So, What is Money? Part 2

It might be possible to imagine a cashless society, but not a moneyless society. People will always fabricate some kind of money in order to help them facilitate trading the things they have for the things they want. What’s your preference to use as money?

Historically metal has been used most. It is a whole lot easier to make change with pieces of metal than with raw eggs. Economist Adam Smith said in the mid 1700s: 

    Metals cannot only be kept with as little loss as any other commodity, scarce anything be less perishable than they are, but they can likewise without any loss, be divided into any number of parts,  as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation.

It became inconvenient over the centuries, however, to stand in line at the marketplace and pull out your bar of gold and whack off an amount for your purchase and weigh it with accuracy. So, the usage of coins became more convenient. Minted coins were easily identifiable and had their weight and purity stamped on them.

It was also common for the coins to bear the image and guarantee of some governmental leader. Sooner or later the governments have always taken over the sovereign control of the minting of coins. Even in the US, under the Mint Act of 1792, the debasement of coins by an individual was made illegal and a crime punishable by death. The government likes to have control of the monetary system. Down through history, however, sovereign governments have repeatedly abused their rights of minting coins.

Would some people accept commodities to be used as money? Yes. Would most people accept precious metals to be used as money? Yes.

But why would any reasonable person accept a small printed piece of paper as money?

(Research ideas from Dr. Jackson’s new writing project on Cultural Economics)