Why is there Money?

Walrasian General Equilibrium Foundations of Monetary Theory

Ross M. Starr, University of California, San Diego, US

The microeconomic foundation of the theory of money has long represented a puzzle to economic theory. Why is there Money? derives the foundations of monetary theory from advanced price theory in a mathematically precise family of trading post models.

‘Starr’s brilliant little volume is the latest of a long line of attempts to integrate money and price (general equilibrium) theory. Within 160 pages and 14 dense chapters, the author synthesizes forty years of careful and painstaking research. He sets them against the background not only of the tradition inaugurated by Walras and carried on by Pareto, Hicks, Patinkin, Samuelson, Clower, Hahn, Kyotaki and Wright (to name but a few) but also of the no-less famous conflict between trust and authority at the origin of money (Frankel, 1977). Hence, and before discussing Starr’s trading post model, it seems not out of place to recall briefly the analytical history of these two central riddles in monetary theory.’
– Œconomia – History/Methodology/Philosophy

‘This book makes compelling reading for anyone interested in exploring the foundations of monetary theory from a rigorous general equilibrium perspective.’
– Gabriele Camera, Purdue University, US

‘Introducing the Arrow-Debreu-Starr model of monetary general equilibrium, Professor Starr provides the best defense ever made for the relevance of the Walrasian model to the pure theory of money. While most monetary theorists ventured to the overlapping generations model and then to the search model, only to create recently a hybrid search-Walrasian model, Starr presents the culmination of a patient, career-long effort to integrate money into the basic Walrasian model, with realistic taxation critically helping the government’s money to dominate.’
– Dror Goldberg, Bar Ilan University, Israel