| The makers of the board game Monopoly print about 50 billion dollars' worth of Monopoly money every year—coincidentally about the same as the amount of new U.S. currency issued in 2002. Every game has bills totaling 15,140 Monopoly dollars. At a cost of about 13 U.S. dollars per set, this "money" would be a good deal if you could buy things other than Boardwalk and Park Place with it. Unfortunately, attempts to pay for groceries, books, or rent with this particular form of money have been unsuccessful. And that's probably a good thing. Since the mid-1930s, Parker Brothers has sold over 200 million Monopoly games, containing more than 3 trillion Monopoly dollars.1 When we pay for our purchases in the real world, we have lots of choices: crisp new $20 bills, credit cards, debit cards, checks, or more complicated electronic methods. Regardless of the choice we make, we are using money to buy our food and clothes and pay our bills. To make sure we can do it, thousands of people work through every night, for the payments system really never sleeps. The middle of the night is the busiest time for check-clearing operations. Trucks make pickups and deliveries, and a fleet of leased airplanes flies sacks of paper checks around the country. And the volumes are astounding. The Federal Reserve reports that in 2000 there were 103 billion non-cash payments made in the U.S., 65 percent of which were paper checks. That means something like 250 million paper checks and 150 million electronic payments were processed on an average business day. From the time you put a signed check into an envelope until it returns to you with your bank statement, that small piece of paper travels a long way. If you choose another way to pay, the path of that payment is just as complicated. |
To understand why money is so important to the smooth functioning of the economy and how it improves everyone's well-being, we need to understand exactly what money is. Just why is a $20 bill issued by the U.S. government much more useful than $20 in Monopoly money? Furthermore, to quantify the impact of money on the economy, we need to be able to measure it. Those are the goals of this chapter: to understand what money is, how we use it, and how we measure it.
1For more fun facts about Monopoly, see http://www.monopoly.com.