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Is money a convention and/or a creature of the state? The convention of acceptability, the state, contracts, and taxes

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This article begins by presenting the idea of money as a convention, first in the economics of conventions and then in post Keynesian economics, also examining whether and how one can reconcile money as a convention with Keynes's essential properties of money. The article then considers the view of money as a creature of the state, in two versions, which connect money to contracts or to taxes, respectively. Finally, it further explores the monetary foundations of a market economy, the conventional foundation of money, and the role of the state. Acknowledging that money is ultimately or fundamentally a convention requires recognizing limits to the state's ability to impose its money on the private agents. At the same time, the state is usually in a much better position than any private agent to influence the process through which the convention of acceptability of money emerges and is reproduced. A stronger proposition is that without state money there would be no stable money in a market economy. Both the fundamental conventionality of money and the essential role of the state can be thus emphasized.
Journal of Post Keynesian Economics / Winter 2013–14, Vol. 36, No. 2 251
© 2014 M.E. Sharpe, Inc. All rights reserved. Permissions: www.copyright.com
ISSN 0160–3477 (print) / ISSN 1557–7821 (online)
DOI: 10.2753/PKE0160-3477360204
DAVID DEQUECH
Is money a convention and/or a
creature of the state? the convention of
acceptability, the state, contracts, and
taxes
Abstract: This article begins by presenting the idea of money as a convention,
first in the economics of conventions and then in post Keynesian economics,
also examining whether and how one can reconcile money as a convention
with Keynes’s essential properties of money. The article then considers the
view of money as a creature of the state, in two versions, which connect money
to contracts or to taxes, respectively. Finally, it further explores the monetary
foundations of a market economy, the conventional foundation of money, and
the role of the state. Acknowledging that money is ultimately or fundamentally a
convention requires recognizing limits to the state’s ability to impose its money on
the private agents. At the same time, the state is usually in a much better position
than any private agent to influence the process through which the convention
of acceptability of money emerges and is reproduced. A stronger proposition is
that without state money there would be no stable money in a market economy.
Both the fundamental conventionality of money and the essential role of the
state can be thus emphasized.
Key words: Money, convention, state, taxes, contracts.
Money is an institution itself and is closely related to organizations and
other institutions. When dealing with money, the following organizations
are particularly relevant: the state, the central bank, and the commercial
banks. In addition to organizations, other relevant institutions pertaining
to money are: conventions (first and foremost, the convention of ac-
cepting money), contracts, taxes, laws (such as contract laws, tax laws,
etc., which in turn have the state as their main enforcer), and informal
social norms.
David Dequech is a professor of economics at the University of Campinas, São Paulo,
Brazil. The author thanks Sheila Dow and especially André Orléan and an anonymous
referee for comments on a previous version. Financial support from the Brazilian
National Research Council (CNPq) and the São Paulo State Research Foundation
(Fapesp) is also gratefully acknowledged.
252 JOURNAL OF POST KEYNESIAN ECONOMICS
This article is concerned with only some of these institutions and orga-
nizations. It examines two different views of money, each emphasizing
a different set of institutions: one of them sees money as a convention;
the other asserts that money is a creature of the state. At least at first
sight, these views seem to be diametrically opposed. Can both have
valid points? If so, can they be reconciled? More specifically, the article
concentrates on two approaches among others that support these views:
the economics of conventions, originated in France, and post Keynesian
economics. Both trace an important part of their origins back to Keynes
and highlight conventions and other institutions in their attempt to provide
a theoretical alternative to neoclassical economics. The primary intended
contributions of the article are three: (1) to propose some forms of orga-
nizing the presentation of, and comparison between, the conventionalist
and the post Keynesian approaches to money, (2) to show differences
between these approaches regarding conventions and the role of the state,
as well as what Keynes called the essential properties of money, but also
(3) to suggest possible ways to make these approaches compatible and
complementary. As a secondary contribution, the article hopes to promote
dialogue between the post Keynesian and the conventionalist schools,
which has, unfortunately, been very sparse so far, in addition to other
approaches to money, in economics and other disciplines.
The fact that the role of central banks and commercial banks is not
highlighted here does not mean that these organizations and their own
institutional rules of thought and behavior are less important. It merely
reflects the need to delimit the scope of the present discussion. Lack
of space prevents a single article from adequately dealing with all the
institutions that are relevant for the existence of money. Two comments
involving banks may be helpful here. First, the general argument that
money is a creature of the state means that the state defines and enforces
money; it does not necessarily imply the more specific idea that the state
is the primary issuer of money (the primary creator of its supply). From
the state money perspective, money can still be endogenously created by
commercial banks (with the possible support of the central bank). Second,
the argument that money is a convention may include, as a special case,
credit money as a convention.
Money as a convention
Monetary theorists usually do not define a convention when applying the
word to money. In quite general terms, which are compatible with differ-
ent approaches, the conventional character of money is mainly related to
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 253
the convention of acceptability, involving the combination of two aspects:
(a) someone accepts something as money because other people (are ex-
pected to) also do it; and (b) what is money is at least in part arbitrary,
in the sense that an alternative is possible and, if everybody accepted
some other object as money, this could be money. In other words, there
are two properties that any convention has and that can characterize the
use of money as a convention: (a) one’s conformity with the (expected)
conformity of others or, more simply, conformity with conformity; and
(b) arbitrariness.
The conventionalist approach
The conventionalist approach to money strongly emphasizes the con-
ventional character of money.1 Its main proponent has been André
Orléan.2
Uncertainty and the need for protection
In his joint work with Michel Aglietta, Orléan discusses the conventional
character of money by taking as a starting point the uncertainty about the
result of one’s economic decisions when exchange is based on the market
principle (Aglietta and Orléan, 2002).3 Without alternative “principles of
exchange” (what we could more appropriately call modes of economic
provision) like reciprocity and redistribution, individuals are autonomous,
but also at the mercy of the market and its vagaries. One cannot count
on the protection of traditional forms of solidarity or of the state. One’s
fortunes depend on how relatively scarce the goods or services that one
offers in the market are, in competition with others.
In the Arrow–Debreu general equilibrium model, this problem is solved
with contingent markets. A contingent commodity is defined in terms of
1 The conventionalist approach to money is much more complex and reflects more
influences (especially from sociology and anthropology) than implied by the follow-
ing attempt at a concise and accessible presentation. A supplementary text for those
who cannot read French is Orléan (1992).
