Alchian correctly describes money's emergence from barter through market processes, but he's too sanguine about fiat money. Commodity money evolved naturally because gold and silver had desirable monetary properties: durability, divisibility, portability, and scarcity. Government monopolization of money and the shift to fiat currency severed the link between money and market forces. Fiat money isn't an evolution that reduces transaction costs—it's a government takeover that enables inflation and manipulation. Sound money requires a commodity standard, ideally gold, that constrains government's ability to debase the currency.

The evolutionary account of money is correct, but the lesson is that money, like language and law, is a spontaneous order—a human institution that emerged without anyone designing it. The problem with fiat money isn't just inflation risk, but that it's the product of government monopoly rather than competitive evolution. If currencies could compete freely, market forces would select for stable monetary units. Competition in currencies would provide better discipline than political promises of restraint. My proposal for denationalization of money would allow this competitive evolution to resume.

Alchian's functional account of money is useful, but it understates the importance of transaction costs in determining monetary institutions. The shift from commodity to representative to fiat money reflects efforts to reduce the costs of storage, transport, and verification. Paper notes are cheaper to handle than gold coins, and electronic transfers are cheaper still. But these efficiency gains come with agency problems—when money is just bookkeeping entries, who controls the supply? The institutional question is: what mechanisms constrain money issuers from overproduction? Commodity standards provide automatic constraints; fiat money requires political or constitutional restraints.

Alchian's identification of inflation as a monetary phenomenon is correct, but the analysis should emphasize the injustice and economic distortions of inflation more strongly. Inflation is a form of theft—government expands the money supply, spending the new money before prices adjust, effectively confiscating purchasing power from those who receive the new money later. Moreover, inflation doesn't affect all prices equally or simultaneously. The new money enters at specific points, distorting relative prices and misleading entrepreneurs about profitable investments. This is the root of the business cycle—monetary expansion creates unsustainable booms that must end in recession.

The connection between money supply growth and inflation is sound, but Alchian's account could better explain the intertemporal distortions that monetary expansion creates. When central banks expand credit, they lower interest rates artificially, sending false signals about the availability of real savings. Entrepreneurs respond by starting more investment projects, especially long-term capital-intensive projects that appear profitable at the artificially low rates. But these projects can't all be completed—when inflation accelerates and interest rates rise, many investments prove unprofitable and must be abandoned. The result is the boom-bust cycle inherent in monetary manipulation.

Alchian focuses on the aggregate price level, but inflation's effects work through relative price changes and adjustment costs. When money supply expands, different prices adjust at different rates. Wages, contracts, and other sticky prices adjust slowly, while commodity and asset prices adjust quickly. These differential adjustment speeds create real economic disruptions—resources are misallocated toward activities that appear profitable only because some prices have adjusted while others haven't. Transaction costs of renegotiating contracts, changing prices, and updating expectations are real costs of inflation that Alchian's aggregate analysis obscures.