Money – A Formula for Perceived Value, Reward and Punishment

We will start our journey towards a new definition and understanding of money by claiming that money is just perceived value of the interactions of a given population of actors. A more formal definition will follow soon, but for now let’s look at the simple stuff.

If the perceived value of a given interaction is “high”, then reward ensues. 

If the perceived value of an interaction is “low”, then punishment ensues.

Reward and punishment are not to be taken as physical, immediate consequences, but more like vested trust. 

So when we say that “rewards follow high perceived value interactions”, we’re just saying that the involved actors are investing more trust in a potential continuation of that interaction, or in the population of actors in which that interaction takes place. Trust is vested both in the individual at the other end of interaction, and in the group to which that individual belongs. 

Subsequently, if “punishment ensues” we’re just saying that the trust invested in a potential continuation of interaction, or in the population of actors in which that interaction takes place, will decrease. We will “spend” less trust in these areas.

As you can see, the base ingredient of perceived value is trust. 

If in a given group the trust is higher, then the value of interactions inside that group will tend to be perceived as high. If trust dwindles, then the perceived value of the interaction decreases. 

Even if, and I find this fascinating, even if, from an “objective” standpoint, interactions across groups are similar.

For instance, in an economy with a high level of trust, a certain item will be perceived as more valuable than in an economy with a lower level of trust. Houses tend to be more expensive in “developed” economies. If we compare two identical houses, one in the United States and one in an Eastern European country, the United States house will be more expensive. 

There is no intrinsic value of a house, it’s just what a potential holder is believing it’s worth of.

A very simple critique of this assumption will come from traditionalists saying: “well, the house in Europe is cheaper, because the labor used to build it was cheaper”. 

Hmm, but why that labour was cheaper? Why a worker accepted to spend the same time and energy on the same types of tasks as a colleague in the US, but at the end of the day he settles for less than the other one? 

The answer is always a function of trust, no matter how deep we’re going down the rabbit hole of the economical processes. At every level, at every interaction, the reward / punishment balance is shifted by trust.

All the other metrics are subsequent to this trust vesting. 

I’m not saying they’re not useful, these other metrics, like cost, labor, resources, etc, or that the “economy” with its rules and strategies is entirely false. I’m just saying it’s a form of learned hallucination, which tries to give meaning to the consequences of an everlasting flow of trust-based interactions.

The main modulator of money is trust.

If we go further and try to formalize these observations related to perceived value, trust and interactions, we may use the following formula:

Money is a function of Perceived Value over a Population of Actors, in a Continuum of Interaction, modulated by Trust.

PV for a PA = Trust / CI

in the next posts we’ll take them one at a time. 

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