2 Although Orléan rarely cites post Keynesian writings, he is aware of, and sympa-
thetic to, important ideas defended by post Keynesians: “By its presuppositions that
place emphasis (i) on the importance of the unit of account and monetary contracts;
(ii) on the role of nonprobabilizable uncertainty; (iii) on the nonneutrality of money;
and (iv) on the fact that, in a capitalist economy, entrepreneurs are the origin of the
issuing of money (endogenous money), our approach is naturally located in the frame-
work of Keynesian and post Keynesian monetary thought” (Orléan, 2007, p. 9; this
and all other translations are mine).
3 Although their book is a collaborative product, the typically conventionalist aspects
in the passages mentioned here seem to mostly reflect Orléan’s contribution, as evi-
denced by his individual works.
254 JOURNAL OF POST KEYNESIAN ECONOMICS
a specific moment in future time and is contingent on the occurrence of
a given state of the world at that time. In this traditional model, agents
may protect themselves today from the effects of uncertainty about the
future, and they are able to do so with commodities and without money,
the latter being just a numeraire. In contrast, Aglietta and Orléan point
out that, in the absence of complete contingent markets, each individual
requires some kind of protection in the form a social link with others.
Each individual, Aglietta and Orléan (2002, p. 66) argue, desires a “mul-
tifunctional” thing, capable of “satisfying an indeterminate multiplicity
of needs” that will depend on future circumstances. The authors call this
social object of desire “wealth,” by which they mean, in the language
of other economists, either money or, more generally, liquidity or liquid
wealth, that is, liquid assets (p. 67).
Aglietta and Orléan consider Keynes as the best theoretician of this
desire of liquid wealth in response to uncertainty.4 In their view, what
Keynes wrote about money as a protection against market uncertainty
can be generalized for every object representing (liquid) “wealth” (p.
68). Moreover, Aglietta and Orléan see Keynes as insisting, as they do,
on the conventional character of money. On the other hand, they wish to
develop a more rigorous theory of (liquid) “wealth” (p. 38).
Money as the result of mimetism in search of “liquidity”
It is common in economic analyses to assume that the commensurability
of commodities is previous to money and explained by “the principle of
value.For Orléan (2004, p. 41), this is a mistaken idea, whether value
is based on utility or on labor. For example, according to what Aglietta
and Orléan call “the instrumental approach to money,money merely
facilitates exchange, allowing traders to circumvent the restriction im-
posed by the requirement of the double coincidence of wants. Without
such a coincidence, exchange cannot take place in a barter economy.
In contrast to such a view, Aglietta and Orléan maintain that we can-
not adequately study money by assuming first a stable market economy
without a socially accepted object, namely, money. They reject the idea
that people could establish stable exchanges in the absence of a socially
shared reference that allows them to agree on the rate of exchange. The
authors argue that it is not sufficient that people know their own needs
(or, they might add, the amount of labor socially necessary to produce
4 Their comments on the absence of a need for liquidity in general equilibrium mod-
els with complete contingent markets are similar to those of some post Keynesians,
most notably Davidson (1994, pp. 100–101).
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 255
the goods). Aglietta and Orléan (2002, p. 344, n. 69) maintain that a
system of market exchange without money could not exist at all or could
be found only occasionally, during monetary crises in which (the thing
that had been accepted as) money is rejected by traders.
Aglietta and Orléan thus study a hypothetical market situation without
a socially recognized money, with two objectives: first, to demonstrate
that this situation cannot persist (in this case, they resort to reductio ad
absurdum); second, to explain the process through which a shared refer-
ence may emerge, even when the initial situation is marked by an extreme
fragmentation of people’s beliefs and interests. In a more recent book,
Orléan (2011, p. 157) describes this thought experiment as concerning
a market economy from which money has somehow been withdrawn.
Still present in such an economy are the market elements that make
money necessary.
In such a hypothetical situation, Aglietta and Orléan argue, people
would still desire something that is accepted by the others. This object
would allow them to satisfy future needs and, more generally, would
protect them against unpredictable future events. In Aglietta and Orléan’s
words, “the question of liquidity does not leave [people’s] mind” (2002,
p. 72)—although it should be added that since money has not yet been
introduced into the analysis, the term “liquidity” at this point denotes, in a
more general sense than is usual, great desirability (and thus acceptability)
in the eyes of others. Thus, each individual would not be concerned only
with his or her own needs, and would try to find out whether a particular
good is being accepted by the others.
Under such conditions, it would not be easy for two individuals A
and B to agree on the rate of exchange between two goods. Individual
A may consider postponing an exchange with B if A believes that the
good possessed by a third individual C will be better accepted by other
individuals in the future. In addition, A may be reluctant to part company
with his or her own good because the latter may become generally ac-
cepted in the future. Moreover, the very fact that individual B is willing
to accept the good possessed by A may be taken by the latter as a sign
that this good is or may become generally accepted. This interpretation
could make A keep that good. In the limiting case, exchange would not
take place at all.
While a market situation without money could not be stable, inves-
tigating it sheds light on the very nature of money from a theoretical
perspective, in Aglietta and Orléan’s (2002, p. 74) opinion (from a his-
torical viewpoint, they acknowledge the origin of money in premarket
societies). Money is a socially shared reference that may emerge and
256 JOURNAL OF POST KEYNESIAN ECONOMICS
allow stable exchanges to occur. Money is at that very foundation of a
market economy (Orléan, 2011, p. 148).
How can individuals converge on a shared reference when each person
is searching for something that is generally accepted and beliefs are very
fragmented? Aglietta and Orléan are not satisfied with the traditional
response that highlights certain properties that have historically char-
acterized precious objects like gold. The concrete form of money is for
them radically indeterminate (Aglietta and Orléan, 2002, p. 74), at the
very high level of abstraction in which their analysis is located. As an
alternative explanation they offer “the mimetic hypothesis.
Each individual desires something that the others will accept. Each
one thus looks around to identify what the others desire and to imitate
them. This is a result of the fundamental relation of separation that
the market establishes among individuals and the uncertainty that
ensues.5
Individuals are all looking for the same thing, but this object can, a
priori, be anything (Aglietta and Orléan, 2002, p. 78) “or almost any-
thing,” including a signature (p. 345, n. 75)—although this depends on
the level of abstraction of the analysis (Orléan, 2008). This means that
money does not have to be a producible good; on the other hand, the
authors do not explicitly deny that it could be an easily producible good,
at least in their very abstract model.6 There is a multitude of candidates
competing for the position of money. This situation of “generalized frag-
mentation” is marked by a conflict of interests, as each individual would
like to impose his or her preferred definition of money on the others, and
by an enormous confusion and uncertainty (pp. 78–79).
