“(…) until we fully understand the origin of financial species, we shall never understand the fundamental truth about money (…)”

Niall Ferguson, The Ascent of Money: A Financial History of the World, (London, Penguin Books, 2009), p. 362.

Indeed, money and finance have been linked very closely to each other throughout history.   Ferguson (2009) gives a useful account this connection from a historical and  evolutionary perspective throughout his book.  He sees this connection natural and (perhaps) inevitable. Therefore, he uses the two concepts interchangeably in the book. The title of his final chapter is Afterword: The Descent of Money.  Yet, he feels the liberty of using ‘finance’ as a synonym for ‘money’.

“Still, I might equally well have paid homage to Charles Darwin by calling the book The Descent of Finance, for the story I told is authentically evolutionary.”

Ibid, p.362.

My arguments in this blog will be twofold.  First, an ‘engineered evolution’ has always been possible, and this is a good thing.  Second, finance is much more than money, and that this is a good thing, as well.

I am using the term engineered evolution in the sense used by experts of molecular biology and genetic engineering.   Although technological advances made biomedical genetic engineering possible only recently, financial history is full of interesting examples of economic genetic engineering.  Ferguson (2009) can be read via this lens, almost readily.  Of course some mutations have failed while some succeeded.  Yet most of them were deliberate innovations aimed to address the economic problems of their time.

Secondly, finance being broader than money, has been acknowledged by many economists, in fact early on.  It seems very likely now that technological advances of today will facilitate further both the development of finance and the development of money, in many cases distinctly from each other.  The gradual unbundling of the two will thereby be driven by technological change.  I see this unbundling as a deliberate and healthy process and will dwell on its benefits in my future remarks.