Why does paper money have value?
In: 0
Just to add a bit to the other answers. Money has value “because we say so” is kind of true but also kind of misleading.
It can make it seem like money is this strange special thing that depends only on people agreeing to make it work. The thing is, that’s how *most* social systems work. For example, laws don’t have any physical existence, they work because enough people agree to follow and enforce them.
But there’s more to it than that – people agree that money has value because it’s *really useful*. Most people, governments and institutions think it’s in their interests for money to continue having value, and that’s a very powerful force. To roughly quote the economist Adam Tooze, money is “backed by everyone who matters”.
It’s generally only in very difficult circumstances when this breaks down.
Latest Answers