Two Sides of the Same Coin: the Ontology of Money in the Political Economies of David Hume and Adam Smith

Abstract

This paper analyses how the so-called metallist theory of money gave way to functionalism in early modernity. Theoretical metallism held that something, in order to perform the role of money, must bear some intrinsic value. Functionalism, on the contrary, endorsed a social ontology of money claiming that anything could perform that role as long as it was accepted as a means of payment. The paper argues that the early modern discovery of the so-called quantity theory of money played a key role in this transition, since this was the idea to question the inherent valueproofness of commodity money for the first time in history. According to our claim, commodity money was gradually replaced by fiat currencies after the former was no longer was regarded as more valueproof than the latter, and this theoretical struggle is clearly documented by Hume’s and Smith’s respective remarks on the subject.