Letter: Money, machines and fundamental mistakes

Published in the Financial Times:

In his interesting letter (Letter, August 3), Konstantinos Gravas says that “money is a machine” and repeats the thought in several ways. To the contrary, money is not a machine. Financial markets are not machines. Economies are not machines. The mechanistic metaphor when applied to money, markets and economies is a source of fundamental mistakes.

All of these are complex, uncertain, recursive, reflexive, expectational, unpredictable, intertwined, interacting events, not machines. We don’t have a good name for these fascinating and often surprising worlds in which we live and interact.

FA Hayek in 1968 proposed the name “catallaxy,” to express that they are composed of ongoing exchanges, based on the Greek word “to exchange.” This did not catch on.

My suggestion is to name them “interactivities.” A key aspect of interactivities is that no one is outside them, looking down in divine fashion. Everyone, including central banks, regulators and experts of every kind, is inside the interactivity, subject to its fundamental uncertainty.