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What is Money - Definition of Money
Definition of Money: According to Walker, money what money does, but this definition of money cannot throw light on the definition of money because money does many things; it is just the functional theory of money.
Robertson has given the most satisfactory definition of money. According to him, anything, which is widely accepted in payment for good or discharges other kinds of business obligations, is called as money. It is not the physical characteristics of money that makes money acceptable it is of social significance. The idea of general acceptability worries some people to take it as flimsy. Money like other goods is demanded because it is useful, but money differs from others in terms of utility. It is not a consumer because it does not yield any direct utility, it is not a capital good because it is incapable of performing feats of physical transformation. It is the commercial theory of money.
According to some the sanction behind money is law. Professor Knapp and some others consider that it is the state that has created money and attribute its value to the external form given to it by the state. It is the state theory of money and the theory stands condemned now.
Thus whatever forms money comes has been now categorized into two kinds Super Money and Plastic Money, but the functions remains same as suggested by Professor Kinley.
Can we say money is medium of exchange?
Money cannot be said medium of exchange. Suppose, in real terms, one apple equals one orange and both are today priced at Rs. 5. Now Rs. 5 can be said to be medium of exchange between apple and orange only for today. It should have been ideally called medium of exchange if it continues to exchange one apple with one orange in real terms for all times to come. But with inflation, you cannot exchange an apple with orange with Rs. 5. It means money has also get a value of its own. You cannot say it does not have value of its own.
If I am right, Money, from economist’s point of view is just another kind of asset. Its value is also determined by demand and supply, but what nobody has answered is what money ought to be? Supposed today a labor toiled hard to earn Rs. 500 and money tomorrow depreciates ruining the value of his Rs. 500.
Now when the assets he built continue to hold value, why his Rs. 500 depreciated? Certainly money ought not to be this. If he had been given gold instead of paper, he would have still got something worthy. Some will argue that all assets bear the risk of being devalued, for them I would like to say that only nature have right to play games with humans, not something that is controlled by humans.