A new look at prices and money: The Kelsonian binary model for achieving rapid growth without inflation.

Norman G. Kurland (*)

1. Introduction

What is money? In his 1967 book coauthored with his spouse Patricia Hetter Kelso, Two-Factor Theory: The Economics of Reality, the late Louis O. Kelso described money:

Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector. (1)

What is clear from this description is that money is a "social good," an artifact of civilization invented to facilitate economic transactions for the common good. Like any other human tool or technology, this societal tool can be used justly or unjustly. It can be used by a few who control it to suppress the natural creativity of millions of people, or it can be used to achieve economic liberation and prosperity for all affected by the money economy.

How important is money? Meyer Amschel Rothschild, the founding father of one of the world's most powerful financial dynasties, has been quoted, perhaps apocryphally, as having said:

Let me issue and control a nation's money and I care not who writes the laws. (2)