The Monetary Structure of Economic Activity

47 Pages Posted: 30 Mar 2020 Last revised: 15 May 2020

Date Written: February 10, 2020


The modern approach to the market as a place with autonomy depends on a certain view of money. According to that view, money is a neutral technology that expresses individual choices made about real goods and services. But the controversies over money that regularly arise in political communities reveal that money is far from a transparent medium. It is a legal project that structures economic activity. Money literally makes the market.

The article extracts a definition of money from the most recent controversy over it. That controversy, the debate over safe assets, suggests that moneys overwhelmingly share a particular character: they are made of sovereign debt, short-term IOUs, that are enabled to act as cash by the sovereign who issues them. The article constructs a thought experiment to illuminate exactly why governments would create money according to this pattern. The experiment suggests, first, that governments gain enormous capacity when they convert in-kind obligations due to them into countable units that can be anticipated, spent, and levied. Second, governments benefit even more when they enable those units to circulate, a feat they manage by enforcing transactions in law – making money the default mode of payment for contracts, torts, property, and other transactions. That activity takes public authority into the intricacies of personal exchange, curating it in ways that condition its exercise.

The article explores each of these qualities – the identity of money as sovereign debt and its enhancement as cash – because each of them represents a legal initiative that fundamentally reconfigures a society’s political economy. In that moment, money departs its reputation as a neutral technology and the market loses its claim as the product of private choice. To the contrary, economic exchange depends on a medium made in law and travels within the channels that medium enables through law.

Keywords: money, safe assets, money creation, debt assets, uint of account, monetary theory, fiscal value, cash premium, modernization, private law

JEL Classification: A12, B00, B2, B25, B5, E4, E40, E42, E5, K00, K3, N1, N01, Z1, Z13

Suggested Citation

Desan, Christine A., The Monetary Structure of Economic Activity (February 10, 2020). Harvard Public Law Working Paper No. 20-04, Available at SSRN: or

Christine A. Desan (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

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