Abstract
Economies which are characterized by private property of resources and market agents striving for their private interests typically create judicial and monetary systems which then cause the process of economic transactions to look much different compared to the often propagated idea of a direct exchange of goods and services. Social and legal norms establish a framework for individual economic behaviour. Transactions on labour, goods and asset markets are regulated by means of explicit or implicit contracts. They render economic processes — to some extent at least — predictable and less risky and allow some planning in a “spontaneous order”. Hence, market relations between firms and households exhibit some degree of stability, which facilitates the employment of optimizing calculations within these decision making units. The terms of these contracts reveal — on the part of the agents involved — the desire for commitment or flexibility.
Money is the measure by which goods are valued, the value by which goods are exchanged, and in which contracts are made payable.
John Lawl1
He who owes is either a bankrupt, or must pay, as long as there is a shilling in the country. But he who buys, or inclines to buy, must have money, or he can buy nothing; for if he buys on credit, he then falls immediately into the former category, and must pay.
James Steuart2
I suppose a person to have lent me a sum of money, on condition that it be restor’d in a few days; and also suppose, that after the expiration of the term agreed on, he demands the sum: I ask, What reason or motive have I to restore the money?
David Hume3
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References
Efficient coordination in the economy cannot occur unless the various agents involved (that is virtually everybody) speak the same monetary language. The institution that allows them to do so is money, but more specifically the unit-of-account function of money. The decentralised plans of hundreds of millions of consumers and millions of producers cannot mesh harmoniously in the aggregate if this common financial language [...] is missing. The efficiency of this language in performing this vital coordination role depends crucially on whether the unit of account always means the same thing to different individuals both at one and the same moment in time and over time“ (Issing 1999a: 10).
Cf. Schumpeter 1934, Hayek 1968, Luhmann 1988: 31.
Cf. Steuart 1767a: 214, Hawtrey 1923: 1, Schumpeter 1970: 33.
Macleod 1855 (quoted from Skaggs 1997: 111).
Hawtrey 1930: 545, cf. Schumpeter 1954: 320–1, Ingham 2000. This line of thought is also taken up by Riese (1995: 56, 59): “Money is not a credit, but emerges from credit.” [All quotations from German texts have been translated by the author.]
Cf. Skaggs 1997: 111–2.
Hicks 1989: 47.
Ingham 2000: 23, cf. Coleman 1990: 119, 186, Heering 1999.
Keynes ( 1930: 3), on the other hand, emphasized the importance of a standard of account as opposed to a bare medium of exchange. “A money of account comes into existence along with debts, which are contracts for deferred payment, and price lists, which are offers of contracts for sale or purchase. [...] Money itself, namely that by delivery of which debt contracts and price contracts are discharged, and in shape of which a store of general purchasing power is held, derives its character from its relationship to the money of account, since the debts and price lists must first have been expressed in terms of the latter. Something which is merely used as a convenient medium of exchange on the spot may approach to being money, inasmuch as it may represent a means of holding general purchasing power. But if this is all, we have scarcely emerged from the stage of barter. Money proper in the full sense of the term can only exist in relation to a money of account.”
Cf. Law 1720: 4–6.
Simmel 1907: 179.
Keynes 1936: 374.
Luhmann 1988: 252 (with additional emphasized parts).
Luhmann 1988: 16, 52, cf. 14, 46–7, 196–7, 230, 246–7, 252, Riese 1995.
For an instructive study of these ideas see Hirschman (1977); he coined the phrase of “money-making as a calm passion”. The civilizing property of a predominance of money interest has also been emphasized by Keynes (see the quotation at the beginning of this chapter).
Luhmann 1988: 253, cf. 19, 69, 255. Simmel (1889: 60) commented critically on the distinctive feature of a monetary society which forces all its members on an equal footing with respect to the assessment executed by the money standard of value. “The lack of quality on the part of money implies [...] a lack of quality on the part of men who offer and demand money. [...] The only reason for one person having the same value as any other in a monetary-circulation system is that no one has any value, but only money. [...] Money is the absolutely objective standard which denies all personal characteristics.”
Luhmann 1988: 21.
Simmel 1901: 722.
Luhmann 1988: 179, cf. 98, 195, 252, Locke 1690: 25.
Luhmann 1988: 70, cf. Schumpeter 1970: 219, 224–5.
Müller 1816: 139.
Menger 1909: 574.
Cf. Kindleberger 1967, Kindleberger 1984: 20, Grantham et al. 1977, De Grauwe 1996: 1–2. For a general treatment of path dependence see Setterfield (1997).
Pierenkämper 1999: 229, cf. Locke 1690: 26, Hawtrey 1923: 177–8, 417, Kiyotaki/ Wright 1992. The idea of a social convention can also be found in Macleod (1882): “In the process of time all nations hit upon this plan: they fixed upon some material substance, which they agreed to make always exchangeable among themselves to represent the amount of debt” (quoted from Skaggs 1997: 112).
Cf. Knapp 1909, Weber 1956: 75–80, 184–93, Schumpeter 1970: 82–3.
Simmel 1907: 177–8.
Cf. Stadermann 1987: 53, De Grauwe 1996: 2–5.
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© 2001 Springer-Verlag Berlin Heidelberg
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Spahn, HP. (2001). Market Organization and Monetary Contracts. In: From Gold to Euro. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-04358-5_2
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DOI: https://doi.org/10.1007/978-3-662-04358-5_2
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