Chapter 1
THE TRANSACTIONS ROLE OF MONEY*
JOSEPH M. OSTROY
University of California, Los Angeles
ROSS M. STARR
University of California, San Diego
Contents
1. Introduction
1.1. The Walras-Hicks-Patinkin tradition: Integrating money into value theory
1.2. Critiques of the tradition
1.3. Some parables of monetary exchange
1.4. Introducing general equilibrium theory to monetary exchange
2. The modern general equilibrium transactions costs approach
2.1. Pareto inefficient equilibrium in a non-monetary economy: An example
2.2. Intertemporal transactions cost models: Sequence economy
2.3. A monetary economy
3. The logistics of decentralized barter exchange
3.1. Dwelling on the disadvantages of barter
3.2. A model of bilateral trade
3.3. Discussion of proofs of Theorems 1-6
3,4. The spontaneous emergence of media of exchange
4. The consequences of budget enforcement for the allocation of
resources
4.1. Another version of the "Pair of Robinson Crusoes"
4.2. Record-keeping in the chicken-egg economy
5. The cash-in-advance constraint
5.1, Existence and quantity-theoretic properties of equilibrium
5.2, A cash-in-advance version of the chicken-egg model
5.3, Responses to changes in the money supply
6. Concluding remarks
7. Bibliographic note
References