Abstract
Very few social institutions are as essential to the functioning of human societies as money. Money can be compared to the oil in the engine of the modern economy. Without a sufficient quantity of money, the engine ‘seizes up’ (and is often irreparable); conversely, too much money can flood the engine (which must then be purged to function normally)). This chapter seeks to set the foundations for the study of money and finance by offering insight from neoclassical, Post-Keynesian and institutionalist monetary theories. All concepts are illustrated using examples taken from ancient and recent international monetary and financial history. The reader will get acquainted with the various functions of money and their relative importance, and discover the connection between debt, credit and money using double-entry accounting mechanisms. This analysis sets the ground for an informed discussion of the various historical forms of monetary sovereignty and monetary contestation.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
Note that the belief in the commodity-money theory has led many economists to erroneous assume that money is neutral—with transactions in kind being covered by a ‘monetary veil’. In Walras’ general equilibrium model for example (and in many modern models such as DSGE models), the money market is defined as a redundant market, in which equilibrium is implied from equilibrium in all the other markets. These postulates explains why such models have failed to predict the 2008 crisis, as they describe a world were monetary and financial dynamics do not impact employment, consumption or investment.
- 2.
The reader interested in this issue can refer to the major work Debt: 5000 Years of History, by David Graeber (2011). For specific case studies on the emergence of the monetary phenomenon in different historical and social contexts, one can recommend Introducing Money, by Mark Peacock (2013). Also see Jean-Michel Servet’s (1994) text The Fable of Barter.
- 3.
Readers interested in the moral aspect of debt may wish to refer to Nathalie Sarthou-Lajus (1997) text. La dette, le devoir, la faute (in French).
- 4.
The quantity of labor referred to in this case corresponds to the socially necessary labor time, given the state of technology, to produce an exchange value equivalent to a crate of tomatoes. In his book Capital (1872), Marx used the term ‘socially necessary labor time’ for the first time to refer to the time needed to create use value in a given technical and historical context.
- 5.
Peacok (2013, p. 49–68) provides an impressive account of our historical knowledge in this area. See Peacock, M. (2013) Introducing Money (London and New York: Routledge).
- 6.
What is considered as ‘legitimate’ redistribution of the taxed surplus depends on the prevailing social and cultural codes. In our democratic societies, States use their share of the surplus to perform regalian functions, and to supply public goods to the population (such as education, a public health system, pensions, environmental protection, etc.). But other uses of the surplus are possible: Egyptians Pharaohs used it to build pyramids, Romans to organize gladiators’ fights, kings of France to entertain their court at the Versailles castle.
- 7.
See for example Alary, Pierre, Jérôme Blanc, Ludovic Desmedt and Bruno Théret (eds., 2016). French Theories of Money. An anthology, Paris, PUF, 330 pp.
- 8.
Jean Bodin, in the sixteenth century, theorized the links between sovereignty (‘defined as the absolute and perpetual power of a republic’) and currency. As a jurist, Jean Bodin understood that money was a mark of sovereignty: just as the monarch has a sovereign power to pass laws without being personally subject to them, he can make a monetary change by law. This makes monetary mutations a mark of sovereignty.
- 9.
At the base of the pyramid are the Roman numerals MDCCLXXVI (1776), the date of the declaration of independence. Two other Latin references should be noted: ANNUIT COEPTIS (“He approves our enterprise”) and a phrase from Virgil NOVUS ORDO SECLORUM (“New order of centuries”).
- 10.
On the other hand, if the creditors are free to accept it or not, then we say that this currency is ‘free market’.
- 11.
The reason why human societies have designated a yellow metal for standard of value will probably remain obscure forever. As Keynes noted as early as 1930, gold (which he called a ‘barbarian relic’) has been a subconscious symbol of power and stability for millennia.
- 12.
Indeed, Treasury deposits at the Central Bank are not included in the monetary base. For a detailed description of the impact of tax payments on the Central Bank’s balance sheet, (see pp. 74–75) in Wray, R. (2015). Modern Money Theory: a Primer on Macroeconomics for Sovereign Monetary Systems. Springer Link, 306 pp.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2023 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Didier, R., Lagoarde-Segot, T. (2023). What Is Money?. In: Lagoarde-Segot, T. (eds) Ecological Money and Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-14232-1_3
Download citation
DOI: https://doi.org/10.1007/978-3-031-14232-1_3
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-031-14231-4
Online ISBN: 978-3-031-14232-1
eBook Packages: Economics and FinanceEconomics and Finance (R0)