IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_86.html
   My bibliography  Save this paper

The Origins of Money and the Development of the Modern Financial System

Author

Listed:
  • L. Randall Wray

Abstract

The origins of money and banking are explained in nearly every introduction money and banking course, but Wray proposes an alternative approach that emerges from a comparative analysis of economic institutions. Orthodox theory suggests that barter replaced self-sufficiency and increased efficiency by fostering specialization- subsequently, establishing some object as a medium of exchange permits greater efficiency. In essence, the orthodox economist espouses the view that we operate in a free market economy in which "neutral money is used primarily to facilitate exchange of real goods, undertaken by self-interested maximizers for personal gain." Institutionalists reject this argument because it emerges from the perspective of a rational economic agent facing scarce resources and unlimited wants-thus, the focus is on choice. Wray states that economic analyses must incorporate interactions between humans and nature, and that the economy is a "component of the material life process of society." Hence, the conventionalists' focus on choice should instead be directed at production and distribution. The Wray thesis suggests that money is necessarily endogenously determined: Monetary economies have not, and cannot, operate with exogenous money supply can function with a commodity reserve system, such a system is subject to periodic debt deflations. In sum, the monetarist policy prescription would be counterproductive to systemic stability and would not yield greater control of the money supply.

Suggested Citation

  • L. Randall Wray, 1993. "The Origins of Money and the Development of the Modern Financial System," Economics Working Paper Archive wp_86, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_86
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp86.pdf
    Download Restriction: no

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_86. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Dunn). General contact details of provider: http://www.levyinstitute.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.