Although conversations between economists are essential — sharpening our thinking, challenging assumptions, and refining concepts — it’s easy to forget just how intractable and unintuitive economics often appears to those outside the discipline. The concepts we handle daily, often with shorthand or implicit understanding, can seem opaque or even paradoxical to non-specialists. For this reason, it’s not only worthwhile but often refreshing to engage with individuals who, although they may lack formal economic training, bring curiosity and practical insight to the table.
Last year, I made note of a comment shared with me after a talk, which sparked a thought-provoking conversation. I’ve also commented on economic memes that have gained popularity, usually via social media. At a recent conference, I gave a talk on dedollarization and the Mar-a-Lago Accord. During the Q&A, someone stepped up to the mic and asked, “When in the world will we finally have a fixed dollar?” He continued by arguing that money, whether dollars, euros, English pounds or Swiss Francs, are units of measurement. Accepting their fluctuation is akin to letting inches or hours morph unpredictably over time….isn’t it?
We reside in a world increasingly shaped by data, quantification, and metrics. And because of that, it’s tempting to regard one of the goods we interact with repeatedly — money — as if it were another unit of measurement, similar to inches for length, seconds for time, or pounds for weight. But money is not, and has never been, a measure of economic value in the same way that other units are fixed and universal. One dollar is not equivalent to one inch. It does not represent a constant or a standard across time, space, or circumstance. Money is a social institution for which the meaning and value are always contingent on broader economic, political, and cultural contexts.
Adding to this confusion is the function of money as a ‘unit of account’ (in addition to a medium of exchange and a store of value). Money is used to price goods, isolate terms of transactions in time, and facilitate economic comparison, even though its purchasing power can fluctuate over time. A unit of measurement, by contrast, is a fixed standard designed to remain constant.
At first glance, a unit of account seems much like a tool of measurement. Prices are expressed in dollars. We scrutinize worth, cost, and wealth in monetary terms. Salaries are compared, fortunes are estimated, and GDPs calculated and ranked — all with money as the implied unit of measurement. But the resemblance is deceptive. Unlike units of measurement, which are defined by stable physical or logical properties, money’s “unit” — the dollar, euro, yen — is anchored not in any immutable constant, but in a fragile consensus mediated by governments, central banks, markets, and individuals.
A true measurement unit must meet several criteria: it must be universally consistent, reproducible, and immune to the vagaries of time and politics. An inch in Florida is an inch in Alaska. A minute on a sundial is conceptually the same as a minute on a smartphone. A kilogram in 1965 and 2025 weigh the same in practice, even though the definition changed in 2019 from a physical artifact to one based on fixed fundamental constants for greater precision and universality. Units are tied to physical constants or abstract-but-enduring standards. Money, by contrast, is constantly changing in value — even when its name remains the same.
Consider inflation. The purchasing power of a dollar in 1925 was vastly different from that of a dollar in 2025 (down by 95 percent, if you’re curious). Even during relatively low-inflation decades, the purchasing power of the dollar erodes gradually — imperceptibly but definitively. If money were a genuine unit of measure, that variability would render it unfit. Imagine if when a contractually-agreed purchase of lumber was delivered from a mill, the lengths varied depending on who ordered it or the current phase of the economic cycle. Trade would collapse. Contracts would fail. Projects would be altered, cancelled, and unfinished.
Importantly, we don’t want money to be a fixed unit in the way a meter or kilogram is. We want money to fluctuate — to stretch and compress — because it is through those changes that money performs one of its most vital functions: signaling economic conditions. Transmitting relative price changes, in response to underlying conditions of supply and demand, is among money’s key purposes. It reflects the scarcity or abundance of resources, the urgency of needs, the shifting preferences of consumers, and the risks perceived among lenders and investors. A perfectly stable dollar, sometimes referred to as a fixed dollar, would be a dead dollar — incapable of signaling anything new.
In that sense, money is not a measuring stick but a messenger: its utility is not in constancy, but rather in responsiveness. When the price of wheat rises relative to the price of corn, or labor becomes more expensive in one sector than another, price changes convey information that prompts entrepreneurs to reallocate capital, producers to adjust output, and consumers to revise their spending. Were the dollar a standardized, rigid unit — like a mile — it would be unable to register and reflect those shifts. That would cripple the pricing process and distort the coordination mechanisms of a market economy.