Individuals searching for money imitate each other because of what
Orléan calls the self-referential nature of money: “money is that which
everybody considers as being money” (Aglietta and Orléan, 2002, p.
85; also pp. 38, 77, on liquid wealth, more generally). In other words,
money has an “intersubjective” nature (p. 77); it is not objective, in the
sense that it is not independent of people’s beliefs.
5 For Aglietta and Orléan, therefore, mimetism is not due to a psychological propen-
sity to imitate (2002, p. 76). In this regard, they differentiate their theory from René
Girard’s, after acknowledging the influence of the latter.
6 To the best of my knowledge, even in less abstract parts of his monetary works,
Orléan never mentions Keynes’s low elasticities of production and substitution, dis-
cussed below. Orléan (2008) does use the expression “essential properties of money,”
but not in Keynes’s sense, referring instead to money as unanimously accepted and as
an institutional link through which society is made present.
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 257
“Each one expresses his or her beliefs, observes the beliefs of others, and
mimetically modifies his or her original choice” (Aglietta and Orléan, 2002,
p. 81).7 A situation in which there is no money may end up in generalized
chaos, but another possibility is the convergence toward a particular object,
recognized by everybody as money. This result is possible because of the
cumulative character of the mimetic process through which people search
for a generally accepted object: the larger the number of people adopting
a certain opinion of what is (or will be) money, the higher the chances of
selection of this opinion by the entire group of individuals (ibid.). In an
earlier work, Orléan (1985) developed a formal model showing, under
some conditions, the convergence toward a unanimous opinion.8
For Orléan, any opinion may become the unanimous one, although this
does not mean that every agent has the same power to influence other
people’s opinions (Orléan, 1985, p. 152). Once shared unanimously, any
opinion will become a self-fulfilling prophecy: the object that everybody
predicts will be accepted by everybody will indeed be thus accepted.
Relatedly, almost anything can become money, as long as it is considered
as such by everybody. “What matters is not the intrinsic content of the
elected object, but the fact of being chosen unanimously by all members
of society.” Its “natural properties” do not make it money (Aglietta and
Orléan, 2002, pp. 81, 85).9
The emergence of money is explained by Aglietta and Orléan as the
endogenous result of a mimetic process. This shared reference “is not
imposed from outside, by an unlikely deus ex machina” (p. 83).
7 This helps us understand how each person can try to influence the others and imitate
the others, as it is not claimed that one does these two things at the same time.
8 Aglietta and Orléan (1992, pp. 91–96) compare and contrast their approach with
Menger’s. They acknowledge that the two views have some points in common. In
both cases, agents have a concern with liquidity or exchangeability (marketability)
and, even if Menger does not use the same terms, there is imitation and a cumulative
mimetic dynamic converging on money. On the other hand, Aglietta and Orléan see
important differences beyond this “formal proximity” (p. 93). Unlike Menger, they
reject value as preexisting money, and see money not as merely faciliting transac-
tions, but as the shared principle of evaluation that allows stable exchange to exist.
Relatedly, they deny the possibility of stable barter and of a market link spontane-
ously emerging out of the individuals’ needs. Another difference, identified by
Aglietta and Orléan (1992, p. 345, n. 8), is that Menger intended to model the actual
historic process of the emergence of money, while they do not. Finally, Orléan’s
more recent ideas on the role of the state (discussed below) also constitute a speci-
ficity of his approach.
9 Aglietta and Orléan (1992, pp. 58–59) point out the failure of attempts to integrate
money into the Walrasian framework, in strictly individualist terms, allowing money
to perform a role that is marginal, at best.
258 JOURNAL OF POST KEYNESIAN ECONOMICS
After the emergence of money
Once the unanimity around money appears, it reproduces itself and
continues being a self-fulfilling prophecy. Each individual now imitates
not another particular agent, but the group as a whole.
For Aglietta and Orléan, the social recognition of money leads agents
to believe that the election of a particular object as money is due to its
intrinsic qualities, instead of mimetism. In the authors’ eyes these quali-
ties play a “completely secondary role” (2002, p. 83), but it is indeed
important for the stability of money that money be “perceived” as (in-
trinsically) legitimate, not as the accidental result of a mimetic process.
In order to persist as such, money has to be “excluded from the circle of
ordinary goods” (p. 85).
This legitimacy of money makes it more difficult for deviant opinions
to appear. Even when they do appear, beliefs that another alternative
would work better as money than the object currently adopted may not
be defended publicly. Money, like any other convention highlighted by
the French conventionalists, is more stable when it is legitimate.10 The
object chosen as money has, however, to pass frequent tests of legitimacy.
“Money seems to us to be always unfinished” (Aglietta and Orléan,
2002, pp. 32–33).
Under some circumstances (we could think of chronically high infla-
tion or a serious balance-of-payments crisis), those deviant beliefs may
become sufficiently widespread for a competition to exist among the
previous money and a few other potential substitutes.
This competitive process may lead to a major monetary crisis and the
emergence of a new money. Furthermore, this competition has a specific-
ity: an increase in the price of a certain object may lead to an increase in
its demand, if seen as a sign of a greater capacity of attraction.
Money and the state
In Aglietta and Orléan’s abstract model of the emergence of money, only
private agents matter. As seen above, Aglietta and Orléan maintain that
the object elected as money may be a priori anything, “for example a
signature” (2002, p. 345, n. 77). This latter example, in the context of
their abstract model, is restricted to a signature of a private agent, not of
a government official. The authors do not restrict their model to material
objects, but, as they do not go into detail about this specific aspect, it is
10 The notion of “legitimate convention” plays a central role in the economics of
conventions (Orléan, 2004).
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 259
not clear why agents would choose an object without intrinsic properties
and at the same time without the support of the state.
For the authors, money does not originate from an exogenous source,
like the state, in particular (Aglietta and Orléan, 2002, p. 87). The state
may be a source of monetary legitimacy, and historically has played an
important role in the origins of money (as Aglietta and Orléan point out
in their historical chapter, particularly on pp. 126–127, where they refer
to the use of money as a unit of measure of debts to the state in ancient
Mesopotamia and to the later coinage of money by the Lydian state).
