The evolution of money as a medium of exchange

This paper uses an evolutionary approach to explain the origin of money as media of exchange in a primitive economy, where agents specialize in production for the purpose of trading for their own consumption goods. A general class of dynamics, which is consistent with Darwinian dynamics, is applied to the selection of strategies. The model produces many of the well-known results regarding the importance of intrinsic value and the proportion of agents specializing in different goods. In addition, the model also shows the importance of initial trading strategies and of the mutations of agents' strategies in selecting equilibria. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classtfication: E00; D83; C73; C62.