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bartering
Economics textbooks often point out that today’s complex economies have replaced bartering, a far older system of direct trade. In Microeconomics Lewis Solmon points out how inefficient the bartering system is. Solmon’s figure shows how much work a shoemaker has to do just to get some eggs.
In Solmon’s figure the shoemaker has to go through many unnecessary steps just to get eggs. The shoemaker desires eggs and goes to the farmer, who desires a coat. So the shoemaker now has to trade his shoes for a coat. The clothier wants a cake before the farmer can get a coat, this takes him to the baker who desires pills from the druggist. The druggist needs shoes so he trades pills for shoes. Now the farmer can go back and eventually get his eggs. As shown there is many problems with the bartering system. This system wastes a lot of time. It seems there would be a lot of traveling for the goods you need to trade. Also, it seems that someone could get ripped off with this system, as seen multiple times in the figure. Eggs are not worth as much as shoes, or a cake being worth a coat. All in all there is just too many steps for getting one item.
Money has replaced this system, and corrected the problems of bartering. With money, the shoemaker could have gone directly to the farmer for eggs and would not have spent so much time traveling about. With money no one could be able to get ripped off as bad, because people would know how much a dozen eggs would normally go for.
The replacement of the bartering system with money has made life easier on people in multiple ways. Solmon’s figure shows the undeniable problems of the bartering system. Without money there would be far too many steps just to get a single item.