Adam Smith devotes a chapter of his book to the origin and use of money. Barter soon gave way to money as, ‘Metals can not only be kept with as little loss as any other commodity, scarce anything less perishable, but they can likewise, without any loss, be divided into any number of parts’.
DEFINING IDEA…
All government, indeed every human benefit and enjoyment, every virtue, and every prudent act, is founded on compromise and barter.
~ EDMUND BURKE, POLITICAL THEORIST AND PHILOSOPHER
Economies are developed when people exchange, ‘the surplus part of their own labour for such parts of the produce of other men’s labour’. Smith talks of how that exchange took place. Initially, ‘cattle were the common instrument of commerce; though they must have been a most inconvenient one’. Certainly, if you were to hand over a cow at your local supermarket, the cashier might be a little perturbed. It’s also rather messy to halve a cow and they don’t readily fit into one’s pocket!
Over the years, many commodities have been used as a means of exchange, including salt, sugar, tobacco and even dried cod. Smith tells of, ‘A village in Scotland where it is not uncommon for a workman to carry nails instead of money to the baker’s shop or the alehouse.’ Good news for the nail maker on page 3, I suppose!
All of these commodities had their challenges and money emerged as the smart alternative, but even that caused problems. First, there was the issue of weighing the gold and silver. A small variation could make a big difference to the value. The second problem was forgery. Covering heavy metals with gold or slicing little bits off each coin before passing it on were common practices. The little shavings would then be melted down to create new coins. It was this action that led to the serrated edge we see on coins today as it eliminated any tampering. ‘Hence the origin of coined money, and those public offices called mints… to ascertain, by means of a public stamp, the quality and uniform goodness.’
Today, the value of money is built on trust rather than any real intrinsic value of the money itself, although in 2006 the price of copper topped $9000 a tonne, which led to fears that people would start to melt down their copper coins as pre-1992 coppers were then worth twice their face value. Considering the Royal Mint estimates that 6.5 billion coppers are missing from circulation in the UK, that’s a tidy little profit. Whether you might be bothered to retrieve the estimated £26 million lying in the street, £11 million languishing at the bottom of handbags, £7.8 million stuffed in car ashtrays and glove compartments, and £5.9 million down the back of sofas is quite another matter! According to the Royal Mint, the lost pennies weigh 22,000 tonnes - the same as a decent sized Royal Navy battleship!
HERE’S AN IDEA FOR YOU…
In truth, money is only useful because it allows you to buy things. There’s nothing to stop you swapping your goods and services for others that you need from other businesses. Check out Bartercard (www.bartercard.com), which allows you to trade with 55,000 businesses in twelve countries using your own goods and services instead of cash. It’s a smart way to get what you need without spending money!