The Dynamics of Money

Per Bak, Simon F. Norrelykke and Martin Shubik

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Abstract: We present a dynamical many-body theory of money in which the value of money is a time dependent ``strategic variable'' that is chosen by the individual agents. The value of money in equilibrium is not fixed by the equations, and thus represents a continuous symmetry. The dynamics breaks this continuous symmetry by fixating the value of money at a level which depends on initial conditions. The fluctuations around the equilibrium, for instance in the presence of noise, are governed by the ``Goldstone modes'' associated with the broken symmetry. The idea is illustrated by a simple network model of monopolistic vendors and buyers.

Date: 1998-11, Revised 1999-05
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Citations: View citations in EconPapers (15)

Published in Phys. Rev. E 60, 2528-2532 (1999)

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Working Paper: The Dynamics of Money (1998)
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