Why do we use different money in different time periods:
(1) cheaper to use new money
(2) more profitable for producers to produce new money
use vs exchange value
certain commodity becomes more attractive when it is used as money
The value of commodity in exchange would exchange the value in use when this commodity has some other uses.
Questions:
(1) When will other commodities come up to be a kind of exchange?
(2) What will the old commodity's value change in the competition?
Technology will shift supply curve of money out and drive down the value of money
What are the justifications of government to step in the production of money:
(1) Natural monopoly: huge fixed cost of making money
Second thought: It doesn't seem to stand. It is cheap to starting printing money, but no one would accept that. Huge fixed cost lies in gaining people's trust to use it as a means of exchange, not in producing money itself.
(2) Externalities problem: some people may free ride one producer's high quality money; if we have different kinds of money, how could anybody know the standard of unit?
Second thought: government should possibly be the ruler rather than be the producer. Standardization do incur benefit to people, but this could be internalized by the market, for example the first guy who invents the stuff.
(3) Information problem: some people say that if there are many kinds of money floating around, then people are confused.
Second thought: we can produce brocheure showing the denomination of currencies.
(4) The reason why government steps in money production: seiniorage and debasement
It is mysterious why few textbooks refer to seiniorage and debasement
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