A Critical Narrative on the Theories of Money

Abstract

Although money is now used as a generally acceptable medium of exchange, the emergence of it was due to unintended consequence of human actions. Since the emergence as the medium of exchange, money underwent several theoretical developments as regards its nature, function and use in the economy. This paper aims at presenting a brief account of the dominant theoretical developments of money. Firstly, a brief analysis of the origin of money as a generally acceptable medium of exchange is developed in this paper. Secondly, the classical functions of money are revisited and finally, the dominant theoretical developments of money – the classical foundations, the quantity theory of money, Keynes’ theory of money, neoclassical theories of money, monetarist school of thought, and post-Keynesian theory of money – are discussed critically on a brief account.

Keywords: Medium of exchange, Quantity theory of money, Barter system, Classical dichotomy, Commodity, Unintended consequence