its just something I have been pondering lately. Why do we need money? I think about the amount of debt people have to pay off, how some people can't even eat due to lack of money, and some other issues. Is there a reason we still use such a system if it causes misery (to an extent)? What would happen if we were to get rid of it entirely? What would happen to us as a society?
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What skill, service, or goods do you have or have the ability to make for barter? Do you garden and hunt for food? Some things can be traded for or aquifer through self sustaining means, but a lot of things are so tied to global economic systems and corporate interest at this point that doing away with money in its entirety would lead to a massive collapse of local and global economies. Money is basically a piece of paper (or these days an electronic record) of an exchange you made with someone else for something of value. It really diversifies the ammount of value you can generate.
If for example, you were a really good welder you would have a tough time trading that skill for the wide variety of consumables and services you have access to by trading your welding for a piece of paper that you can take anywhere and spend. The local cattle farmer might not need any welding, so you get no beef or dairy. Trading for items of value that can be traded again has always existed. Gold, spices, textiles, heck even stone knives if you go back far enough have all acted as currency at one point or another, just not money like we are used to.
its just something I have been pondering lately. Why do we need money? I think about the amount of debt people have to pay off, how some people can't even eat due to lack of money, and some other issues. Is there a reason we still use such a system if it causes misery (to an extent)? What would happen if we were to get rid of it entirely? What would happen to us as a society?
Why would we do so? Money provides a system of standard value whereby all exchanges of any good or service can be weighed.
Power. Everybody wants it. Also, it forgoes the problems and isolation of bartering. So in a sense, freedom as well.
The whole problem with money, is that it eventually makes society top heavy.
This next part is more of me and my ideas, but I firmly hold that over time it eliminates freedom, but it takes awhile for such negative effects to happen. Every society will have it though, because the natural progression of the early positive effects it brings. The only society I can imagine, is an extremely advanced one that survived and suffered through the late negative effects of it.
What would happen if we were to get rid of it entirely? What would happen to us as a society?
Millions, if not billions of people will die and the survivors will end up in caves. Te misery caused by money is peanuts to the misery without it.
That's not hyperbole.
The problem is that resources are finite. and not equally distributed. For example, someone in a forest wilk have a lot of wood, but not wheat. Someone near the coast will have fish, but not wood. And so on.
Barter worked for a time -- "I'll exchange some wood for some fish". However, not everyone who had excess fish wants to trade for wood. What's the guy living in the forest supposed to do, then?
And that's why money was invented. Yes, I may not want your wood, but your money is good enough because I can use this money to exchange it for something else to someone else.
I'm sure you play magic. Would you trade your cards for, say, food? What if a farmer doesn't want your cards?
Money is the easy option. Why barter when we can just hand each other rocks.
I'm a terrible idealist though, so lets not go back to bartering, and get rid of money anyways. Lets make everything free and power society with our faith in fellow humanity.
It'll work. Why wouldn't it?
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its just something I have been pondering lately. Why do we need money? I think about the amount of debt people have to pay off, how some people can't even eat due to lack of money, and some other issues. Is there a reason we still use such a system if it causes misery (to an extent)? What would happen if we were to get rid of it entirely? What would happen to us as a society?
economist here, if something is not clear or you dont agree, feel free to point it out
why money? because is trade made easier
1 you can hold value, if you have a limited time product (or service) you can hold the value, with trade you have to consume the other thing right away, with money you can save for tomorrow, with trade sometimes you cant.
example, lets say im a medical doctor, if i trade my service for food, i need to eat the food right away, with money i can choose to eat food tomorrow.
2 you need fewer people to agree on value
example, lets say you have 6 product that you can trade (A B C D E F), 1 person owns each product, if we trade, then we need to make a deal between the conversion rate between A and B, A and C, A and D....etc, this is N*(n-1)/2 conversion rates, so with 6 product this is 15 , so between all people they have to make 15 separates deals, with money you only need to agree on n separates deals, thats 6 (the money value of A, B, C, D, E and F)
3 related to 2, you need only 1 transaction to have what you want, you buy X period, with trade you need sometimes to trade A for B and this for F to get E.
about debts , debts allow you to buy something now, and pay on the future, imagine how many time would take you save for you own house witout debt
about people dying because they dont have money, the problem is not money itself, it resource allocation, people in poor countries dont die because they dont have money, they die because the country dont have sufficient food, or maybe they have food, but politics/corrupt/military power mess up with the allocation of products.
