Money and Markets:Introduction

In the history of economic thought the relationship between money and market has been interpreted from two contrasting points of view. On the one hand, money is seen as an instrument created by individuals to overcome the difficulties involved in barter, its basic function being as a medium of exchange, while the other view has it that money developed before the market and that its principal function is that of a standard of value. Evidently, therefore, in the former case the unit of account function is seen to have emerged from a practice (exchange of goods and services) based on the advantages to be had for individuals seeking to maximise their utility, while in the latter case money emerges as a rule adopted by members of the community (the political authorities promoting it and ensuring it be respected) which pre-dates the market. As in the case of money, also for the market two approaches have come into confrontation in the course of the history of economic thought. With the first the market is seen as a column bearing the economies characterised by private property and freedom of enterprise. It represents the means by which members of society democratically come to decisions about the use of resources and distribution of income. In the second approach, on the other hand, the market is seen as the means by which decisions on the use of resources and distribution of income, once taken by the groups enjoying economic command, are passed on to the other members of society to be implemented. In the first case the market lies at the heart of the system and serves to prevent the enjoyment of privileges and position rents by some members of society excluding others, while in the second it merely plays a supporting role for the existing patterns of power.