Money is so ever-present in modern life that we usually take its existence for granted. Financial crisis like the recent one in 2008 are signi cant alerts about the importance of money and nance. Having a clear understanding of the concepts on the nance domain is fundamental to gure out the evolution of the economy before innovations in the Finance Industry. This research aims at addressing these issues by investigating the conceptual foundations of money, grounded in the Uni ed Foundational Ontology and based on the literature review of the most relevant economic theories.
Money permeates most aspects of life in modern societies. \Despite its immense
contribution for economic performance, we tend to be oblivious towards the
infrastructures that support the operation of the monetary system. As it is often
the case with infrastructures, whether social or technological, they remain
invisible as long as they operate and ful ll their functions. In case of accident,
disruption or crisis, their breakdown makes them visible and raises concerns and
questions about their operation" [
Having an integrated view that shares a common conceptualization of the
nance domain is paramount in a number of activities required to ensure the
proper functioning of the nancial system [
In the last years, there has been a growing interest, within the nancial
sector, in the adoption of ontology-based conceptual models to make the nature
of the conceptualizations explicit [
Despite the wide number of e orts to create a uni ed view of the reality
related to economic and nance domains [
The remainder of this paper is organized as follows. First, in Section 2, we discuss the ontological nature of money and currencies as described in the literature. In Section 3 we present our proposal, an initial version of the Reference Ontology of Money. We conclude in Section 4 with some nal considerations. 2 2.1
Two leading schools of thought present fundamentally di erent arguments
regarding the origins of money. A classic theory, known as the commodity theory of
money was defended by many classical economists like Carl Menger [
Alternatively, there are those who argue that money is a social construction
in lieu of a physical commodity [6, 16{19]. This view is known as the credit
theory of money. According to this theory, money is merely a token of a \credit
relationship, a promise from someone to grant (or repay) a favor (e.g. a product,
a service) to the holder of the token" [
Historically, money has taken on scores of forms, from tobacco, salt and shells
to large circular stone discs. Early money was usually a commodity money, that
is, an object considered valuable itself. \The commodity can be gold, silver,
squirrel pelts, seashells, or whatever a community decided. In its simplest form,
commodity money is like barter. People trade one type of object for goods and
services" [
\Modern economies are typically based on at money, which is similar to
commodity-backed money in its appearance, but radically di erent in concept,
as it can no longer be redeemed for a commodity. Fiat money is any legal tender
designated and issued by a central authority. It is only really money because
some authority says it is money" [
Status Function and Trust
\Human beings have a special capacity, which is that they can impose functions
on objects and other people where the function is not performed in virtue of the
physical features of the person or object (or at least not the physical features
alone), but it is performed in virtue of the fact that a certain status has been
assigned to the person or object" [
Although the format of money has changed considerably over time, the functions
of money remain unchanged. \Behind the diverse forms of money there is a
common intension, an unchanging core of meaning" [
The Oxford Dictionary [
A legal tender is anything recognized by law that can be used to pay
contractual debts. Countries specify which objects are considered legal tender for
debts that are subject to its contract law. In most of them, the national
government is the only party authorized to produce and distribute physical currency
in its geographical area of control. The government also regulates the
production of non-physical currency by banks through its monetary policy, usually
implemented via the central bank. In some countries, alternate currencies are
permissible, but only the nationally sponsored currency has the status of legal
tender. And in still other countries a foreign produced currency is both
acceptable currency and legal tender. For example, in the countries of the euro area,
only euro banknotes and coins are legal tender and therefore, by law, must be
accepted as payment for a debt within those countries. According to the Article
128 of the Treaty on the Functioning of the European Union [
As previously mentioned, status functions, which can be expressed in terms of laws, specify which objects are considered money. These monetary objects have an associated exchange value, which allows them to be exchanged for something (e.g. goods or services) with the same exchange value. Exchange value can be de ned as the ratio in which one commodity exchanges for another. It represents the worth of one good or service expressed in terms of the worth of another. In modern economies, money emerges as a neutral commodity in which all other commodities express their exchange values.
