Why Money Matters: A Postscript

  • Paul Davidson


The terms in which contracts are made matter. In particular, if money is the good in terms of which contracts are made, then the prices of goods in terms of money are of special significance. This is not the case if we consider an economy without a past and without a future. Keynes wrote that ‘the importance of money essentially flows from it being a link between the present and the future’ to which we add that it is important also because it is a link between the past and the present. If a serious monetary theory comes to be written, the fact that contracts are indeed made in terms of money will be of considerable importance.1


Cash Flow Market Maker Spot Price Debt Financing Asset Holder 
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© Paul Davidson 1978

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  • Paul Davidson

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