Money: An Alternative Story

Abstract

This paper presents an alternative approach that locates origin of money in credit and debt relations, with unit of account emphasized as numeraire in which credits and debts are measured. This approach de-emphasizes medium of exchange function and market; indeed, credits and debits can exist without markets and without a medium of exchange. We start from presumption that money is a fundamentally social phenomenon, whose origins must lie in varied and complex social practices. We contend that monetary unit almost certainly required and requires some sort of authority to give it force—hence presumption of a connection between a central authority (called the state) and unit of account, or currency. We use this alternative approach to examine specific historical cases and to show that there is a different interpretation of origin of money that is more consistent with a Keynesian/Institutionalist view of economics.