Economics and the Social Meaning of Money

Jonathan Morduch

IN THE SOCIAL MEANING OF MONEY, Viviana Zelizer steadily takes apart the idea of fungibility — that a dollar is a dollar is a dollar. She argues that the notion that "money is a single, interchangeable, absolutely impersonal instrument" (Zelizer 1994: 1) fails to acknowledge the many ways that we separate, personalize, and earmark different sources of money. Zelizer shows how money received as charity is treated differently from gambling winnings, for example, or how money earned by husbands is often demarcated from money earned by wives, with different sets of expectations, obligations, and restrictions around how the money is spent. Zelizer demonstrates that money touches so much of life that studying the meanings we attach to particular monies becomes a way to gain insight into our relationships with others and our self-understandings; our views of what is permissible, regrettable, and admirable; our anxieties and aspirations; our biases and blindnesses; and where lines are drawn between necessities and luxuries.

Zelizer deploys archival evidence on approaches to earning and spending in the United States to challenge arguments — from Karl Marx's (1867) critique of commodity fetishism to Georg Simmel's (1900) depiction of the anonymizing role of money — that view market exchange mediated by money as inevitably impersonal and often depersonalizing. In this way, Zelizer positioned The Social Meaning of Money to enter a conversation in economic sociology around the market and society, an inquiry into the power and limits of the market system. Her evidence and interpretation, though, speak to a wider set of concerns. Approached from the perspective of economics rather than economic sociology, Zelizer's evidence can be seen as laying down a challenge to a different set of ideas — that is, depictions of household choice developed and defended in works such as Gary Becker's Treatise on the Family (1981) and related texts that became central to neoclassical microeconomics in the 1960s through 1990s (Bergstrom 1996). This was not Zelizer's intended target, but, with the passage of time, we can see how the frameworks square off against each other.

In this context, the evidence presented in The Social Meaning of Money can be redeployed as a critique of the way that fungibility was asserted by the Chicago school economists. The Chicago school canon builds a case for flattening various forms of conflict and differentiation within families, and it pushes away from focusing on differences in preferences as explanations for household choices. This flattening — and its focus on the roles of prices and incomes in determining choices — came to define neoclassical analyses of "the economics of the household" (e.g., Becker 1974, 1981; Stigler and Becker 1977). Here, The Social Meaning of Money plays a counterpoint not to the left but to the right. Zelizer's work shows that the assertion of fungibility may have been productive for Chicago school analyses, but it is not productive when trying to understand a broader set of questions about human relations and household choices.

Economists find two types of justification for assuming that money is fungible within households. The first stems from a view that differences in preferences within families are apt to be minor. As a result, for all intents and purposes, the household can be treated as if it acts with one head whose task is to solve a grand optimization problem encompassing all household economic choices. This is an empirical claim with important theoretical implications. If it is true that the household can be imagined as if it was a comprehensive planner with relatively stable and consistent preferences, the analytical focus can then turn to how prices and various constraints drive choices.

Stigler and Becker (1977) capture this spirit in the title of their article, "De Gustibus Non Est Disputandum" (there is no arguing about differences in preferences). Their position is that, in principle, differences in preferences — including those within families — may explain some choices but that, in practice, the explanatory power of such differences is usually far weaker than that of variation in prices and incomes. Once conflicts over preferences are removed from consideration, assuming the fungibility of money meets with little opposition. From there, it follows that the task for economists is not to spend much time on the genesis of preferences, nor on intrahousehold conflict, but instead: "On our view, one searches, often long and frustratingly, for the subtle forms that prices and incomes take in explaining differences among men and periods" (76). The view has been contested (see McCloskey 1993) but remains a core of modern microeconomics.

The second justification for asserting the fungibility of money in budgeting is purely practical. Fungibility is not the most hallowed assumption in empirical economics, but it is among the most useful — and economists are understandably reluctant to give it up. Invoking the fungibility of money makes much of empirical household economics possible — or at least far simpler. Once the assumption is accepted, economists can collect data from households composed of different strands of individual activity and then aggregate those data into sums...