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I'll try to keep this short. Money is simply a medium of exchange between two parties. This can take the form of paper, precious metals, cigarettes, animals, et
by atom-morgan 13y ago
I'll try to keep this short. Money is simply a medium of exchange between two parties. This can take the form of paper, precious metals, cigarettes, animals, etc.
Money arises in a society to avoid the problem known as the "double coincidence of wants”. In other words, it's much easier to trade something like gold as a medium instead of hoping that someone will be willing to exchange their chicken, or even half of one, for my butter. They must want my butter and I must want their chicken. Something like gold is more scarce, portable, durable, and divisible along with many other factors.
I use gold simply because it has a long history as money, but it could be anything. It’s determined by the market. The more desirable something is by the market as a whole, or the more commonly it is used by market participants as a medium of exchange because they know others will accept it, will determine how well it will function as money. Multiple currencies could be used within a market at the same time as well.
Feel free to ask follow-up questions. I love this topic :)
- JoeAltmaier 13y agoDoesn't money have to be symbolic? OR its barter which doesn't use money. Blur these two and the word quits having much meaning.
- atom-morgan 13y agoI don't understand what you're trying to say.
- roymurdock 13y agoI think he/she trying to say that money must be symbolic, intrinsically worthless, or else you are essentially exchanging two goods i.e. barter. When you consider cattle as money this argument is somewhat valid but when you look at our current system of paper and electronic money, it's pretty clear that the cost of paper and ink is negligible. My question to you is the following: There are many intrinsic properties of a money (portability, divisibility, etc.) and there is one important extrinsic property of money: acceptability. Why/how does one form of money become more acceptable than another?
- atom-morgan 13y agoIt's determined by the market. Popularity and the network of people you interact with. Why is Facebook more popular than Orkut?