The state’s success depends, however, on the private agents’ interpreta-
tion of its actions. For Aglietta and Orléan, the insufficiency of the state
is revealed when it tries in vain to impose its money on private agents:
“even the threat of the guillotine did not stop at all the massive rejection
of the assignat,a paper money issued by the state during the French
Revolution (p. 102). This seems to be a reason why they believe that
their abstract model is capable of revealing the concealed, conventional
nature of money.
In later works, Orléan (2008) has partly revised his treatment of the
relation between money and the state. The model of mimetic convergence
only reveals part of the process. One must also consider that each agent
prefers a money candidate that is most accessible to him (Orléan, 2011, p.
163). Given the variety of interests underlying the rivalry between several
competitors for the position of money, the state cannot remain indifferent
to disputes about what is or should be money (Orléan, 2008, p. 8).
To the extent that the state carries a project of political unification and that
it has the means to do so, it plays a role that may be decisive in conducting
the monetary process to success, in particular to the extent that it has the
legitimacy that allows it to confront the powerful interest antagonisms to
which the definition of money inevitably gives rise. (Orléan, 2008, p. 9)
The state may turn out to be an indispensable actor to constitute the
monetary unanimity by showing itself as the only actor capable of neutral-
izing the violent oppositions that the determination of a shared monetary
norm cannot but produce. (ibid., pp. 9–10).
In a stronger statement, Orléan even refers to the state as “an essential
actor in the process of monetary unanimity” (2008, p. 8). This implies
a greater recognition of the asymmetry of power between the state
and the private agents and, as Orléan himself admits, represents a
change in relation to the views defended earlier (as in Aglietta and
Orléan, 2002): “I no longer believe that the desires for [liquid] wealth
necessarily converge toward the same object solely due to the mimetic
260 JOURNAL OF POST KEYNESIAN ECONOMICS
concentration” (Orléan, 2008, p. 9). This comes with a redefinition of
the relation between money and the state. On the other hand, Orléan
still argues against seeing money as “a docile instrument in the
hands of the state” and against seeing the state as able to impose the
monetary instruments of its choice regardless of the private agents’
beliefs (Orléan, 2008, p. 8). Also noteworthy is that Orléan’s revision
does not address a question raised above that might lead to a greater
emphasis on the state when paper money is considered, namely, why
would agents accept and desire an object without intrinsic properties
if it did not have the support of the state? This issue is at best implicit
in his discussion of conflicting interests.
A post Keynesian approach: money as a convention with essential
properties?
Money as a convention?
Aglietta and Orléan (2002, p. 38) see their analysis as close to the one
developed by Keynes, who in their interpretation insisted on the conven-
tional character of money. They do not provide at that point any textual
evidence from Keynes’s writings.
In any case, some post Keynesians are more explicit than Keynes on this.
Paul Davidson (1994, p. 86) approvingly cites Harrod (1969, p. x): “Money
is a social phenomenon, and many of its current features depend on what
people think it is or ought to be.” Sheila Dow states that “acceptability in
payment is a matter of convention” (Dow, 1996, p. 172). Victoria Chick
writes: “To ‘be money,’ an asset must be widely acceptable. An asset
becomes widely acceptable because it is believed to be liquid. It is liq-
uid precisely because it is widely acceptable” (Chick, 1983, p. 306). In
Fontana and Venturini’s (2003, p. 398) summary of the post Keynesian
literature on money, one of the points is the view of money as a social
convention.
On the other hand, three comments must be made. First, statements
such as these are not often made by these authors themselves or by other
post Keynesians. The idea that money is a convention is far from being
a point of clear post Keynesian consensus. A fortiori the same is true of
the importance of this idea. Second, the statements cited in the previous
paragraph do not amount to the acceptance of the ultimate conventional-
ity of money, as we shall see below. Third, one has to consider whether
and how the conventionality of money is compatible with the proposi-
tion that money has some essential properties, as argued by Keynes and
some eminent post Keynesians, such as Chick (1983, ch. 17), Davidson
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 261
(1978, 1994), Dow (1996), and Kregel (1980), among others. This third
point is discussed next.
The essential properties of money
In chapter 17 of The General Theory, Keynes highlights the following
essential properties of money.
First, money has a negligible elasticity of production in the private en-
trepreneurial sector (Keynes, 1936, p. 230). This means that zero or few
people can be employed in the private sector to produce money. When
the demand for money increases, employment in private firms does not
directly increase. As Davidson (1994, p. 57) puts it, money does not
grow on trees; otherwise firms would employ people (or people would
employ themselves) to plant and harvest money.
A low elasticity of production does not necessarily imply a low elastic-
ity of supply. Admittedly, it does so in the case of commodity money, at
least without large buffer stocks. With money not backed by commodi-
ties, however, even if employment still does not increase, the monetary
authority and/or commercial banks have the capacity to easily increase
the money supply.11 On the other hand, if they abused this capacity and
allowed the money supply to increase too rapidly, the thing used as money
could be rejected (see below the quote from Keynes, 1936, p. 241 n.8).
The second essential property of money in Keynes’s eyes is a negligible
elasticity of substitution. This refers to money as a store of value and,
as Davidson (1978, p. 222) explains, to substitutes with a significant
elasticity of production, that is, producible substitutes. An increased
demand for money does not spill over producible goods and therefore
employment does not indirectly increase. Financial assets such as bonds
or stocks may be good substitutes for money as a store of value (although
not as a unit of account and a means of payment), but they also have a
low elasticity of production.
A third essential property of money has sometimes been identified in
Keynes’s approach, although he did not initially list it together with the
other two (see Keynes, 1936, p. 238): low or negligible carrying costs
11 When Keynes confusingly referred to “the inelasticity of supply which we have
postulated as a normal characteristic of money,” he was abstracting from “official
action” by the monetary authority (Keynes, 1936, p. 235). He distinguished the mon-
etary authority from the private entrepreneurial sector when first describing money’s
low elasticity of production and provisionally postponed the consideration of “a delib-
erate increase in its supply by the monetary authority” (p. 230), that is, by the central
bank—as a “green cheese factory” (p. 235). Before and after The General Theory, he
also admitted the crucial role of commercial banks in increasing the money supply,
especially in response to demand.
262 JOURNAL OF POST KEYNESIAN ECONOMICS
in terms of waste, custody, and so on (Keynes, 1936, pp. 225, 226, 233).
