bain_y_howells__monetary_economics__policy_and_its_theoretical_basis

34 MONETARY ECONOMICS
sufficiently low. Even the very poor can borrow from pawnbrokers or ‘loan
sharks’ and, when they do so, what they receive is money. In these cases,
it is not ‘money’ that is scarce. People talk of not having enough ‘money’
but what they lack is ‘spending resources’ as we have defined them above:
real and financial assets together with the ability to borrow.
Pause for thought 2.3:
What does the word ‘money’ mean in the following quotation from Shakespeare’s
The Merchant of Venice, Act I Scene III?
‘Hath a dog money? Is it possible a cur can lend three thousand ducats?’
Things may be different, however, at an aggregate level. Much depends
on whether we accept the notion that the authorities could and should operate
on the interest rate by attempting to control the stock of money. In this
case, we would need a clear idea of what constitutes the money supply and
some ability to measure it. If, however, the authorities attempt to control
spending directly by adjusting the interest rate, we do not need to define or
to measure ‘money’ even at an aggregate level. We might still choose to
attempt to do so but only perhaps as one of a number of indicators of the
desirability of adjusting the interest rate. The fact that we might only have
a very limited and specific need for a definition of ‘money’ in economics
may well influence the definition we use, although we should bear in mind
that the interest of economists in money is not limited to the macroeconomic
relationship between the aggregate money supply and aggregate demand.
Let us look, next, at the various approaches to the definition of money in
economics.
Descriptive definitions of money
A standard approach is to begin with the three roles attributed to money in
the economy. We have mentioned two of these: money as a medium of
exchange and money as a unit of account. The third is as a store of value in
that the use of money allows for the separation of supply and demand in
time. Goods and services can be produced and sold in one time period and
the proceeds held in the form of money until a later period when they can
be used to purchase goods and services. Exchanges in a monetary economy
are accepted as non-synchronized. This is accepted as a benefit because
it removes ‘the double coincidence of wants’ associated with barter — the
need to find a buyer for your goods who also happens to sell the goods you
desire. In this way, the use of money saves greatly on search and informa-