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Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution.

Fungibility is different from liquidity. A good is liquid (or tradable) if it can be exchanged for money or another different good. A good is fungible if one example of the good is substantially equivalent to another example of the same good.

Fungibility does not imply liquidity, and liquidity does not imply fungibility. Diamonds are easily bought and sold (the trade is liquid), but individual diamonds are not interchangeable (diamonds are not fungible). Zimbabwean dollar bank notes are interchangeable in London (they are fungible there), but they are not easily traded there (they are not liquid in London).

Examples of highly fungible commodities are petroleum (gasoline), electricity, precious metals, and many currencies.

Fungibility has nothing to do with the ability to exchange one commodity for another. It has everything to do with exchanging one example of a commodity with another example of the same commodity.

In international relations, the term fungibility is usually applied to the power of states.^{[citation needed]} International relations theorists who believe that power is fungible see different types of power as reinforcing each other.^{[citation needed]} By way of analogy: with power as a fungible commodity, a state may translate its economic power into military power (eg. buy some tanks/military aircraft/armaments), and vice versa (sell some tanks/aircraft). A major debate in international relations is the degree of fungibility between hard power and soft power.^{[citation needed]}

In legal disputes, when one party is compelled to remedy another party as the result of a ruling or adjudication, the appropriate legal remedy may depend on the fungibility of the underlying right, obligation or property interest that is intended to be restored.^[1] Depending on whether the interests of the aggrieved party are fungible (a determination made by the trier of fact), the appropriate remedy may change. For example, a court may require specific performance as a remedy for breach of contract, instead of the more favored remedy of monetary damages.^[2]

In Does God Play Dice? The New Mathematics of Chaos, the mathematician Ian Stewart argues that fungibility applies to science as well. The example he uses is that subatomic particle theory is fungible when studying molecules "provided it led to the same general feature of a replicable molecule."

Another example is the concept of mass, either gravitational or inertial mass. Mass is fungible in all observationally consistent theories of gravitation. All compositions of matter fall identically in vacuum, including binding energies.

Johanna Drucker discusses the idea that fungibility may also exist in respect of typography and the recording of information. In her article "The Future of Writing in Terms of its Past: The New Fungibility Factor" she argues that in our new age of technology, the form that written language takes is no longer an important part of the message it conveys. This is due to the fact that the appearance of a message can be changed at the click of a mouse button.^[3]

• Gold standard
• Private currency
• Silver standard

1. ^ S. Williston, The Law of Contracts § 1338 (1920); Farnsworth, Legal Remedies for Breach of Contract, 70 Colum. L. Rev. 1145, 1147 (1970)
2. ^ Bunge Corp. v. Recker, U.S. Ct. of App., 8th Cir., 1975; Restatement (Second) of Contracts Ch 16. introductory note (1981)
3. ^ Drucker, J. 1995, The Future of Writing, Emigre (Issue 35, Summer 1995).