The use of money as a store of value certainly depends on this charac-
teristic. If high inflation occurred and were considered as impacting on
carrying costs—as Davidson (1978, p. 237) suggests when referring to
“the inflationary costs of holding money”—then the object previously
used as money would lose the characteristic of low carrying costs and
would no longer be used as store of value, thus no longer being money
in its full capacity, capable of performing all its classic functions.
What exactly are these properties, especially the two low elasticities, es-
sential for? Davidson and other post Keynesians have certainly followed
Keynes in relating them to the problem of unemployment: in situations
of uncertainty, when people prefer liquidity, this search for liquidity does
not generate employment, given the low elasticities of production and
substitution of money, as well as of other financial assets. As properties of
money and other financial assets, they are seen as essential for the theory
of unemployment (the reference to other financial assets is important
because liquidity preference as a cause of unemployment does not need
to be directed toward money). In addition to this, are those properties
essential for something to be money?
Referring in particular to the low elasticities of production and substitu-
tion, Keynes offers a positive answer:
The attribute of “liquidity” is by no means independent of the presence of
these two characteristics. For it is unlikely that an asset, of which the sup-
ply can be easily increased or the desire for which can be easily diverted
by a change in relative price, will possess the attribute of “liquidity” in
the minds of owners of wealth. Money itself rapidly loses the attribute
of “liquidity” if its future supply is expected to undergo sharp changes.
(Keynes, 1936, p. 241, n. 8)
At first blush, this view seems to be in marked contrast with Aglietta
and Orléan (2002). They argue that a priori anything could be elected as
money—hence, those low elasticities are not required. The contrast may,
however, be less sharp than it seems at first, as discussed below.
Can these properties be reconciled with the conventionality of money?
As mentioned above, whether we can speak of money as a convention
depends on identifying in the use of money two properties that any conven-
tion has: (1) conformity with conformity; and (2) arbitrariness.
In Keynes’s own view, liquidity has an institutional character: “The
conception of what contributes to ‘liquidity’ is a partly vague one, chang-
ing from time to time and depending on social practices and institutions”
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 263
(Keynes, 1936, p. 240). While nothing in this passage clearly refers to
conventions, Keynes may have suggested that liquidity is at least in part
conventional. In the same passage, he implies that, in order for something
to be liquid, it has to be liquid “in the minds of the owners of wealth” (p.
241). In another passage, Keynes (1936, p. 234) refers to factors that make
money liquid “in the estimation of the public.This is compatible with,
although it does not point all the way to, the property of conformity with
conformity.
Keynes and several post Keynesians might even accept the idea that
anything could be money as long as it were accepted by everybody as
money, but their emphasis on the low elasticities of production and
substitution indicates that they do not believe that everything is equally
likely to be accepted by everybody. These authors imply that economic
agents would notice it if an object did not have those properties. Hence,
such an object is unlikely to become money.
The essential properties of money are primarily related to the issue of
arbitrariness. They mean that not everything can be money. While this
considerably reduces the possible degree of arbitrariness, money could still
be arbitrary, in the sense that different alternatives can satisfy these proper-
ties. History provides examples: commodity money in the form of precious
metals, paper money backed by such a commodity, and fiat money.
Money as a creature of the state
There are two variants of the view that the state plays a crucial role in
determining what is money, since it is responsible for stipulating a unit
of account and enforcing a specific set of laws. In this sense, these two
approaches might be considered different versions of the state theory
of money. One of them is centered on contracts, the other on taxes. In
addition to describing these versions in terms of a similar structure, the
purpose is to discuss not whether one of them (or a combination of the
two) is the better theory of state money, but rather the possible relation
between each of these variants and the conventionality of money.12
Money and contracts
The basic view
From the perspective that focuses on contracts, money is both the unit of
account in which contracts are denominated and the means of discharging
12 Readers will notice several parallels between the ways in which the subsection on
contracts and the one on taxes have been organized and written.
264 JOURNAL OF POST KEYNESIAN ECONOMICS
contractual obligations. Money is also closely linked to the institution of
the state, since the state is responsible for establishing that unit of account,
determining the means of contractual dischargement, and enforcing the
law(s) of contracts. The latter are another type of institution to which
money is tied in this approach. So are social norms of honesty and social
responsibility, whether they are internalized or not.
This view is influential within post Keynesian economics, with Keynes
as a precursor. In his Treatise on Money, Keynes defined a “money of
account” as “that in which debts and prices and general purchasing power
are expressed. . . . A money of account comes into existence along with
debts, which are contracts for deferred payment, and price lists, which
are offers of contracts for sale or purchase” (Keynes, 1930, p. 3). In both
cases contracts are present. Keynes also defined money itself as “that
by delivery of which debt contracts and price contracts are discharged,
and in the shape of which a store of general purchasing power is held”
(p. 3, emphasis removed).
Although Keynes associated contracts with “law or custom, by which
they are enforceable,” and identified “the state or the community” as the
enforcing agents, he ended up highlighting the state (1930, p. 4). Ac-
cording to Keynes, all modern states in the past “four thousand years”
have claimed the right not only to enforce contracts but also to determine
“what thing corresponds to the name” or description in the contract (ibid.).
He then argued that at this stage “Knapp’s chartalism—the doctrine that
money is peculiarly a creation of the state—is fully realized” (ibid.).
Among the post Keynesians arguing along these lines, Davidson (1978;
1994, ch. 6) is, again, a major exponent (although he is less restrictive
than Keynes in that he sees the state as usually responsible for enforcing
contracts (Davidson, 1978, p. 147). This is compatible with the existence
of historical exceptions that Keynes might have ignored. In Davidson’s
view, money and contracts are simultaneous. “It is synchronous existence
of money and money contracts over an uncertain future which is the
basis of a monetary system. . . . The very institution of money as a unit
of account immediately gives rise to . . . contracts” (Davidson, 1978, pp.
142, 148–149; emphasis added). For Davidson, there are contracts both
in spot markets—for immediate payment and delivery—and in forward
markets—for payment and delivery at some specific dates in the future
(Davidson, 1994, p. 49)—or a combination of the two. It is thus implicit
that every monetary transaction involves a contract (either written or
not). Even someone who thinks that this is stretching language too far
(although it may be like this in the law of contracts) may acknowledge
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 265
that a capitalist economy is necessarily based on contracts, because it has
at least one crucial type of contract, involving delayed payment: the wage
contract. Moreover, as Davidson (1994, pp. 97–101) points out, without
other forward contracts (such as those required for bank credit to exist),
the level of economic activity would be much lower, due to uncertainty.
