By Jonathan Newman

Proponents of Modern Monetary Theory (MMT) think that money is a “creature of the state.” They say that money is whatever the state says it is, and that this is instituted primarily through taxation. For them, money is “that which [the state] accepts at public pay offices (mainly, in payment of taxes).”

MMTers dispute the Mengerian theory of the origins of money, saying that it “is based on false a-historical premises.” Carl Menger made the commonsense claim that before money, there must have been barter. In barter, people trade goods for direct use—they don’t use any good as a “bridge” or “medium” to get a different good that they actually want. You can imagine that getting what you want from the market could be very difficult. You have to find somebody who has what you want and, simultaneously, who wants what you have. This condition for voluntary exchange is called the “double coincidence of wants,” and it’s a severe constraint for direct exchange markets.

Menger posited that market participants in such a........

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