The problem is not money, it society itself, think like this, remove money out of the equation, and world is still miserable (maybe even more miserable), money only reflect human nature. On the other hand, most of the better places to live (mainly scandinavian countries) use heavily the price system.
about people dying because they dont have money, the problem is not money itself, it resource allocation, people in poor countries dont die because they dont have money, they die because the country dont have sufficient food, or maybe they have food, but politics/corrupt/military power mess up with the allocation of products.
While LeviantanCL has a lot of good points, I think this is the crux of the issue.
Resource allocation has always been problematic regardless of the system of trade in a country.
Money is a necessary evil. As others have touched on, it mostly serves to formalize the exchange of goods and services.
Society just plain cannot exist without the ability to barter. No one is capable of generating everything they need by themselves, so an exchange must be allowed for. Money makes this exchange easier, as you do not always have to have directly equivalent exchanges - I don't have to trade you two tons of sugar to get a cow, I can sell sugar by the pound to 4000 people for $1 each and then give you $4000 for your cow (really rough example, but you get the idea).
Money also allows the exchange of less tangible things, like services. Religion, for example, is something that is difficult to place a barter value on, but money can be given to churches to support their existence. Art is another good example.
As for the problems with money stated in the OP, these are mostly a problem of the DISTRIBUTION of money. If we eliminate money, these problems likely still exist, as those people who had no money also have very little in terms of other resources to exchange.
If you would seek to abolish the system of money, what would you suggest to replace it? The only other alternatives are a straight bartering system, which is basically just money but more difficult to track, or communism, where the government collects up the resources everyone produces and distributes them evenly. And while that sounds like it's a good alternative, history has kind of shown that it leads to the same kinds of problems as capitalistic systems - you've still got people involved in the collection and distribution, which inevitably leads to corruption and inequality. Communes can exist on a very small scale, like at the village level, but on a national or global scale it is next to impossible to do.
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Money is the easy option. Why barter when we can just hand each other rocks.
I'm a terrible idealist though, so lets not go back to bartering, and get rid of money anyways. Lets make everything free and power society with our faith in fellow humanity.
It'll work. Why wouldn't it?
It wouldn't work because there would be no incentive to participate. Not all people are altruistic, MANY would take advantage of that system. People assign perceived value to almost everything, skills and talents, ability to provide for this utopian free society would inherently assign value to those able to provide, thus giving them more power. It really wouldn't be much different than the current monetary system.
Money is the easy option. Why barter when we can just hand each other rocks.
I'm a terrible idealist though, so lets not go back to bartering, and get rid of money anyways. Lets make everything free and power society with our faith in fellow humanity.
It'll work. Why wouldn't it?
It wouldn't work because there would be no incentive to participate. Not all people are altruistic, MANY would take advantage of that system. People assign perceived value to almost everything, skills and talents, ability to provide for this utopian free society would inherently assign value to those able to provide, thus giving them more power. It really wouldn't be much different than the current monetary system.
In Fact, money allow altruistic behavior, if people were altruist, they could donate money or product (with the money they gain). If you think the people dont donate enough right now, taking money out of the equation dont change this. Again the problem is people and/or the society.
Made the following scenarios, people are altruistic or not, and we have a capitalist system or one that people do thing for the "greater good".
If people are altruistic, both system works, because in the greater good society everyone do their job (think of ants), and in the capitalist system people would donate all their money so people with less buy stuff. If people are not altruistic, then capitalism is the lesser evil.
People need incentives, this a fact, not a theory. Even the countrys that growth with communism in the past (URSS and China for example) have incentives, the problem is that the incentive in such cases was a negative one "if you dont do your job, you get killed".
Money is literally a piece of paper (or even air/abstract) with a value given by the society, its reflect a society structure, if you find something bad with money you have a problem with society itself.
We need money because its the universal tranding standard. If I need milk and meet and I go down to the butcher I don't want to have to trade him technical expertise as a programmer for the meet I want from him. I get payed by one person and I can use that universal payment to purchase things I want and need. If you get rid of money then you are back bartering and while bartering can work just fine it adds in the complication that both sides need to own something that the other desires to own more than or equal to what they are loosing.
Money is just a substitute that we acknowledge as a value equivalence to what we consider the value of the money to be in trade. It is super fungible and it allows society to function smoother.
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Money allows people to buy/get things from someone whom have no need for said people's skills.
Why should I, as a single farmer, give the day-care provider food? the Day Care service isn't watching my kids.
