Embedded Files
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
describe money as a system with parts, relationships and functions
Think about the last time you used money. Maybe you paid for lunch with a card, sent money to a friend through your phone, or got coins in change at a shop. The coins aren’t made of gold. The numbers on your screen have no substance. The notes in your wallet only work because people agree they have value.
Most of us use money every day without thinking much about it. But what is money, really? Why does it work? Could it be different?
In most countries, we live in a monetary economy. That means most of what we need like food, housing, transport, or electricity has to be paid for with money. If you don’t have money, you often can’t access those things. So understanding how money works helps us understand how our economy works and who it works for.
Figure 1. What is money?
(Credit: SumUp, Pexels license)
How can systems thinking help us understand money?
How can systems thinking help us understand money?
Systems thinking helps us understand complex things by looking at the parts, relationships, and functions that make them work. Money is not just a thing we use. It is part of a monetary system, a human-made system with institutions, rules, technologies, and relationships that shape how money is created, moved, used and trusted.
Two key ideas are important here:
money is the tool we use to exchange, measure, and store value;
the monetary system is the structure that makes this tool work.
Looking at money as part of a system helps us ask better questions like who creates the rules, who benefits, and how the system could be changed to serve people and the planet.
Parts of the money system
Parts of the money system
Most monetary systems include the following parts:
people: everyone who takes part in the system by spending, earning, saving, borrowing, or exchanging;
institutions: these are organisations that manage or influence the system. They can include states, central banks, commercial banks, mobile payment companies, and community groups;
forms of money: these are the tools or technologies used to make exchanges like coins, notes, bank accounts, mobile money apps, and local tokens. These tools only work because people trust and accept them;
rules, laws, and social norms: these shape who can create money, how debt works, what forms of money are allowed, and who has access to the system.
For example, in Kenya the national monetary system uses the Kenyan shilling as money. But in the neighbourhood of Kongowea, people created a different kind of monetary system and money called Bangla-Pesa. The Bangla-Pesa is a complementary currency, used only within the community and based on mutual trust. Both the national and local systems have some similar parts, but they are designed and used in different ways.
Figure 2. The Bangla Pesa (top) and Kenyan shilling (bottom) currencies.
(Credit: Laban Walloga, Wikimedia Commons)
Relationships in monetary systems
Relationships in monetary systems
Monetary systems are social systems, connecting buyers and sellers, lenders and borrowers, workers and employers, households, communities, and states. These connections are built and maintained through flows of money and are shaped by deeper social forces like trust, power, and shared values.
Here we briefly discuss trust and power. Other social aspects of money such as values, social norms, and narratives are explored in more detail in Section 6.1.4.
Trust
Money only works if people trust it. If you accept 1,000 Indian rupees for your work, you trust that you can use those rupees to buy food from someone else. That trust depends on the reliability and stability of the whole system: its rules, institutions, and forms of money.
This trust is influenced by the design of the system. People are more likely to trust money that is widely accepted, backed by strong and reliable institutions, and protected by law. But sometimes people trust a currency not because they freely choose to, but because they have no other option.
Figure 3. When a shopkeeper accepts rupees for goods, they trust that they can use the rupees for exchanges with other people.
(Credit: yurakrasil, licensed from Adobe Stock)
Power
Power plays a big role in trust and who gets to design the monetary system in the first place. States, central banks, and global organisations often control the rules about how money is created, who can access it, and what it can be used for. These decisions can concentrate money and influence in the hands of a few (Section 1.3.9).
In some cases, people have been forced into monetary systems they did not choose. During colonial rule, European powers required many societies to stop using local exchange systems and instead adopt colonial currencies. This made it easier for those in power to control trade, land, and labour (Section 5.2.1).
Creating new local monetary systems, like complementary currencies, can be a way for people to reclaim some power over their local economies and strengthen community trust (Section 6.3.4 - coming soon).
Figure 4. Central banks, like the Central bank of Nigeria shown here, have the power to shape monetary systems.
(Credit: GodwinPaya, CC BY-SA 4.0)
What are the functions of money and money systems?
What are the functions of money and money systems?
Most economics textbooks describe money as having three main functions:
a medium of exchange: we use or pay money to get things we need or want;
a unit of account: to measure and compare the value of different things;
a store of value: to save the value of things to use later, for example getting paid for work today, and using the value of that labour to pay for something later. It gives people the power to purchase (purchasing power) things over time, if the system is stable.
Monetary systems also perform wider roles:
settling debts and obligations: helping people track what they owe or are owed over time;
shaping economic activity: shaping how and where money flows through rules, rewards, and restrictions.
Whether monetary systems support regenerative economies depends on how they are designed, who controls them, and what values they reflect.
Figure 5. Functions of money and monetary systems.
(Credit: Icons from Noun Project, various artists)
Why does this matter?
Why does this matter?
If we think of money as just a tool for exchanging things, we may not question the system behind it. But if we understand money as part of a monetary system shaped by human choices, we can ask:
Who designs the system?
Who benefits from it?
What values does it reflect?
Could it be changed?
These questions help us imagine and build monetary systems that support wellbeing for people and for the planet.
Activity 6.1.1
Activity 6.1.1
Concept: Systems
Skills: Reflection, Thinking skills (transfer)
Time: Varies depending on option
Type: Individual, pairs or small group
Option 1: Reflecting on money in your life
Time: 30-40 minutes
Think about your own experience with money. How is money part of a system in your life?
