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{\rtf\ansi\deff0\ansicpg1252

{\fonttbl
{\f0\froman times new roman;}}
{\colortbl\red0\green0\blue0;\red255\green0\blue0;\red255\green255\blue255;\red1
54\green154\blue154;}
{\info{\author Abba}}
\jexpand\viewkind1\viewscale100
{\shp{\*\shpinst\shpleft4986\shptop4626\shpright7320\shpbottom6973\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2028\shpz0\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 2334}}
{\sp{\sn geoBottom}{\sv 2347}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;5;(1173,0);(0,1173);(1173,2346);(2346,1173);(1173,0);
}}
{\sp{\sn pSegmentInfo}{\sv 2;12;16384;45824;1;45824;1;45824;1;45824;1;45824;2457
7;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 0}}
{\sp{\sn lineWidth}{\sv 9525}}
{\sp{\sn lineColor}{\sv 65793}}
{\sp{\sn lineDashing}{\sv 0}}
{\sp{\sn fLine}{\sv 1}}{\sp{\sn lineColor}{\sv 65793}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft5013\shptop4600\shpright7346\shpbottom6933\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2029\shpz1\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 2333}}
{\sp{\sn geoBottom}{\sv 2333}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;83;(1173,0);(1080,0);(986,13);(893,40);(800,53);(720,
93);(626,133);(560,173);(480,226);(413,280);(346,346);(280,413);(226,480);(173,5
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,1360);(40,1453);(53,1546);(93,1626);(133,1706);(173,1786);(226,1866);(280,1933)
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93,2306);(986,2320);(1080,2333);(1173,2346);(1266,2333);(1360,2320);(1453,2306);
(1533,2280);(1626,2253);(1706,2213);(1786,2160);(1866,2120);(1933,2053);(2000,20
00);(2053,1933);(2120,1866);(2160,1786);(2213,1706);(2253,1626);(2280,1546);(230
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280,800);(2253,720);(2213,626);(2160,560);(2120,480);(2053,413);(2000,346);(1933
,280);(1866,226);(1786,173);(1706,133);(1626,93);(1533,53);(1453,40);(1360,13);(
1266,0);(1173,0);(1173,0);(1173,0);}}
{\sp{\sn pSegmentInfo}{\sv 2;168;16384;45824;1;45824;1;45824;1;45824;1;45824;1;4
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5824;1;45824;1;45824;1;45824;1;45824;1;45824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 0}}
{\sp{\sn lineWidth}{\sv 3175}}
{\sp{\sn lineColor}{\sv 66047}}
{\sp{\sn lineDashing}{\sv 6}}
{\sp{\sn fLine}{\sv 1}}{\sp{\sn lineColor}{\sv 66047}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft5986\shptop4600\shpright6186\shpbottom4786\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2030\shpz2\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 200}}
{\sp{\sn geoBottom}{\sv 186}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;88;(0,173);(106,66);(106,66);(106,66);(106,66);(120,6
6);(120,66);(120,66);(120,66);(120,66);(120,66);(120,66);(120,66);(120,66);(120,
66);(120,66);(120,66);(120,66);(120,66);(120,66);(120,66);(120,66);(120,66);(120
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13,186);(13,186);(13,186);(13,186);(0,186);(0,186);(0,186);(0,186);(0,186);(0,18
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3);(0,173);(0,173);(0,173);(66,40);(186,0);(146,133);(0,173);(0,173);}}
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5824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}
{\sp{\sn fillColor}{\sv 65793}}
{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft7106\shptop5586\shpright7293\shpbottom5773\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2031\shpz3\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 187}}
{\sp{\sn geoBottom}{\sv 187}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;88;(13,0);(120,106);(120,106);(120,106);(120,106);(12
0,106);(120,120);(120,120);(120,120);(120,120);(120,120);(120,120);(120,120);(12
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0,120);(120,120);(120,120);(120,120);(120,120);(120,120);(120,120);(120,120);(12
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(13,0);(13,0);(13,0);(13,0);(13,0);(13,0);(13,0);(13,0);(13,0);(13,0);(13,0);(14
6,66);(186,186);(66,146);(13,0);(13,0);}}
{\sp{\sn pSegmentInfo}{\sv 2;178;16384;45824;1;45824;1;45824;1;45824;1;45824;1;4
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5824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}
{\sp{\sn fillColor}{\sv 65793}}
{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft5000\shptop5813\shpright5186\shpbottom6000\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2032\shpz4\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 186}}
{\sp{\sn geoBottom}{\sv 187}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;88;(80,66);(186,173);(186,173);(186,173);(186,173);(1
86,173);(186,173);(186,173);(186,173);(186,173);(186,173);(186,186);(186,186);(1
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73,186);(173,186);(173,186);(173,186);(173,186);(66,80);(66,80);(66,80);(66,80);
(66,80);(66,80);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);
(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);
(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);(66,66);
(66,66);(80,66);(80,66);(80,66);(80,66);(80,66);(80,66);(40,133);(0,0);(133,40);
(80,66);(80,66);}}
{\sp{\sn pSegmentInfo}{\sv 2;178;16384;45824;1;45824;1;45824;1;45824;1;45824;1;4
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5824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}
{\sp{\sn fillColor}{\sv 65793}}
{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}

{\sp{\sn fArrowheadsOK}{\sv 0}}


{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft7280\shptop5826\shpright7400\shpbottom6013\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2033\shpz5\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 120}}
{\sp{\sn geoBottom}{\sv 187}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;10;(53,93);(66,93);(66,186);(53,186);(53,93);(0,120);
(66,0);(120,120);(53,93);(53,93);}}
{\sp{\sn pSegmentInfo}{\sv 2;22;16384;45824;1;45824;1;45824;1;45824;1;45824;1;45
824;1;45824;1;45824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}
{\sp{\sn fillColor}{\sv 66047}}
{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft6226\shptop4546\shpright6400\shpbottom4666\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2034\shpz6\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 174}}
{\sp{\sn geoBottom}{\sv 120}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;10;(106,53);(186,53);(186,66);(106,66);(106,53);(120,
120);(0,66);(120,0);(106,53);(106,53);}}
{\sp{\sn pSegmentInfo}{\sv 2;22;16384;45824;1;45824;1;45824;1;45824;1;45824;1;45
824;1;45824;1;45824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}
{\sp{\sn fillColor}{\sv 66047}}
{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft4946\shptop5586\shpright5066\shpbottom5760\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2035\shpz7\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 120}}
{\sp{\sn geoBottom}{\sv 174}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;10;(53,0);(66,0);(66,80);(53,80);(53,0);(120,66);(66,
186);(0,66);(53,0);(53,0);}}
{\sp{\sn pSegmentInfo}{\sv 2;22;16384;45824;1;45824;1;45824;1;45824;1;45824;1;45
824;1;45824;1;45824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}

