Is There a Market for Money, or Are There Markets for Money? There ain't no such thing as the Supply of or Demand for Money
<< Back to editing
Previous version by
a
<< Older
Newer >>
Revert to this one
search results
/index.php?action=ajax&rs=GDMgetPage&rsargs[]=laissezfaire30_3.pdf&rsargs[]=0
__________________________________________________________________
William
Barnett
II
and
Walter
Block
Is
There
a
Market
for
Money
,
or
Are
There
Markets
for
Money
?
There
ain
’
t
no
Such
Thing
as
the
Supply
of
or
Demand
for
Money
I
.
Introduction
.
St
.
Paul
(
1
Timothy
6-10
)
famously
said
,
“
For
the
love
of
money
is
the
root
of
all
evil
…
.
”
This
is
extremely
dubious
.
But
as
far
as
economic
analysis
goes
,
money
is
the
root
of
much
confusion
.
The
easiest
way
to
see
this
is
to
get
to
the
essence
of
an
economic
phenomenon
.
In
such
cases
,
we
ask
if
the
phenomena
would
/
could
exist
in
a
barter
economy
.
If
so
,
then
money
cannot
be
of
the
essence
of
the
matter
.
More
important
,
any
definition
of
the
phenomena
that
involves
money
is
,
obviously
,
inadequate
,
in
that
,
at
best
,
it
is
misleading
,
but
usually
confusing
,
thereby
causing
faulty
analysis
.
For
example
,
untold
time
and
ink
has
been
squandered
developing
the
theory
,
and
empirical
estimates
,
of
“
the
”
demand
for
money
.
However
,
correct
analysis
concludes
that
there
is
no
such
thing
.
Money
qua
money
is
one
side
of
every
monetary
transaction
.
Therefore
,
in
the
market
in
which
X
trades
for
dollars
,
the
price
of
money
is
in
terms
of
X
/$.
Of
course
,
in
the
market
in
which
Y
trades
for
dollars
,
the
price
of
money
is
in
terms
of
Y
/$.
There
is
then
no
“
the
”
demand
for
money
.
Rather
,
in
every
market
in
which
some
good
trades
for
money
there
is
a
demand
for
money
;
i
.
e
.,
there
are
demands
for
money
,
not
a
demand
for
money
.
Of
course
,
the
foregoing
comments
apply
equally
to
“
the
”
supply
of
money
.
It
should
be
noted
that
some
Austrians
,
including
the
present
authors
,
fall
into
this
trap
when
they
are
not
careful
;
e
.
g
.,
when
we
speak
of
an
increase
in
“
the
”
supply
of
money
,
rather
than
in
the
stock
of
money
.
In
section
II
we
outline
the
thesis
of
this
paper
,
that
there
are
numerous
markets
for
money
,
not
a
single
one
.
Section
III
is
devoted
to
documenting
failures
in
the
economic
literature
to
appreciate
this
point
.
We
conclude
in
section
IV
.
II
.
Many
markets
for
money
.
According
to
Barnett
and
Block
(
2005-
2006
,
205
):
“
Money
is
the
only
good
that
has
no
(
non-trivial
)
money
price
.
As
such
there
is
no
market
for
money
.
Rather
,
there
are
as
many
markets
for
money
as
there
are
non-money
goods
that
people
wish
to
exchange
for
money
.
Thus
,
in
a
real
sense
there
is
neither
a
demand
for
,
nor
a
supply
of
,
money
;
rather
,
in
each
market
there
is
a
demand
for
,
and
supply
of
,
the
non-money
good
.”
William
Barnett
II
is
Chase
Distinguished
Professor
of
International
Business
and
Professor
of
Economics
,
and
Walter
Block
is
Harold
E
.
Wirth
Eminent
Scholar
and
Professor
of
Economics
,
both
at
the
College
of
Business
Administration
,
Loyola
University
,
New
Orleans
.
__________________________________________________________________
Laissez-Faire
18
/index.php?action=ajax&rs=GDMgetPage&rsargs[]=laissezfaire30_3.pdf&rsargs[]=1
__________________________________________________________________
This
is
a
good
jumping-off
point
for
us
in
terms
of
the
thesis
of
the
present
paper
.
We
wish
to
assert
the
claim
that
while
there
are
many
markets
for
money
,
as
many
as
there
are
goods
and
services
people
wish
to
trade
for
money
,
there
is
no
a
(
or
the
)
market
for
money
.
