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Friday, January 2, 2015

Money

What is money? The standard answer is currency. An economist might respond that it's a medium of exchange, or a unit of value, or some other use. Money most simply is, in fact, a medium of exchange. What does that mean?

Money can be thought of as a commodity like any other, like corn or gold. The primary difference between money and any other good is what people want money for. In most cases, if somebody wants to buy a bushel of corn, they probably want the corn itself. However, money is a commodity desired for its ability to attain other goods. Simply put, money is a good people trade to get other goods.

Money is distinct from any other good in a barter economy insofar that many people want it, making trades easier and more frequent. Without money, modern civilization and a modern economy simply would not exist.

[This was heavily inspired by What Has Government Done to Our Money by Murray Rothbard and On the Origin of Money by Carl Menger.]

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