chapter  4
21 Pages

Initiation of money from the act of exchange

Introduction The act of exchange is the most indispensable constituent of the process that led to the development of money-based economies. There would not be money in an economic and social environment where there is no exchange. It is primarily due to this fact that in almost every theory of the origin of money there is an embedded element of exchange. In each exposition this element would enter the description of the process of the formation and the rise of money. It is either done intentionally, i.e. the author is aware of the great significance of this factor, or the author is unaware of its significance but cannot entirely escape from its presence in their analysis of the origin of money. This is one aspect of money that cannot be excluded from any discussion of its origin. For this reason the element of exchange will always, either explicitly or implicitly, somehow find its way into the framework of relevant discussion. It takes the centre stage for some authors and a secondary position for many others. There are, broadly speaking, two different perspectives on the act of exchange. These are the Marxian and non-Marxian perspectives. In the Marxian perspective the act of exchange is a much more technical term. Money for Marx, at least in one of his multiple interpretations of the origin of money, is not an outcome of a deliberate invention. It is formed in “the course of exchange” (Marx 1971: 49). He concludes, aptly, that money is neither an instrument that is “cunningly devised” to overcome the inconveniences of barter trade nor is it a product of conventions. It has risen “naturally out of exchange” (Marx 1973: 65). The quotations from Marx pose the central issue of the question of the origin of money. Here the matter is brought to a head. Money is looked at as a product of definite economic and social relations of production. But that is not exclusive to the Marxian school. The German Historical School, the Institutionalist school and the Post-Keynesian school share a similar view. For all these schools money is not merely an economic fact but a social and historical entity. They all see it as emerging within a definite set of economic, legal, social, technological and historical conditions. The point that separates the two, in this respect, is the technical use of the term “exchange.”