Money is a medium of exchange that is agreed upon by a society, can be used in exchange for goods and services, and is an indicator of value. Money is considered to be an improvement over barter, in several practical ways:
- Money is systematically organized, with divisions that work (one cannot trade half a cow without killing the cow).
- One can acquire goods even if the products of one’s own individual labors are not of interest to the seller.
- Money doesn’t have a built-in time limit, as some bartered goods may, after which they lose value (for example, bread growing stale).
- Money is of a manageable size and shape, unlike some barter standards, such as cattle.
Money met these criteria in early times by being made of items that are small, light, and of generally recognized value. Items such as arrowheads, animal hides, salt, butter, cacao beans, and tobacco leaves. These commodities closely related to food, warmth, and the home, had similar intrinsic value to nearly everyone in the societies in which they were used. Objects of precious metal were also sometimes used, with weight being the deciding factor in assessing value.
As the use of money developed, it did not have to have value in itself, and symbolic objects, rather than items of essential and immediate necessity, began to be used. Cowrie shells were used as currency in a number of countries, mainly in Asia and West Africa, as were beads from the clamshells called wampum in the United States.
Paper currency came into use in tenth century China, and its use was spread by the ruler Genghis Khan in the thirteenth century. The use of paper currency, and other types of money without intrinsic value, depends on the widespread acceptance of their symbolic value.
In Europe, at first, paper money was something like a voucher, a written guarantee of an amount of worth from the person who held the coin that backed it. But in the eleventh century, governments began printing money, and paper money began to become regular, with set values, sizes, and shapes. Today, credit card companies try to convince us that we don’t need money, and that even checks are outdated.