Money

To better understand the possibilities and limitations of barter, imagine that you own an apple orchard on a hill and that the fruits grow there are the juiciest and sweetest in the entire region. You work hard there, and your shoes are torn to shreds during the season. You harness a donkey to a cart and drive to the nearest town by the river: a neighbor told you that a shoemaker lives on the southern edge of the market square, who sewed him strong shoes that have been in use for the fifth year. You find a shoemaker's workshop and offer him apples in exchange for shoes.

The shoemaker is at a loss. How many apples should I ask for in payment for the shoes? Dozens of customers come to him every day, some with a bag of apples, some with wheat, some leading a goat or carrying cloth, and even the same goods have different quality. And someone offers not material things, but their own knowledge: they treat back pain or write a petition addressed to the ruler. The last time a shoemaker changed shoes for apples was three months ago, when did he take three bags of apples—or four? Again, those were sour apples from the valley, and these are first-class crops from the hill. On the other hand, he took those apples as payment for small women's shoes, and this buyer needs hefty ones for a man. One more consideration: cattle have just died, and leather is in short supply. Tanners charge twice as many finished shoes for raw materials as they did a month ago. That should be taken into account too, right?

In a barter-based economy, both the shoemaker and the gardener have to re-compare the relative value of dozens of different goods every day. If a hundred products are sold on the market, then you need to keep 4950 price pairs in mind. And if there are 1000 products, then 499,500 pairs! How to deal with it?

Further - worse. Even if you can figure out the price of a pair of dappled shoes, it still doesn't guarantee a purchase. The agreement of both parties is required for the transaction to take place. But what if the shoemaker doesn't like apples and his head is busy thinking about divorce at this moment? Of course, the gardener could have found a lawyer who loves apples, and the three of them would have agreed on everything. What if a lawyer's basement is full of apples, but he needs a haircut?

Some societies have tried to solve this problem by creating a central exchange system: everyone deposits their goods and services into it, and in exchange they receive what they need from the distributor — for example, in the Inca Empire. But most societies have come up with a much simpler way to exchange among many "narrow specialists": money has been invented.

A complex commercial system cannot function without some kind of money. The comparative value of all goods and services is quickly determined in money. In a monetary economy, a shoemaker only needs to know the cost of different types of shoes, and there is no need to memorize the price ratio between shoes and apples or shoes and goats. And the gardener is spared the need to choose among all the shoemakers the one who loves apples.

Sapiens. A brief history of mankind. Harari Yuval

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