A Theory of Money, Prices, and the Rate of Interest, Part II. Fiat Money and Noncooperative Equilibrium in a Closed Economy.

by Martin Shubik

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback66 pages $25.00 $20.00 20% Web Discount

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.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

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.