{\sp{\sn fillColor}{\sv 66047}}


{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
{\sp{\sn fLayoutInCell}{\sv 1}}}}
{\shp{\*\shpinst\shpleft6160\shptop6760\shpright6346\shpbottom6946\shpfhdr0\shpw
r3\shpwrk0\shpfblwtxt1\shplid2036\shpz8\shpbxpage\shpbypage
{\sp{\sn shapeType}{\sv 0}}
{\sp{\sn fFlipH}{\sv 0}}
{\sp{\sn fFlipV}{\sv 0}}
{\sp{\sn rotation}{\sv 0}}
{\sp{\sn geoRight}{\sv 186}}
{\sp{\sn geoBottom}{\sv 186}}
{\sp{\sn shapePath}{\sv 4}}
{\sp{\sn pVerticies}{\sv 8;88;(66,106);(173,0);(173,0);(173,0);(173,0);(173,0);(
173,0);(173,0);(173,0);(173,0);(173,0);(186,0);(186,0);(186,0);(186,0);(186,0);(
186,0);(186,0);(186,0);(186,0);(186,0);(186,0);(186,0);(186,0);(186,0);(186,0);(
186,0);(186,0);(186,0);(186,0);(186,13);(186,13);(186,13);(186,13);(186,13);(186
,13);(186,13);(186,13);(186,13);(186,13);(186,13);(186,13);(80,120);(80,120);(80
,120);(80,120);(80,120);(80,120);(66,120);(66,120);(66,120);(66,120);(66,120);(6
6,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(
66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);
(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,120);(66,106)
;(66,106);(66,106);(66,106);(133,146);(0,186);(40,66);(66,106);(66,106);}}
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5824;1;45824;1;45824;24577;32768}}
{\sp{\sn fFillOK}{\sv 1}}
{\sp{\sn fFilled}{\sv 1}}
{\sp{\sn fillColor}{\sv 65793}}
{\sp{\sn fLine}{\sv 0}}{\sp{\sn lineColor}{\sv 0}}
{\sp{\sn lineType}{\sv 0}}
{\sp{\sn fArrowheadsOK}{\sv 0}}
{\sp{\sn fBehindDocument}{\sv 1}}
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\pard\li1000\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1000\ri0\sl-213\slmult0 \fs
18\cf0\par\pard\li1000\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1000\ri0\sl-733\s
lmult0 \fs54\cf0\f0\charscalex100\b {MONEY IN MARKET CLEARING}\b0 \par\pard\li52
13\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li5213\ri0\sl-213\slmult0 \fs18\cf0\par
\pard\li5213\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li5213\ri0\sl-320\slmult0 \fs
28\cf0\f0\charscalex100\b {By}\b0 \par\pard\li3866\ri0\sl-320\slmult0 \fs28\cf0\
f0\charscalex100\b {Mohammad Gani}\b0 \par\pard\li2986\ri0\sl-280\slmult0 \fs24\
cf0\f0\charscalex100\b {Economic Science Institute, Dhaka, Bangladesh.}\b0 \par\
pard\li5240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li5240\ri0\sl-213\slmult0 \fs1
8\cf0\par\pard\li5240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li5240\ri0\sl-293\sl
mult0 \fs18\cf0\f0\charscalex100 {Wheat}\par\pard\sect\sectd\sbknone\cols3\colno
1\colw5000\colsr-0\colno2\colw1853\colsr-0\colno3\colw4586\pard\li3800\ri0\sl-21
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\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li3800\ri0\sl-213\slmult0 \fs18\cf0\par\p
ard\li3800\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li3800\ri0\sl-346\slmult0 \fs18
\cf0\f0\charscalex100 {Boot}\par\column\pard\li240\ri0\sl-213\slmult0 \fs18\cf0\
par\pard\li240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li240\ri0\sl-213\slmult0 \f
s18\cf0\par\pard\li240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li240\ri0\sl-213\sl
mult0 \fs18\cf0\par\pard\li240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li240\ri0\s
l-213\slmult0 \fs18\cf0\par\pard\li240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2
40\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li240\ri0\sl-213\slmult0 \fs18\cf0\par\
pard\li240\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li240\ri0\sl-306\slmult0 \fs18\
cf0\f0\charscalex100 {Table}\par\pard\li0\ri0\sl-213\slmult0 \fs18\cf0\par\pard\
li0\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li0\ri0\sl-280\slmult0 \fs24\cf0\f0\ch
arscalex100\b {Abstract}\b0 \par\column\pard\li0\ri0\sl-213\slmult0 \fs18\cf0\pa
r\pard\li0\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li0\ri0\sl-213\slmult0 \fs18\cf
0\par\pard\li0\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li0\ri0\sl-213\slmult0 \fs1
8\cf0\par\pard\li0\ri0\sl-346\slmult0 \fs18\cf0\f0\charscalex100 {Hat}\par\pard\
sect\sectd\sbknone\pard\li773\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {Mar
ket clearing is the central issue in}\fs20\cf0\f0\charscalex100 { macroeconomics
. Two centuries of debate on Say\uc1\u8217Xs Law indicates that the }\par\pard\l
i773\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {issue is not yet settled. T
his essay pr}\fs20\cf0\f0\charscalex100 {oposes that double coincide}\fs20\cf0\f
0\charscalex100 {nce is a necessary condition }\fs20\cf0\f0\charscalex100 {for m
arket clearing, in }\par\pard\li773\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex10
0 {addition to the equality of demand and supply at equilibrium prices. However,
the literature does not recognize}\par\pard\li773\ri0\sl-240\slmult0 \fs20\cf0\
f0\charscalex100 {necessity of double coincidence. Jevons (1875) gave shape to t
he conventional wisdom on double coincidence. The}\par\pard\li773\ri0\sl-226\slm
ult0 \fs20\cf0\f0\charscalex100 {idea is that it is peculiar to barter, and that
money overcomes}\fs20\cf0\f0\charscalex100 { this inconvenience. This is a fall
acy. It prevents the}\par\pard\li773\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex1
00 {development of a theory of money as a necessary medium of indirect exchange.
It hides the role of money in market}\par\pard\li773\ri0\sl-226\slmult0 \fs20\c
f0\f0\charscalex100 {clearing. By recognizin}\fs20\cf0\f0\charscalex100 {g doub
le coincidence as a necessary condition for }\fs20\cf0\f0\charscalex100 {any tra
de, and the role}\fs20\cf0\f0\charscalex100 { of money in market}\par\pard\li773
\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {clearing, economics can become a
much st}\fs20\cf0\f0\charscalex100 {ronger and practically more useful sc}\fs20
\cf0\f0\charscalex100 {ience. Monetary reform can correct}\par\pard\li773\ri0\s
l-226\slmult0 \fs20\cf0\f0\charscalex100 {the perverse circulation of money and
prevent involuntary unemployment, undue instability, and excess debt.}\par\pard\
li933\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li933\ri0\sl-306\slmult0 \fs22\cf1\f
0\charscalex100 {Keywords: Market clearing, neutrality of money, do}\fs22\cf1\f0
\charscalex100 {uble coincidence, unemployment, instability, debt.}\par\pard\li2

