What is Money for?
Money is used to solve the limitation of direct exchange. This primitive system worked well to meet basic needs in small communities when people produced and exchanged items necessary for survival. However, in a larger society with interactions involving many unknown agents and increasing demands, a challenge that impedes development arises, known as coincidence of wants.
This limitation is presented in 3 layers:
1) Coincidence of wants on a scale: This occurs when one of the items involved in the exchange does not have an equivalent value, and the item of greater value cannot be divided into smaller parts.
Example:
A person wants to exchange pairs of sandals for a large boat.
The owner of the boat cannot divide it into smaller parts to exchange it for pairs of sandals, or is not interested in acquiring all the pairs that would be equivalent to the value of the entire boat.
2) Coincidence of wants on a time scale: This situation concerns exchanging a perishable product for another durable product of greater value.
Example:
The individual wants to exchange Sashimi for a Tuk Tuk.
It is not possible to accumulate the value in quantity of sashimi before the food spoils.
3) Coincidence of desires in Locations: This limitation refers to the exchange of physical structures involving different locations.
Example:
Most houses are not transportable, so it is not possible to exchange geographically distant houses.
An alternative to solve the issue of coincidence of desires is to establish a series of intermediate exchanges until finding an item desired by an individual who has what can be exchanged for the product that the person is interested in.
Summary: Add successive intermediate exchanges until something serves as a means of exchange common to most agents.
That is what money is for, to be a universally accepted means of exchange.
Money was discovered by humanity as a response to the increase in social and commercial interactions and specific demands to make the exchange of values ββefficient over time and space.
In this way, all your spiritual, mental, emotional and physical energy applied to a good purpose can be accumulated, carried through generations and exchanged for your good achievements. So be it.
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