Is money a convention and/or a creature of the state? the convention of acceptability, the state, contracts, and taxes

Abstract

This article begins by presenting the idea of money as a convention, first in the economics of conventions and then in post Keynesian economics, also examining whether and how one can reconcile money as a convention with Keynes's essential properties of money. The article then considers the view of money as a creature of the state, in two versions, which connect money to contracts or to taxes, respectively. Finally, it further explores the monetary foundations of a market economy, the conventional foundation of money, and the role of the state. Acknowledging that money is ultimately or fundamentally a convention requires recognizing limits to the state's ability to impose its money on the private agents. At the same time, the state is usually in a much better position than any private agent to influence the process through which the convention of acceptability of money emerges and is reproduced. A stronger proposition is that without state money there would be no stable money in a market economy. Both the fundamental conventionality of money and the essential role of the state can be thus emphasized.

Keywords:

• Money
• convention
• state
• taxes
• contracts