106\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2106\ri0\sl-293\slmult0 \fs22\cf0\f0


\charscalex100\b {JEL Classifications}\b0 \fs22\cf0\f0\charscalex100 {:}{ }\fs22
\cf0\f0\charscalex100\b {B41, C67, C68, D46, D51, D71, D74, E41, E52, J64}\b0 \f
s22\cf0\f0\charscalex100 {,}\par\pard\li1226\ri0\sl-213\slmult0 \fs18\cf0\par\pa
rd\li1226\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1226\ri0\sl-360\slmult0 \fs20\
cf0\f0\charscalex100 {An earlier version was presented at the History of Economi
cs Society Annual Meeting, June 25-28, 2004. }\par\pard\li3933\ri0\sl-226\slmul
t0 \fs20\cf0\f0\charscalex100 {Victoria University, Toronto, Canada.}\par\pard\l
i2266\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {The authors thanks the many
participants}\fs20\cf0\f0\charscalex100 { for useful comments and suggestions.
}\par\pard\li2226\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {Special thanks
are to Geoff Harcourt, Pa}\fs20\cf0\f0\charscalex100 {trick Gunning and Sasan F
ayazmanesh . }\par\pard\li2280\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2280\ri0\
sl-213\slmult0 \fs18\cf0\par\pard\li2280\ri0\sl-213\slmult0 \fs18\cf0\par\pard\l
i2280\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2280\ri0\sl-346\slmult0 \fs20\cf0\
f0\charscalex100 {Please send criticisms, comments, and suggestions to ganiosman
@hotmail.com }\par\pard\sect\sectd\sbknone\pard\sect\sectd\sbkpage\pgwsxn12240\p
ghsxn15840\marglsxn666\margrsxn133\margtsxn666\margbsxn173\pard\li813\ri0\sl-213
\slmult0 \fs18\cf0\par\pard\li813\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li813\ri
0\sl-213\slmult0 \fs18\cf0\par\pard\li813\ri0\sl-546\slmult0 \fs32\cf2\f0\charsc
alex100\b {1}\b0 \fs32\cf2\f0\charscalex100\b {.}\b0 { }\fs32\cf0\f0\charscalex1
00\b {Introduction}\b0 \par\pard\li773\ri0\sl-293\slmult0 \fs24\cf0\f0\charscale
x100 {Market clearing requires that the }\fs24\cf0\f0\charscalex100 {buyer pays
the seller. The pa}\fs24\cf0\f0\charscalex100 {yment must meet two necessary }\
par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {conditions. First,
the value of the payment must be}\fs24\cf0\f0\charscalex100 { equal to the valu
e of the good. This is a more}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\ch
arscalex100 {general condition than the equality}\fs24\cf0\f0\charscalex100 { of
demand and supply at equilibr}\fs24\cf0\f0\charscalex100 {ium prices. It may b
e called}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {equivale
nce. The second condition is that the b}\fs24\cf0\f0\charscalex100 {uyer must de
liver a payment of a definite kind,}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0
\f0\charscalex100 {whether it is a real good or money, which the se}\fs24\cf0\f0
\charscalex100 {ller accepts. It is a necessary condition for any}\par\pard\li77
3\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {trade, direct or indire}\fs24\c
f0\f0\charscalex100 {ct, immediate or intertempor}\fs24\cf0\f0\charscalex100 {al
, regardless of whethe}\fs24\cf0\f0\charscalex100 {r money is used or not.}\par\
pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {This second necessary
condition may be called double coincidence. }\par\pard\li1493\ri0\sl-280\slmult
0 \fs24\cf0\f0\charscalex100 {Sadly, the literature does not recognize the n}\fs
24\cf0\f0\charscalex100 {ecessity of double coincidence. So it fails to}\par\par
d\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {see the role of money as
a device }\fs24\cf0\f0\charscalex100 {to create an artificial double coin}\fs24\
cf0\f0\charscalex100 {cidence to meet this necessity }\par\pard\li773\ri0\sl-280
\slmult0 \fs24\cf0\f0\charscalex100 {and thereby serve as an artificial means of
paym}\fs24\cf0\f0\charscalex100 {ent in market clearing. It is a puzzle why for
mal }\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {models do no
t recognize the role}\fs24\cf0\f0\charscalex100 { of money as a means of paym}\f
s24\cf0\f0\charscalex100 {ent. Serving as a means of}\par\pard\li773\ri0\sl-266\
slmult0 \fs24\cf0\f0\charscalex100 {payment is the essential function }\fs24\cf0
\f0\charscalex100 {of money. It if does not serve as}\fs24\cf0\f0\charscalex100
{ a means of payment, it cannot}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\
charscalex100 {be money. Yet all formal models treat money as }\fs24\cf0\f0\char
scalex100 {either a numeraire (measure of value) or as a}\par\pard\li773\ri0\sl280\slmult0 \fs24\cf0\f0\charscalex100 {bond (store of value), but never purely
as a me}\fs24\cf0\f0\charscalex100 {ans of payment. Why has conventional wisdom}
\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {overlooked the es
sential function of money, and in}\fs24\cf0\f0\charscalex100 {stead has been obs
esse}\fs24\cf0\f0\charscalex100 {d with non-}\fs24\cf0\f0\charscalex100 {essenti
al}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {functions? A r

