What is Money?

When you think of money, I bet your US Dollar note or Cambodian Riel note should come to your mind. Well, it is partly true. Your note is one of the form of money called fiat currency. Money is more than just the paper you put in your wallet. Back in the past, people used to use gold or silver as money. Money can come in any type of form as long as it is generally accepted in the exchange of goods and service. This article from the Guardian paints a much better picture that money can just be anything. Prisoners used to accept cigarette as money within the prison economy (have you watched the classic movie called Shawshank Redemption?) then mackerel can and now ramen. So what are the functions of money?

The first essential function of money is that it is a medium of exchange. Money is used to facilitate the exchange of goods and service. Imagine a world without money. It would be a nightmare to buy or sell stuff in the economy. Say you are corn farmer and want to buy 2 kg of meat from a seller but the seller will only sell the meat if you have 5 kg of apple. In order to buy the meat, you will need to find other sellers who are selling apple and is willing to exchange 5 kg of apple with your 5 kg of corn. You would have to chase other sellers if the apple seller only settles for other goods. This kind of system that the exchange of goods is made with other kinds of goods is called "barter system". Therefore, money which is accepted by all parties will reduce the inefficiency of having to chase apple and other produce to buy 2 kg of meat. Meanwhile, prisoners can also exchange all sort of goods and service in the jail which makes life a lot easier.

Money also function as a unit of account. In a plain word, it means that money indicates to others the measure of value of goods and service. Money makes it easy to under its value. For instance, 1 kg of meat cost 10$, 1 kg of corn cost 1$ and 1 kg of apple cost 5$. Therefore, we can know for sure the value of meat, corn and apple. Wouldn't it be more complicate if we only know that 1 kg of meat equals to 10 kg of corn and 1 kg of apple equals to 5 kg of corn. How about the relative value between meat and corn or beef, veggie and so on? It is a lot easier to have a common unit in terms of money for those produce.

Another important function of money is that it has to store value. If we hold 100$ note today, we are almost certain that 30 days later the value of the dollar note is still 100$ and people will accept our 100$ note (let's get inflation out of the equation for simple explanation). The fiat money works well as money in the economy because it is light, durable (unlike gold or silver which is super heavy) and will hold its value in the future. This reasons also explain why prisoners choose cigarette and now ramen as a form of money. Ramen can last a very long time. It is not very heavy to carry around or store it. Other stuff might not be a great form of money. For example, milk is a terrible choice for money. It can get spoiled easily. One needs to always store it in a fridge. The value of milk today should worth nothing in a month time because the milk is spoiled and no one is going to accept it in the exchange of goods and service.

One thing to take away from this article is that when you think of money, it can be more than just a piece of paper. Well, it can be the noodle that you eat when you run out of cash at the end of the month.

Is the Goal of Higher Education to make its Graduates and the Country Rich?

I recently had a conversation with my friend who is a software developer. He said his current job would only need a person with 6 months of rigorous computer programming training. The current programming language that he is using was not even taught during his 4-year college education. Come to think of it and being inspired by a book written by Ha-Joon Chang, a South Korean economist, is the goal of tertiary/higher education to make its graduates rich and thus the country rich?

College education is in high demand at the moment both in the developed and developing countries. In a country like Cambodia where almost 70% of the population is under the age of 35, the number of young people going to college is increasing dramatically. One of the major reason that fuels the demand for college education is the parent’s and young people’s hope of high salary (for most people) and employers demanding college graduates for a vacant position. Basically, there is a trend for employers to search for candidates with a college degree, which significantly increases the demand for college education among young people. Those who do not have a college degree are facing the risk of being put at a disadvantage. It is understandable why employers place a lot of emphasis on college degree. The reason is employers are looking for employees who are competent, knowledgeable, hardworking and reliable. One of the best proxies (a representation of something) to determine such qualities is a college degree. A college-educated person is more likely to be a smart, competent and hardworking person. One, colleges teach a number of subjects that should help graduates to function in their new roles. Two, one must have put a significant amount of effort to endure the gruesome 4 years in college. Third, college graduates should be accustomed (to a certain extent) to an environment which demands great teamwork and leadership, as can be learned during group assignment, clubs or other leadership roles within the school.

While 4 years of college education teaches you a lot, I think it is safe to say one does not use everything that they learn at school and applies them in the daily tasks of one's work. My friend who is a software development does not use Photoshop, Statistics, History or Geography for his daily work. He learned a new programming language through on-the-job training. My point is that a bachelor degree is definitely important, but the society should not put too much hope on bachelor degree alone to solve the society’s problems and to make the country rich. For a few positions like a cook, a technician, a website designer or programmer, a 1 or 2 year vocational training should be enough to perform the roles required for this position. An employer should not disqualify the applicants who is not a college graduate.

It is important to understand that, as put by Ha-Joon Chang, not everything that is taught at the formal education is meant to make the students richer or to promote the prosperity of a nation. A typical businessman or an investment banker does not use chemistry, biology, history or geography lesson that is taught in high school or sociology, environmental studies, philosophy and music taught in the foundation year of college. These subjects are taught to help people to live a more meaningful life and to become a good citizen within the society.

The downside of putting too much emphasis on tertiary education is that it puts the country at a dangerous trajectory where not having a college degree means you are not smart enough and you are not favorable to your potential employers. One of my Chinese friends said many Chinese want to get a Master or even PhD degree to stand a better chance of being recruited, since the job competition in China is very fierce. The time and money that one spends is an opportunity cost. Not everyone can afford higher education and a number of jobs does not require 11 years of higher education. From a pure economic point of view, the resource (time and money) should be spent elsewhere that generates a better return on investment. Some subjects taught at the university are not relevant to one’s workplace. Many important skills and qualities can be learned through on-the-job training including technical knowledge, leadership, teamwork, and self-discipline.

I am not trying to claim that there is no value in higher education. I, myself, have benefited a lot from higher education. I have a broader perspective of the world and live an independent life thanks to higher education. But the society should not believe that only college graduates are competent and rule out applicants without a college degree. In addition, to better prepares college students for their professional work, companies and universities should closely collaborate to design a curriculum that. We should conclude this article to remember that the goal of education is not to make a country financially rich. The reason to invest in education is to help citizen think critically, live a meaningful life and become a good citizen within the society.