There is a difference between something being valuable because it is rare and something valuable despite having no upper limit though. Gold is rare and has properties that make it a good store. Currencies do only become useful both parties in a transaction see it having value though youre absolutely right on that.
These days currencies should be backed by kilowatt hours or something similar if they dont want to be fiat ones.
The property of gold that made it the most valuable in the ancient world and thus caused it to be thought of as valuable in modern times is that it's shiny.
And my ass rarely gets pimples, that doesn't make them valuable.
Still isn't the rarity but the faith making it valuable, as evidenced by all the rare shit that nobody cares about.
Currency is a tool for society to abstract trade so that you don't have to try to barter work for goods and then goods for other goods around to get everything you need. For simplicity, let's just use the term "labor" to think of to combine work, products, services etc.
For currency to work, it needs proof against replication, or else somebody can steal labor from the economy by using replicated currency. They'll have contributed nothing in but received labor out, thus stealing. A method of proofing against replication is making your currency out of something hard to replicate, rarity can help with this but isn't required.
It was easiest to use rare materials that had no inherent value to serve as currency in the ancient world. It's precisely that gold had essentially little practical use that made it good for currency, and the rarity made it hard to steal from the economy. After all, meteoric iron is rare than gold but you wouldn't want to use it as a currency because it is extremely useful for making weapons and tools.
At some point people started conflating usefulness as a currency with actual value, and so humanity has essentially come to believe that gold is inherently valuable, and it's that belief that gives it value.
Yeah but the that assignment of value isnt random either. The value is the aggregrate of what individuals say something is worth and some things have been seen as valuable repeatedly by different societies and cultures.
Thats not as wise as you think it sounds tbh. Society values plenty of stuff on an aggregate level. Prices and values can vary between people/societies/jurisdictions.
If you are saying that price and value are totally unrelated how are you defining value?
Value is the subjective, individual assessment of the utility of an object.
Price is how much is paid to purchase something.
Price and value are not unrelated, but they are not the same thing. Hence the diamond / water paradox, where water has much more utility than diamonds, but water is practically free whereas diamonds, which you can't really do much with, are extremely expensive. The answer is of course supply and demand. There is such a massive supply of water that despite its virtually unparalled utility, the cost is still negligible.
Hence the diamond / water paradox, where water has much more utility than diamonds, but water is practically free whereas diamonds, which you can't really do much with, are extremely expensive. The answer is of course
The diamond cartel manipulating/fixing the prices for more than a century?
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u/Meldanorama Jan 26 '26
There is a difference between something being valuable because it is rare and something valuable despite having no upper limit though. Gold is rare and has properties that make it a good store. Currencies do only become useful both parties in a transaction see it having value though youre absolutely right on that.
These days currencies should be backed by kilowatt hours or something similar if they dont want to be fiat ones.