The Technological Role of Fiat Money

Abstract

This article argues that fiat money’s only technological role in an economy is to act as societal memory: money allows people to credibly record some aspects of their transactions and make that record accessible to other people. This record-keeping role is demonstrated in the three standard paradigms of fiat money: the overlapping generations, turnpike, and search models. In these models, if a new economy is created by removing the money and replacing it only with a historical record of all transactions, known to everyone in the economy, then the original monetary allocation is still achievable as an equilibrium.

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