Niklas Luhmann characterizes money as a medium of communication within the economic system in his social systems theory. In his framework, money serves several key functions that facilitate the reduction of complexity and the stabilization of economic interactions. Here are the main points of Luhmann's characterization of money:

1. Medium of Communication: Money is seen as a medium that facilitates communication within the economic system. It enables the exchange of goods and services by providing a common reference point for value, thereby simplifying transactions.

2. Reduction of Complexity: By providing a standardized measure of value, money reduces the complexity of economic interactions. It allows for the comparison of disparate goods and services, making trade more efficient and predictable.

3. Symbolically Generalized Medium: Money is a symbolically generalized communication medium, meaning it has a broad and universally accepted meaning within the economic system. This acceptance allows it to function smoothly across different contexts and transactions.

4. Trust and Credit: Money also embodies a form of trust, as its value relies on the collective belief in its stability and acceptability. The use of money presupposes trust in the economic system and its institutions, such as banks and financial markets.

5. Temporal Dimension: Money facilitates the coordination of economic activities over time. It enables saving, investing, and borrowing, which allows for the planning and execution of long-term economic projects.

6. Decoupling of Transactions: Money allows for the decoupling of transactions in time and space. A seller can receive money now and use it later, and a buyer can purchase goods and services without needing to barter directly.

7. Functional Differentiation: In Luhmann's theory, society is composed of various functionally differentiated systems (e.g., the legal system, political system, economic system). Money is crucial for the differentiation of the economic system, as it provides a unique medium for economic communication that is distinct from other forms of communication used in different social systems.

In summary, Luhmann views money as a vital medium of communication that reduces complexity, facilitates trust, and enables the functional differentiation of the economic system. It plays a central role in stabilizing economic interactions and ensuring the smooth operation of the broader social system.