emark from Bertrand Russell ma}\fs24\cf0\f0\charscalex100 {y shed some light on


this paradox. He said:}\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li
1493\ri0\sl-293\slmult0 \fs20\cf0\f0\charscalex100 {(1): \uc1\u8220X\uc1\u8230X.
...the point of philosophy is to start with something so simple as not to seem w
orth stating, }\par\pard\li1493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {a
nd to end with something so paradoxical that no one will believe it.\uc1\u8221X
Russell (1918), page 53. }\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\par
d\li1493\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {Apparently, the obvious
fact }\fs24\cf0\f0\charscalex100 {that the buyer pays the sell}\fs24\cf0\f0\char
scalex100 {er was deemed \uc1\u8216Xnot worth}\par\pard\li773\ri0\sl-280\slmult0
\fs24\cf0\f0\charscalex100 {stating.\uc1\u8217X The penalty of not stating the
obvious ha}\fs24\cf0\f0\charscalex100 {s been tragic. The expenditure of much en
ergy}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {to build mon
etary theory and macroeconomics did not produce compelling theorems about}\par\p
ard\li773\ri0\sl-266\slmult0 \fs22\cf0\f0\charscalex100 {money, as it was withou
t a proper articulation of }\fs22\cf0\f0\charscalex100 {the role of money in }\f
s22\cf0\f0\charscalex100 {market clearing. The key }\par\pard\li773\ri0\sl-280\s
lmult0 \fs24\cf0\f0\charscalex100 {issues are still being debated, }\fs24\cf0\f0
\charscalex100 {and whether the market (especially for labor) clears is not yet}
\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {known with any co
nfidence. Nor is anybody sure}\fs24\cf0\f0\charscalex100 { if money has effect}\
fs24\cf0\f0\charscalex100 { on output or not.}\par\pard\li1493\ri0\sl-266\slmult
0 \fs24\cf0\f0\charscalex100 {If money is shown formally as a means of pa}\fs24\
cf0\f0\charscalex100 {yment, then the inevitable conclusion is that}\par\pard\li
773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {money is necessary to clear t
he market under indi}\fs24\cf0\f0\charscalex100 {rect exchange. In a formal mode
l with a means }\par\pard\li773\ri0\sl-280\slmult0 \fs22\cf0\f0\charscalex100 {o
f payment, price theory and monetary theory b}\fs22\cf0\f0\charscalex100 {ecome
two inseparable parts of the same theory }\par\pard\li773\ri0\sl-280\slmult0 \fs
24\cf0\f0\charscalex100 {of payment. In that case, macro and microeco}\fs24\cf0\
f0\charscalex100 {nomics become inseparable, and the prevailing}\par\pard\li773\
ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {micro and macroeconomics become o
bsolete One }\fs24\cf0\f0\charscalex100 {surprising conclusion is that the grave
st}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {economic miser
ies of humanity, namely need}\fs24\cf0\f0\charscalex100 {less poverty, undue ins
tabili}\fs24\cf0\f0\charscalex100 {ty, and excess debt}\par\pard\li773\ri0\sl-28
0\slmult0 \fs24\cf0\f0\charscalex100 {arise from a perversion in the circulation
of mo}\fs24\cf0\f0\charscalex100 {ney such that market clearing is impeded. The
se}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {problems can b
e solved by reforming the monetary system.}\par\pard\li1493\ri0\sl-280\slmult0 \
fs24\cf0\f0\charscalex100 {William Jevons (1875) is the best architect of the co
nventional wisdom on double}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\char
scalex100 {coincidence. It is supposed that double coinciden}\fs24\cf0\f0\charsc
alex100 {ce is a peculiar inconvenience of barter, and that}\par\pard\li773\ri0\
sl-266\slmult0 \fs24\cf0\f0\charscalex100 {money overcomes this. These erroneous
Jevonian }\fs24\cf0\f0\charscalex100 {ideas became conventional wisdom and misl
ed}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {the profession
into fundamental e}\fs24\cf0\f0\charscalex100 {rror. The practical consequence
of}\fs24\cf0\f0\charscalex100 { theoretical error has been the}\par\pard\li773\r
i0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {persistence of needless}\fs24\cf0\
f0\charscalex100 { unemployment, unjust transfer of}\fs24\cf0\f0\charscalex100 {
wealth, and undue instability. For}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf
0\f0\charscalex100 {further progress, economic theory must rethink }\fs24\cf0\f0
\charscalex100 {the issue of market cl}\fs24\cf0\f0\charscalex100 {earing and th
e role of}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {money i
n it. Economic policy must then be refo}\fs24\cf0\f0\charscalex100 {rmed to use
the power of money properly for}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\
charscalex100 {growth, stability, and equity. Mone}\fs24\cf0\f0\charscalex100 {t
ary reform can avoid the perv}\fs24\cf0\f0\charscalex100 {ersion in the circulat
ion of}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {money, and

thereby prevent involuntary unempl}\fs24\cf0\f0\charscalex100 {oyment, unjust t


ransfer of wealth, and undue}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\cha
rscalex100 {instability.}\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\
li2493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0
\par\pard\li2493\ri0\sl-333\slmult0 \fs24\cf0\f0\charscalex100 {Mohammad Gani (O
ctober 2004):}\fs24\cf0\f0\charscalex100\i { Money in Market Clearing}\i0 \par\p
ard\li4853\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {Page 1 of 20}\par\pard
\sect\sectd\sbkpage\pgwsxn12240\pghsxn15840\marglsxn666\margrsxn133\margtsxn666\
margbsxn173\pard\li813\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li813\ri0\sl-213\sl
mult0 \fs18\cf0\par\pard\li813\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li813\ri0\s
l-546\slmult0 \fs32\cf2\f0\charscalex100\b {2}\b0 \fs32\cf2\f0\charscalex100\b {
.}\b0 { }\fs32\cf0\f0\charscalex100\b {Jevons on Double Coincidence}\b0 \par\par
d\li773\ri0\sl-293\slmult0 \fs24\cf0\f0\charscalex100 {William Jevons may very w
ell be the archite}\fs24\cf0\f0\charscalex100 {ct of the conventional wisdom on
double}\par\pard\li773\ri0\sl-266\slmult0 \fs22\cf0\f0\charscalex100 {coincidenc
e. Paradoxically, his book \uc1\u8220X}\fs22\cf0\f0\charscalex100\i {Money and t
he Mechanism of Exchange}\i0 \fs22\cf0\f0\charscalex100 {\uc1\u8221X is not much
}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {discussed in the
literature on the history of thoug}\fs24\cf0\f0\charscalex100 {ht, apparently b
ecause of the nature of success. }\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f
0\charscalex100 {According to Russell (1902), the successful }\fs24\cf0\f0\chars
calex100 {teacher makes himself redundant by making his}\par\pard\li773\ri0\sl-2
66\slmult0 \fs24\cf0\f0\charscalex100 {teaching a part of commonsense. Jevonian
ideas have become commonsense.}\par\pard\li1493\ri0\sl-280\slmult0 \fs24\cf0\f0\
charscalex100 {Jevons provides a pretty exhaustive study }\fs24\cf0\f0\charscale
x100 {of money, covering its }\fs24\cf0\f0\charscalex100 {functions, its history
,}\par\pard\li773\ri0\sl-280\slmult0 \fs22\cf0\f0\charscalex100 {and the issues
of currency, coinage, and banking. Th}\fs22\cf0\f0\charscalex100 {e book begins
with barter and lists what are }\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\
charscalex100 {termed inconveniences of barter}\fs24\cf0\f0\charscalex100 {. The
next step shows that th}\fs24\cf0\f0\charscalex100 {e use of money avoids these
}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {inconveniences.
This effectivel}\fs24\cf0\f0\charscalex100 {y stops any further examination of d
ouble coincidence. }\par\pard\li1493\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex
100 {Jevons is an excellent logician and that }\fs24\cf0\f0\charscalex100 {makes
his arguments compelling. Where he falls}\par\pard\li773\ri0\sl-280\slmult0 \fs
24\cf0\f0\charscalex100 {off the track, it is hard for his followers to ge}\fs24
\cf0\f0\charscalex100 {t back on track. Let us see two aspects of his}\par\pard\
li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {analysis of double coincide
nce to see how he went }\fs24\cf0\f0\charscalex100 {off the track. The first is
its inconvenience as}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex1
00 {opposed to its improbability. The second is its }\fs24\cf0\f0\charscalex100
{presumed absence in monetized transaction.}\par\pard\li773\ri0\sl-213\slmult0 \
fs18\cf0\par\pard\li773\ri0\sl-306\slmult0 \fs24\cf0\f0\charscalex100\b {2.1: In
convenience versus improbability of double coincidence}\b0 \par\pard\li1493\ri0\
sl-333\slmult0 \fs24\cf0\f0\charscalex100 {The idea that barter is inconvenient
compar}\fs24\cf0\f0\charscalex100 {ed to money is old. It is found in earlier}\p
ar\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {writings of Adam Sm
ith (1776), J. B. Say (1803)}\fs24\cf0\f0\charscalex100 {, J. S. Mill (1850) and
Amasa Walker (1865). }\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\l
i1493\ri0\sl-293\slmult0 \fs20\cf0\f0\charscalex100 {(2): \uc1\u8220XBut when th
e division of }\fs20\cf0\f0\charscalex100 {labour first began to take place, thi
s power of exchanging must}\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\char
scalex100 {frequently have been very much clogged and embarrassed in its operati
ons. One man, we shall }\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charsca
lex100 {suppose, has more of a certain commodity than }\fs20\cf0\f0\charscalex10
0 {he himself has occasion for, while another has }\par\pard\li1493\ri0\sl-240\s
lmult0 \fs20\cf0\f0\charscalex100 {less. The former consequently would be glad t
o dispose of, and the latter to purchase, a part of this }\par\pard\li1493\ri0\s
l-226\slmult0 \fs20\cf0\f0\charscalex100 {superfluity. But if this latter should

