The Rise of Money: An Evolutionary Analysis of the Origins of Money.

This paper shows that if there are more goods than money in all trading periods then non-convertible fiat money is evolutionarily successful in complex economies. This result is developed in Kyotaki and Wright [9] search model of money, using a learning algorithm developed by Marimon et. al [13]. When we include an evolutionary model similar to Kandori, Mailath, and Rob [8] we find that fiat money is frequently evolutionarily successful. To be precise let x be the probability someone finds someone who has a good they want–small x represents a complex economy–and let µ be the fraction of people holding money in any trading period. As long as µ < 1−2x 2−2x fiat money will be evolutionarily successful.