Menger’s account of the origin of money as a case study in the evolution of institutions

Daniel Nientiedt

The Review of Austrian Economics, 2023, vol. 36, issue 2, No 5, 205-215

Abstract: Abstract This paper analyses Carl Menger’s account of the origin of money as an example of an “invisible-hand explanation” of social phenomena. According to a distinction made by Edna Ullmann-Margalit, invisible-hand explanations can refer to two different aspects of such phenomena. First, they can describe how the aggregation of individual actions leads to the emergence of a social phenomenon. Second, they can show that the phenomenon performs a valuable function that secures its continued existence. Menger’s account of the origin of money is particularly satisfying because it includes both kinds of invisible-hand explanations: He describes how money could have emerged from the self-interested actions of many individuals and shows the social usefulness of the money phenomenon. This distinguishes Menger’s account from theories that focus on either one kind of invisible-hand explanation. The paper discusses the example of Friedrich Hayek’s theory of cultural evolution, which focuses only on the aspect of social usefulness.

Keywords: Carl Menger; Money; Invisible-hand explanations; Friedrich Hayek; Cultural evolution (search for similar items in EconPapers)
JEL-codes: B13 B25 B31 E42 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11138-022-00600-0

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