by Scientific economics needs more memes: short statements which capture the imagination and stick to the mind of lay people as well as economists. One of the well known memes of classical and neoclassical economics is the definition of money: Money is: * A means of exchange * A store of value * A unit of account As such, it’s not bad. But it’s incomplete. The unit of account and the means of exchange do not have to be the same thing. In the olden days, in the Dutch Republic (as well as elswhere), the universal unit of account was the Stuiver and multiples thereof, like the Carolus Guilder of twenty Stuiver. While the means of exchange existed of a bewildering array of Pieces of eight, Guilders, Nobels, Thalers and whatever and sometimes, especially before 1650, even of products like rye
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Scientific economics needs more memes: short statements which capture the imagination and stick to the mind of lay people as well as economists. One of the well known memes of classical and neoclassical economics is the definition of money:
Money is:
* A means of exchange
* A store of value
* A unit of account
As such, it’s not bad. But it’s incomplete. The unit of account and the means of exchange do not have to be the same thing. In the olden days, in the Dutch Republic (as well as elswhere), the universal unit of account was the Stuiver and multiples thereof, like the Carolus Guilder of twenty Stuiver. While the means of exchange existed of a bewildering array of Pieces of eight, Guilders, Nobels, Thalers and whatever and sometimes, especially before 1650, even of products like rye which were used to pay ‘monetary’ rents. It’s good to make a clear distinction between the unit of account and the means of exchange! However – this meme is (neo)classical as it implicitly understands transactions as isolated here and now events, without social or historical or political embedding or repercussions. We have to change it. One way to do this is, as sometimes already happens, to add a fourth dimension to the definition, stating that money also is:
* the standard of deferred payments
The debt contracts using the unit of account as the standard of deferred payments tie the individual actors of (neo)classical economics together and, as their balance sheets and projected liquidity statements change, also change the economic nature of these people and companies. This adds a time as well as a social as well as a political dimension to the definition. See, for a depressing example, this story about debt collecting in Coeffeyville, Kansas. Money makes the world go round. And in Coffeyville, debt makes it stop. Other examples are mortgages or commercial credit which open up possibilities but also come with risk. Any money meme should encompass this part of our monetary world.