Market Organization and Monetary Contracts

  • Heinz-Peter Spahn


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.


Monetary Economy Economic Transaction Market Organization Money Income Market Society 
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  1. 4.
    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).Google Scholar
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    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.]Google Scholar
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    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.”Google Scholar
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    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.”Google Scholar
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    Cf. Stadermann 1987: 53, De Grauwe 1996: 2–5.Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2001

Authors and Affiliations

  • Heinz-Peter Spahn
    • 1
  1. 1.Lehrstuhl für Wirtschaftspolitik, Institut für VolkswirtschaftslehreUniversity of Hohenheim (520 A)StuttgartGermany

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