Making Money: Coin, Currency and the Coming of Capitalism. By Christine Desan. Oxford University Press; 496 pages; $85 and £50.

MONEY may feel as solid as the Bank of England, but it is an ever-shifting phenomenon. People have gone from using gold or silver coins through paper notes and plastic cards to the modern practice of “quantitative easing” (QE).

To some on the Republican right in America, this evolution is a rake’s progress, in which QE is a debasement of the currency leading to hyperinflation and economic ruin. They want a return to the gold standard, whereby the amount of money would be linked to a country’s gold reserves. Politicians (and central bankers) would be unable to tamper with it.

But in a new book, “Making Money”, Christine Desan, a Harvard law professor, challenges the view of money’s history as a fall from grace. She is part of the “cartalist” school which argues that money did not develop spontaneously from below, but was imposed from above by the state or ruler. A sovereign might offer tokens as payments for goods and services, and agree to accept those tokens back to meet taxes or debts. In effect a guarantee from the state, this made such tokens useful for private trade. And governments were able to charge for the service of turning gold and (more usually) silver bullion into coin.

Despite this incentive for the creation of money, the standard medieval complaint was that there was not enough money to go round. The currency was too valuable for everyday trade; back in 13th-century England, one farthing, or a quarter-penny, bought four cups of ale (those were the days). The daily wage was a penny or two.

Modern economists tend to think of money as a nominal, not a real, issue; expanding the money supply may raise prices but not affect the volume of goods and services being traded. But Ms Desan argues that, in medieval times, this was not the case. The lack of coins made it difficult to trade. Coin shortages encouraged the use of money from abroad, the author argues. In addition, the coinage was debased by the medieval practice of “clipping” of coins, or shaving off the edges to save the silver. All this led to the frequent need to reclassify or redenominate the coinage. Sometimes it was the monarchs who were pulling off this trick as a way of boosting their own finances. At other times redenomination also helped to boost activity; an early version of QE.

Nevertheless, every change prompted howls of complaint from the losing parties. Redenominations also led to tricky legal disputes. When repaying a debt, was the borrower obliged to repay a set number of coins? When creditors tried to argue that it should instead be a set amount of silver, the privy council of James I declared that “the king by his prerogative may make money of what matter and form he pleaseth, and establish the standard of it.”

This attitude underwent a reversal after the Glorious Revolution, which brought William III to power in 1689 with the help of Whig financiers who set up the Bank of England. The king’s creditors naturally had an interest in sound money, and Britain adopted the gold standard, which was to last, in peacetime at least, for much of the next two centuries. Over the long run, prices were remarkably stable during this period; over the short run, however, the discipline required by this standard required some short, sharp slumps which imposed considerable pain on the working classes. The advent of universal suffrage after the first world war made it impossible for democratically elected governments to impose such costs on their voters; commodity money disappeared and “fiat” money (ie, money that is what the government declares it to be) became the norm.

In essence, history has seen a battle between money’s role as a store of value (which requires a restricted supply) and its role as a means of exchange (which can require the creation of more money). This battle is still going on. Ms Desan displays exemplary scholarship in detailing money’s origins, albeit in an academic style that is hard work for the general reader. But her study is worth the effort.