Typography

Economists are sometimes guilty of misrepresenting real-world liquid objects as living examples of the abstract variables populating their favorite monetary model. A good example of this is the incorrect reliance on Yap stones to illustrate the idea of fiat money by economists as varying as Keynes, Milton Friedman and James Tobin. Whereas fiat money is intrinsically useless, inconvertible, and unbacked, Yap stones certainly aren't, the anthropological evidence revealing that the stones had cultural and religious significance apart from their monetary value. Similar in concept is the story of the macute , a unit of account used in Angola hundreds of years ago. Much like the exotic Yap stone, the existence of the macute (or macoute) came to the attention of Western thinkers as trade and conquest revealed ever large parts of the globe. Montesquieu was one of the first to describe the macute, noting: The negroes on the coast of Africa have a sign of value without money. It is a sign ...

Lord Keynes continues to squabble with the Austrians on the origins of money in two separate posts, one on Adam Smith and the other on Mises's regression theorem . The combativeness on the blog is unproductive, but I left a few comments anyways. On Smith: I don't really disagree with your claims, although I think you have to read the full Wealth of Nations in order to appreciate Adam Smith's theory of money. For instance, you are quoting from book 1 chapter 4, but Smith also has a very interesting (and much more extensive) chapter describing the complex workings of the system of bills of exchange, so he was by no means focused on gold and silver as money (See book 2 chapter 2). In this way he was different from Menger, who never discusses credit. Like Henry Dunning Macleod (who I see someone has already quoted), Smith was comfortable with credit as money.  The existence of Henry Dunning Macleod, as well as George Berkeley and James Steuart, disconfirms the thesis that clas...