From Goods to Money

The media of payment evolve in time from goods to reference goods to what is generically called money. At this stage, we may call money any media of payment that are not directly products, the goods or reference goods that bear the direct real value. The reason for the evolution is that what we call money – suppose it’s coins – has the following additional qualities:

Ø  Medium of Exchange

Money is a better medium of exchange than goods: A has a fish and wants two eggs, B has two eggs but does not want any fishes; A has to find a C who wants the fish in exchange for something that B will accept in exchange for the eggs. Complicated, isn’t it? Better sketch it out. And that’s but the simpler case. Instead, anyone will accept money in exchange.

Ø  Unit of Account

When it comes to measuring, group cooperation has a requisite: the unit of measure, so that what A meant yesterday over here and what B will mean tomorrow over there are easily comparable; just as language, this uniformity is an agreement, and as such it is the basis on which it becomes possible to cooperate. It’s far more practical when all fishes, eggs, houses, cows, sheep, and wheat can all be compared through the same unit of measure.

Ø  Divisible

While a cow or a house can hardly be partitioned, money can have any number of suitable multiples and submultiples.