This instability reflects the political and institutional nature of money. Units of measurement are typically managed by scientific bodies — the National Institute of Standards and Technology, for example, with its Office of Weights and Measures — not by central banks or legislatures. But the supply of money, the interest rates that determine its availability, and the institutions that govern its issuance are all subject to political motives, ideological frameworks, and economic pressures. Monetary authorities change their policies in response to inflation expectations, employment mandates, geopolitical crises, and electoral concerns. The resulting fluctuations in monetary value are not bugs in the system; they are features.
Moreover, money does not exist in isolation. It is inseparable from credit, debt, and institutional trust. A dollar is not simply a “thing” but a tacit agreement — one that is only meaningful if others accept it and treat it as valuable. This contrasts sharply with units like the second or the kilogram, which require no trust to function as standards. You don’t need confidence in the Federal Reserve to know how long a minute lasts; but the entire utility of a dollar hinges on expectations about the future, confidence in the issuer, and functioning systems of redemption and exchange.
This dependence on belief and social consensus means that money’s meaning is always subjective. Economists often refer to this as the “nominal” versus “real” value problem. While a price tag may read $100, that figure tells us little about the underlying value of the good or service without context. What does $100 mean when a loaf of bread costs $1? Something very different than when that same loaf costs $10 or $50. No such ambiguity clouds physical units. An inch is always an inch; a dollar is only a dollar until tomorrow, when it might not buy what it did yesterday.
Is the dollar under a commodity metal standard a true measurement, then? After all, if it’s pegged to a fixed quantity of gold or silver, doesn’t that impart the stability and universality we associate with measurement units? No: because even under a gold standard, the dollar is not defined by a physical constant in the way a meter is defined by the speed of light. Its value still depends on convertibility, trust in redemption mechanisms, and the monetary authority’s ability and willingness to uphold the convertibility. History shows that gold standards can and have been suspended, manipulated, or abandoned under fiscal stress or political duress. In practice, a commodity peg doesn’t transform money into a measure; it merely tethers its symbolism to another fluctuating asset — one that itself responds to changing expectations, discoveries, production, and demand.
Money is a good like any other in that it must be produced, demanded, and exchanged — but it is a special type of good because its primary value lies not in consumption or production, but in its universal acceptability for acquiring other goods. Its function as a medium of exchange uniquely positions it to facilitate coordination across time, space, and markets. And unlike scientifically defined units of measure, such as decibels or Planck lengths, a dollar held in an ATM or wallet is not a passive standard of value but an active economic agent, exerting influence on liquidity, demand, and the broader market for dollars by virtue of its potential deployment.
The interaction between money and prices is best understood as a series of exchange ratios — dynamic relationships reflecting how much of one good or service is given up to obtain another, using money as the intermediary. Rather than serving as a fixed yardstick, money acts as a conduit through which relative scarcities, consumer preferences, and market-wide expectations are constantly negotiated and expressed.
This distinction matters, because the illusion of money as a measure distorts economic thinking. It encourages the belief that we can compare values across time and space with precision — when in reality, all such comparisons are muddied by shifting exchange rates between currencies, changing price levels, and evolving social norms. It fosters misguided reliance on monetary aggregates as if they captured real economic output or human wellbeing in any straightforward sense.
To regard money as a measure is to overlook its essence: a human convention shaped by institutions, influenced by belief, and vulnerable to manipulation. It is a tool of coordination, not a ruler of value. By apprehending a dollar as a meter of “worth,” we obscure the complex, dynamic nature of the monetary system — and risk making decisions, both personal and political, based on a fundamentally flawed analogy.
Money facilitates exchange and diverse forms of wealth by enabling indirect trade and specialization, simultaneously serving as a common denominator that makes economic calculation and valuation possible in a complex, rapidly evolving economy. Money is a vernacular, a semaphore flag, a lever, and a ledger entry: a deeply contingent artifact of social interaction. Understanding its true nature begins with shedding the myth that it is, or ever should be, a unit of measure. It isn’t. And that realization is essential to first seeing, and then seeing through, the countless illusions of price, value, and wealth in the modern world.
