“Money, money, money…” sang Abba in 1976. What is it? It is funny how challenging it is to define. Is it those metallic discs clinking in your pocket? How about those strips of colored paper in your wallet? How about when you write a check? Is that money? What if you write on a napkin, “I’ll give you $10 on Friday.” Is that money? How about if we shake hands and I simply say, “I’ll give you $10 on Friday.” Is that money? Or is money the magnetic orientation of iron oxide molecules on that brown strip back of your credit card? Is it a stream of ones and zeroes on the hard drive of your financial institution’s computer? What is money?
Whether you consult economists or financiers, business school deans or directors of the International Monetary Fund, you’ll always get much the same answer. It will be something like this: money is a government authorized circulating medium of exchange that allows us to count and store value.
While that definition is basically true, it hardly tells the entire story. For a far more useful depiction, we should turn to the 10th chapter of William James’ The Principles of Psychology published in 1890. While William James, who in my opinion had a much more correct understanding of the human soul than Sigmund Freud, is not trying to define money, he is helping us understand the breadth of its impact upon our lives.