CHAPTER 3
THE MEANING OF MONEY

ONE of the purposes of economic theory is to look through the veil of money 1 to the realities behind it. The plain man rarely looks through the veil. To him money means wealth. When he says: Money is not everything, he means (in the economist's language): A command over goods and services is not the same thing as happiness. He does, however, take a glance through the veil when he says: Money is not what it was. Then he means that the purchasing power of a unit of money over goods and services has fallen in the more or less recent past.


MONEY AND PURCHASING POWER

The reason why the plain man concentrates upon money is that he can hope (according to his personal circumstances) by working, saving, speculating, employing labour, demanding a rise in pay, to increase his command over money, whereas the purchasing power over goods and services that a unit of money represents is something arising out of the total operation of the economy, which he can do nothing about.

Moreover, it is a necessary condition for the operation of a capitalist economy (or, indeed, of any economy much more complicated than that of the robins) that its members should think in terms of money rather than purchasing power. For, if they are highly purchasing-power conscious, then, when they expect a rise in money prices they all become speculators, buying goods not for use but for a rise in value, and this itself causes prices to rise, so that, unless there are powerful checks

____________________
1
Cf. A. C. Pigou, The Veil of Money.

-25-

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