CHAPTER TENMoney and value
1. Introduction
Money is the key institution in markets. Its use defines the scope of markets, apart from barter arrangements which still survive at the fringes of modern markets.1 One of the most damaging misconceptions of general equilibrium theory in the 20th century was the assumption that in principle, markets could operate without money. In this perspective, money is conceived as a mere technology for implementing transactions; money is just a veil, and prices are defined in a strictly relative fashion, with the nominal price level determined by the quantity of money.2
The standard theory of money blanks out another important aspect that we tackle in this chapter: The history ...
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