Wealth and Money

Generally people think money to be wealth. A man having huge amount of money is ordinarily considered as a wealthy man in the society. But in economics, it is not so.

Wealth as already discussed should have four characteristics, i.e. utility, scarcity, transferability and external possession of man. Money is limited in supply. So it satisfies the attribute of scarcity. It is an ‘external possession’ of man and is ‘transferable’. But money does not possess an important attribute of wealth, i.e. utility. It may have value-in-exchange but no value-in-use (utility). But we can get the metal in it when we melt the coin. Once we melt the coin, it is no longer money. It is a different commodity now.

The above argument is fully applicable to paper money. In case of metallic money, the metal content of coins has value-in-use (utility). But we can get the metal in it when we melt the coin, it is no longer money, it is a different commodity now. The above argument is fully applicable to paper money. It is a different commodity now.

Bank money is the expression of debts of the banks to individuals. As already discussed all debts must be excluded in calculating wealth of the country. Moreover they have no value-in-use as in case other kinds of money.

From above discussion, it is clear that money constitutes a claim on wealth or title to wealth but it is not wealth itself. A hundred rupee note is not wealth; it is title to wealth.