What Is Money? Conclusions on the Nature of Money

In an important sense our task throughout this monograph has been to develop a theory of the nature of money. When asked “What is money?”, most people respond — quite reasonably — that money is used to buy something. This gets at money’s use as a medium of exchange, which is of course the most familiar use. If pressed further, most would also say that money is something one can hold as a store of value. Indeed, economists recognize money as the safest and most liquid store of value available, at least outside situations with high inflation, when money’s value falls rapidly. Some people will also mention the use of money to pay down debt, with money used as a means of payment, or means of final settlement of contractual obligations. Finally, if we ask people “How much is that worth?” — pointing to just about anything — a common response would be to evaluate worth in terms of money, this time acting as the unit of account used to measure wealth, debt, prices, economic value.