In this context, agents holding the control of monetary objects have the power to carry out economic transactions in the amount corresponding to its exchange value. As the exchange value of goods and services can change, in uenced by the economic environment and the dynamic of the system of prices, the purchasing power associated with these economic transactions also changes. It means that the exchange value of the transaction that the agent manages to carry out remains the same (and is equal to the exchange value associated to the monetary object under his control), however, the quantity of goods and services that he manages to get with that value will vary, depending on the exchange value of these commodities. 3
In this section we use the aforementioned theories to present a preliminary model
of the Reference Ontology of Money, which was designed taking as basis the
Unied Foundational Ontology (UFO). UFO is a foundational ontology developed
with an interdisciplinary approach, inspired by Formal Ontology, Philosophical
Logic, Linguistics, and Cognitive Psychology. It consists of three main parts:
UFO-A [
In our analysis, we rely mainly on some concepts de ned in UFO-C. A basic distinction in UFO-C is related to agents and (non-agentive) objects. An agent is a specialization of a substantial individual (existentially independent objects) that can be classi ed as physical (e.g., a person) or social (e.g., an organization, a society). Objects are non-agentive substantial individuals that can also be categorized in physical (e.g., a book) and social objects (e.g., language).
We model the Status Function Description that de nes certain types
of objects as money and guarantees their acceptability as a type of Normative
Description. UFO-C de nes Normative Description as a type of Social
Object that de nes one or more rules/norms recognized by at least one social
Agent and that can de ne nominal universals such as social moment universals
(e.g., social commitment types), social objects (e.g., the crown of the King of
Spain) and social roles (e.g., president, or pedestrian). Examples of normative
descriptions include the Italian Constitution, the University of Bolzano PhD
program regulations, and also a set of directives on how to perform some actions
within an organization. In the nance domain, the Treaty on the Functioning
of the European Union [
The entity Monetary Object Type represents the types of objects that are considered money according to a Status Function Description. Historically, di erent types of objects have been used as money in all its manifestations, such as (i) tobacco, salt, among others, used as commodity money (money in the form of objects considered valuable), (ii) banknotes and paper certi cates, used as commodity-backed money (money backed by an underlying commodity such as gold), and (iii) banknotes, coins and bank deposits in electronic format, used as at money (money which is not backed by anything).
In the ontology, Monetary Object represents instances of Monetary Object Types and stands for the objects that are considered money according to a certain Status Function Description. The Monetary Object Nominal Value corresponds to the nominal value (also known as face value) stamped on the Monetary Object by the issuing authority.
Valid Monetary Object and Not Valid Monetary Object represent two di erent phases of the Monetary Object's life cycle. For example, new banknotes are not considered valid until they are released and put into public circulation. Likewise, damaged banknotes are not considered valid and must be destroyed.
We represent the quantitative perspective of money by means of the
Monetary Object Exchange Value. This property is speci c to valid monetary
objects as only they can be exchanged for goods and services in the economy.
The exchange value of a Valid Monetary Object is equal to its nominal
value. In the ontology, both the Monetary Object Nominal Value and the
Monetary Object Exchange Value are represented as qualities inhering in
the Monetary Object and in the Valid Monetary Object, respectively. In
UFO, a quality is an objecti cation of a property that can be directly evaluated
(projected) into certain value spaces [
As argued in the previous section, when an agent holds the control of a valid monetary object she is endowed with the power to make economic transactions in the amount corresponding to its exchange value. We capture it by means of the objecti ed relationship labeled Control, between Valid Monetary Object and Agent. The Exchange Power to carry out economic transactions inheres in the Agent and is grounded on the Control relationship. It assumes a value in a Currency conceptual space, which is equal to the exchange value of the Valid Monetary Object. Finally, the Exchange Power has an underlying Purchase Power that corresponds to the quantity of goods and services that the Agent manages to get with that Exchange Power. As previously discussed, the Purchase Power depends on the Exchange Value of goods and services.
In the ontology, objects considered valuable, such as goods and services, are modeled as Value Bearers. We model the Exchange Value of these commodities as a quality value that is \attached" to a Value Bearer, as a result of an assessment made by an Agent. The relationship Exchange Value Ascription represents this assessment. We are aware that the current ontology does not provide a deep analysis of the concept of exchange value. This analysis fall outside the scope of this paper, as our focus is the modeling of the relationship between money and exchange value. We plan to address this issue by future research.
It is woth mentioning that Monetary Objects are also considered Value Bearers as they can be traded in the economy as regular commodities, like collectible items. For example, some rare banknotes are traded by banknote collectors at far more than their nominal (or face) value. Even valid banknotes in circulation can be traded as collectible items at a value above their face value. However, for the acquisition of goods and services in the economy, a banknote functions as a means of exchange and will always be worth its face value.
It is clearly recognized in the literature that trust is a crucial element for
the well functioning of any monetary system [