Money Is the Scribe of a Market Economy

Abstract

The purpose of this chapter is to give an alternative version and interpretation of Kocherlakota’s argument that money is a memory (bookkeeping technology). There seems to be some confusion in the way in which the conception of a memory-money is presented and understood today. What is acceptable is the idea that money allows a decentralized control over the actions of individuals in the market, thus providing an alternative to centralized control which is incompatible with a market economy. Such an idea is old, going back at least to Galiani. What impairs its presentation in Kocherlakota’s version is a double confusion between money and capital (due to the assumption of durability of fiat money) on the one hand, and between accounting and centralization on the other. Even a brief explanation of the relationship between money and accounting allows us to dispel these confusions and to propose a different idea of what money really does in a market economy. An essential component of money is the nominal unit of account, an aspect completely disregarded by academic theory. The unit of account is the language of individuals in the market. It is the mode of expression and computation of individuals in their relationships with one another. Its existence and its definition depend upon a sovereignty which is inherent to the market economy, and which is completely obscured by academic theory, where money is conceived as a particular commodity, that is, fiat money.