THE EMERGENCE OF MONEY IN COMMODITY EXCHANGE, OR MONEY AS MONOPOLIST OF THE ABILITY TO BUY

Costas Lapavitsas ()
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Costas Lapavitsas: Department of Economics, SOAS University of London, UK

No 126, Working Papers from Department of Economics, SOAS University of London, UK

Abstract: Money's emergence in commodity exchange remains a unresolved issue within economic theory. Current general equilibrium models, drawing on Menger, offer an explanation that rests on the economic advantages of a universally accepted means of exchange that is established through ‘social custom’. This is problematic because it does not fully explain money’s unique ability to buy, and leaves out of account the social foundations of the customary practices required for money’s emergence. An alternative explanation is given here, drawing on Marx’s theory of value but involving a thorough reworking of it. Money is shown to be the monopolist of the ability to buy. 'Social custom' plays a vital role in its emergence, but has determinants that are consistent with the social underpinnings of markets.

Pages: 30 pages
Date: 2002-11
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