On the Origins and Evolving Role of Money

This paper explores the origins and evolving role of money. It stresses the role of money in solving coordination problems. This role is present with or without exchange. A historical overview of money stresses the evolutionary aspects of monetary institutions. The analysis develops a general evaluation of economic efficiency under transaction costs and imperfect information, and in the presence of public goods and externalities. It identifies a nonneutral role for money. It argues that the efficiency gains from exchange are only part of the benefits of a monetary economy.