ABSTRACT
Economists assume that its use for the purposes of exchange defines a primary function of money (Newlyn, 1971, p. 1). Anthropologists maintain that this function, although far from being fortuitous, is not essential (Mélitz, 1974, p. 21; Schacht, 1973, p. 22). Monetary theory, as economists conceive of it, depends upon the coincidence of an exchange economy with a sphere of payment, as defined in chapter 1. If in any modern economy the process of integration seems to be so complete that the two institutions cannot be considered apart from each other, this is only because fixed exchange rates have now been established, once and for all, between coin, notes and bank deposits.1 Although chapter 7, on ‘Distribution and redistribution’ will show this to be too simple a view, a concept of an ideal world in which money is used for the purposes of exchange and for nothing else, and in which money plays a part in all exchanges, is still fundamental in elementary economic thinking (Boulding, Pfaff and Pfaff, 1973, p. 1; Friedman, 1962, p. 14). This chapter looks at this world, and all that it involves-but subject always to the reservation that it may have no historical reality whatever.2