chance to have}\fs20\cf0\f0\charscalex100 { nothing that the former stands in n


eed of, no }\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {exch
ange can be made between them.\uc1\u8221X Smith (1776). Chapter 4, Para 2}\par\
pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-253\slmult0 \fs2
0\cf0\f0\charscalex100 {(3): \uc1\u8220X\uc1\u8230X. What infinite confusion and
difficu}\fs20\cf0\f0\charscalex100 {lty must arise\uc1\u8230X\uc1\u8230X..wer}\
fs20\cf0\f0\charscalex100 {e everyone obliged to }\par\pard\li1493\ri0\sl-226\sl
mult0 \fs20\cf0\f0\charscalex100 {exchange his own products specifically for tho
se he}\fs20\cf0\f0\charscalex100 { may want; and were the whole of this process
}\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {carried on by a
barter in kind. The hungry cutler must offer the baker his knives for bread; }\
par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {perhaps, the bake
r has knives enough, but wants a coat; he is willing to purchase one of the tail
or}\par\pard\li1493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {with his brea
d; the tailor wants not bread, but bu}\fs20\cf0\f0\charscalex100 {tcher\uc1\u821
7Xs meat; and so on to infinity.\uc1\u8221X- J B Say }\par\pard\li1493\ri0\sl-22
6\slmult0 \fs20\cf0\f0\charscalex100 {(1803): Book 1, Chapter 21, Section 1, Par
a 3. }\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-240\s
lmult0 \fs20\cf0\f0\charscalex100 {(4): \uc1\u8220XThe inconveniences of barter
are so gr}\fs20\cf0\f0\charscalex100 {eat, that without some more commodious me
ans of}\par\pard\li1493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {effecting
exchanges, the division of employments could hardly have been carried to any }\
par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {considerable exte
nt.\uc1\u8221X-J S M}\fs20\cf0\f0\charscalex100 {ill (1848): Book 3, Chapter 7,
Section 1, Para 3. }\par\pard\li773\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li773
\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {Jevons makes the statement clear
er than earlie}\fs24\cf0\f0\charscalex100 {r authors to articulat}\fs24\cf0\f0\c
harscalex100 {e double coincidence:}\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf
0\par\pard\li1493\ri0\sl-253\slmult0 \fs20\cf0\f0\charscalex100 {(5): \uc1\u8220
XThe first difficulty in barter is to find }\fs20\cf0\f0\charscalex100 {two pers
ons whose disposable possessions mutually }\par\pard\li1493\ri0\sl-226\slmult0 \
fs20\cf0\f0\charscalex100 {suit each other's wants. There may be many peop}\fs20
\cf0\f0\charscalex100 {le wanting, and many possessing those things }\par\pard\l
i1493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {wanted; but to allow of an
act of barter, there }\fs20\cf0\f0\charscalex100 {must be a double coincidence,
which will rarely }\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex10
0 {happen.\uc1\u8221X -W S Jevons (1875): Chapter I, Para 5. }\par\pard\li1493\r
i0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-253\slmult0 \fs20\cf0\f0\char
scalex100 {(6): \uc1\u8220XWe have seen that three inconveniences att}\fs20\cf0\
f0\charscalex100 {ach to the practice of simple barter, namely, the }\par\pard\l
i1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {improbability, of coinciden
ce between persons wanting and persons possessing; the complexity of}\par\pard\l
i1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {exchanges, which are not ma
de in terms of one single substance; and the need of some means of }\par\pard\li
1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {dividing and distributing va
luable articles. Money remedies these inconveniences, and thereby }\par\pard\li1
493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {performs two distinct functio
ns of high importance, acting as\uc1\u8212X (1) A medium of exchange. (2) A }\pa
r\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {common measure of v
alue.\uc1\u8221X - W S Jevons (1875): Chapter III, Para 1.}\par\pard\li2493\ri0\
sl-213\slmult0 \fs18\cf0\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\l
i2493\ri0\sl-373\slmult0 \fs24\cf0\f0\charscalex100 {Mohammad Gani (October 2004
):}\fs24\cf0\f0\charscalex100\i { Money in Market Clearing}\i0 \par\pard\li4853\
ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {Page 2 of 20}\par\pard\sect\sectd
\sbkpage\pgwsxn12240\pghsxn15840\marglsxn666\margrsxn133\margtsxn666\margbsxn173
\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-213\slmult0 \fs
18\cf0\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-413\s
lmult0 \fs24\cf0\f0\charscalex100 {It is clear to Jevons}\fs24\cf0\f0\charscalex
100 { that there is an \uc1\u8216X}\fs18\cf0\f0\charscalex100\i {improbability o
f double coincidence between persons wanting}\i0 \par\pard\li773\ri0\sl-266\slmu