There
logically
cannot
be
any
such
thing
,
since
money
takes
part
in
every
exchange
in
the
non-barter
economy
.
It
might
at
the
outset
seem
unduly
pedantic
to
insist
upon
such
a
careful
,
even
narrow
,
word
usage
.
But
if
economics
is
to
become
a
science
,
one
of
the
requisites
for
this
eventuality
is
a
common
and
accurate
language
.
If
the
dismal
science
is
to
be
truly
scientific
,
it
cannot
tolerate
sloppiness
and
imprecision
.
1
Literally
,
if
there
were
to
be
a
or
the
market
for
money
,
there
could
be
only
one
good
or
service
traded
against
the
monetary
medium
.
Since
no
one
contends
any
such
thing
,
there
can
only
be
markets
(
plural
)
for
money
.
Consider
one
possible
exception
to
this
general
rule
.
Can
we
not
speak
of
the
market
for
foreign
money
?
For
example
,
someone
wants
to
purchase
euros
with
dollars
.
Would
it
violate
the
thesis
of
the
present
paper
to
refer
to
the
market
for
1
We
do
not
object
to
imprecision
in
ordinary
language
.
For
example
,
the
word
“
indifferent
”
has
a
perfectly
clear
referent
amongst
most
speakers
of
the
English
language
.
But
there
is
no
such
thing
as
indifference
in
economics
,
since
every
time
man
acts
,
he
chooses
one
thing
,
and
sets
aside
another
.
If
he
were
indifferent
,
he
could
never
act
in
such
a
manner
.
In
like
manner
,
“
work
”
in
physics
means
mass
multiplied
by
distance
.
In
commonplace
language
,
holding
weights
at
arms
length
entails
great
work
,
even
though
it
would
not
in
science
since
nothing
moves
any
distance
at
all
in
this
example
.
euros
?
Perhaps
in
a
world
where
these
were
the
only
two
currencies
such
talk
might
be
reasonable
,
but
in
the
present
one
with
numerous
types
of
notes
,
this
would
clearly
be
impermissible
.
But
even
here
we
go
too
far
.
For
consider
another
possible
exception
:
contemplate
that
glorious
day
when
we
all
use
gold
money
.
Gold
is
the
only
money
;
there
is
no
other
.
Would
it
make
sense
to
claim
that
there
is
now
a
market
for
money
,
instead
of
many
such
markets
?
Again
,
no
,
for
gold
money
would
now
trade
against
numerous
goods
and
services
,
and
there
would
be
as
many
markets
for
this
precious
resource
as
there
would
be
goods
and
services
.
It
is
possible
,
even
likely
,
that
in
a
monetary
economy
in
which
gold
is
the
monetary
commodity
,
money
might
consist
both
of
gold
coins
and
bullion
.
In
that
case
there
would
be
a
demand
for
bullion
money
in
terms
of
coin
money
,
and
vice
versa
.
However
,
even
in
that
case
there
would
be
no
the
demand
for
and
the
supply
of
money
.
Rather
,
when
considering
gold-coin
money
,
there
would
merely
be
one
more
demand
for
such
money
,
along
with
all
the
other
demands
thereof
,
save
in
that
case
in
addition
to
such
demands
for
money
(
supplies
of
other
goods
)
there
would
also
be
a
gold-bullion
demand
for
money
(
supply
of
goldbullion
money
).
That
is
,
this
would
be
no
different
than
any
other
case
in
which
there
was
more
than
one
money
commodity
;
e
.
g
.,
silver-coin
money
,
circulating
alongside
gold-coin
money
,
with
the
two
sometimes
exchanging
against
each
other
at
free-market
prices
.
Let
us
consider
an
objection
to
our
thesis
.
It
might
be
asserted
that
there
is
indeed
such
a
thing
as
the
demand
for
money
(
in
contradistinction
to
supplies
of
__________________________________________________________________
Laissez-Faire
19
/index.php?action=ajax&rs=GDMgetPage&rsargs[]=laissezfaire30_3.pdf&rsargs[]=2
__________________________________________________________________
goods
,
as
we
argue
)
on
the
basis
that
in
some
cases
it
is
specifically
the
money
that
is
the
desired
object
in
an
exchange
;
i
.
e
.,
the
reason
A
enters
into
an
exchange
with
B
is
to
get
money
from
B
;
therefore
A
does
have
a
demand
for
money
.
