Medium of Exchange Matters

Abstract

Organized groups face a fundamental problem of how to distribute resources fairly. We found people view it as less fair to distribute resources equally when the allocated resource invokes the market by being a medium of exchange than when the allocated resource is a good that holds value in use. These differences in fairness can be attributed to being a medium of exchange, and not to other essential properties of money (i.e., being a unit of account or a store of value). These findings suggest that egalitarian outcomes have a greater likelihood of being accepted as fair when the resources being distributed take the form of in-kind goods rather than of cash transfers.