Austrian School Arguments on the Free-Market Origin of Money

The Austrian School of Economics offers an innovative and vital perspective on how money came to be, a perspective that firmly establishes money as a free market creation and validates the efficacy of market exchange.

According to Carl Menger, the 19^th-century founder of the Austrian School, money could not have originated as the invention and imposition of a wise ruler or government. Several difficulties and outright absurdities are inherent in such a scenario:

1) No historical record of any state-imposed origin of money anywhere in the world can be found. Surely, such a critical development-if it had originated in a state edict-would have attracted the attention of contemporaries who would have permanently commemorated it in a multitude of ways.

2) The state theory of the origin of money assumes that a single person or committee-having never been introduced to the concept of a universal medium of exchange that is seldom or never used for direct consumption-invented such a concept. This would require an almost superhuman degree of creativity, seeing as the king or committee would need to have originated the idea of money in an experiential vacuum.