And
if
we
add
all
such
demands
from
the
many
A
’
s
out
there
,
the
result
is
the
market
demand
for
money
.
Superficially
,
this
objection
sounds
like
a
refutation
of
our
viewpoint
.
However
,
it
is
problematical
from
the
point
of
view
of
standard
supply
and
demand
(
S&D
)
analysis
.
The
reason
is
that
if
we
are
to
take
the
object
of
the
market
participants
’
desire
as
the
criterion
,
then
in
most
every
case
it
is
what
is
being
sought
,
not
what
is
being
foregone
,
that
is
the
key
.
It
is
true
that
sometimes
the
key
to
an
exchange
is
that
A
wishes
to
be
rid
of
some
good
,
x
,
and
will
in
some
cases
even
pay
to
be
rid
of
it
.
However
,
that
is
not
the
usual
case
.
In
a
normal
situation
,
A
,
an
automobile
dealer
,
desires
to
acquire
money
(
for
some
yet
undetermined
purpose
)
and
must
sell
cars
to
obtain
it
.
The
motive
is
to
get
hold
of
the
money
,
the
sale
of
the
car
is
only
the
means
to
this
end
.
If
then
,
we
refer
to
A
’
s
acts
as
constituting
his
demand
for
money
,
and
not
his
supply
of
cars
,
if
we
are
to
be
consistent
we
must
apply
the
same
“
logic
”
to
his
exchange
partners
.
That
is
,
the
motive
of
each
of
the
purchasers
to
whom
he
sells
his
cars
is
to
acquire
one
or
more
vehicles
,
and
the
parting
with
money
is
but
the
means
to
that
end
.
Therefore
,
to
be
consistent
,
we
must
think
in
terms
of
their
demand
(
s
)
for
autos
,
and
not
their
supplies
of
money
.
Then
,
in
terms
of
S&D
analysis
,
we
must
consider
the
interactions
of
A
’
s
demand
for
money
with
B
’
s
demand
for
cars
.
That
is
,
we
have
not
S&D
analysis
,
but
D&D
(
and
this
does
not
refer
to
Dungeons
and
Dragons
)
analysis
.
All
of
which
raises
the
question
of
the
relevant
price
.
What
,
pray
tell
,
would
an
S&D
figure
look
like
if
the
relevant
curves
were
the
buyer
’
s
demand
curve
for
the
good
x
,
and
the
seller
’
s
(
of
x
)
demand
curve
for
money
?
To
pose
the
question
is
to
make
the
point
that
for
a
monetary
economy
S&D
analysis
is
the
analysis
of
the
supply
of
,
and
demand
for
,
goods
in
terms
of
money
prices
,
not
the
supply
of
,
and
the
demand
for
,
money
,
in
terms
of
any
price
or
price-like
construct
(
such
as
the
purchasing-power
of
money
).
III
.
Erroneous
claims
of
a
single
market
for
money
.
Errors
abound
in
the
mainstream
economic
literature
on
this
issue
.
Unfortunately
,
they
are
so
legion
that
the
examples
appearing
below
constitute
only
the
tip
of
the
iceberg
.
Every
author
who
employs
a
“
market
for
money
”
in
his
model
makes
this
mistake
,
and
virtually
every
macroeconomics
text
does
so
.
Consider
just
these
few
examples
(
all
emphases
on
a
or
the
“
market
for
money
”
in
quotes
in
this
section
have
been
inserted
by
the
present
authors
):
1
.
Friedman
,
D
.
(
1989
,
219
)
mentions
“
The
market
for
money
”
as
a
chapter
heading
.
2
.
Sløk
(
2000
)
offers
this
view
:
“
A
market-based
monetary
policy
depends
on
the
existence
of
a
market
for
money
…
.
”
3
.
Friedman
,
B
.
(
1983
,
180
)
follows
the
same
practice
:
“
The
market
for
money
and
the
market
for
credit
”
is
used
to
head
a
section
of
a
chapter
.
4
.
Lutz
(
2006
,
252
)
likewise
entitles
his
chapter
21
:
“
The
market
for
money
.
