An old Sufi story tells of a long ago king who heard stories about an enormous and strange animal in a faraway land. He was curious to know more about it and sent his wisest men to learn what they could and return to inform him. His wisest men set out to find the animal called elephant.
After months of journeying they came to the land of elephants and were taken to see one. Now as it happened, these wise men, though the wisest in their land, were also blind. To learn about the elephant, they had to use their hands. They each made an investigation to their satisfaction, and then packed up and returned to their king.
After the long journey home, they were brought into the presence of the king to give their report.
The first blind man said, “I know the elephant; it is like the trunk of a tree. It is round and sturdy.”
The second blind man said, “No, that is wrong. I know the elephant and it is like a carpet. It is thin and leathery and flaps like a flag in a breeze.”
The third blind man said, “Dear fellow travelers, I fear you are in error. I know the elephant and it is like a long hose. It is tubular and flexible.”
The king was none the wiser, for each of his advisors had explored a different part of the elephant with their hands. One had touched the elephant’s leg, one the ear, and the other, the trunk. And so it is with money.
Economics & monetary theory
The authors of most economic books refer to money as if they had gone on a journey of research and are reporting as blind men who saw only one part of an elephant. For some, money simply is; no discussion is given about how it is created or destroyed. Such economists focus on the pros and cons of economic policies and political systems as if the type of money system, the whole elephant, were inconsequential.
For some, true money is only a commodity, like gold, that has value as a commodity in the marketplace.
For some, true money is a debit or credit – a statement of an IOU that can be transferred to others.
For some, true money is the accounting itself that lies behind debits and credits.
Humans tend to see issues as either-or propositions and then argue about why one’s point of view is correct. We set up an antagonist and defend our own idea against it. However, we cannot understand the whole elephant of true money when we operate this way.
Money is all of the above and more, as we will see.