Where's Waldo?

We had an interesting discussion in the freshman seminar on the impact of the internet on the economy. We all see some of the disruptions– Uber and Lyft are causing major changes to the taxi companies, Amazon has done away with most brick-and-mortar bookstores (and many other kinds, as well), and the notion that you need to actually to somewhere in the physical world to buy something (that you will see, touch, and perhaps try out before you buy) is getting restricted more and more to items that seem oddly special for just the reason that you need to see before you buy. Even the paradigm of this, the car, is having buying habits changed by companies like Tesla.

We only touched on a more fundamental change in the economy that the computer and networking world is bringing about– the very notion of money. It wasn’t that long ago that what stood behind our currencies was a hot political topic– there were those who worried about currency that was only backed by silver, rather than by gold. The idea was that the value of money needed to be directly traced to some precious metal that the money represented. A $100 bill got its worth by being capable (at least in theory) of being exchanged for $100 in gold (or at least gold coins).

This notion was abandoned by most countries in the early part of the 20th century. What made $100 worth something is that someone else was willing to part with some set of goods and services in exchange for the bill. The final arbiter was that you could pay your taxes with such bills; the government always needs to be paid, so that kind of worth is a form of guarantee.

Now, the real money is just bits in a computer. Banks exchange the bits with each other, and we all hold our money in those banks, where they are represented as bits, and where we can transfer the bits via computers, or credit cards, or by direct electronic means. On occasion we exchange some bits for bits of paper (bills) that we can carry around with us and use to pay, but that is become less and less needed as we all become used to the notion of money as bits.

This can be very convenient. I was recently in England for most of a week. My ATM card could be used to get English currency because bits are easy to transfer internationally. But I didn’t need the currency all that often; mostly I paid with credit cards that were tokens allowing me to directly move bits from one account to another. I remember many years ago when I first went to England, and needed to worry about getting traveller’s checks beforehand so I would have money while I was there. Just not needed any more.

All of which leads to the question of what money is now. It isn’t a representation of a precious metal. It’s more a consensual hallucination that we all believe will continue to be exchanged for goods, services, or (as a last resort) taxes. But it isn’t much of a thing so much as a representation in the Internet.

All of which brings me to one of my favorite characters in this space, J.S.G. Boggs. Boggs became (in)famous for drawing complex pictures of obviously fake U.S. bills (he often put his own face on the bill), and then passing the art at the value shown on the bill. So if the bill showed $100, he would ask for $100 worth of goods (or change). Merchants were happy to do this, since the bills were worth much more than their face value (as art). But it drove the U.S. Secret Service (which has as part of its job the enforcement of anti-counterfeiting laws) somewhat bananas. The courts finally sided with Boggs, who claimed that the work was performance art. But it was also something that had value of a sort that, at least in the initial transaction, was not like other forms of art.

Things are getting more complex today. Bitcoin is hardly performance art, but whether or not it is currency is under debate. It appears to have value (although it fluctuates considerably), it can be used for payments, and is certainly causing some authorities consternation. How much it changes the economy is yet to be seen, but it will certainly have an impact no matter what happens.