lt0 \fs16\cf0\f0\charscalex100\i {and persons possessing}\i0 \fs22\cf0\f0\charsc


alex100 {\uc1\u8217X. This apparently is the first inconve}\fs22\cf0\f0\charscal
ex100 {nience of barter. Who knows what might}\par\pard\li773\ri0\sl-280\slmult0
\fs22\cf0\f0\charscalex100 {happen if this short-lived logician lived long en}\
fs22\cf0\f0\charscalex100 {ough to revise his writings}\fs22\cf0\f0\charscalex10
0 {. Improbability is not}\par\pard\li773\ri0\sl-280\slmult0 \fs22\cf0\f0\charsc
alex100 {really inconvenience; but one may fall prey to }\fs22\cf0\f0\charscalex
100 {heritage of using inarticulate words. Jevons}\par\pard\li773\ri0\sl-266\sl
mult0 \fs22\cf0\f0\charscalex100 {knows quite clearly that when barter}\fs22\cf0
\f0\charscalex100 { is possible, which of course occurs rarely, it is gainful an
d}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {not inconvenien
t at all. }\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl
-253\slmult0 \fs20\cf0\f0\charscalex100 {(7): \uc1\u8220XExchange has been calle
d}{ }\fs18\cf0\f0\charscalex100\i {the barter of the superfluous for the necessa
ry,}\i0 \fs20\cf0\f0\charscalex100 { and this definition}\par\pard\li1493\ri0\sl
-226\slmult0 \fs20\cf0\f0\charscalex100 {will be correct if we state it as}{ }\f
s18\cf0\f0\charscalex100\i {the barter of the comparatively }\i0 \fs18\cf0\f0\ch
arscalex100\i {superfluous for the comparatively}\i0 \par\pard\li1493\ri0\sl-226
\slmult0 \fs20\cf0\f0\charscalex100\i {necessary\uc1\u8221X.}\i0 \fs20\cf0\f0\ch
arscalex100 { -W S Jevons (1875): Chapter II, Para 1.}\par\pard\li1493\ri0\sl-21
3\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-293\slmult0 \fs24\cf0\f0\charscalex10
0 {If exchange is the}{ }\fs20\cf0\f0\charscalex100 {\uc1\u8216X}\fs18\cf0\f0\ch
arscalex100\i {the barter of the comparatively super}\i0 \fs18\cf0\f0\charscalex
100\i {fluous for the comp}\i0 \fs18\cf0\f0\charscalex100\i {aratively necessary
}\i0 \fs20\cf0\f0\charscalex100 {\uc1\u8217X,}\fs24\cf0\f0\charscalex100 { then
}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {double coincide
nce must mean that in an excha}\fs24\cf0\f0\charscalex100 {nge, the seller of th
e fi}\fs24\cf0\f0\charscalex100 {rst good regards it as}\par\pard\li773\ri0\sl-2
66\slmult0 \fs24\cf0\f0\charscalex100 {comparatively superfluous, that is, lower
in ut}\fs24\cf0\f0\charscalex100 {ility compared to the payment (second good).
In}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {short, it is g
ainful. Carl Menger holds the same view. }\par\pard\li1493\ri0\sl-213\slmult0 \
fs18\cf0\par\pard\li1493\ri0\sl-306\slmult0 \fs20\cf0\f0\charscalex100 {(8): \uc
1\u8220X\uc1\u8230X.. if command of a certain amount of A's goods were transferr
ed to B and if command of a}\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\cha
rscalex100 {certain amount of B's goods were transferred to A, the needs of both
economizing individuals }\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\chars
calex100 {could be better satisfied than would be the case in the absence of thi
s reciprocal transfer.\uc1\u8221X Menger}\par\pard\li1493\ri0\sl-226\slmult0 \fs
20\cf0\f0\charscalex100 {(1871): Chapter 4, Section I, Para 4 }\par\pard\li1493\
ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-346\slmult0 \fs22\cf0\f0\cha
rscalex100 {The logical question must be asked: If}\fs22\cf0\f0\charscalex100 {
exchange is gainful as it barters \uc1\u8216X}\fs18\cf0\f0\charscalex100\i {the
comparatively }\i0 \par\pard\li773\ri0\sl-266\slmult0 \fs20\cf0\f0\charscalex100
\i {superfluous for the co}\i0 \fs20\cf0\f0\charscalex100\i {mparatively necessa
ry}\i0 \fs24\cf0\f0\charscalex100 {\uc1\u8217X, why is it regarded as inconvenie
nt? We must conclude}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex1
00 {that barter is improbable,}\fs24\cf0\f0\charscalex100 { but not inconvenient
. }\par\pard\li1493\ri0\sl-280\slmult0 \fs22\cf0\f0\charscalex100 {Double coinc
idence in kind is rare, but if it }\fs22\cf0\f0\charscalex100 {occurs, it is con
veniently gainful. The danger }\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\c
harscalex100 {is that one may not see the fundamental distinc}\fs24\cf0\f0\chars
calex100 {tion between barter and }\fs24\cf0\f0\charscalex100 {indirect exchange
in }\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {hence may no
t recognize that under indirect exch}\fs24\cf0\f0\charscalex100 {ange, the absen
ce of double coincidence in kind}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0
\charscalex100 {is compensated by the presence of multiple coinci}\fs24\cf0\f0\c
harscalex100 {dence in kind, and that if multiple coincidence}\par\pard\li773\ri
0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {exists, it is possible to use money
as a de}\fs24\cf0\f0\charscalex100 {vice to create artificia}\fs24\cf0\f0\chars

