Money is memory

This paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible (following Myerson [8], the standard definition of feasibility is adapted to take account of the lack of commitment). The environments feature either memory or money. Memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past. Money is defined as an object that does not enter utility or production functions, and is available in fixed supply. The main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory. Depending on the environment, the converse may or may not be true. Hence, from a technological point of view, money is equivalent to a primitive form of memory. (C) 1998 Academic Press.