Money Is Memory

Abstract

This paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible (following Myerson [8], the standard definition of feasibility is adapted to take account of the lack of commitment). The environments feature either memory or money. Memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past. Money is defined as an object that does not enter utility or production functions, and is available in fixed supply. The main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory. Depending on the environment, the converse may or may not be true. Hence, from a technological point of view, money is equivalent to a primitive form of memory. Journal of Economic Literature Classification Numbers: E40, C73, D82. 1998 Academic Press I. INTRODUCTION At its heart, economic thinking about fiat money is paradoxical. Fiat money consists of intrinsically useless objects that do not enter utility or production functions. But at the same time, these barren tokens allow societies to achieve allocations that would otherwise not be achievable. The purpose of this paper is to uncover what permits these barren tokens to article no. ET972357 232 0022-0531Â98 25.00

Monetary policy in a channel system

“…We impose βR ≤ 1, since when βR > 1, agents would store infinite amounts of goods which is 11 As in Koeppl, Monnet and Temzelides (2006) the linearity of consumption utility and the linearity of production disutility implies that no welfare is generated. 12 An alternative framework that would also generate a degenerated distribution of asset holdings is the large household framework of Shi (1997).…”

“…5 Second, the optimal spread is decreasing in the rate of return of the collateral and equal to zero when the opportunity cost of acquiring collateral is zero. Third, a central bank has two 4 By 'essential,' we mean that the use of money expands the set of allocations (Kocherlakota 1998 and Wallace 2001). 5 The rate of return of the collateral determines the opportunity costs for commercial banks of accessing the lending facility of the central bank where a high rate of return implies a small or zero opportunity cost.…”

“…11 As we will see below, in equilibrium all households will hold the same amounts of money and collateral when they move on to the money market. 12 …”

Organizations and overlapping generations games: Memory, communication, and altruism

“…Naturally, if the member of the other organization could simultaneously send a public message, then simple cross checking mechanisms exist to sustain any feasible payoff of the full memory game. 17 14 See, for example, Kocherlakota (1998), Kocherlakota and Wallace (1998), Wallace (2001), and Corbae, Temzelides, and Wright (2001). 15 In many disputes, attacks directed from one group toward another are often justified as retaliatory punishments for transgressions that occurred long before anyone in the current cohort was around (e.g., conflicts in Northern Ireland, Bosnia, and the Middle East).…”

“…Although j(k + 1) was unaware of the earlier deviation, message m j initiates the Q j -phase, nonetheless. Rewriting (14) gives…”