You can choose how to show your thinking. For example, you might:
write a short reflection,
draw a diagram of the people, tools, and rules involved,
make a simple map of how money flows through your day or week
Try to include:
the parts of the system (e.g. people, institutions, tools),
the relationships (e.g. exchanges, flows, or rules),
and a short explanation of how it all connects.
If you have time, share your ideas with a partner or in a small group. How are your experiences with money similar? How are they different? Why?
Option 2: The story of the circulating money
Time: 30 minutes
The story below has been told in many versions across the world: in economics books, community finance workshops, and even online debates. Sometimes it’s set in a village, sometimes in a hotel. It invites us to think differently about what money is, and how it works. Note: the same story below is shown in a series of graphics through this link.
The Parable of the Circulating Money
In a small town, many people owed each other money, but no one had enough cash to pay. The baker owed the farmer for flour. The farmer owed the vet for treating his cow. The vet owed the hotel owner for a weekend stay. And the hotel owner owed the baker for some birthday cakes.
Everyone was stuck.
One day, a traveller arrived and gave the hotel owner $10 as a deposit for a room. The hotel owner rushed to pay the baker the $10 she owed. The baker took the same note and paid the farmer. The farmer gave it to the vet. And the vet handed it to the hotel owner.
Just then, the traveler came back and said he wouldn't stay after all. The hotel owner returned his $10 note.
In the end, no one was worse off. No one had any more money than before. But all the debts were cleared.
Individually, in pairs, small group or as a class, consider the following questions:
What does this story show about the role of money in the economy?
Why did the debts disappear, even though no one earned new money?
What would have happened if the coin or note had not entered the system at all? Could these debts have been cleared in a different way?Does this story change the way you think about money, seeing it as part of a system rather than as only a 'thing'? Why or why not?
How might this story connect to ideas about community or trust?
Option 3: What can the Bangla-Pesa tell us about how money works?
Time: 40 minutes
Note: Here is a link to a GDoc worksheet with the questions in the table below that students can use for the activity.
Watch the following documentary (ca. 25 minutes) on the Bangla-Pesa community currency in Bangladesh, a community in Mombasa, Kenya. Alternative link: Documentary on Will Ruddick and Kenyan Community Currencies
As you watch, briefly answer the questions in the second column using information from the video.
After the video is finished, work with a partner or in a small group to discuss what you learned and consider the bigger questions about money in the third column.
Ideas for longer activities and projects are listed in Subtopic 6.5
Checking for understanding
Checking for understanding
Further exploration
Further exploration
Bangla-Pesa: Empowering a grassroots economy - a ca. 3 minute animation about the Bangla-Pesa currency. Difficulty level: easy
Documentary on Will Ruddick and Kenyan Community Currencies - a ca. 25 minute documentary from Grassroots Economics about the Bangla-Pesa community currency. Difficulty level: easy
There are now more than half a billion mobile money accounts in the world, mostly in Africa — here's why this matters - An article from Our World in Data that explains how mobile money is helping people in Africa and other low-income regions access financial services without a bank account. Difficulty level: medium
Money for Beginners: An Illustrated Guide - A graphic introduction to money systems written by economist Randall Wray. It explains how money is created, how it works in modern economies, and how our understanding of money has changed over time. A great way to dive deeper using storytelling and illustrations. Difficulty level: easy/medium
Monetary Literacy 101 - A paper by economist Bernard Lietaer introducing key ideas about money as a system. It explains how different types of money influence social and ecological outcomes, highlights the problems of a one-size-fits-all monetary system, and argues for a greater diversity of currencies to create more resilient, equitable economies. Difficulty level: medium/high
What is money? (in German, scroll down the page to find it) - a module from the Hochschule für Gesellschaftsgestaltung on money, addressing key questions such as: How does money actually work? What forms does it take? And why is our current monetary system structured the way it is? Multimedia content provides a tangible insight into how money shapes our economy and society. Difficulty level: easy/medium
Sources
Sources
Graeber, D. (2014). Debt: The first 5,000 years. Melville House.
Hochschule für Gesellschaftsgestaltung. (2024). Was ist Geld? https://hfgg.de/impact/digitaler-transformations-campus/
Lietaer, B. (2010). Monetary literacy 101 – A short introduction to the why? and how? of reforming money (Working paper). Currency Solutions for a Wiser World. https://bernard-lietaer.org/wp-content/uploads/2022/07/Monetary-Literacy-101-Lietaer2010.pdf
Martin, F. (2014). Money: The unauthorised biography. Vintage.
McLeay, M., Radia, A., & Thomas, R. (2014). Money creation in the modern economy. Bank of England Quarterly Bulletin, 54(1), 14–27. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Reardon, J., Caporale, M. M. A., & Cato, M. S. (2018). Introducing a new economics: Pluralist, sustainable and Progressive. London: Pluto Press.
Ruddick. W. (2016, January 25). How Bangla-Pesa tapped the value of an informal community. Heinrich Böll Foundation. https://www.boell.de/en/2016/01/25/how-bangla-pesa-tapped-value-informal-community
van Staveren, I. (2015). Economics after the crisis: An introduction to economics from a pluralist and global perspective. Routledge.
Wray, L. R. (2022). Making money work for us: How MMT can save America. Polity Press.
Terminology (in order of appearance)
Terminology (in order of appearance)
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