The Appearance of Carriers and the Origins of Money
The main goal of this essay is to provide microfoundations in a spatial general equilibrium framework for the fact that individuals use money to make transactions, and hence microfoundations for the cash in advance constraint. We analyze the emergence of a monetary economy out of a redistribution barter system where goods are sent to a central market and then redistributed among individuals. We show that, as the population increases beyond a certain point, the barter exchange system becomes too expensive. To reduce the exchange system cost, and as a result of individuals’ rational behavior, a new specialized merchant, the carrier, appears and causes frictions among traders leading to the appearance of money. There are, however, certain conditions for this process to succeed. These conditions concern the economic characteristics of those goods chosen to act as money, and the level of economic development.
|Date of creation:||12 Feb 2001|
|Date of revision:|
|Note:||Type of Document - Acrobat PDF; pages: 36 ; figures: included|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jose Noguera S., 2001.
"Barter Economies and Centralized Merchants,"
- Laidler, D., 1996.
"Notes on the Microfoundations of Monetary Economics,"
UWO Department of Economics Working Papers
9610, University of Western Ontario, Department of Economics.
- Laidler, David, 1997. "Notes on the Microfoundations of Monetary Economics," Economic Journal, Royal Economic Society, vol. 107(443), pages 1213-23, July.
- Anas, Alex & Xu, Rong, 1999. "Congestion, Land Use, and Job Dispersion: A General Equilibrium Model," Journal of Urban Economics, Elsevier, vol. 45(3), pages 451-473, May.
- Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, number 9780198811633, March.
- Anas, Alex, 1992. "On the birth and growth of cities: : Laissez-faire and planning compared," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 243-258, June.
- Marcus Berliant & Hideo Konishi, 2000.
"The Endogenous Formation of a City: Population Agglomeration and Marketplaces in a Location-Specific Production Economy,"
Boston College Working Papers in Economics
451, Boston College Department of Economics.
- Berliant, Marcus & Konishi, Hideo, 2000. "The endogenous formation of a city: population agglomeration and marketplaces in a location-specific production economy," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 289-324, May.
- Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
- Hicks, John, 1989. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198287247, March.
- Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
- Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
- Gale, Douglas, 1978. "The core of a monetary economy without trust," Journal of Economic Theory, Elsevier, vol. 19(2), pages 456-491, December.
- Howitt, Peter & Clower, Robert, 2000. "The emergence of economic organization," Journal of Economic Behavior & Organization, Elsevier, vol. 41(1), pages 55-84, January.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
- Clower, Robert W, 1995. "On the Origin of Monetary Exchange," Economic Inquiry, Western Economic Association International, vol. 33(4), pages 525-36, October.
- Fujita, Masahisa, 1988. "A monopolistic competition model of spatial agglomeration : Differentiated product approach," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 87-124, February.
- Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, vol. 89(4), pages 847-877, September.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0012014. 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: (EconWPA)
If references are entirely missing, you can add them using this form.