calex100 {l double coincidence. }\par\pard\li1493\ri0\sl-266\slmult0 \fs24\cf0\


f0\charscalex100 {As we study the literature, it becomes clear that the authors
are confusing commodity }\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charsca
lex100 {money with barter. For example, in the simplest }\fs24\cf0\f0\charscalex
100 {case of indirect exchange, there are three real}\par\pard\li773\ri0\sl-280\
slmult0 \fs24\cf0\f0\charscalex100 {goods. No tow of them have double coincidenc
e and }\fs24\cf0\f0\charscalex100 {yet all three of hem t}\fs24\cf0\f0\charscale
x100 {ogether have triple}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charsc
alex100 {coincidence in the specific sense that each good }\fs24\cf0\f0\charscal
ex100 {has both an offer and an acceptance in its kind.}\par\pard\li773\ri0\sl-2
80\slmult0 \fs24\cf0\f0\charscalex100 {Thus suppose that a farmer first se}\fs24
\cf0\f0\charscalex100 {lls his food against a piece of cl}\fs24\cf0\f0\charscale
x100 {oth, and then sells the cloth to}\par\pard\li773\ri0\sl-280\slmult0 \fs24\
cf0\f0\charscalex100 {buy medicine. It may appear as a two-stage barter, }\fs24\
cf0\f0\charscalex100 {but it is not barter. The }\fs24\cf0\f0\charscalex100 {clo
th here is used as}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100
{commodity money. Money is something which is}\fs24\cf0\f0\charscalex100 { boug
ht without an inte}\fs24\cf0\f0\charscalex100 {ntion to consume and}\par\pard\li
773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {sold without having produced
it. It is bought just}\fs24\cf0\f0\charscalex100 { to serve as an inte}\fs24\cf0
\f0\charscalex100 {rmediate payment. The}\par\pard\li773\ri0\sl-280\slmult0 \fs2
4\cf0\f0\charscalex100 {critical point is that at }\fs24\cf0\f0\charscalex100 {e
ach stage, there must be}\fs24\cf0\f0\charscalex100 { double coincidence. Thus }
\fs24\cf0\f0\charscalex100 {at the first stage, there}\par\pard\li773\ri0\sl-280
\slmult0 \fs24\cf0\f0\charscalex100 {is double coincidence between food and clot
h, }\fs24\cf0\f0\charscalex100 {and at the second stage, there is double}\par\pa
rd\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {coincidence between clot
h and medicine. In a }\fs24\cf0\f0\charscalex100 {more advanced economy with fia
t money, the}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {farm
er sells food for money and then sells }\fs24\cf0\f0\charscalex100 {money for me
dicine, replacing commodity money}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f
0\charscalex100 {(cloth) with fiat money. But it is still the case th}\fs24\cf0\
f0\charscalex100 {at at the first stage, there is double coincidence}\par\pard\l
i773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {between food and money, and
at the second stag}\fs24\cf0\f0\charscalex100 {e, there is double coincidence be
tween money}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {and m
edicine. It is not obvious that the job of m}\fs24\cf0\f0\charscalex100 {oney is
to transfer claims and obligations on real}\par\pard\li773\ri0\sl-280\slmult0 \
fs24\cf0\f0\charscalex100 {goods in an indirect exchange. If the farmer delivers
food to the weaver, he has a claim on the }\par\pard\li773\ri0\sl-280\slmult0 \
fs24\cf0\f0\charscalex100 {output of the weaver, but he wants to transfer this}\
fs24\cf0\f0\charscalex100 { claim to obtain medicine from the aptekar. He }\par\
pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {gives the cloth to the
aptekar to get the medicine}\fs24\cf0\f0\charscalex100 {. Money is necessary to
}\fs24\cf0\f0\charscalex100 {achieve this transfer. }\par\pard\li2493\ri0\sl-2
13\slmult0 \fs18\cf0\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li249
3\ri0\sl-413\slmult0 \fs24\cf0\f0\charscalex100 {Mohammad Gani (October 2004):}\
fs24\cf0\f0\charscalex100\i { Money in Market Clearing}\i0 \par\pard\li4853\ri0\
sl-280\slmult0 \fs24\cf0\f0\charscalex100 {Page 3 of 20}\par\pard\sect\sectd\sbk
page\pgwsxn12240\pghsxn15840\marglsxn666\margrsxn133\margtsxn666\margbsxn173\par
d\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-213\slmult0 \fs18\c
f0\par\pard\li1493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-413\slmul
t0 \fs24\cf0\f0\charscalex100 {In the absence of the distin}\fs24\cf0\f0\charsca
lex100 {ction between direct and indi}\fs24\cf0\f0\charscalex100 {rect exchange,
one confuses }\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {co
mmodity money with barter and reaches the fa}\fs24\cf0\f0\charscalex100 {llaciou
s impression that}\fs24\cf0\f0\charscalex100 { double coincidence is}\par\pard\l
i773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {not necessary when money is
used.}\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {(9): \uc1\
u8220XThe earliest form of exchange must have consisted in giving what was not w

anted directly }\par\pard\li1493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {


