The Puzzle of Metallism: Searching for the Nature of Money

Abstract

From the dawn of coined money to just a few decades ago, the monetary system had been linked, directly or indirectly, to a commodity. The age-long dominance of metallism is puzzling because the conventional character of money, or cartalist theory, had already been grasped in the earliest writings on the subject, notably by Plato. The evolution of the monetary system led to the emergence of metals as the dominant form of money owing to their well-known qualities of durability, homogeneity, divisibility, and the like. Yet, these physical qualities actually relate to market properties underlying the natural selection of media of exchange, enhancing the microeconomic efficiency in performing monetary functions and the macroeconomic effectiveness of maintaining monetary stability. After inquiring about the puzzle of metallism, this article investigates the development of the cartalist hypothesis and the origins of monetary management.