Language, law and money

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Eric Lonergan, "The economics of language: David Hume & valuing Facebook", Philosophy of Money 2/19/2016:

Language, law and money have very similar economic properties. Specifically, the resilience and propagation of these institutions does not reside in some intrinsic, physical value, nor in a promise, nor in the value each individual derives from them. It resides in a network externality.



  1. DCBob said,

    June 5, 2016 @ 9:16 pm

    Nice link to a deeply useful insight.

  2. Graeme said,

    June 6, 2016 @ 7:42 am

    'Network of externalities' is quite an obfuscation for 'the social roots/value'.

    As for the idea that law and money share the logic of the logos of language. Tell that to the street kid whose only freedom and power is his argot.

  3. leoboiko said,

    June 6, 2016 @ 3:31 pm

    @Graeme: I think "externality" has a definite meaning for economists, viz., a cost or a benefit that affects someone who did not choose to be involved in that transaction. If I buy gasoline and burn it in my car, your air gets polluted, even though you weren't involved in the transaction (you're "external" to my economic activities). If I decided to keep bees for profit, the flowers in your garden will get lots of pollinators, even though you weren't involved in my operation.

    Recall that the basic Homo economicus model is that of rational agents who perform voluntary transactions based on self-interest and cost/benefit analysis. When you're trying to understand the world through such a lens, costs and benefits "ouside" the transactions become a very salient complication.

    A "network of externalities", then, is economese for the situation where the value of a product depends on how many people use it. No matter how many people drink orange juice, the value of orange juice remains the same to me. However, if all my friends use WhatsApp, then WhatsApp is more valuable for me than Signal, even though I'd otherwise prefer Signal. To put it another way, each new user increases the value of the service for all current users, as an externality. Wikipedia has a simple diagram illustrating how the number of potential telephone calls grows when more people subscribe; and the more potential calls I can make, the more my particular telephone line is valuable for me (even though other people are buying telephone lines with their own money, without my participation).

  4. Andrew John said,

    June 6, 2016 @ 5:42 pm

    It's a nice post, but far from a new insight. There has been a (small, but significant) literature on economics and language going back more than half a century; this literature has explicitly analysed language in terms of network externalities since at least the early 90s. And monetary theorists long ago explicitly noted the parallels between money and language.

    [(myl) The author of the cited post starts with David Hume (1711-1776), and includes references to Mandeville (1670-1733), Menger (1840-1921), & Hayek. And his first sentence is "David Hume is the first great thinker to identify language, law and money as ‘spontaneous’ institutions of social organisation. Hume was on to something quite profound, which remains under-appreciated."

    So it's a bit odd to criticize him on the grounds that what he discusses is "not a new insight".]

  5. Pflaumbaum said,

    June 6, 2016 @ 8:21 pm

    That's very helpful leoboiko, thanks.

  6. D.O. said,

    June 6, 2016 @ 10:41 pm

    Nah, that would have effectively meant that language is of higher value for larger communities than for smaller ones. Looks pretty improbable both as a static observation and as an explanation of language divergence process.

  7. Michael Watts said,

    June 7, 2016 @ 2:04 am

    Languages do have greater economic value when they have larger (and richer) communities of speakers, though. Speakers of rarer or poorer languages are generally willing to elaborate on that theme at length. Heck, I've had a German guy tell me "I wish English was my native language", and Germany is very high-prestige as countries go.

  8. Bob Ladd said,

    June 7, 2016 @ 2:50 am

    What Pflaumbaum said.

  9. Coby Lubliner said,

    June 7, 2016 @ 9:09 am

    leoboiko: it's oeconomicus (remember, this is Language Log).

  10. DMT said,

    June 7, 2016 @ 10:03 am

    Cory Lubliner – not in contemporary usage, unless your comment has been stuck in moderation since about 1950.

  11. Coby Lubliner said,

    June 7, 2016 @ 11:02 am

    DMT: in economists' usage perhaps, but this is not Economics Log.

  12. Joe said,

    June 7, 2016 @ 11:44 am

    Just to tie in what leboiko said about "network of externalities" and Graeme's comment about street kid's argot. An externality could be negative – the value of a product is inversely proportional to the number of people using it (eg luxury items) – and I imagine argot or jargon is an example of such an effect. Reminds me of Pullum's "nerdview" where such effects leak into general usage and thus has diminished value for everyone else.

    [(myl) In fact argot/jargon/cant, like many forms of fashion, may have non-monotonic exernalities — an in-group signifier may have value only to the extent that others in the group recognize it, but loses value if the group becomes too large.

    And innovation in the context of a tradition is a more complex version of the same thing.]

  13. Andrew John said,

    June 7, 2016 @ 5:20 pm


    Point taken to a certain extent; I should have been clearer. Lonergan certainly does take as his starting point Hume's recognition of a significant parallel between money and language. But Lonergan's post is primarily concerned with elucidating this parallel using the idea of network externalities, and then extending the analogy to Visa and Facebook. My intended point was that this explanation does not constitute a new insight: the fact that language can be analysed in terms of network externalities, in a manner analogous to certain theories of money, has long been understood by those interested in the intersection of economics and linguistics (admittedly a small group!). There is a small but significant academic literature on the subject, so while Hume's insight may indeed be underappreciated, it is not completely unappreciated. Similarly, it is very well understood that Facebook and Visa depend heavily on network effects.

    Yes, it is only a blog entry — but it _is_ a blog post with footnotes and references. Still, as I said before, I do think it is a nice post; perhaps I am being unfair to Lonergan, who after all makes no claim of originality.

  14. nnyhav said,

    June 9, 2016 @ 11:09 am

    On the economy of language: the comparison turned on its head

  15. Andrew John said,

    June 10, 2016 @ 6:06 pm


    That's cool and thought-provoking. I have read a fair bit on the economics of language, but to the best of my recollection I haven't seen that particular language/money analogy discussed anywhere.

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