: They are worth whatever someone else will give for them. If you have a lump of gold, and I have some bread, we don't need some authority to tell us whether we should trade. Not anymore than two 10-year olds with baseball cards need their Moms to tell them.
Thats barter, I still cannot compare them with a third term- specifically, a stable third term. To be able to have money, everyone *has* to agree a standard by which to compare commodities- when we say wellies are worth £5 and a book is worth £10 we are making a comparison of some common feature, and we need a standardised example by which to measure that feature- now, just as if I said the wellies are 250 grammes, and the book 100 grammes we would be comparing them according to a common value, which gains standardisation via Le Grande K (again, authority is needed to affix weights and measures, otherwise folks'll cheat you. Flour used to be sold mixed with chalk, alcohol watered down, no law to stop it...).
Unless *everyone* agrees a fixed standad, you are stuck with barter, which is inefficient.
: Nonsense. It's determined by the personal valuation of each participant.
No, we must look for a common factor, when I compare the price of wellies to a book, since both are expressed in pounds, they must both be expressing the same quality. Thousands of people pay 25p for a twix every day, do each of them just randomly beleive its worth 25p?
: Easy -- consequences of trust. Why do you think that people used to spot check coins by biting them?
And modern business can so afford to spend so much time and effort on checking its currency.
: It doesn't have to be gold. In prisons, cigarettes evolved into a medium of exchange. No one had to coordinate that. The Warden never said "you prisoners will trade using cigarettes as a standard."
Indeed, that bagan as barter, but since cigaretes are highly valued they can become currency- although they are standardised by their producing firms...Also, cigarretttes are just advanced barter, people tend to use them, rather than save them for more spending- money only has one use- exchange- thats when you have a universlaised currency.
: All money has *ever* been, in economic terms, is a coordinating mechanism for barter. It's a measurement tool. The measure has *always* been determined by the market.
Erm, no, hence Royal mints, hence devaluation (debasing) currency in the middle ages- money is more advanced than barter, since it is *universal* i.e. everyone will accept it. After all, copper coins were pretty much worthless in themselves, except with reference to their standarisation by authority- hence monarchs heads on coins. In order to work, we must choose one commodity by which to measure all the rest, and it has to be authority which chooses the commodity.
: Even with fiat money, can you tell me what a dollar is worth? It's worth what you can buy for it.
About 60p last I recall, about 1/200th of a pound of Gold.
: The dollar itself is fundamentally useless. It's only the opportunity for exchange that gives it value.
Indeed, but only because everyone exchnages with it...
: The point of money is that it gives a measurement coordinator between heterogenous goods and services. It provides an expression mechanism for market participants, so that it's possible to determine how many loaves of bread one is giving up in order to buy a steak.
Exactly, its a third term, but it can only work in reference to a specific store of value, such as Gold. Without a state to guarantee the money, you cannot have universalised functioning free markets- you need to stop fraud and forging- and without universal acceptance you're down to barter, which isn't efficient.
: Which is why they spring up in any environment without authority, eh? History is always debatable, so why don't we point to a prison? Or a school?
And usually they do have an authority- the hardest lag, the biggest kid, the teacher, mammy and daddy. Without some authority enforing weights and measures, and monetary value, a market cannot function, because there are no universal/common terms of referrence. Why is a metre as long as it is, because we say so.