This blog is about Graphic Design, Vector Art, and Cartoon Illustration

Why using money is easier than bartering

As an old marketing guy, I get a big kick out of listening to people who, uh, apparently never took economics 101, or it made no impression on them. And these are the people who really don't understand how money works. It starts with an exchange of value.

I recently saw a Facebook post that described how everyone could eat for free. Everyone would have their own garden, and they would exchange with other people. That is, one person would grow a crop of carrots, and their neighbor would grow tomatoes, and they would share. And really, that's the basis of all economic transactions in the world - exchange for value. At that level, it's called bartering. And the people exchanging have to determine value. That is, would a small basket of carrots be a fair exchange for several bags of tomatoes? Well, maybe, maybe not. It depends on the people making the exchange. That's how it begins. Of course you could say that no one would keep track, but that's not how human nature works. One person would feel cheated by another person if they didn't receive the same value back.

Another problem with a bartering system is that it's difficult to make real-time exchanges with something that grows. Carrots are ready at different times than tomatoes. So the next logical step is to create a way to record the value given, and then when the tomatoes are ripe, to complete the exchange. And you've invented money.

Money is just a placeholder for value. In reality, it's just little pieces of paper that say that you have produced something of value, and you can use those pieces of paper in the future for something of value for yourself. That is, you get money for your carrots, and when your neighbor's tomatoes are ripe, you get tomatoes.

When I first started freelancing graphic design, I tried doing barter exchanges. In fact, my very first job was done in exchange for some major car repairs. But little by little I found that bartering creates disagreements about value, and it can be difficult to keep track of. Money solves that. When I do work, I get paid in money. When I need car repairs, I give that money to someone else. Then they give that money to someone else. That's circulation, and that's what money does.

I hope this helps. If you expect things to be "free", chances are someone is working on something that that you have your eyes on to steal, and they will defend it. Stealing things is something that seems to make sense to a lot of people, but it never made sense to me. I expect to get paid for my efforts, and in exchange I pay other people for theirs.