Money is a veil

Apropos the fishing tribe mentioned below, some explanatory comments. The idea of positing an economy without money is to show that the categories of saving, investment, and capital cut across modes of production. That is, these categories exist even in moneyless economies. I think that the classical and neoclassical economists have always treated of the real economy. Income in such a framework is the sum total of utilities and psychic satisfactions that accrue to an individual over time. Thus, distributional questions fall outside the domain of economic analysis because the subjective element of income can’t be measured. There is something faintly unsatisfactory with such an understanding of income.

In a fiat money economy, money is not a veil. Advances of money by banks to entrepreneurs, allows them a claim on current resources, which can be diverted as capital to further increase production. These advances made may fructify in enhanced production. On the other hand, the resources levied by the entrepreneur may be simply frittered away, not increasing productive capacity or future production in any way. Money advanced as loans by banks can be used in current consumption.


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