Contracts and the conventional character of money
The contract-based approach seems to be compatible with the view that
accepting money is a convention. This can be shown by considering
the two properties of conventions mentioned above: conformity with
conformity and arbitrariness.
Emphasizing the link between money and contracts is compatible with
the idea that an individual accepts something as a means of payment at
least in part because she believes that others will also accept it. Someone
who does not have pending forward contractual obligations may accept
the object that works as the means of contractual settlement because of
an expectation that (others will accept it because) others who have such
obligations will accept it.
The contract-based approach is also compatible with the idea that
money is arbitrary. Different alternatives could be conceived to the
specific thing working as money. This does not mean, however, that all
potential candidates to the position of money are equally strong. As dis-
cussed earlier, Keynes and several post Keynesians do not estimate very
highly the chances of candidates that do not possess (either intrinsically
or not) low elasticities of production and substitution.
Even though he points out the importance of the state, Davidson him-
self notes that for an object to be money it is not sufficient that the state
establish that object as means of contractual settlement and announce its
willingness to legally enforce contracts: it is also necessary that people
have faith in the state and its ability to enforce contracts. “Money can
function as the medium of contractual settlement only if the community
believes that acceptance of the monetary intermediary as a liquid store
of general purchasing power involves no risks (only uncertainties), since
the state will enforce enactment of all future offer contracts in terms of
the monetary unit of account” (Davidson, 1994, p. 103; emphasis added).
Davidson implies that something is money only while it is accepted
by the economic agents: if people do not believe that the state will be
able to enforce contracts, they will stop accepting what the state estab-
lishes as the means of contractual settlement. If so, the monetary system
breaks down. This lays the foundation for the economy to adopt barter
266 JOURNAL OF POST KEYNESIAN ECONOMICS
practices—only provisionally, as Davidson (1978, p.153; 1994, p. 101),
like Orléan, believes that, apart from periods of serious monetary crises,
barter is a fiction—or for a new monetary unit of account to be used to
denominate new contracts (Davidson, 1978, pp. 148, 237).
We can therefore distinguish two steps in the reasoning that links
contracts and money. First, the state establishes a unit of account in
contracts as well as a particular object as the means of contractual
dischargement and announces its willingness to enforce the law of
contracts. Then, depending on whether the public trusts the state and
its ability to enforce contracts, that object does (or does not) become
and remain money.
Money and taxes
The basic view
A different variety of theory of money that highlights the role of the state
has been appropriately called the taxes-drive-money view (Wray, 1998, p.
18). From this perspective, money is, first and foremost, both the unit of
account in which taxes (as distinct from contracts) are denominated and
that which is accepted as means of tax payment (the means of discharg-
ing tax obligations, as distinct from contractual obligations). Money is
therefore closely linked to the institution of the state, since the state is
responsible for establishing that unit of account, deciding what it accepts
in payment for taxes, and enforcing the tax laws (as distinct from the
contract laws). The latter are another type of institution to which money
is tied—by definition, since taxes are introduced by these laws—in this
approach. Here, too, social norms of honesty and social responsibility
are important, whether they are internalized or not.
A prominent supporter of this view was George Friedrich Knapp (1905),
whose complex views and terminology are succinctly presented by L.
Randall Wray (1998, pp. 23–29). Given that Knapp’s book was titled The
State Theory of Money and that he defended a “chartalist” approach, it
should be noted that there is variation among the users of these expres-
sions. For some authors, the state theory of money—or the idea that
money is a creature of the state—and chartalism are synonymous with
the taxes-drive-money view (e.g., Wray, 1998, who does, however, note
that chartalism is often understood in a different sense). For others (e.g.,
Davidson, 2002, p. 72), chartalism denotes the contracts view. We have
seen, however, that the idea of money as a creature of the state and thus
what we can call the state theory of money is more general than both the
taxes-drive-money view and the contract-based approach: as argued above,
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 267
the latter two are variants of the former. The same applies to chartalism, if
this is equated with the view of money as a creature of the state.
In his Treatise on Money, Keynes gave (possibly partial) support to
Knapp’s views. First, in general terms, he defended Knapp’s chartalism,
equating it with the idea of money as a creation of the state (Keynes, 1930,
p. 4; cited above). At that point, Keynes had only referred to contracts and
debts and not to the state as a tax collector or as a creditor. Later on he
added: “At the cost of not conforming entirely with current usage, I propose
to include as state money not only money which is itself compulsory legal
tender but also money which the state or the central bank undertakes to
accept in payments to itself or to exchange for compulsory legal-tender”
(Keynes 1930, p. 6). He referred again to Knapp in positive, but now more
specific, terms: “Knapp accepts as ‘money’—rightly, I think—anything
which the state undertakes to accept at its pay-offices, whether or not it
is declared legal tender between citizens” (Keynes, 1930, p. 6, n. 1). This
does go beyond Keynes’s initial remarks linking money to contracts. It
does not necessarily imply, however, giving priority to taxes in the defini-
tion of money. At least in chapter 1 of A Treatise on Money, Keynes may
have simply defended both links, with contracts and taxes. Moreover, in
The General Theory, Keynes related money to wages, debt contracts, and
debts, but not specifically to taxes (1936, pp. 236–237).
In current times, the taxes-drive-money view has been developed by
a group of post Keynesian economists, including Wray, as well as by a
few others, such as Charles Goodhart. For a presentation and additional
references to other proponents of this view, both within and outside the
post Keynesian camp, see Wray (1998, and also 2004).
Taxes and the conventional character of money
The taxes-drive-money view seems to be compatible with the view that
accepting money is a convention. This can be shown by considering the
properties of conformity with conformity and arbitrariness.
Emphasizing the link between money and taxes is compatible with
the idea that an individual accepts something as a means of payment
at least in part because he or she believes that others will also accept
it. Someone who does not have pending tax obligations may accept the
object established by the state as the means of payments of taxes, be-
cause of an expectation that (others will accept it because) others who
have such obligations will accept it. Indeed, this is how some proponents
of the taxes-drive-money view explain the general acceptance of the
government’s money. As Abba Lerner put it in his 1946 Encyclopaedia
Britannica entry on money:
268 JOURNAL OF POST KEYNESIAN ECONOMICS
Any particular seller will accept as money what he can use for buying things
himself or for settling his own obligations. This seems to say that a means
of payment will be generally acceptable if it is already generally accept-
able, and it looks like a circular argument. But it only means that general
acceptability is not easily established. General acceptability may come about
gradually. If a growing number of people are willing to accept payment in
a particular form, this makes others willing to accept that kind of payment.
