Nobel Prize Winner John Nash Talks Money at Smith Alumni Event

Even Nobel Prize winners sometimes struggle with the tools of the digital economy. I'm not quite prepared for the actual technology here, Dr. John F. Nash, Jr. joked, after having some trouble with the Frank Auditoriums projection system. Nash, who was awarded the Nobel Prize for Economics in 1994, spoke to a packed auditorium and three overflow rooms on October 14, 2004, at the University Alumni Associations Alumni College event, held in Van Munching Hall, home of the Smith School of Business.

Nash's audience of alumni, faculty and students were treated to a scholarly discussion of Ideal Money and an overview of its long and interesting history as a medium of exchange.

The Dismal Science
Nash reflected on the bad reputation money has acquired throughout history. Religion and philosophy generally regard money in a negative light, according to Nash. Money is associated with sin and evil; Judaism, Christianity and Islam consider the lending of money at interest usury; and wealth is seen as leading to the temptations of greed, avarice, selfishness, and an absence of charity, Nash said. The association of currency with the clearly mundane and possibly unclean has affected the popular view of economics as well. Economics has been called the dismal science, said Nash.

Nash made the argument that money is a good thing if used for the common good. It is money as a means for the transfer of utility in which Nash was interested.

Money, Utility and Game Theory
Nash reflected on how Keynesian-style microeconomics has affected American economic theory. Keynes theories are oriented toward fixing problems, the economic equivalent of a hospital, Nash said. In modern times we see this attitude reflected in the state establishment of a central bank and treasury that manipulates the national currency in order to, for instance, reduce inflation, without regard to how those manipulations affect the long-term reputation of that currency.

Ideally, says Nash, money should be a standard of measurement comparable to the watt or the hour or a degree of temperature used to measure the transfer of utility. Nash acknowledged, however, that the psychological reaction of humans to money is such that it may never be possible to create a perfectly ideal currency standard. Money is linked directly to utility, but utility for money is a non-linear function, said Nash. You might not be ten times more happy to be getting ten billion dollars than one billion dollars. One billion might be enough.

Much of the talk used the European Unions currency the Euros an example of the changes we are seeing to our idea of money and as a jumping off point to discuss the money of the future. Nash believes that in the near future we may see fewer and fewer national currencies and an increased number of multi-national currencies, like the Euro that will stand in relative competition to each other.