The Review of Austrian Economics, 14:4, 267–317, 2001.
2001 Kluwer Academic Publishers. Manufactured in The Netherlands.
Toward a General Theory of Credit and Money
MOSTAFA MOINI email@example.com
Department of Economics, Oklahoma City University, 2501, N. Blackwelder, Oklahoma City, OK 73106, USA
“Practically and analytically, a credit theory of money is possibly preferable to a monetary theory of
Joseph A. Schumpeter
“Whether power to command the industry of others be not real wealth? And whether money be not in
truth Tickets or Tokens, for recording and conveying such power? And whether it be of consequence what
material the tokens are made of? ... Whether all circulation be not alike circulation of credit, whatsoever
medium—metal or paper—is employed: and whether gold be any more than credit for so much power?”
Bishop Berkeley. Querists
Abstract. Money is not a thing but a species of credit, and hence a social relation involving rights and obligations.
It emerged as the most abstract species in the course of the general process of evolution of credit. Formulation
of a theory of credit is, therefore, logically prior to any theory of money. A framework proposed along this line
by Macleod, during the second half of the 19th century, has been neglected until now. Combined with Walras’s
numeraire and etalon concepts, this approach provides the foundation for a General Theory of Credit and Money,
presented in this paper.
JEL classiﬁcation: E5, E4, E0.
Information Technology and deregulation are changing the meaning of the terms “bank”,
“banking” and “money”. As money is increasingly recorded and transmitted in the form
of digitally coded information, one is led to believe that perhaps money is not, and has
never been a thing at all, as suggested by the medium-of-exchange concept. Rather it is a
certain type of social relation about which the relevant information may be recorded and
transmitted by a variety of means. This line of thought leads to a fresh investigation into
the nature and origin of money.
Section 1 surveys some current developments in the payment system and shows that
money and monetary policy are undergoing signiﬁcant changes, which cannot be under-
stood by means of the traditional concept of money. In Section 2 a distinction is drawn
between “money” and “monetary instrument”, a concept that is treated more fully in
Sections 10, 11 and 12. Section 3 argues that, coupled with certain questions arising from
the dominance of Information Technology within the payment system, the said distinction
is sufﬁciently fundamental to establish the grounds for the formulation of a new theory
of money. Section 4 notes that money has a dual character in that it appears as one thing