Why should I, as a swimming pool, give the electric company free passes? Small town swimming pools don't use electricity.
If I need meat, and the Local Butcher doesn't have a computer, how is the programmer going to get the butcher to give him steak?
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its just something I have been pondering lately. Why do we need money? I think about the amount of debt people have to pay off, how some people can't even eat due to lack of money, and some other issues. Is there a reason we still use such a system if it causes misery (to an extent)? What would happen if we were to get rid of it entirely? What would happen to us as a society?
The debts that people have and the ills that are attributed to money are not caused by money. They are caused by decisions from human actors.
If people cannot eat due to lack of money, then abolishing money will not thereby give them the means to eat. If you starve in a world with money, you do so because you have insufficient resources to exchange for food.
Abolishing the medium of exchange will not cure the problem that people starving are still without resources to exchange.
This forum is testament to the fact that we play magic (one way or another). Magic cards cost a bunch. It's unfortunate that things like life things (Schooling, Vehicles, Housing etc) cost so much that the question becomes an issue so frequently in our culture.
Money is just stored time, skill and labor. In some time before economies and barter, to eat you had to hunt, forage, farm, and in general: work. To have shelter you had to build it. To have clothing and amenities, you had to make them. All that took time, effort and skill. Today, it still takes time and effort to have all those things. Only, it isn't necessarily you that has to directly contribute to the securing of food, shelter, and other such commodities. Unless you are a hermit, living off the land, it's very likely other people have expended their time and effort on your behalf.
Why do they do it? Well, because you trade your time for theirs. Your skills for theirs. These days, economies are highly specialised and complex. Not everything relates to survival. Some things are merely for fun. But at the end of the day, they still cost people their time and effort to make possible. And at the end of the day, no one is going to give you their time and effort for nothing (that's slavery). So, we all barter our time to get what we desire in life, and money as a mechanism for this exchange just makes it easier.
If for example, you were a really good welder you would have a tough time trading that skill for the wide variety of consumables and services you have access to by trading your welding for a piece of paper that you can take anywhere and spend. The local cattle farmer might not need any welding, so you get no beef or dairy. Trading for items of value that can be traded again has always existed. Gold, spices, textiles, heck even stone knives if you go back far enough have all acted as currency at one point or another, just not money like we are used to.
The whole problem with money, is that it eventually makes society top heavy.
This next part is more of me and my ideas, but I firmly hold that over time it eliminates freedom, but it takes awhile for such negative effects to happen. Every society will have it though, because the natural progression of the early positive effects it brings. The only society I can imagine, is an extremely advanced one that survived and suffered through the late negative effects of it.
Millions, if not billions of people will die and the survivors will end up in caves. Te misery caused by money is peanuts to the misery without it.
That's not hyperbole.
The problem is that resources are finite. and not equally distributed. For example, someone in a forest wilk have a lot of wood, but not wheat. Someone near the coast will have fish, but not wood. And so on.
Barter worked for a time -- "I'll exchange some wood for some fish". However, not everyone who had excess fish wants to trade for wood. What's the guy living in the forest supposed to do, then?
And that's why money was invented. Yes, I may not want your wood, but your money is good enough because I can use this money to exchange it for something else to someone else.
I'm sure you play magic. Would you trade your cards for, say, food? What if a farmer doesn't want your cards?
"Sometimes, the situation is outracing a threat, sometimes it's ignoring it, and sometimes it involves sideboarding in 4x Hope//Pray." --Doug Linn
I'm a terrible idealist though, so lets not go back to bartering, and get rid of money anyways. Lets make everything free and power society with our faith in fellow humanity.
It'll work. Why wouldn't it?
Hoping for a cure, or at least an outbreak.
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economist here, if something is not clear or you dont agree, feel free to point it out
why money? because is trade made easier
1 you can hold value, if you have a limited time product (or service) you can hold the value, with trade you have to consume the other thing right away, with money you can save for tomorrow, with trade sometimes you cant.
example, lets say im a medical doctor, if i trade my service for food, i need to eat the food right away, with money i can choose to eat food tomorrow.
