Outline of an approach to a theory of fiat money that investigates the properties of a noncooperative trading game embedded in a closed economic system. A simple model is constructed to illustrate the use of fiat money in an economy with no uncertainty, no borrowing, and positions of complete information. It is shown that inflation and deflation are not symmetric, and that there do exist noncooperative games which contain among their limit equilibrium points the competitive equilibria of associated nonmonetary markets. It is also shown that a noncooperative game involving borrowing cannot be defined without specifying "rules of borrowing," or a bankruptcy law. (See also P-4686.) 66 pp. Ref.
This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.