Money is:

1. A measure of wealth

2. A medium of exchange of wealth

3. A means of storing wealth.

Positive economics can be defined as being about maximising the satisfaction of wants from scarce economic resources.

Normative economics is about moral issues such as the distribution of wealth.

Potentially positive economics has ‘right’ answers, solutions to equations. Normative economics is about human values and opinions. They may not be right or wrong, and whether they are good or bad is a question of judgement.

Value is real. The value of something depends on human goals and needs. Every life form has to make decisions about how to use its resources to maximise its wants (which is usually about growth, survival and reproduction. Ants have to decide how many ants will fetch water, how many will guard the hill, how many will fetch food, how many will explore etc. They value things in ant time.)

We’ve gotten clever and invented money to do the job for our society which most creatures decide in other ways.

But the general problem of economics - how to satisfy wants with scarce resources is a universal problem for every life-form. It’s always a crisis because we could always do more if only we had more resources. If the ants get it wrong some ants may die. If we get it wrong some humans will starve, die of disease, lose their shelter accomodation etc. Happens to several thousand every day unfortunately, but that’s still better than millions.

However, what’s a crisis for a million ants in an ant-hill trying to make everything work, is nothing compared to the crisis of trying to make everything work for 7 billion humans in a global society.

If the ants make a mistake, things get serious, for the ants.

If we make a mistake (and its so complex it’s hard not to) then it’s potentially a big problem for 7 billion people.

If the world transport, electricity, communications, GPS, systems stopped globally for just 24 hours tens of millions of people would die. (There’s one million people up in the air right now for a start). If they stopped for a week around three billion people would die. When food can’t enter the cities and the sewage system stops working people leave the cities. Then the deaths start.

Money is just one small part of an incredibly complex set of systems that keeps our global economy and society functioning, fed and clothed. It’s balanced on a razor’s edge the whole time, and getting more so.

If you want to know a little about how complex it all is, just research how the GPS system satellites keep time sufficiently accurately to enable planes to land on autoland. How time is kept on the internet and in space is mind-bogglingly complex. It’s just one tiny little thing we never worry about that enables everything else to keep running.

Money is just a measure of value and wealth. The real issues are that wealth and value need to be constantly measured and exchanged hundreds of millions of times a second to keep everything working. You can see this by watching the stock exchange. Or the bond markets. Or the way the price of petrol keeps moving up and down at the local petrol petrol / gas stations.

What is the value of a bottle of Evian water if you are alone in the middle of the Sahara desert? How much would you pay for it?

How much is that same bottle of water worth to you if you are in a small boat alone in the middle of Lake Victoria?

Yet the cost of getting that water bottled and transported to you is probably the same in both locations.

Value is a constantly shifting thing. Money is used in measuring and trading it.

As you carry that bottle of water into the desert it becomes more valuable with every stride.

Economics is about real world complexities and it is complex. The fact that we created money to help out, makes it much easier in some ways, but introduces additional complexities in others.

There’s plenty more in The Oracle about economics, money, and the like. Meantime I hope this helps provide a little insight.