Value of Money

A dollar now than a dollar tomorrow.

Class notes for detailed info.

Money’s Role §

1. Solves the problem of the double coincidence of wants
   1. Observe the Edgeworth Box|420. This is a full barter system based on Indifference Curves.
2. Functions as a claim on future consumption (=store of value, claim on future consumption)
   1. I give you the perishable food now ⇒ you give me a claim on future consumption.
   2. Discounting future value ← due to risk aversion and instant gratification (human psychology)

Sociology Perspective: §

See (Article) Minimum Viable Superorganism Melting Asphalt

Money is industrial-grade prestige status

Time Value of Money §

⇒ Thus arises the time value of money and financial markets

• Money is discounted using a discount rate (=interest)
• Financial markets are essential for a store of value

Properties Required in Physical Money §

1. Divisible ⇒ numerical money. You can divide it into as much as reasonable in transaction
2. Scarce ⇒ gold/silver is often used
3. Desirable ⇒ again, gold/silver.
4. Durable ⇒ metallic goods

See the Gold Standard for more information