The Semiotic Theory of Money (1)

Article by Chris Waller 2012
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Foreword (2005)

I first published this short series of essays in 1992/93. They were a response to the catastrophic application of the tenets of Monetarism to the British economy, the resultant unemployment and social dislocation, the consequences of which persist even now. Much of their content is a criticism on Monetarism, the economic theory postulated by its architect and chief advocate, Milton Friedman.

Interviewed by the Financial Times (June 7th 2003), Friedman admitted that, "The use of the quantity of money as a target has not been a success." In light of Friedman's recantation, I now offer these essays once again that the ideas in them may be reconsidered.


The Quantity Theory of Money is insufficient for an understanding of the behaviour of economies. A further aspect of money needs to be considered, that is, it Quality. By examining money from a semiological perspective, parallels may be drawn between money and language. Money thus reflects the culture which gave rise to it, that is, not just value but values. Ignoring or suppressing the moral dimension of money corrupts the functioning of economies. The solution lies in a more 'articulate' money.

Economics is sometimes defined as 'the study of the production, distribution and consumption of wealth' and while economists have never been wholly satisfied with such a definition, it is a good as any. It could be argued that this definition might seem to restrict the subject matter to the positive aspects only, and indeed, it was this objection which in 1932 led Lionel Robbins, an economist of the English Classical School, to define economics as the science which studies 'human behaviour as a relationship between ends and scarce resources which have alternative uses. Within this definition it will be seen that the boundaries of economics with such disciplines as sociology and psychology are not easily fixed, but Robbins opined that the study of economics should be a scientific, logical process without ethical or moral overtones. This represented a significant departure from the study of economics under its old name of 'political economy' and as originally envisaged by the prime architect of economic theory, Adam Smith.

Smith held the chair of Moral Philosophy at Glasgow University from 1752 for twelve years and during this time lectured on theology, ethics, jurisprudence and economics respectively. His lectures on ethics formed the basis of his first book, 'The Theory of Moral Sentiments' and it was in the last section s of his course of lectures that he outlined the subject s to be developed in his later 'Wealth of Nations'. We should be aware therefore that while Smith can be regarded as a liberal thinker, and is championed as such by present-day economic 'libertarians', there exists a further dimension to this work which is in essence moral and illustrates his concern with the psychological and social costs of economic growth. Similarly, he cautioned against the motives of businessmen, lambasting them for their 'mean rapacity', 'monopolising spirit' and 'interested sophistry'.

What is clear is that Smith pursued the establishment of a socio-economic environment in which individual enterprise could flourish and be harnessed. While this has been the declared aim during the age of economic management (That is, post Bretton Woods) and particularly during the previous decade, the emphasis has fallen upon econometrics and its relationship to macro-economic policy - morality has ceded to mathematics. It is this loss of the moral dimension in economic thinking, I contend, that lies at the root of our economic ills and I believe that a solution can only be found which begins with a thorough examination of that bane of modern life, money.

It is inevitable that in any study of economics, an examination of money will play a significant part, and that likewise, a definition is required from which to commence any further inquiry. Money is defined as, 'a medium of exchange, a measure of value, a store of value and a standard of deferred payment'. I am unhappy with this definition since, while it tells us what money does and how it is used, it does so within the conceptual domain of economics and thereby leaves it within the economic frame, unavailable for a more extensive investigation.

It is for this reason that I wish to examine money from a very different viewpoint. With the ascendency of the Monetarists in the political sphere during the nineteen-eighties, money, or more precisely, the quantity of money, was the principal topic of discussion, being regarded as the sine qua non of economic policy. While I do accept certain of the monetarist tenets, I contend that the quantity of money is a necessary but not sufficient criterion for the effective functioning of an economy. Over the last ten years, the Treasury's record in economic forecasting has been less than spectacular despite the increasing sophistication of the computer models being used. This would suggest a fundamental failing within those models and it is most significant that during this same period the minds of many economists have been exercise by the thorny question just how the 'real' economy' - the manufacture of goods and provision of services - is linked to the financial economy. It is apparent that the raw 'quantity theory' of money is alone not adequate and that more needs to be known about the nature of money. To this end, I want to consider money as a language and thence to identify the consequences of this view upon the general functioning of an economy.


Semiotics may be broadly defined as the science which deals with signs, signals and symbols, and their use by creatures. It is at present a somewhat inchoate subject with many disparate schools of thought and practitioners. For this reason I shall work within a narrow usage of semiotics and definitions of its terms. It is not necessary to undertake an extensive and detailed explanation of semiotics for the purposes of this essay, merely to identify certain key points. A bibliography is provided for those who wish to read further upon the subject.

To begin to talk about semiotics we need firstly to consider the contributions made by two of its founding fathers, Charles S Peirce and Ferdinand de Saussure. Peirce, founder of the modern science of semiotics, first clarified the distinctions between the 'dyadic' structure of stimulus-response behaviour and the 'triadic' nature of symbol usage. Saussure, another pioneer of semiotics, further elucidated the human usage of the sign by the distinguishing of its two component parts, the 'signifier' and the 'referent'.

