Money as an Institution of Capitalism

Abstract

There is an old saying that everyone knows what money is except economists. When economists rush to their dictionaries, they find references to medium of exchange, unit of account, and measure of value. While there can be no quarrel with these definitions, they do not take us very far toward understanding money in the kind of world in which we actually live. For example, the dictionary does not tell us that the production of goods and services by which we live is a byproduct of the expectation of businessmen to make money. While one does not expect a dictionary to contain a treatise on money, is it unreasonable to expect lexicographers to do better by economists? We shall be concerned with money as a special form of private property and with the impact of this strategic institution on employment and output in the economy as a whole. What is special about money under capitalism is that the private owners of capital assets may be deterred from making them available to wage earners because of uncertainty concerning the terms on which real output can be converted into money in the future at time of sale. The purchase of raw materials and the utilization of plant and equipment are also determined by business judgments about the realization of prospective money gains. To analyze money as an institution of capitalism presupposes a clear picture of the salient features of the capitalist system. Under capitalism, The author thanks Louisa Gardner Dillardfor helpful suggestions in the preparation of this article.

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