Daily Archives: December 26, 2013

Essays in Monetary Theory and Policy: On the Nature of Money (6)

By Andreas Lückert*

1. Introduction

Money is “what we use to pay things”. In order to be efficient it needs to be generally accepted. (Lerner, 1947) The question arises how this general acceptability gets created. The true origin of money will never be known for sure. (Wray 2005, p. 3) Still, the heterodox and the orthodox view established different explanations for the nature of money.  These theories will be explained in the following and a recommendation for policy making will be made.

2. Orthodox Approach

The orthodox approach goes along with the exogenous theory of money. It sees money as a neutral thing, which evolved out of barter and is not determined by the real economy. This paragraph explores this nature of money from the orthodox view.

Continue reading