In last month's column, we learned that the money you thought you had in your bank account is not, in fact, there! Modern money, I wrote, is a fantastic social fiction. "Money," writes a contemporary Buddhist philosopher, "is a collective thought."

It is one of the triumphs of modern society to take a bunch of colored paper, intrinsically worthless, and declare it to function as "money." Modern money is indeed an impressive "collective thought."

One function of money derives from what we call the "double coincidence of wants." I produce economics lectures and you produce heads of lettuce. It is evidently difficult to directly trade one for the other, and we have to haggle: one economics lesson for 300 heads of lettuce. But barter trade is inefficient. The time spent haggling could have been spent producing (or enjoying leisure). Modern money solves the barter problem in an inexpensive way so we can more easily trade things we posses and value (lectures) for other things we do not possess and value (lettuce). Money also serves as a convenient way to easily compare the value of lectures and lettuce. Instead of trading one lecture for 300 heads of lettuce, we say that one lecture is worth $150/hour, and one head of lettuce is worth half a dollar.

It is one of the triumphs of modern society to take a bunch of colored paper, intrinsically worthless, and declare it to function as "money," a generally accepted medium by which to exchange our mutual production of goods and services. Modern money even allows us to trade our products over long distances: I produce lectures in Georgia but you produce lettuce in California.

And that's not all. Modern money also permits us to "store" the fruits of our labor for future use. When I produce lectures, you don't have to sit in my classroom, lettuce in hand. Instead, I convert the lectures into "money" (my salary) and store it in my bank account – and then I buy your lettuce months or even years later. Of course, money can "spoil" (inflation depreciates the exchange value of money) but so do my lectures, and so does your lettuce.

Modern money, indeed, is an impressive "collective thought." I like the philosopher's phrase.

But then he makes a mistake. Money, he says, is "now used to determine the value of our time;" money reduces to the "financial value in our interactions;" money has come to determine "the value of culture." This is wrong. It is wrong because these statements ascribe to money an intrinsic value. But, as we have seen, money does not have intrinsic value, only functional value. Money is a useful social fiction that facilities exchange of values, such as lectures for lettuce. Money is cheap, colorful paper – or ethereal records in banks' computers.

Valuation has nothing to do with money at all. Money merely translates one value into another.

Instead of  focusing on money, let us focus on people and the value they assign to their production and possessions. For example, money is  not "used to determine the value of time." Time has the value we assign to it. If I value an hour of time with my wife more than the same hour spent lecturing (for money), so be it. Money is merely a handy way of translating one value to the other. Moreover, focusing on money leads one to confuse total and incremental values. Forty hours of lecturing yield, translated, a certain monetary equivalent with which to acquire other goods and services. So do forty-one hours. The extra hour, the 41st hour, yields an incremental value of equivalent goods and services, consumed now or in the future, consumed here or elsewhere, indeed consumed in this generation or the next. Is the 41st hour of lecturing "worth" giving up whatever else I could have done that hour, such as spending it with my wife and children? You see, valuation has nothing to do with money at all – yet has everything to do with individual, personal assignments of value to time spent.

Neither does money deterrmine "the value of culture." A culture that prefers to spend an incremental hour watching an atrocious movie merely watches an atrocious movie. It's not the money; it's the mindset that we may wish to question. One culture values atrocious movies, another values contemplative living. Who is to praise or blame? In praise or blame we merely reveal our own valuation. But, certainly, let's not blame money, the translator of one value into another. Money is merely the veil. Behind the veil are the goods and services we value and wish to produce and to consume (such as lectures and lettuce). At the heart of our daily economic affairs is not money at all. At the heart is the ability to exchange what I have for what I need. Money is a useful lubricant; it is not the engine. The engine is our health, our education, our creativity, our ability to labor. At the heart is what we value.

And finally, a dig I won't resist: I am a PhD (philosophiae doctor) economist -- economists are philosophers, too.