Definition of Money


A clear and complete understanding of money requires starting with a working definition.


Money MattersMoney consists of any economic good, or any claim on such a good, that serves as a general medium of indirect exchange and that acts as a final means of payment.

I will describe in detail the important elements of this definition.

  1. Economic Good — Carl Menger clearly defines an “Economic Good.”
    For now, its something people want that exists in relative short supply.
  2. Any Claim On Such A Good — This refers to bank notes and demand bank accounts.
  3. General Medium Of Indirect Exchange — General refers to a wide usage. Medium of indirect exchange refers to its acceptance for further exchange.
  4. Final Means Of Payment — Final refers to the fact that the payor need take no further action to complete the payment.

Each of these elements is included in the definition for an important and specific reason.

Later, I will expand on these descriptions and I will explain why some popular definitions of money do not hold up to scrutiny.

Draft or Summary Page

In order to maintain continuity in the structure and navigation of the site we have posted a number of pages in a draft or summary format. We are working on the final edition and will post it as soon as possible.