The income theory of money was conceived in the 19th century, and in the
first half of the 20th century it formed the backbone of all the main monetary approaches of the time. Yet, since it did so mostly implicitly rather than explicitly, and since the
later developments moved economic theory in a different direction, the income theory
of money is hardly remembered at present. While mainly accounting for the origins of
the approach, I am also offering a brief comparison with the present mainstream economics and I shortly address the question of the possible future of the theory too. The
income theory of money explains how nominal prices are formed by interaction of nominal expenditures streams with real streams of goods sold. While various ideas leading
to this theory were expressed already by John Law, Richard Cantillon, and JeanBaptiste Say, it is perhaps only Thomas Tooke whom we might want to call the originator of the theory. Within the Classical School of Political Economy, Tooke's ideas were
further elaborated by John Stuart Mill. The theory reached a momentous formulation in
the works of Knut Wicksell, in many respects a similar exposition was delivered also by
Friedrich Wieser. The recognition of the theory was impaired by a change of the mainstream paradigm as well as by a surge in emphasis laid on the quantitative modelling in
economics. Yet, there are certain fundamental questions of the monetary theory which
the general equilibrium style models cannot cope with, while the income theory of money can, at least to a certain degree. This might give the theory some hope for the future.