Fungibility

Abstract

Fungibility is a central notion in economics, though often unnoticed and unnamed. It means merely ‘substitutable’, and is in origin a Latin legal term meaning ‘such that any unit is substitutable for another’ (from fungor meaning ‘do, discharge’). A debt can be discharged with any money, not merely moneys from a particular account. The task of a low-level administrator is to make accounts fungible with each other, so that pencil money may be spent for office parties when required; the task of a high-level administrator is to prevent this. Mother cannot give money ‘for’ a new refrigerator: the gift merely raises the recipient’s income. Likewise the World Bank rule that the items ‘financed by’ the Bank must attain a certain level of social return is pointless. The $100 million given to a government will be used anyway for the marginal project in the government’s list; the project ‘for which the money is given’ can be claimed to be any intramarginal one.