for that which was wanted. This simple traffic we call}{ }\fs20\cf0\f0\charscale
x100\i {barter}\i0 \fs20\cf0\f0\charscalex100 { or }\fs20\cf0\f0\charscalex100\i
{truck,}\i0 \fs20\cf0\f0\charscalex100 { the French }\fs20\cf0\f0\charscalex100
\i {troc,}\i0 \fs20\cf0\f0\charscalex100 { and }\par\pard\li1493\ri0\sl-226\slmu
lt0 \fs20\cf0\f0\charscalex100 {distinguish it from sale and purchase in which o
ne }\fs20\cf0\f0\charscalex100 {of the articles exchanged is intended to be held
}\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {only for a sho
rt time, until it is parted with in a second act of exchange. The object which t
hus }\par\pard\li1493\ri0\sl-240\slmult0 \fs20\cf0\f0\charscalex100 {temporarily
intervenes in sale and purchase is money. At first sight it might seem that the
use of }\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {money o
nly doubles the trouble, by making two exchanges necessary where one was suffici
ent; }\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {but a slig
ht analysis of the difficulties inherent in simple barter shows that the balance
of trouble}\par\pard\li1493\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {lies
quite in the opposite direction. \uc1\u8221X \uc1\u8211XW S Jevons (1875): Cha
pter I, Para 4. }\par\pard\li773\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li773\ri0
\sl-293\slmult0 \fs24\cf0\f0\charscalex100 {The use of the term \uc1\u8216Xincon
venience\uc1\u8217X instead of }\fs24\cf0\f0\charscalex100 {\uc1\u8216Ximprobabi
lity\uc1\u8217X makes it hard, and perhaps even }\par\pard\li773\ri0\sl-280\slmu
lt0 \fs24\cf0\f0\charscalex100 {impossible to recognize that double coincidence
}\fs24\cf0\f0\charscalex100 {must be present when money is used, although}\par\p
ard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {this time, it is first
}\fs24\cf0\f0\charscalex100 {between a real good and money, and th}\fs24\cf0\f0\
charscalex100 {en between money and another real}\par\pard\li773\ri0\sl-280\slmu
lt0 \fs24\cf0\f0\charscalex100 {good. We could generalize Jevons by putting the
}\fs24\cf0\f0\charscalex100 {word money and changing \uc1\u8216Xrarely\uc1\u821
7X into}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {\uc1\u821
6Xusually\uc1\u8217X in his passage as follows: (Changes are in}{ }\fs24\cf0\f0\
charscalex100\b {bold}\b0 \fs24\cf0\f0\charscalex100 {)}\par\pard\li1493\ri0\sl213\slmult0 \fs18\cf0\par\pard\li1493\ri0\sl-293\slmult0 \fs20\cf0\f0\charscalex
100 {(5* generalized): There may be many people wanting }\fs20\cf0\f0\charscalex
100\b {money}\b0 \fs20\cf0\f0\charscalex100 {, and many possessing }\fs20\cf0\f0
\charscalex100\b {money}\b0 \fs20\cf0\f0\charscalex100 {; but to }\par\pard\li14
93\ri0\sl-226\slmult0 \fs20\cf0\f0\charscalex100 {allow of an act of barter}{ }\
fs20\cf0\f0\charscalex100\b {between a real good and money}\b0 \fs20\cf0\f0\char
scalex100 {, there must be a double coincidence, }\par\pard\li1493\ri0\sl-226\sl
mult0 \fs20\cf0\f0\charscalex100 {which will}{ }\fs20\cf0\f0\charscalex100\b {us
ually}\b0 \fs20\cf0\f0\charscalex100 { happen.}\par\pard\li773\ri0\sl-213\slmult
0 \fs18\cf0\par\pard\li773\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li773\ri0\sl-32
0\slmult0 \fs24\cf0\f0\charscalex100\b {2.2: Double Coincidence in Monetized Tra
nsactions}\b0 \par\pard\li773\ri0\sl-333\slmult0 \fs24\cf0\f0\charscalex100 {Onc
e one thinks of how money overcomes the al}\fs24\cf0\f0\charscalex100 {leged inc
onvenience of ba}\fs24\cf0\f0\charscalex100 {rter, it requires a}\par\pard\li773
\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {difficult and perhaps impossible
mental gymnastic }\fs24\cf0\f0\charscalex100 {to switch to the idea }\fs24\cf0\
f0\charscalex100 {that double coincidence}\par\pard\li773\ri0\sl-280\slmult0 \fs
24\cf0\f0\charscalex100 {must be present even when money is used. On}\fs24\cf0\f
0\charscalex100 {e apparently feels no n}\fs24\cf0\f0\charscalex100 {eed to show
how money}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {itself
changes hands, presumably because it is o}\fs24\cf0\f0\charscalex100 {bvious. T
he literature is obsessed with the issue}\par\pard\li773\ri0\sl-280\slmult0 \fs2
4\cf0\f0\charscalex100 {of why people will accept (fiat) money, but quite forget
ful of the issue of why they will spend it. }\par\pard\li773\ri0\sl-280\slmult0
\fs24\cf0\f0\charscalex100 {Perhaps it is presumed that people of course }\fs24\
cf0\f0\charscalex100 {do not consume money, but spend it. Indeed, they}\par\pard
\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {take it if and only if the
y believe that they can sp}\fs24\cf0\f0\charscalex100 {end it. But this is incom
patible with the idea of}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charsca

lex100 {money as a store of value, although most formal m}\fs24\cf0\f0\charscale


x100 {odels of money are models}\fs24\cf0\f0\charscalex100 { of a store of value
.}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {The Keynesian r
evolution and the }\fs24\cf0\f0\charscalex100 {rise of macroeconomics would }\fs
24\cf0\f0\charscalex100 {be wholly unnece}\fs24\cf0\f0\charscalex100 {ssary if t
he }\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {issue of spen
ding money (i.e., supply of }\fs24\cf0\f0\charscalex100 {money) was properly for
malized earlier.}\par\pard\li1493\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100
{Having regarded double coincidence as an in}\fs24\cf0\f0\charscalex100 {conveni
ence instead of as a necessity, the}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0
\f0\charscalex100 {train of thought wanders off into an intractable }\fs24\cf0\f
0\charscalex100 {territory because at th}\fs24\cf0\f0\charscalex100 {is point, t
he connection}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {bet
ween money and exchange is forgotten. Even though everybody knows that money cir
culates,}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {somehow
nobody feels a need to cons}\fs24\cf0\f0\charscalex100 {ider the circuit in whic
h it ci}\fs24\cf0\f0\charscalex100 {rculates. The essential function}\par\pard\l
i773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex100 {of money as a medium of exch
ange is dismisse}\fs24\cf0\f0\charscalex100 {d as not worth stating. Th}\fs24\cf
0\f0\charscalex100 {e distraction leads to}\par\pard\li773\ri0\sl-280\slmult0 \f
s24\cf0\f0\charscalex100 {three lines of enquiry, all away }\fs24\cf0\f0\charsca
lex100 {from the essential function of }\fs24\cf0\f0\charscalex100 {money. First
, th}\fs24\cf0\f0\charscalex100 {e issue of how}\par\pard\li773\ri0\sl-266\slmul
t0 \fs24\cf0\f0\charscalex100 {money might have arisen endogenously from an ear}
\fs24\cf0\f0\charscalex100 {lier state of barter }\fs24\cf0\f0\charscalex100 {le
ads to the Austrian}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex10
0 {theory of money. The second issue is the functi}\fs24\cf0\f0\charscalex100 {
on of money as a numeraire or measure of value}\par\pard\li773\ri0\sl-280\slmult
0 \fs24\cf0\f0\charscalex100 {or unit of account, leading to }\fs24\cf0\f0\chars
calex100 {the quantity theory of money, }\fs24\cf0\f0\charscalex100 {monetarism,
and Lucasian super-}\par\pard\li773\ri0\sl-280\slmult0 \fs24\cf0\f0\charscalex1
00 {neutrality of money. The third is }\fs24\cf0\f0\charscalex100 {the issue of
money as a store of }\fs24\cf0\f0\charscalex100 {value, leading to the Keynesian
}\par\pard\li773\ri0\sl-266\slmult0 \fs24\cf0\f0\charscalex100 {theory of money
and }\fs24\cf0\f0\charscalex100 {subsequent developments. These are all }\fs24\
cf0\f0\charscalex100 {off the track digressions that indeed}\par\pard\li773\ri0\
sl-280\slmult0 \fs24\cf0\f0\charscalex100 {contradict the role of money as a mea
ns of pa}\fs24\cf0\f0\charscalex100 {yment. All three issues }\fs24\cf0\f0\chars
calex100 {are still being debated.}\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0
\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2493\ri0\sl-213\slmult0
\fs18\cf0\par\pard\li2493\ri0\sl-213\slmult0 \fs18\cf0\par\pard\li2493\ri0\sl-4
26\slmult0 \fs24\cf0\f0\charscalex100 {Mohammad Gani (October 2004):}\fs24\cf0\f
0\charscalex100\i { Money in Market Clearing}\i0 \par\pard\li4853\ri0\sl-280\slm
ult0 \fs24\cf0\f0\charscalex100 {Page 4 of 20}\par}