Is Money discovered or invented?
I recently watched the following video from the Foundation for Economic Education (FEE):
The video is ultimately about fiat money and central banking, but it opens by asking a fundamental question: Is money discovered or created?
The video’s narrator posits that money was discovered [00:23], using the emergent economy of a WWII prisoner-of-war camp as a primary example. In that camp, cigarettes spontaneously became the medium of exchange to solve the “double coincidence of wants” [01:24].
My Take: The Invention of Value
I find myself disagreeing with the “discovery” framing. I believe that money—as defined by Webster—is an invention designed to bridge the gap in valuing labor.
Definition: Something generally accepted as a medium of exchange, a measure of value, or a means of payment.
While FEE uses the prison camp to show “spontaneous order” [02:14], the prisoners didn’t “discover” the concept of money; they already understood how currency functioned from their lives before the war. They simply identified an appropriate commodity—cigarettes—to act as the vehicle for that existing invention [01:44].
Barter vs. Spontaneity
I suspect FEE leans into the “discovery” language because of their stance on state-controlled currency and the push for decentralization/Bitcoin [06:04]. However, calling it discovery feels like wordplay. The transition from bartering food and labor to using a medium of exchange is a human response to the need for efficiency.
Exchanges of labor and goods define human preference, but the mechanism to facilitate those exchanges at scale is a tool we built, not a law of nature we found.
Video Details
- Title: Who Controls Your Money?
- Channel: Foundation for Economic Education
- Key Themes: Spontaneous order [02:14], the Gold Standard [04:31], and the rise of Bitcoin [06:13] vs. Central Bank Digital Currencies (CBDCs) [08:12].
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#fee #economics