I have already used the terms symbol, signal and sign but before I proceed further I want to obviate any terminological confusion which might arise. I do not like the term 'symbol' in this context since it has emotive connotations, being frequently used about national flags, religious and political insignia - crosses, swastikas etc. I want to remain with the terminology of Saussure and use the term 'sign', not least because it can be easily associated with his subsequent dissection of the sign into its two component parts, the signifier and the referent.

The Dyadic Interaction

The dyadic event is an interaction between two or more entities, which as a simple stimulus-response structure, i.e.

A+B image

This type of interaction can be found operating from the level of sub-atomic particles up to the level of non-human communication. Every component of the universe is in interaction with every other, whether it be through the medium of electro-magnetic radiation or the force of gravity. The functioning of the entire physical universe can be understood in terms of dyadic interactions, albeit inconceivable in the number and complexity of their interrelationships. At a purely physical level, the dyadic interaction can be accounted for in terms of mechanisms which follow the usual rules of physics governing mass, velocity, time and similar variables. But what about non-human communication?

When a rabbit is frightened, it emits a noise which warns other rabbits within earshot of impending danger. Upon hearing this noise, the other rabbits will bolt for cover This type of communication is still simply dyadic, that is, stimulus-response. The rabbit cannot fake the 'panic' noise and upon hearing it, can do nothing other than run for cover. This behaviour is 'hard-coded' into the rabbit's brain and, as such, has allowed the rabbit as a species to survive. While it is a valuable, indeed necessary, tool of survival it is nonetheless barely removed from physical mechanism and the rabbit bolting under the stimulus of the 'panic' noise is not significantly different from a stone falling under the stimulus of gravity.

Though one can speak loosely of the 'language' of animals, this is extremely misleading since none of the natural communication of animals can be said to comply with the requirements of language in the human sense, that is, having a rule-governed syntax. Similarly, the various attempts to teach animals to 'speak - Rumbaugh's chimpanzees or Skinner's pigeons - while they may have imparted additional communication skills to the animals, did not give them language. All the communications which were observed could be reduced to a sequence of dyads, straightforward stimulus-response and bore no substantial correspondence with human language.

The Triadic Interaction

At some time in the last two million years of the Earth's history there arose a new phenomenon, an event wholly different in its nature to any which had preceded. It has been called 'triadic behaviour', the 'Delta Factor' and 'thirdness' among others. This event occurred in the evolution of Humankind and despite numerous diligent attempts to prove to the contrary, has not been found into be manifest in the behaviour of any other species. It is not necessary that this behaviour is unique to the human species but it certainly appears to be, and where it does occur, new possibilities come into being.

The triadic structure is that in which a sign 'A' is understood by the organism 'B' not as a signal, but as 'meaning' or referring to another perceived segment of the environment. For example, in my immediate environment at this moment is an object to which I attach the sign 'table'. Anyone hearing or reading that word, will now be able to envisage roughly to what it is I am referring, without having directly to experience the table. Diagrammatically, it can be represented thus:

triadic image

i.e. spoken or spelt.

This triad is irreducible and cannot be expressed as a sequence of dyads, that is, the speaker, the signifier and the referent form a unit whose three component parts are mutually interdependent and essential. It will now be seen from the structure above that a variety of new phenomena appear. Firstly, the diagram shows the triadic structure for the speaker, the 'sign-utterer', but in order for there to be any communication there must also be a 'sign-receiver'. We therefore move on to:

second triadic image

In this second diagram I have shown the lines of the triad as solid, indicating its irreducibility, but have shown the resultant communication in a broken line. With the dyadic event, there is no scope for misunderstanding, the stimulus-response mechanism is rigid, but in the triadic event, the communication takes place across an interface between the sign-utterer's triad and the sign receiver's triad. Such communication as does occur depends upon the degree of concordance between the sign-utterer's experience and the sign-receiver's experience. This type of communication requires firstly a translation by the sign-receiver (signifier to referent). It will be appreciated at this stage that there is ample scope for misinterpretation in this type of communication resulting from disparities between the experience of the utterer and the receiver.

For the species which crosses the threshold into triadic behaviour, there is, from a semiological standpoint, a greater difference between that species and a rabbit than between the rabbit and a rock. As I have said earlier, Humankind is unique on Earth as the species which made the transition into triadic behaviour and as such occupies an exalted place in the scheme of things. The species which remains with dyadic behaviour inhabits an environment, that is, a continuum of undifferentiated experience. But, the species which leaps into triadic behaviour inhabits a 'world' - it analyses its experience, differentiates the component parts and labels them in order to be able to consider them abstractly and ultimately manipulate them.

Part 1  Part 1b  Part 2  Part 3  Part 4


Chris Waller - Permission granted to freely distribute this article for non-commercial purposes if attributed to Chris Waller, unedited and copied in full, including this notice.

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