It is well known that a competitive equilibrium may fail to exist when preferences are possibly satiated. We show that this non-existence problem does not arise if one of the commodities is paper money. Moreover, and equilibrium is weakly Pareto efficient in the economy with money. This paper therefore gives an economic solution to the classical problem of non-existence of competitive equilibri...

We construct a model where capital competes with fiat money as a medium of exchange, and we establish conditions on fundamentals under which fiat money can be both valued and socially beneficial. When the socially efficient stock of capital is too low to provide the liquidity agents need, they overaccumulate productive assets to use as media of exchange. When this is the case, there exists a mo...

We consider the problem of including the costs and value of the institutions that define money and support trade, within the framework of economic optimization.We comparemonetary systemsmediated by durable commodity monies, versus pure fiat monies, in order to understand the separation and eventual independence of the institutionally-created value ofmoney from the values of underlying traded go...

In this article, profit is considered from the point of view power theory exchange and money. This allows solving several problems at micro- macroeconomic levels. At microeconomic level, both classics neoclassic have difficulty explaining production trade profits. Considering these phenomena position money, to give simple exhaustive explanations, which are based on idea that profits due an incr...

Commodity money arises endogenously in a general equilibrium model with separate budget constraints for each transaction. Transaction costs imply differing bid and ask (selling and buying) prices. The most liquid good—with the smallest proportionate bid/ask spread—becomes commodity money. General equilibrium may not be Pareto efficient. If zero-transaction-cost money is available then the equil...

We construct a search-theoretic model where fiat money coexists with real assets, and all assets can be used as a media of exchange. The terms of trade in bilateral matches are determined by a pairwise Pareto-efficient pricing mechanism. We do not have to appeal to exogenous liquidity constraints to generate asset prices that are consistent with the following facts: (i) fiat money can be valued...