original source of actual money (which we can assume was received in return for some actual physical labour). These complicated financial products, and the money they engender, was a root cause of the 2008 financial crisis, one of the definitive events of our generation.
Here’s the point: if money is our paradigm social construct, then money is weird. It has this capacity to generate itself seemingly out of nothing, or out of all proportion to its underlying value, and at the same time has a sort of ethereal quality, as it is dependent on trust and predictions about the future.
Accordingly, if that’s what social constructs here, then here’s a response to one skeptical of the proliferation of gender concepts: that’s just what social constructs are! They’re these complicated things perhaps only distantly related to the flesh and blood work of actual physical labour and the wages thereof, and only distantly related to, say, actual physical characteristics.
So that’s the argument: if you think that gender is socially constructed, then you should think it’s like other socially constructed things. Our paradigm of a socially constructed thing is money, and money is strange: it seems to create itself out of nothing, defining itself against itself in a way untethered from reality. This doesn’t make it any less real, or indeed any less crucial an important concept in our lives (we are still living with the fallout of the financial crisis). And so if our gender concepts exhibit a similar sort of untetheredness and tendency to proliferate, that shouldn’t tell against them. It’s exactly what we should expect.
I want to end by considering one objection to this idea. Basically I’m suggesting that money should be a central philosophical concept, that attending to it can shed light on who we are in deep and important senses. You might think that’s just nonsense: there’s something fundamentally weird about trying to use our conception of money to draw deep conclusions about ourselves. Money is the epitome of shallow, you might think; it’s metaphysically light-weight, and not the object of serious theorizing. Humankind predated money and doesn’t require money, and money will die out when we die out (and indeed, we will arguably die out because of our lust for money; but that sort of consideration goes in a different direction to the one I’m considering here).
There are a couple of responses. First is to note that, as far as an objection to this as a piece of philosophical reasoning goes, it arguably falls short. Academic philosophy is simply full of people drawing conclusions about the nature of reality by attending to certain other, seemingly unrelated parts of reality.
It’s incredible common, across eras and across ideological divides, to make claims about the nature of some portion of reality by attending to another portion of reality. Thus Timothy Williamson, arguably the pre-eminent living analytic philosopher, thinks that everything always exists. I exist now, but I also existed in 2000 BC and I will exist in 4000 AD. The important difference is that now I am concrete, whereas at those other times I am not concrete. It’s not important why he thinks it (or indeed what it really means): what’s important is that he thinks this fact ‘impinges on matters of moral and emotional concern’ (Modal Logic As Metaphysics, p29). If I always exist, then perhaps I oughtn’t fear death so much. Similarly, since most everyone will agree that we should care about how our loved ones’ lives go while we’re around, then since for Williamson we’re always around, we should care about how our loved one’s lives will go once we die, because we’ll still be around, just no longer concretely so.
Again, the reasons for this are not important, and it is important to note that these are really asides from Williamson: his theory doesn’t turn on these thoughts. But they’re still there: considerations from the metaphysics of time impinge on the things we care about.
The same thing goes for arguably the pre-eminent living continental philosopher, Alain Badiou. He thinks matters of great political and personal import follow from the power set axiom of set theory according to which given any set of items, if you form the set of all its subsets, that latter set is bigger than the former set. Given the set, say, of Obama, Clinton, and Carter, you can form the set of its subsets as so: {Obama}, {Clinton}, {Carter}, {Obama, Carter}, {Obama, Clinton}, etc. The set of subsets is bigger than the original set.
Badiou loves the power set axiom (you could check out Being And Event, though it’s not exactly easy going). He thinks it shows how reality always exceeds our capacity pin it down: we think we’ve got a hold of something, we collect it together in thought and count it, and then poof, a new thing arises bigger than the original. And this always happens, not only in set theory, but also, for example, in politics: we think we’ve got a stable political order but the seeds of revolution are always there threaten to bubble out of it, like new a new bigger set bubbles out of a given set thanks to the power set axiom.
Again, the reasons aren’t important. Here’s what’s important: philosophers frequently make claims about matters of concern by examining the nature of these recondite areas of maths and logic. These are two perhaps extreme but certainly representative examples of how many philosophers try to think about the world.
And here’s my claim: money is more important than sets. If we’re going to be basing our ontology on some feature of the world, money is a decent feature, because it is so central to how we live. Money matters to us, and it matters so much it doesn’t seem much of a stretch to say that this mattering partly defines us, just as the capacity for language or the desire for food or sex matter to us and have been used to try to define us.
You might remain unconvinced. On behalf of Badiou and Williamson, you might point out that sets and other logical objects exist necessarily: that imparts on them a grandeur such that it’s reasonable to think about them when thinking about the structure of reality. Money, on the other hand, lacks grandeur: to repeat myself, it’s shallow and unessential.
I doubt this, though. I think a good case can be made for the claim that what’s definitive of humankind is, in part, that we use money. And I’m not entirely alone in this claim. The book Against The Gods by Peter Bernstein makes the claim that coming to understand risk lead to a quantum leap forward for humanity. By being able to quantify how likely future uncertain outcomes were, we freed ourselves from the superstition that the future was the province of God. But banking relies precisely on assessing risk, on planning against the contingencies of bank runs and defaulted loans. Money, the money of banks, one might say, is the social construction of risk. If the appreciation of risk is then a definitive part of modern humans, then money is a concept which one must understand to understand modern humans, and so deserves to play a central role in our attempts to understand ourselves.
That’s it, then. If both gender and money are socially constructed — and most people agree they are — then there’s some reason to think they are similar. Attending to the concept of money since the introduction of banking reveals something notably other than our commonsense picture of gold pieces of inherent value. We shouldn’t be surprised if attending to the concept of gender in the same way yields similar insights.
(This was written as part of a trilogy concerned with the philosophical light the concept of money, broadly construed, can shed on various matters of interest — see also this and this about respectively treating followers on social media as if they were currency, and treating famous arguments for markets as similar to some claims in social justice.)
