Rethinking Money: A Survey on Economic Theories of Money

Abstract

Money is a tool people deal with on a daily basis. It is also an important instrument for governments to manage their functions. But despite the familiarity, probably few people could tell exactly what money is, or how it works. With the development of new forms of currency, for instance Bitcoin, the conventional view of money has been challenged. The paper is a theoretical survey and an analytical study on the historical thoughts of the nature of money. It also attempts to provide analytical critiques on the three main theories of money, i.e., commodity, credit and state theories. This research constitutes a close reading of the main proponents, and a summarization of the proposed ideas. Through in-depth examination of the works of those important economic theorists, such as Aristotle, Richard Cantillon, John Locke, Karl Marx, Henry Dunning Macleod, Georg Simmel, Alfred Mitchell-Innes and Georg Friedrich Knapp, it is hoped to unfold the great contributions these thinkers have made to the concept of money, the evolution of the theory on monetary economics, the challenges or the weaknesses they might face. Author aims to uncover the merits of existing alternative theories while attempting to search for a general theory on money that can encompass the multitude of aspects that money possesses. This paper provides answers to questions along the lines of: Is there one particular characteristics of money? How did money emerge in the society? And most importantly, what is money?