Origin of money.
These difficulties are met by the use of money. Some kind of good in
general use comes to be accepted as a medium of trade. Money is simply
one kind of wealth which is taken, not for itself, but to pass along.
Each person takes it in the belief that it will enable him to distribute
his purchasing power in a more effective way. Money was not an
invention, as are some mechanical devices, suddenly hit upon, but it was
invented in the sense that the use as money of this or that object grew
into a social custom as its convenience was tested by practice. Money
is used in some degree everywhere except in the most primitive tribes.
Historically viewed, the money first used in any community seems in
every case to have been an object capable of giving immediate enjoyment
to its possessor: salt, furs, rare feathers, bronze for weapons, silver
and gold for ornaments, etc. This valuable good then gradually comes to
be used as money, adding to its value-in-use this quality of
value-in-exchange.
The use of money and money-prices.
A money-economy is a social organization, or an economic community,
where money is generally used as the means of payment, in contrast with a
barter-economy where trade is carried on without the use of money. In
either case it is a matter of degree, and actually both methods are
found in use in any modern community in varying proportions. The
numerous problems arising with the use of money in a money-economy make
up an important sub-division of economics, which must in the main be
reserved for later study. Our present purpose, however, is merely to get
in mind a few fundamental ideas regarding the use of money as a
standard of current prices.
Goods had value long before such a thing as
money was known in the world. All the essential features of the
valuation process are possible without reference to money. But the great
bulk of the trade of the world is effected through the instrumentality
of money (and credit), and prices are nearly always quoted in money
terms. So, altho there may be valuation and even a certain amount of
trade (and therefore prices) without the use of money, it is natural for
us to look for concrete illustrations of trade and of price to the
money transactions which are taking place around us all the time—the
familiar purchase of a good for money. Moreover, while the explanation
of the more complicated problem of market prices without reference to
money is quite possible, it is simplified by having these prices
expressed in money terms.
Money and evaluation
Why a process of delicate price fixing
can not go on in a state of true barter. The lack of correspondence
between the amounts of the two goods, makes very exact estimates of the
value of goods in barter difficult and often impossible. Therefore, in
the earlier stages of society, no careful estimate of value is made by
the individual. Children do not make it. The typical trade of the small
boy is a “trade even”; Johnny exchanges his gingerbread for Jimmie’s
jack-knife. It marks an epoch in the industrial development of the boy
when he begins to keep store with pins, and no longer trades candy for
apples, but both for pins, which have become the means of trade in his
boy world. He then can express values in much more exact terms. In our
society most children begin early to grow familiar with this conception
of some thing used as a means of trading other goods; but travelers find
some savage tribes still in the earlier childish stage of development,
unable to grasp the thought, or understand the use, of money. When
through lack of money there is a failure to adjust valuation, there is a
loss of the possible advantage in each trade. There is a further waste
of time and of effort to find something that will be accepted in barter,
and the loss offsets a large part of the gain even when the barter is
effected.
Richard E. Lucas
09157274597
/ 09222084500
669 Alden Bldg. Unit 3 2nd
floor
Rizal Extension, Brgy
Cut-Cut
Angeles City, Pampanga
Philippines
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