Thursday, March 26, 2020

Because money makes the world go 'round

Bill Maurer, PhD, IMTFI Director, Dean, UCI School of Social Sciences explains money's many meanings, particularly amid the COVID-19 pandemic and times of crisis, in this piece for the Consortium of Social Science Associations (COSSA).

I often get asked questions like, “What is an anthropologist like you doing studying money? I thought that was the domain of economists!” The archaeological and ethnographic record is full of objects, texts, and records of promises humans have used for millennia to mark transactions with one another and figure value. It’s true that I enjoy working with and thinking about those objects, and among my favorite places are the money galleries in museums around the world and at the regional branches of the U.S. Federal Reserve. But the anthropology of money is more than an archive of the arcane. Understanding practices like bridewealth, involving objects like the tevau of the Santa Cruz Islands, can shed light on how contemporary money is far more than a neutral medium of exchange. This matters for product design, financial literacy programming, and macroeconomic policy, too.

Indeed, now that the world is in a global pandemic caused by the rapid spread of the COVID-19 virus, what people do with money and its technologies has acquired a new kind of significance. Although the virus apparently does not survive for long on fibrous materials like cloth and paper, reports have surged of Chinese and other officials ordering the disinfecting of banknotes to prevent its spread. The fintech industry conference organization Money 2020, promoting its (almost certainly to be cancelled) next event, proclaimed in an email that the pandemic would usher in the end of cash and the era of digital payments—despite the fact that most in-person digital payments (at your local take-out restaurant now, for example) rely on plastic and metal cards and point of sale devices, touched by many hands, on which the virus can survive for several hours. And in Kenya, the authorities are recommending all Kenyans use mobile phones to pay—about which, more below.

Economic uncertainty is leading many to horde cash, which may intensify a trend that had already been in motion given historically low interest rates—now even lower—and shifting behaviors related to digital payment. The Federal Reserve reports a steady increase in cash demand, despite a decline in cash transactions. Since the rich are putting their money in things like money market funds and CDs, however, this cannot be due to their behavior. With all the ways to pay via laptop, mobile phone or smart watch, why should the Fed need to supply banks with more and more banknotes? We found a clue in some recent research on young people’s use of budgeting apps like Mint. We set out to understand what financial literacy lessons—if any—such apps taught their users. But along the way we discovered that some of our subjects were withdrawing cash from the ATM on payday and stashing it away, because services like Venmo had made it so easy to spend the money in their bank account. Whereas, for me, the money in the bank is my store of value, for them, Venmo had turned bank money into current-use funds. Storing cash was a means of controlling spending. Cash is not dead or dying—its uses are just changing.

Read the full piece, courtesy of COSSA:

Why Social Science? is a project of the Consortium of Social Science Associations, a 501(c)(6) non-profit organization based in Washington, DC. Our goal is to share the benefits and contributions of federally-funded social and behavioral science research with the public and encourage its widespread use for tackling challenges of national importance. To learn more about COSSA visit #whysocialscience