While a vast number of readers watched as election commission employees in neighboring Belarus performed dangerous pirouettes on step ladders and other feats for the glory of the current dictator, a truly important event took place in this country. Alexei “Kamendant” Tereshchuk published an essay Catallactic Theory of Money. By internet standards, it is, of course, a long-read, but overall the text is quite concise, and despite the roughness of the presentation, the work deserves to be read by anyone who is even slightly interested in economics. Although, of course, those unfamiliar with Mises’s monetary theory will find the essay quite difficult to read, as it is a direct development of it, using Mises’s own conceptual framework.
For Mises, money is a special category of goods used as a medium of indirect exchange. This good acquires its value through a historical process that can be mentally traced back to the time when money was an ordinary consumer good (the so-called regression theorem).
Kamendant generalizes the concepts of indirect exchange and money. He defines indirect exchange as interpersonal exchange in which goods are acquired for their exchange value. Thus, money becomes just one of the possible goods used for indirect exchange. What is its fundamental characteristic that distinguishes it from other goods? Or put this way: what properties allow a certain good to become money?
Kamendant provides a definition of money that contains the answer to this question. Money consists of goods used to reduce costs in indirect exchange. It is precisely about the reduction of costs. If the exchange of one good for another is carried out directly with lower costs than when using some intermediary commodity, then the need for money does not arise.
Mises derived indirect exchange strictly from direct exchange. However, there is rich anthropological material showing that in primitive societies that do not use money, the economy is nonetheless not barter-based. Instead, there are usually various forms of mutual obligations, which gave rise to the debt theory of the origin of money. Kamendant points out that the only condition under which the demand for money as such could disappear is the equality of costs when exchanging any goods for each other. However, it is quite difficult to imagine such a society; that is exactly why societies with a pure barter economy do not exist.
Also quite interesting is the part of the essay dedicated to the so-called functions of money: scarcity, durability, divisibility, and so on. Kamendant indicates the role of these functions. From his point of view, these are simply different aspects of saving when using money. At the same time, only part of the saved costs relates to exchange itself. But beyond that, there are savings on storage costs, change, and so on.
Perhaps I will not try to briefly summarize Kamendant’s entire essay in one post; it turns out muddled and unclear. Read it yourselves.
My only complaint about the text is that it is written in rather poor language and needs editing. The author claims that this is only part of a future treatise on economic theory, and I hope that before the publication of the treatise, it will be proofread a bit better.
Nevertheless, I am terribly glad that Austrian economic theory remains alive and evolving, rather than being reduced to a retelling of treatises from the middle of the last century.
