Title: Adam Smith's money problem

Authors: Reynold F. Nesiba

Addresses: Department of Economics, Augustana University, 2001 S Summit Avenue, Sioux Falls, SD 57197, USA

Abstract: In his Debt the First 5000 Years, anthropologist David Graeber (2011) argued that in the Wealth of Nations, Smith asserts that money spontaneously arose as a medium of exchange to overcome the double-coincidence-of-wants under an imagined system of barter. The result is that Smith's view of barter and money obscures our understanding of the role of money in economic history and in economic theory. In contrast, in his 1998 book, Understanding Modern Money, L. Randall Wray asserts that Smith saw the fundamentals of the Chartalist taxes-drive-money approach. More specifically, Smith is among the first to see that a government's requirement that tax payments be made in paper money can lift the value of that money above its par price with specie. In contrast with Graeber, Wray sees Smith as enhancing our understanding of economic history and theory. Unlike the famous 'Adam Smith Problem' that exists primarily between his emphasis on the essentiality of sympathy for others in The Theory of Moral Sentiments (1759) and the pursuit of self-interest that animates The Wealth of Nations (1776), 'Adam Smith's Money Problem' exists within the pages of The Wealth of Nations itself. This paper discusses these different views with a hope to resolve the competing tensions.

Keywords: Adam Smith; barter; modern monetary theory; MMT; chartalism; money; taxes-drive-money; David Graeber; L. Randall Wray.

DOI: 10.1504/IJPEE.2024.144137

International Journal of Pluralism and Economics Education, 2024 Vol.15 No.2, pp.95 - 103

Received: 13 Jul 2023
Accepted: 19 Jan 2024
Published online: 28 Jan 2025 *

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