Measuring money—the beer standard

-August 05, 2014

It almost seems as though 7 billion children agreed to pretend that sheets of paper and metal disks have extraordinary value and, therefore, can be exchanged for goods and services. Then, when an adult calls us in for supper, the Monopoly money reverts into paper and cheap metal like Cinderella’s horse-driven carriage reverts into pumpkins and mice.


There's nothing quite like play money.

I mean, isn’t all money play money?

Well, yes and no. Here’s a way to think of money that isn’t too far from the actual history of currency. We start out with gold. Shiny, yellow, rare, and not very reactive. It’s rare: the total volume of gold that has been mined consists of a cube roughly 25 m on a side. It’s shiny: gold doesn’t tarnish, its oxide forms a hard transparent shell around its volume. Silver tarnishes and iron rusts, so they’re not as good because that tarnish and rust comes off and you’re left with less of the good stuff. Gold sticks around.


Gold: I want it and I want it now.

At first, you and I exchange gold for stuff. But neither of us wants to carry around a scale and a tub of water to measure weight and density so that we can check quantity and purity. To make it easier, we have our gold converted to coins. The coins are stamped with a seal of authenticity that’s difficult to counterfeit and the edges are ridged so that we can tell at a glance if someone has filed off a little gratuity. Now we can exchange coins without worrying about them.


Coins scratch cell phones and make ESD. Who needs them?

Because the coins are heavy, it’s kind of a pain to carry them around. They bounce against our cell phones in our pockets and create ESD (electrostatic discharge). If we leave them at home, they can be stolen. So we store our coins in banks. The banks give us paper receipts for our deposits. The receipts are easy to carry so instead of paying gold coins for my beer, I sign over one of my receipts. This way, you can go to the bank and get your gold whenever you want. But why bother? You can just sign that receipt over to your hop growers and yeast providers without having to bother with the gold at all.

These bank notes are so successful that no one bothers to go to the bank and get the promised gold, they just exchange the notes.

Okay, it’s kind of a silly story. The banknotes are obviously currency, “legal tender for all debts, public and private.”


The real thing: People kill for this stuff.

This is where I start to get confused. You can’t take money to the bank and get gold or silver or iron or anything except a larger number next to your account number on a hard drive. We haven’t even pretended to be on the gold standard in over 40 years. So I read some books and figured it out.

What value does money really have? Well, shockingly, you can spend it and get almost any item or service you desire, including gold—just don’t try to buy it at a bank. The situation hasn’t changed much from when bank notes symbolized the existence of some gold equivalent stashed somewhere that we never visited.

In some sense, instead of being on a “gold standard” we’re on an “everything standard.” After all, circuits, beer, massages, scotch, transistors, vodka, books, wine, engineering, ale, and all the rest are no less arbitrary than gold. Some would argue the things in my list are far more useful than gold.

Ransom’s favorite beers—far better than gold. (photo by Ransom)

So, instead of being on a “gold standard,” money is based on a “beer standard” or an “everything you can buy standard,” take your pick.

There’s no fundamental difference between exchanging money for property than gold, it’s just a different standard, right? I mean, as long as we all agree to keep playing the game.

Loading comments...

Write a Comment

To comment please Log In

FEATURED RESOURCES