The origin of money

André Orléan

pp. 113-143

in: Francisco Varela, Jean-Pierre Dupuy (eds), Understanding origins, Berlin, Springer, 1992

Abstract

Most economists now agree that the basis of money is its general acceptance as a medium of exchange among the members of a given community. Although the metallist tradition long dominated economics, modern thinkers no longer hold that the acceptance of money as a medium of exchange should be understood as resting on a belief in the intrinsic value possessed by money itself. When Frank Hahn sought to lay the groundwork for an adequate theory of money, his first statement was that he was "interested in an economy where money is of no intrinsic worth and is universally accepted in exchange" (Hahn, p. 158). From this perspective, any reference to gold as a standard of value is taken as a failure to have reached a true understanding of monetary phenomena. In his famous textbook, Paul A. Samuelson goes so far as to make the following declaration: "From the standpoint of understanding the nature of money, it is perhaps simpler that the citizenry" s gold certificates and coins no longer exist. The modern student need not be misled as were earlier generations of students, by some mystical belief that "gold backing" is what gives money its value. Certainly gold, as such, has little to do with the problem" (Samuelson, 1976, pp. 278–279).