The History of Money, Part One – Barter

money If you think about it, it’s kind of a weird thing we do, trading scraps of colored paper for goods and services. How did money come into being? I thought it would be interesting to look at the history of money and see how it applies to our lives today. This type of study is called “numismatics.” I’m not sure if that makes us “numismaticians” today … it being a new vocabulary word and all.

Looking back in history, the barter system was originally used between strangers or enemies. Friends and associates would often just gift each other with needed items, without a contracted agreement for repayment. Bartering came into play when there was a question of trust involved. The difficulty with a bartering system was that the value was dependent on the needs of that moment.

I remember back to my childhood. One of my friends had a bag of Jolly Ranchers, and she was selling them to her friends. I forget exactly how much she was charging for each flavor, but I do recall that the grape were fairly cheap, and the watermelon were the most expensive. She didn’t like the grape, but she liked the watermelon the most and it would be harder for her to part with those, so she jacked up the price to ease her pain and suffering. This is an example of the price being determined by the need of the seller.

On the other hand, what if the buyer really needs the item in question? The seller can jack the price up then, too. I don’t need eggs right now, so I wouldn’t pay much for one. However, in two or three days, when I’m out and I really need one, I’d be willing to pay more.

The seller needs to find a buyer who is anxious to buy, and the buyer needs to find a seller who isn’t charging an outrageous price for the item. Then the buyer needs to come up with an item that would hold similar value for the seller so they can make the exchange. This is the difficulty with the barter system—finding what we need and having something to trade for it.

Stay tuned as we discuss the introduction of money into human history.

Related Blogs:

Bartering Resources

A Little Bit of This for a Little Bit of That

Get It Free When You Barter