By Jonathan Newman

For better or worse, Elon Musk has taken a liking to old Milton Friedman videos. On the good side, Musk has embraced Friedman’s distrust of government and money printing. Friedman, however, was no Rothbard regarding the consistent application of ethical and economic principles to the actions of the state. Despite Friedman’s compromises and error-ridden macroeconomic theorizing, there’s no denying that he was a great popularizer and eloquent defender of laissez-faire.

On the bad side, Musk has now embraced monetarist-inspired inanities like, “Money is simply an abstract representation of real things.”

The post was attached to a video of Musk reflecting on the nature of money:

People get confused. They sometimes think an economy is money. But money is the database for the exchange of goods and services, and/or time-shifting the exchange of goods and services. Money is a database. Money is not a power in and of itself. You can run a thought experiment where you are shipwrecked on an island and you’ve got a trillion dollars in a Swiss bank account. It’s worthless. You’d rather have a can of soup. You could have all the bitcoin in the world, and you’re still going to starve. The actual economy is goods and services.

The most sense I can get out of Musk’s claim that “money is a database” is that he means that money merely refers to real goods and services, in the same way an entry in a library’s database might note the location of and other identifying information about a particular physical book. Musk’s point is that the database entry is not the book. The database entry helps you obtain the book. Bringing the analogy back to money, money only helps us get items in the market.

Now, this analogy does work when you are making the simple (but important!) argument that more money does not increase the stock of consumer goods or factors of production. For example, creating more library database entries does not magically create more books. But that’s as far as the analogy goes. It breaks down as soon as you consider why people demand money, the formation of money prices, and the full effects of changes in the money relation.

Money is an “element of change” because people hold it and accept it as payment in view of an uncertain future. As Mises 

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