1. Lecture 1: Money – Its Origin & Its Importance
ECO 473 – Dr. Dennis Foster

2. Backstory – The “Austrian” School
Böhm-Bawerk
(Capital & Interest)
Menger (Principles of Economics)
Mises
(Theory of Money & Credit; Human Action)
Hayek
(Individualism & Economic Order)
(The Road to Serfdom)
Rothbard
(Man, Economy & State)
(The Mystery of Banking)

3. Arises in a market setting
The Origins of Money
Arises in a market setting
Direct exchange (barter)
Indirect exchange
Characteristics:
Portable, divisible, storable, recognizable, scarce.
What distinguishes a “medium of exchange” from money?
Why use gold as money?

4. Money solves problems …
Double coincidence of wants
Indivisibilities
Calculation of profit and loss.
With barter how can a business owner tell if they are profitable?

5. Money and the State The “state” can’t invent money.
But, the “state” can take over money.
What advantages would a king have in minting coins?
How can a king debase money when it is gold coins?
Can a king debase money when it is paper redeemable for gold? What if the paper was non-redeemable for gold?
Note that monetary units were defined in terms of some commodity:
British pound, Japanese yen, U.S. dollar.
How is it that cigarettes can be money?

6. Lecture 1: Money – Its Origin & Its Importance
ECO 473 – Dr. Dennis Foster