Sea shells, jewels, cigarettes, salt, and various other commodities have been used historically as money. The moneys of preference in advanced economies, however, have been gold and silver (primarily the former), which satisfy the above-listed requirements most effectively.

The money price of a good is determined in the same basic manner as its price in terms of any other good. The money price of a cow, for instance, is determined by the supply and demand schedules for cows versus money, which can in turn be traced to the marginal utility rankings that individuals assign to cows and to money. The marginal utility attached to money, however, derives from its expected usefulness in future exchanges—and is therefore dependent on money prices. On the surface, the value of money thus seems to present a chicken-and-egg problem.

The Austrian regression theorem solves this problem, by observing that a transition period is required for the market to determine money prices (). If we call this transition period a "day," then the rankings of money units on today's value scales are determined, not by today's prices, but by those of yesterday. Consequently we no longer have a problem of circularity.

^Previous