chapter  11
18 Pages

Menger’s theory of money: some experimental evidence

ByPeter G. Klein, George Selgin

More than a century ago, Karl Menger (1981 [1870], 1892) sought to explain how the social institution of money-a generally-accepted medium of exchange-could develop without deliberate design in an economy of selfinterested individuals. Rejecting as unhistorical earlier theories treating money as a product of some explicit agreement or edict, Menger portrayed it as a product of spontaneous evolution. Menger’s theory ultimately helped to inspire a large modern literature on the spontaneous emergence of exchange media, including contributions by Jones (1976) and Kiyotaki and Wright (1989, 1993).