The True Story of Money: How Governments Invented Money and Shaped Markets
By Steven Hail for The Conversation
For generations, economists have been taught a story of money originating from barter systems, evolving into coins, paper money, and banking systems. However, there’s no historical evidence to support this narrative. Instead, two century-old articles by economist Alfred Mitchell-Innes shed light on a different truth: money was actually invented by early governments.
Early currencies, like clay tablets and shells, were used for taxation and governance. Even today, taxes drive the demand for a government’s currency. Banks also create money through loans, highlighting the complexities of our monetary system.
Understanding the true origins of money challenges conventional economic beliefs, emphasizing the role of governments in shaping markets. This concept reframes ideas about free markets, unemployment, and wealth distribution, highlighting the regulatory role of governments in economic systems.
(Published on 13 May 2024, 11:24 IST)