Fungibility

From ArticleWorld

Fungibility is the characteristic of a commodity or attribute that allows all occurrences or instances of it to be interchanged. That is, any one unit of it can be swapped for any other with no loss of quality or value. A block of standard refined metal could be fungible, while its ore would not. All mass is fungible, that is, affected exactly the same way by gravitational pull. The fungibility of intangibles such as sovereignty and influence is a hotly debated subject in international relations and human rights.

The classic example of a fungible good in economics is gold – any one gram can be swapped for any other one, while two kilos of wheat are not fungible due to possible differences in quality. In finance, fungibility refers to the same characteristic of financial insutruments such as listed options or futures contracts, as well as the cross-market tradability of a stock.

Less obvious or easily identified examples of fungibility lie in intangibles such as political or social power or moral authority. If, for example, a country has considerable economic power, or the potential for it, is that fungible with military power? This kind of balance and interchangebility is commonly discussed in terms of the fungibility of hard power and soft power.

The term briefly became a matter of public debate in 2004 , when the United States Defense Secretary Donald Rumsfeld said, with reference to US troops in Iraq, that 'people are fungible'.