Enough Gold in a Society without and with Moneylenders,
YALE UNIV NEW HAVEN CT COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
Pagination or Media Count:
If an exchange is modeled as a strategic market game with one commodity serving as a mony, then if there is no credit available and if all traders are insignificant in size, so that an individual does not influence prices, the noncooperative equilibria NEs of the game will coincide with the competitive equilibria of the exchanged economy provided that there is enough money to facilitate trade. The meaning of enough money is that the NEs are interior. In other words the constraint that an individual cannot spend more of the means of payment than he holds is not binding on any individuals plans. The condition on enough money is characterized both by the total amount of money in the system and its disribution. It is possible that an economy may not have enough money no matter how it is distributed it is also possible that a redisribution will give rise to interior solutions. These statements can be made precise and illisutrated by means of specific examples. If there is enough money but is is maldistributed it can be shown that a loan market 100 backed by gold will bring efficiency. With the economic model in this paper it is straightforward to check that a zero rate of interest with efficient lending emerges. The commercial needs of trade are financed. If a multistage model with a time discount were introduced then the interest rate in equilibrium would not be zero.
- Economics and Cost Analysis
- Numerical Mathematics