Cash or Card: Consumer Perceptions of Payment Modes - Scholarly ...

Adam Smith proposed that money is simply a measure of ‘wealth of a nation’ and wealth is
associated with value. The concern with value has since dominated classical economic
thought. Classical economists proposed that money is just a measurement of value, medium
of exchange, a measure of account, and a means of storing value (Keynes, 1930; Grierson,
1977; Furnham and Lewis, 1986; Hicks, 1989; and Hoover, 1996). In classical economics,
money is viewed as an essentially tangible entity that could be stored and circulated reflecting
the dominance of the commodity theory of money (Ingham, 2004).
(Mills 1871, 1848) recognised the need to understand money at the individual level and
proposed that economics was the science that dealt with only one of many human motives,
the desire to maximise wealth. He proposed that several interrelated notions characterised
classical economic thought:
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� that money is a tangible entity; that the value is determined by the value of precious
metals it contained,
� that the value was determined by the supply and demand of the material constituting
the entity and cost of production,
� that the variation in the quantity of money causes price movement, and not vice versa,
� that the existence of bank liabilities in the form of notes and bills of exchange were
acknowledged as
part of money supply only if they were convertible into gold and/or silver .
Karl Marx was critical of Mill’s economic assumptions and argued that Mills (and the rest of
classical economists) emphasised the interest of the capitalist class that it served. During the
19 th and 20 th Centuries new ideas in economic thought emerged. The two dominant theories
are the marginal utility and general equilibrium. Marginal utility theory suggests that
consumption to maximise the total utility they receive from various goods and services
(Jevons, 1871; Finn, 1992). Although prominent economist have criticised aspects of this
theory and proposed extensions and modifications utility maximisation remains the
fundamental pillar of economic thought (Friedman, 1953). General equilibrium theory
incorporated the activities of both producers and consumers and assumes that the price of
goods and services is determined by the interactions of millions of individuals’ maximising
utility. In this view money remains the central as medium of exchange, store of value that can
be exchanged for other commodities.