An Example: Money

Abstract

The institution of money, like that of language, or that of the State, has often been seen to be based on some kind of contractual agreement. Aristotle describes the nature of money as follows:

Money has become by convention a sort of representative of demand; and that is why it has the name ‘money’ (nómisma) because it exists not by nature but by law (nómos) and it is in our power to change it and make it useless. (Ethica Nicomachea, V.5.II33a)

The word nómos is ambiguous: in another translation of Ethica it has been translated as “custom”. This ambiguity reflects a theoretical problem in the classical social theory: money has been seen either as a result of an act of will of the legislator, or as a contract or convention based on voluntary agreement between economic agents. Roman jurisprudence and medieval political thinkers considered that the sovereign had an unlimited power over monetary institutions, including the power to determine the real value of money. This was the opinion supported by e.g. Thomas Aquinas, who in his commentaries translated Aristotle’s nómos as “lex” (Monroe 1923, 27).