Monetary theory

Social economy has always been, and probably will remain, a monetary economy. The exceptions are of no significance. Small communities in isolation may do without money and barter may suffice under very primitive conditions. We might also conceive of a modern economy which is so completely planned that it does not use money. But between the non monetary orders of earliest times and of a perhaps very distant future we have societies which, though differing widely in many respects, are all monetary economies. This continuity of money among otherwise changing institutions suggests that this man-made instrument is particularly important for the social economy.

That an increasing division of labour gives rise to increasing exchange, and that increasing exchange encourages the use of ever improving monetary instruments, can be readily under stood. It is next to impossible that all wishes of bartering individuals should coincide as to the kind, quality, quantity and value of the things which are mutually desired, especially in a modern economy in which on a single day millions of persons may exchange millions of commodities and services. A medium of exchange which everyone is willing to accept easily overcomes the difficulties of barter, for by splitting the actions of barter into purchases and sales which are independ ent of each other, the need is eliminated for people's wishes to coincide exactly as to quality, quantity, value, time and place.