David Dick

Abstract: "The Counterfeiting Problem"

Despite discussion from distinguished figures in the history of philosophy (Aristotle, Locke, Smith, and Marx), the philosophical question of how money gets its value has become underexamined of late. This paper divides the potential answers to this question into two camps. Advocates from the “backing” camp insist that money gets its value by standing in for another commodity that “backs” it. Against this view, advocates from the “functionalist” camp take monetary value to be held up by nothing more than a social convention that permits any given thing to function as money. After arguing that a functionalist analysis can overcome two fatal problems for any backing account, this paper points out that counterfeit currency poses a new problem for the functionalist account of monetary value. This problem could be solved by resorting to the backing view, but not without resurrecting that view’s insoluble problems. The counterfeiting problem leaves us with two unsavory options in understanding monetary value. The first is to endorse a kind of backing view to account for counterfeits, but thereby inherit the philosophical and empirical endemic to those views. The other is to endorse a functionalist account but thereby have to deny the possibility of counterfeits. While there is an asymmetrical dependence between the functional value of counterfeit money and the functional value of legitimate money, it seems that it is not one that can ultimately resolve this paradoxical result.