On the Necessity of Money in Smith’s Commercial Society and Marx’s Commodity Producing Economy

Isabella Weber ()
Additional contact information
Isabella Weber: Peterhouse College, University of Cambridge

No 1527, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper argues that both Smith and Marx find money to be necessary for the specialization of individual producers and the regulation of social production by market exchange. Increasing returns to scale constitute an incentive towards individual specialization of production and social division of labor. However, specialization is conditioned on the ability of specialized producers to provide their needs by exchange. A stable equilibrium of individually diversified production can emerge when social norms or limits to exchange prevent specialization. Specialization under conditions of barter constitutes a highly unstable equilibrium since the specialized producers fail regularly to provide their needs by exchange. It tends to either collapse back into a diversified equilibrium or to give rise to a socially accepted general equivalent, i.e. money. Money greatly increases the strategic complementarity of specialization by providing sufficient exchange certainty and a relatively stable specialized equilibrium can emerge.

Pages: 30 pages
Date: 2015-11
New Economics Papers: this item is included in nep-his, nep-hpe and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.economicpolicyresearch.org/econ/2015/NSSR_WP_272015.pdf First version, 2015 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1527

Access Statistics for this paper

More papers in Working Papers from New School for Social Research, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mark Setterfield ().