2 you need fewer people to agree on value
example, lets say you have 6 product that you can trade (A B C D E F), 1 person owns each product, if we trade, then we need to make a deal between the conversion rate between A and B, A and C, A and D....etc, this is N*(n-1)/2 conversion rates, so with 6 product this is 15 , so between all people they have to make 15 separates deals, with money you only need to agree on n separates deals, thats 6 (the money value of A, B, C, D, E and F)
3 related to 2, you need only 1 transaction to have what you want, you buy X period, with trade you need sometimes to trade A for B and this for F to get E.
about debts , debts allow you to buy something now, and pay on the future, imagine how many time would take you save for you own house witout debt
about people dying because they dont have money, the problem is not money itself, it resource allocation, people in poor countries dont die because they dont have money, they die because the country dont have sufficient food, or maybe they have food, but politics/corrupt/military power mess up with the allocation of products.
The problem is not money, it society itself, think like this, remove money out of the equation, and world is still miserable (maybe even more miserable), money only reflect human nature. On the other hand, most of the better places to live (mainly scandinavian countries) use heavily the price system.
pd: there are problems with money nevertheless, read this http://www.nytimes.com/2009/09/15/business/global/15gdp.html?pagewanted=1&_r=1&
Resource allocation has always been problematic regardless of the system of trade in a country.
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Society just plain cannot exist without the ability to barter. No one is capable of generating everything they need by themselves, so an exchange must be allowed for. Money makes this exchange easier, as you do not always have to have directly equivalent exchanges - I don't have to trade you two tons of sugar to get a cow, I can sell sugar by the pound to 4000 people for $1 each and then give you $4000 for your cow (really rough example, but you get the idea).
Money also allows the exchange of less tangible things, like services. Religion, for example, is something that is difficult to place a barter value on, but money can be given to churches to support their existence. Art is another good example.
As for the problems with money stated in the OP, these are mostly a problem of the DISTRIBUTION of money. If we eliminate money, these problems likely still exist, as those people who had no money also have very little in terms of other resources to exchange.
If you would seek to abolish the system of money, what would you suggest to replace it? The only other alternatives are a straight bartering system, which is basically just money but more difficult to track, or communism, where the government collects up the resources everyone produces and distributes them evenly. And while that sounds like it's a good alternative, history has kind of shown that it leads to the same kinds of problems as capitalistic systems - you've still got people involved in the collection and distribution, which inevitably leads to corruption and inequality. Communes can exist on a very small scale, like at the village level, but on a national or global scale it is next to impossible to do.
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It wouldn't work because there would be no incentive to participate. Not all people are altruistic, MANY would take advantage of that system. People assign perceived value to almost everything, skills and talents, ability to provide for this utopian free society would inherently assign value to those able to provide, thus giving them more power. It really wouldn't be much different than the current monetary system.
In Fact, money allow altruistic behavior, if people were altruist, they could donate money or product (with the money they gain). If you think the people dont donate enough right now, taking money out of the equation dont change this. Again the problem is people and/or the society.
Made the following scenarios, people are altruistic or not, and we have a capitalist system or one that people do thing for the "greater good".
If people are altruistic, both system works, because in the greater good society everyone do their job (think of ants), and in the capitalist system people would donate all their money so people with less buy stuff. If people are not altruistic, then capitalism is the lesser evil.
People need incentives, this a fact, not a theory. Even the countrys that growth with communism in the past (URSS and China for example) have incentives, the problem is that the incentive in such cases was a negative one "if you dont do your job, you get killed".
Money is literally a piece of paper (or even air/abstract) with a value given by the society, its reflect a society structure, if you find something bad with money you have a problem with society itself.
Money is just a substitute that we acknowledge as a value equivalence to what we consider the value of the money to be in trade. It is super fungible and it allows society to function smoother.
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Why should I, as a single farmer, give the day-care provider food? the Day Care service isn't watching my kids.
Why should I, as a swimming pool, give the electric company free passes? Small town swimming pools don't use electricity.
If I need meat, and the Local Butcher doesn't have a computer, how is the programmer going to get the butcher to give him steak?
The debts that people have and the ills that are attributed to money are not caused by money. They are caused by decisions from human actors.
If people cannot eat due to lack of money, then abolishing money will not thereby give them the means to eat. If you starve in a world with money, you do so because you have insufficient resources to exchange for food.
Abolishing the medium of exchange will not cure the problem that people starving are still without resources to exchange.
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Why do they do it? Well, because you trade your time for theirs. Your skills for theirs. These days, economies are highly specialised and complex. Not everything relates to survival. Some things are merely for fun. But at the end of the day, they still cost people their time and effort to make possible. And at the end of the day, no one is going to give you their time and effort for nothing (that's slavery). So, we all barter our time to get what we desire in life, and money as a mechanism for this exchange just makes it easier.
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