What’s economics? There are two answers. One is it’s the sphere of human activity encompassing the production and distribution of goods and services, which has sometimes been referred to as provisioning. This is quite a lot but not everything. It includes meditation classes but not meditation, making and selling binoculars but not bird-watching, etc. The problem is that it includes so much of human life that it is barely a delineation at all. From this perspective farming is part of the economy, and so is shopping for food, cooking the food at home, and even piling some of it on your plate. It’s a matter of debate whether eating the food should qualify as economic, not to mention the trip to the toilet sometime later. (I think the answer should be yes to the toilet part.)
Then there’s a much narrower conception that confines itself to just the money economy, things that are produced for sale, paid labor, and money congealed into financial assets and obligations. This is largely what mainstream economics is about, although it claims to be about human well-being in a much more encompassing sense, using welfarism as a bridge between the empirical world of markets and the putative substrate of “utility”.
In the end, the reason for attaching a label like economics to some portion of human activity is practical: to guide a division of labor that allows us to balance the demand for specialized expertise with the need to remain aware of the interconnections that matter in real life. I suspect the line ought to be drawn differently for different motivating questions, different types of societies, maybe even different individuals and their intellectual skills and backgrounds.What I want to suggest is a way of thinking about the relationship between these two conceptions. Think of the money economy as the fungible component of provisioning. That’s what money does: everything that’s exchangeable for money is exchangeable for everything else with this same property. The non-monetary economy is not fungible; there are limited options for parting with some elements of it for more of other elements. Restaurant cooking is part of the fungible world. I can spend more money eating out, or I can save up and buy a camera, or piano lessons or a savings account that allows me to eat out more ten or twenty years from now. Cooking at home is only slightly exchangeable. I can cook less in order to do something else with that particular bit of time, but unless I use the time to acquire money the number of things I can exchange with cooking is limited.
So how much does fungibility matter? The one thing fungible goods do have going for them is a range of choice, since if you have any of them you can exchange them for others. Otherwise there is no relationship between how fungible an activity or good is and how important it is to my well-being. Love is right up there at the top of values, and it is famously nonfungible: money can’t buy me love. Some environmental impacts are fungible, some aren’t, since the interdependent character of ecological relationships sets severe limits to the notion of chopping the natural world into pieces that can be managed through generalized exchange. Political goods, like freedom and democracy, aren’t fungible at all. Health? In some ways yes, in others no.
An important consideration is that fungibility matters more the more widespread it is. In societies where only a very few goods and services are exchanged for money—which means most societies in most periods of human history—the money economy plays a relatively small role in human well-being and the dynamics of social change. The increasing extent of fungibility as a core characteristic of modernity is equally why the money economy now matters much more to us. This is an important consideration in debates about the role of GDP growth as a guide to economic and social policy. It is objectively true to say that monetary measures of prosperity like GDP per capita (or better, median measures of money income or consumption) are vitally important today, because a large portion of what people need is part of the fungible universe. It is also true, however, that many essential goods are still not fungible and will probably never be, so a fixation on monetary indicators is a serious mistake. Access to higher levels of money income matters more to nearly everyone in the world than was the case in former times, but it’s still not everything—not even close.
I’ve thought about this in connection with child labor. Even before the rise of child labor “protagonism”, that opposes efforts to eliminate child labor in the name of respecting children’s agency and opposing eurocentrism, I encountered resistance to the notion that children should be in school rather than working full-time at home or in the fields. By trying to reduce child labor I was advancing the monetary economy over the competing claims of the traditional economy of household and kin, of the intergenerational transmission of culture and knowledge through joint work, of self-provision. And it was true. But when I thought about the world these children would be living in over the decades to come, it seemed clear to me that enough of what they needed for a good life would be in the fungible realm that lack of education would mean a lifetime of deprivation. That isn’t true for each single child, but it will probably be true for the vast majority. Seeing the matter in purely monetary terms is simplistic, but still seems to me to be the proper starting point.