In 1875, British economist William Stanley Jevons93
demonstrated how money remedies the problem of the ‘double coincidence of wants’ which severely limits the bartering system: “The first difficulty in barter is to find two persons whose disposable possessions mutually suit each other’s wants. There may be many people wanting, and many possessing those things wanted; but to allow an act of barter, there must be a double coincidence, which will rarely happen.” In a barter economy, a transaction may occur when the supplier of goods A wants B and the supplier of goods B wants A. Money facilitates transactions as it provides more liquidity: the suppliers of goods A and B may sell to whoever and use the funds to purchase the product of their choice.
The concept of double coincidence of wants could also be extended to payment instruments. For two parties to agree to transact, they both need access to the same payment instrument. And the instrument used most widely is cash.
In fact, banknotes and coins have become a universal language. They enable people from different cultures and different societies to transact, to exchange goods and services and to communicate. Anywhere on the planet, the “meaning” of banknotes is understood, even between those who do not speak the same language.
Within the broad cash community, there are active and even passionate sub-communities. An internet search for “banknote collectors” yields 528,000 results. Other cash geeks include communities who monitor the circulation of banknotes by tracking the serial numbers. One popular site www.whereisgeorge.com
follows US one dollar notes, which feature the portrait of George Washington. At the time of writing, the most popular note was spotted 15 times in just over three years, travelling 4,183 miles. Almost 250 million notes have been entered into the website. While this site was created essentially for fun, its data has been used by scientists to draw conclusions about the statistics of human travel, independent of the means of transportation involved94
. These models are used, for instance, to predict the geographical spread of epidemics.
Cash also helps to create a form of social cohesion within society. The same notes and coins are used by all, young or old, rich or poor. In a way, cash creates a social network. And this is an open social network that does not require detailed sign-ups or any form of technology.
In 2002, the OECD brought together high-ranking government officials and business leaders in Luxembourg to debate the future of money. The conference had two key objectives: first to explore the relationships between new forms of money and technological, economic and social change, and second to consider the implications for leadership in the public and private sectors. The papers were published in The Future of Money95
. In the opening paper, Riel Miller, Wolfgang Michalski and Barrie Stevens warn of the social risks associated with new payment methods: “A profusion of new payment methods and issuers of money could have a perverse impact on social dynamism by further fragmenting and ghettoising certain communities and regions. More sophisticated and differentiated monies might be used to discriminate and reinforce the existing correlation between hierarchies of creditworthiness and social status. Under these circumstances there is the risk that the political legitimacy and ultimately the viability of the monetary space are called into question. Without careful attention to the governance of new transaction systems, there is an increased danger, already heigh-tened by the social dislocation of a transition period, of a political backlash against changes which are seen as undermining cherished symbols, like the national currency, without sufficiently opening up new horizons.”