What is Money?

This week on Planet Money, Alex Blumberg and company investigate exactly that question: What is money? Monday's podcast was especially illuminating, featuring economist, author, and Harvard professor Niall Ferguson explaining what money is.

The crux of his argument isn't that money is paper and coins, bank notes and IOUs. Money is a symbol, whether tangible or intangible, that crystallizes a relationship between loaner and debtor. Money is confidence in other people and society as a whole. It has exactly the value that society assigns to it and no more or no less. If tomorrow everyone in the world decided that all money was worthless, it would be worth exactly zero.

One of Ferguson's anecdotes was of an epiphany he had while studying the past of money. He found a clay tablet that had written on it a promise to pay a certain amount of wheat to whomever possessed it. He realized that this was one of the first instances of money; an otherwise worthless object that, because of what could be considered a "confidence trick," was worth so many kilos of a commodity.