General acceptability may be established rapidly if very important sellers
or creditors are willing to accept payment in a particular form of money.
For example, if the government announces its readiness to accept a certain
means of payment in settlement of taxes, taxpayers will be willing to accept
this means of payment because they can use it to pay taxes. Everyone else
will then be willing to accept it because they can use it to buy things from
the taxpayers, or to pay debts to them, or to make payments to others who
have to make payments to the taxpayers, and so on. (Lerner, 1946, p. 693,
cited by Forstater, 2006, pp. 211–212; see also Wray, 1998, p. 36)
Moreover, the size of the government plays a role in the process (Wray,
2004, p. 16), reinforcing the incentive to accept that which the state ac-
cepts. We could add that so does the fact that the state is the very agent
responsible for enforcing debts (including tax debts).13
The taxes-drive-money view is also compatible with the idea that money
is arbitrary, as there are conceivable alternatives. These are not, however,
equally strong candidates. Low elasticities of production and substitution
are considered important (not just for their employment implications) by
at least some proponents of this approach (e.g., Wray, 2007).
Wray also admits that for an object to be money it is not sufficient that
the state establish that object as means of tax payment and announce its
willingness to enforce tax liabilities. People need to believe that the state
will be able to do this (Wray, 1998, p. 12). This is not always accomplished:
“when the state is in crisis and loses legitimacy, and in particular loses its
power to impose and enforce tax liabilities, ‘normal money’ will be in a
‘state of chaos,’ leading, for example, to use of foreign currencies in private
domestic transactions” (p. 36). This implies that something is money only
as long as it is accepted by people: if people do not believe that the state
will be able to enforce tax liabilities, they will stop accepting that which
the state establishes as the means of payments of taxes. Anyone would
stop doing so if everybody else did.14
13 Wray (2004, p. 18) states that legal tender laws are difficult to enforce. Perhaps
there is an implication that tax laws are in his view easier to enforce.
14 Wray (2004, p. 4) seems to indirectly recognize the conventional character of
money, by approvingly citing other authors who do.
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 269
We can therefore distinguish two steps in the reasoning that links taxes
and money. First, the state establishes a unit of account in taxes as well
as a particular object as the means of tax payment and announces its
willingness to enforce the law of taxes. Then, depending on whether the
public trusts the state and its ability to enforce taxes, that object does (or
does not) become and remain money.
Further analysis and conclusions
Before drawing some conclusions about the conventionality of money
and the role of the state, perhaps it is useful to begin with a related issue,
which we may call the monetary foundation of a market economy. We
have seen that conventionalists and post Keynesians agree that money is
at the very foundation of a market economy, because barter could not be
widespread and stable. Under Keynes’s influence, conventionalists and post
Keynesians have related money to the search for liquidity in response to
uncertainty. Instead of taking money as already existing, Orléan does so
at a more basic level of analysis. Even if this is not how Orléan explicitly
puts it, the thought experiment of a market economy without money (in
which several local “monies” accepted only in restricted circles could ex-
ist) is intended to show that uncertainty, the need for protection, and the
search for that which the others accept are intelligible before, or logically
previous to, the existence of money. Orléan shows that markets imply an
uncertainty about decision results that leads people to want protection
in the form of something that others will accept, but, in the absence of a
generally accepted unit of account, this search for protection compounds
the problem of uncertainty about the rate of exchange, a problem that, in
turn, may prevent exchange from taking place in a generalized way or at
all. Money is required to solve this problem—by telling people what the
unit of account is (and at the same time what others will accept)—and thus
to allow a stable market economy to exist.15
For post Keynesians and other scholars to understand and possibly
value the conventionalist approach to money, it is important to keep in
mind the difference between monetary history and monetary theory in
that approach. Orléan not only admits, but insists, that his abstract model
does not correspond to the historical origins of money (in antiquity).
More recently, Orléan (2011, p. 153) has introduced the notion of “con-
ceptual genesis,” as distinct from the historical genesis of money. At the
15 In this hypothetical situation, production exists without forward contracts, while
Dow links money to contracts when referring to the very existence of money as a
response to uncertainty (Dow, 1993, p. 19).
270 JOURNAL OF POST KEYNESIAN ECONOMICS
same time, he may be said to forcefully argue that the conventionalist
theory helps us understand not only the monetary foundation of a market
economy, as discussed in the previous paragraph, but also what I pro-
pose to call the conventional foundation of money, which is the same as
the ultimate or fundamental conventionality of money, as distinct from
its generic conventionality (more on this distinction below). Relatedly,
Orléan’s theoretical argument is not detached from history: (a) it tries to
capture the nature of money specifically in market economies (with or
without a monetary crisis), not in any economy; and (b) it seems to have
been heavily influenced by Orléan’s studies (since his Ph.D. dissertation)
on the German hyperinflation of the 1920s, as well as other examples
of monetary crises. What was stated above about uncertainty, the need
for protection, the search for something generally accepted, and the
absence of a general unit of account before the establishment of money
also applies to an economy going through a monetary crisis, with the
previous money being questioned or rejected by several agents, so that
money no longer exists in its full capacity. Indeed, such a crisis is one of
the phases considered by Orléan’s theory, as well as a class of historical
examples of the limits of the state. In addition, Orléan (e.g., 1992) has
also investigated the relation between archaic and modern money.
We can now turn to our main issues: the conventionality of money and
the role of the state.
We should conclude that money—or, more specifically, its acceptability—
is ultimately a convention, at least in a market economy: someone accepts
money ultimately because others are also expected to accept it; and there are
alternatives to the thing currently being used as money. This fundamental
conventionality of money is explicitly defended by the conventionalist
approach. Some post Keynesians also refer to money as a convention, but
do not explicitly connect and reconcile this idea with the essential proper-
ties of money, in Keynes’s sense, nor with the view that stresses the role
of the state. Accepting Keynes’s identification of the essential properties
of money reduces money’s degree of arbitrariness, but does not eliminate
it, because different alternatives may satisfy the requirements represented
by these properties. The relation between the conventionality of money
and the role of the state is a more complex issue.
