The Fourth Function of Money

Stephen Yearwood
2 min readJun 29, 2021

rationing goods and services

Photo by Jason Leung on Unsplash

According to every economics textbook, money has three functions: it is a medium of exchange; it is a unit of account; and it is a store of value. In today’s existing economy, it is also the way goods and services get rationed.

That was not always the case. Before industrialization, relatively few people worked for wages or a salary. Historically, most people worked in agriculture, to include slaves and serfs. Farmers who were neither sought to be as self-sufficient as possible. Most of the few artisans were singularly self-employed, without any employees. There was much less exchange, and much of it that did take place took the form of barter.

Now, almost no one is self-sufficient: almost everyone depends on exchange for even the most basic needs, much less other wants. Almost every exchange that takes place in the economy involves money. The vast majority of people depend on wages or a salary as source of money during our working lifetimes.

So one of the functions of money has become the rationing of goods and services. That adds an element of moral considerations to the distribution of money, in the form of wages and salaries in particular, that did not exist prior to industrialization.

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Stephen Yearwood

unaffiliated, non-ideological, unpaid: M.A. in political economy (where philosophy and economics intersect) with a focus in money/distributive justice