…
”
__________________________________________________________________
Laissez-Faire
20
/index.php?action=ajax&rs=GDMgetPage&rsargs[]=laissezfaire30_3.pdf&rsargs[]=3
__________________________________________________________________
Unhappily
,
even
Austrian
economists
,
who
are
usually
more
careful
scholars
about
such
matters
,
err
on
this
point
.
Many
fewer
of
them
model
the
“
market
for
money
,”
but
still
this
error
may
be
found
in
this
literature
too
.
Consider
these
examples
:
1
.
Garrison
(
1984
,
197
)
states
:
“
It
is
argued
below
that
the
‘
market
for
time
’
and
the
‘
market
for
money
’
both
in
their
conceptual
isolation
and
in
their
actual
interaction
,
give
rise
to
all
the
phenomena
that
are
conventionally
regarded
as
macroeconomic
in
nature
.”
2
.
Again
,
Garrison
(
1984
,
footnotes
deleted
):
“
Though
it
may
be
thought
unnecessary
to
argue
the
centrality
of
money
in
macroeconomic
theory
,
it
is
worthwhile
to
consider
the
special
sense
in
which
money
is
an
economy
wide
phenomenon
.
Monetary
theorists
have
long
recognized
that
‘
money
has
no
market
of
its
own
.’
It
is
the
obverse
of
this
truth
that
highlights
the
macroeconomic
character
of
money
.
With
trivial
exceptions
every
market
is
a
market
for
money
.
In
a
modern
economy
every
exchange
involves
some
specific
quantity
of
money
.
That
this
fact
should
be
the
focus
of
our
attention
has
been
recognized
by
economists
both
new
and
old
.
There
is
no
denying
,
of
course
,
that
money
serves
several
functions
,
as
listed
in
any
principles
text
,
but
the
presence
of
money
on
one
side
of
each
exchange
in
every
market
is
the
special
sense
in
which
money
is
an
economy
wide
phenomenon
.”
3
.
In
the
view
of
Rothbard
(
2004
,
ch
.
10
,
emphasis
in
bold
added
by
present
authors
):
“
Making
this
distinction
,
we
find
that
,
contrary
to
Hutt
,
each
individual
has
self-sovereignty
over
his
person
and
property
on
the
free
market
.
The
producer
,
and
the
producer
alone
,
decides
whether
or
not
he
will
keep
his
property
(
including
his
own
person
)
idle
or
sell
it
on
the
market
for
money
,
the
results
of
his
production
then
going
to
the
consumers
in
exchange
for
their
money
.
This
decision
—
concerning
how
much
to
allocate
to
the
market
and
how
much
to
withhold
—
is
the
decision
of
the
individual
producer
and
of
him
alone
.”
4
.
And
again
(
Rothbard
,
2004
[
1962
],
Chap
.
6
,
Appendix
:
Professor
Oliver
on
Socioeconomic
Goals
,
C
.
The
Attack
on
Income
According
to
Earnings
):
“
His
goods
or
services
are
freely
exchanged
on
the
market
for
money
.”
5
.
According
to
Loasby
(
1998
,
81
):
“
This
Hayek
(
1933
)
attempts
to
do
through
the
introduction
of
money
,
together
with
a
market
for
money
.”
6
.
In
the
opinion
of
Endres
(
1991
,
79
):
“
Time
horizons
and
associated
contractual
obligations
in
the
market
for
money
credit
destined
for
more
permanent
productive
investment
are
much
longer
and
substantially
different
from
horizons
which
normally
obtain
in
the
market
for
consumption
loans
.”
7
.
Here
is
a
statement
from
Carilli
,
Dempster
and
Rohan
(
2004
,
38
):
“
Thus
,
in
every
case
where
price
level
rigidity
causes
a
shortage
of
funds
,
incentives
will
lead
to
the
dissipation
of
that
shortage
,
but
in
cases
where
prices
and
wages
adjust
quickly
,
the
shortage
will
be
eliminated
by
the
mutual
adjustment
of
quantity
supplied
and
quantity
demanded
in
the
market
for
money
.”
8
.
And
another
one
from
these
authors
(
2004
,
41
):
“
A
plausible
real
world
view
is
that
the
process
of
price
level
(
Austrian
)
and
money
supply
(
Monetarist
)
adjustment
will
occur
,
in
most
instances
,
__________________________________________________________________
Laissez-Faire
21