Credit and State Theories of Money

Credit and State Theories of Money

The Contributions of A. Mitchell Innes

Edited by L. Randall Wray

In 1913 and 1914, A. Mitchell Innes published a pair of articles that stand as two of the best pieces written in the twentieth century on the nature of money. Only recently rediscovered, these articles are reprinted and analyzed here for the first time.

Chapter 2: What is Money?

A. Mitchell Innes

Subjects: economics and finance, economic psychology, history of economic thought


A. Mitchell Innes [377]* HE FUNDAMENTAL theories on which the modern science of political economy is based are these: That under primitive conditions men lived and live by barter; That as life becomes more complex barter no longer suffices as a method of exchanging commodities, and by common consent one particular commodity is fixed on which is generally acceptable, and which therefore, everyone will take in exchange for the things he produces or the services he renders and which each in turn can equally pass on to others in exchange for whatever he may want; That this commodity thus becomes a ‘medium of exchange and measure of value;’ That a sale is the exchange of a commodity for this intermediate commodity which is called ‘money;’ That many different commodities have at various times and places served as this medium of exchange, – cattle, iron, salt, shells, dried cod, tobacco, sugar, nails, etc.; That gradually the metals, gold, silver, copper, and more especially the first two, came to be regarded as being by their inherent qualities more suitable for this purpose than any other commodities and these metals early became by common consent the only medium of exchange; That a certain fixed weight of one of these metals of a known fineness became a standard of value, and to guarantee this weight and quality it became incumbent on governments to issue pieces of metal stamped with their peculiar sign, the forging of which was punishable with severe penalties; That Emperors,...

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