A few years ago we sat down with Neil Wallace and had two lengthy, free-ranging conversations about his career and, generally speaking, his views on economics. What follows is a distillation of these conversations.

We present a model of a dynamic and complex economy in which the creation and the destruction of money result from interactions between multiple and heterogeneous agents. In the baseline scenario, we observe the stabilization of the income distribution between wages and profits. We then alter the model by increasing the flexibility of wages. This change leads to the formation of a deflationary spiral. Aggregate activity decreases and unemployment increases. The macroeconomic stability of the model is affected and eventually a systemic crisis arises. Finally, we show that the introduction of a minimum wage would have made it possible to boost the aggregate demand and to avoid this crisis.

I examine the robustness of monetary equilibriain a random-matching model, where a more efficient mechanismfor trade is available. Agents choose between two tradingsectors: the search and the intermediated sector. In theformer, trade partners arrive randomly and there is atrading externality. In the latter, a costly matchingtechnology provides deterministic double-coincidencematches. Multiple equilibria exist with the extent of costlymatching endogenously determined. Money and “mediated” trademay coexist. This depends on the size of the probability ofa trade, relative to the cost of deterministic matching.This outcome is inferior for an increasing-returnsexternality. Under certain conditions, regimes with onlycostly matching are welfare superior to monetary regimeswith random matching.