Existence and stability of conventions and institutions in a monetary economy

The example of money illustrates that the role of history is crucial in explaining the emergence and persistence of conventions and institutions. This implies that in analyzing money and monetary institutions the usefulness of the general equilibrium analysis and game theory, which both draw upon an instrumental concept of rationality, is limited. In our view a fruitful analysis of conventions and institutions has to take account of the importance of historical contingencies and the fundamental incompleteness of individual knowledge.