Stressing the link between money and the state via contracts and/or
taxes is compatible with the idea that an individual accepts something as
a means of payment at least in part because she believes that others will
also accept it: someone who does not have pending contractual or tax
obligations may accept the object that works as the means of settling these
obligations because of an expectation that (others will accept it because)
THE CONVENTION OF ACCEPTABILITY, THE STATE, CONTRACTS, AND TAXES 271
others who have such obligations will accept it. Money can then be said
to be a convention in this generic sense. Acknowledging that money
is ultimately or fundamentally a convention requires, however, going
further than this idea—in which the state could still freely determine
money and then be conventionally followed by the private agents—and
recognizing that there are limits to the state’s ability to impose its money
on the private agents. As shown above, the existence of such limits is
recognized by post Keynesian supporters of the contract-based version
or the taxes-drive-money version of the state-centered approach. Only
extreme state theorists of money would treat money as an instrument
that the state can freely impose on others and manipulate. When the state
succeeds in defining money, which is often the case, money is a legal
norm, involving the threat of formal sanctions. At the same time, because
the coercive power of the state cannot always ensure that its definition of
money is accepted, money ultimately has a conventional foundation.
Even if one agrees that money is ultimately a convention, one may still ac-
knowledge the importance of the state, but this can be done in different ways.
In this regard, we should distinguish between at least two propositions.
The first proposition is that not every agent has the same power to lead
others to accept a particular candidate, and the state is usually in a much
better position than any private agent to influence the process through which
the convention of acceptability of money emerges and is reproduced. The
state theorists of money who admit its fundamental conventionality would
certainly accept this first proposition. The state is legally responsible for
determining the unit of account in contracts and taxes, together with the
means of settlement, and for enforcing the laws of contracts and taxes.
This grants the state some special rights or powers that private agents
lack. Furthermore, post Keynesians and some other authors also stress the
sizable volume of tax transactions and government contracts. Within the
conventionalist approach, Orléan himself acknowledges that money would
not be stable if it were exclusively based on the mimetism of private agents
and therefore had a purely conventional character. He sees the state and
its legitimacy as possibly needed to arbitrate conflicting private interests
about the definition and issuing of money.
The second proposition is stronger and corresponds to the idea that without
state money there would be no stable money in a market economy.16 Some
16 Requiring state money is more restrictive than requiring the state, but even if some-
how there were no state money, the state could still be deemed necessary to deal with
the danger of forgery (Hodgson, 1992) and/or to prevent expectations of sharp chang-
es in the money supply that, according to Keynes, could make money lose its liquidity.
272 JOURNAL OF POST KEYNESIAN ECONOMICS
post Keynesians maintain that a monetary crisis occurs if the state is not able
to make its money—connected to contracts and/or to taxes—accepted.
At least in the case of these authors, the state-centered approach could be
better described, and should describe itself, not as asserting or implying
that the state is always capable of making people accept its money, but
rather as claiming that the state has to be able to do so if a stable money
is to exist. Orléan is not explicit on this, but has come closer to this posi-
tion in more recent years. Unless there are historical counterexamples of
stable stateless money in market economies, this is a plausible idea.
For some of those who accept this second proposition and money’s
conventional foundation, money can perhaps be said to be both a con-
vention and a creature of the state: a convention created by the mimetic
private agents together with the state. Others may not use such phrasing,
but, more important, agree about both the conventional foundation of
money and the essential role of the state.
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... Antes mesmo dos mercados se desenvolverem entre firmas e famílias, o débito e o crédito já existiam e a moeda poderia ser uma tabua de madeira ou uma roda de pedra gigante, a depender do que o ente hierárquico superior determinasse. Dequech (2013) destaca que esta abordagem seguiu duas vertentes distintas, uma liderada pela visão de Davidson (1972) e outra pela leitura que Wray (1998) fizera de Keynes (1930de Keynes ( [2013) e os demais chartalistas. ...
... Na ausência (hipotética) de uma mercadoria existente no posto de moeda, a opinião média dos agentes logo convergirá no sentido de apontar o item escolhido ao posto. Temos, então, que a moeda surge como um representante de dívida socialmente aceito, isto é, uma instituição informal: a convenção (Dequech, 2013) 8 . Como característica das convenções, a moeda carrega consigo a conformidade com a opinião média e a arbitrariedade. ...
... Como característica das convenções, a moeda carrega consigo a conformidade com a opinião média e a arbitrariedade. Conforme Dequech (2013), o aspecto convencional da moeda vem do fato das pessoas aceitarem moeda como representante da dívida por acreditarem que outros também o aceitarão, conformando-se assim, com a opinião média. Enquanto a arbitrariedade da moeda exprime-se no fato de existirem diversos candidatos ao posto de moeda sem que haja uma superioridade notória na escolha de um em detrimento de outro. ...
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... Non-fiat forms of money emerge when money is viewed as a social convention where one party accepts it as a means of payment in the expectation that the other party will accept it as a means of payment (Frost et al, 2020). 1 Once this social convention is widely believed, the specific substance, object or commodity being used as a means of payment will become 'money'. This is how money was created until government-backed money emerged and replaced the social convention system of money (Dequech, 2013;Frost et al, 2020). ...
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Several firms have expressed an interest to develop a stablecoin in Nigeria called the compliant-Nigerian-Naira (cNGN). The purpose of this paper is to explore the features, benefits, and challenges of issuing a stablecoin in Nigeria known as the cNGN stablecoin. The study also compares the proposed cNGN with the eNaira central bank digital currency and offer several differences that are worth noting. The study shows that the proposed cNGN stablecoin offers many benefits. They include enabling faster payments, ensuring seamless cross-border payments, and increasing participation in the financial system for those who are already banked. The study also identifies some challenges of the proposed cNGN stablecoin. The study concludes by stating that the long-term success of the cNGN will be guaranteed if majority of Nigerians embrace it and if cNGN issuers collaborate with regulators to ensure that the cNGN is designed in a way that achieves financial stability objectives, transparency, and consumer protection.
... I hold government money because my mother used this money, because my grandmother used this money. Government money is demanded because it is a social convention, a social tradition (Orléan 1985;Aglietta/Orléan 2002;Dequech 2013). A third theory of money demand, which is the one held by MMT, is the taxesdrive-money theory, which states that we hold money because we need it to pay taxes. ...
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... In fact, as affirmed by John Richard Hicks (1967): "money is what it does". For this reason it is a convention and /or a State creature (Dequech, 2013). Money is undoubtedly one of the main social technologies, constituted for human being by human beings in continuous development. ...
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