The Utility of Money

Biagio Bossone

Chapter Chapter 3 in Trailblazing Visions of Money in Economic Theory, 2025, pp 45-74 from Springer

Abstract: Abstract This chapter explores the utility of money as a fundamental economic asset serving as a means of payment and a source of liquidity for individuals and societies. It positions money within a broader context of financial assets, examining how its utility derives from its immediate convertibility into goods and services. The theory allows money to be compared with goods, services, and assets and builds on three foundational components: (i) a choice-theoretic model assessing utility from assets with various liquidity levels; (ii) a variable cost structure for asset liquidation that reflects financial inefficiencies and market mood changes; and (iii) a model for expectations formation amid uncertainty. The theory integrates elements of neoclassical economics, emphasizing a choice-theoretic model that evaluates utility based on liquidity levels and the costs associated with asset liquidation. By dissecting how market sentiment and uncertainty influence resource allocation and asset prices, the chapter formulates a framework that captures the dynamics between consumption, money, and non-money assets.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-031-82544-6_3

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DOI: 10.1007/978-3-031-82544-6_3

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