On the Nature of Money

The exact definition and nature of money are unknown but some useful observations and theories can still be made:

• Money emerges from markets.
• Successful money cannot be made purely by social contract (the market naturally conspires against it for better money)
• Successful money cannot be made purely by decree of the government (markets not totally controlled by the government naturally conspire against it for better money)
• Money can be, but doesn't have to be a commodity.
• It is possible that no such thing as true money exists but rather things can be more or less moneylike, depending on the features they posses.

Before money, before markets:

• Gift Economies = essentially have a virtual money / virtuous points system, giving away goods and services with no immediate exchange, but expectation of future benefit for the individual/group
• Most people still engage in something similar to a gift economy today among family, friends, roommates, religious organizations, etc.
• Gift economies do not scale in number of participants and do not work among strangers or adversaries.

Given the limitations of gift economies, one next turns to the idea of having a barter-based economy. But once again, even more limitations emerge. The inherent problems with barter naturally give way to money emerging in a market that does not have money:

• double coincidence of wants
• indivisibility issues
• no standard unit of account
• difficulty to store wealth

Here is where things really start to get contentious, what are the most important features that make something money? In no particular order:

• Provides a medium of exchange
• Provides indirect exchange
• Provides a unit of account
• Divisibility
• Easily stored
• Easy exchange process
• Purchasing power
• Maintains value
• Portability
• Durability

In the natural world, the resources which have the best features for use as money are gold and silver, which is why they emerged in so many markets as the dominant form of money.