Money, The Root Of All Evil? – Revisited

I have a brief addendum to an article I wrote a few days earlier on the nature of money, and why it is an extremely humane and benevolent invention. There is another factor which makes the use of currency a truly wonderful practice: Divisibility of Value.

Consider the money-less society of pure barter. Let’s imagine that I am hungry for some eggs. I need to trade with the local chicken farmer for some tasty grade-As. However, the only item I have available to trade is a solar-powered laptop computer. I think most of us would agree that if I traded my laptop for a dozen eggs, I’d be getting the short end of the stick in this deal (Unless I’m on the verge on starving). Unfortunately for me, there’s nothing I can do about it; the laptop is largely only valuable as-is. I can’t chop it up into 5 pieces of equal value and trade 1/5 of a laptop for eggs. Under very exact circumstances, maybe, but certainly not in general. The laptop may be a very valuable item, but it is almost useless in day-to-day barter unless I’m willing to take a huge loss in many instances. It’s like using a nuclear bomb to clear out a bee hive, in terms of proportion and wasted value.

The laptop is not very divisible. Money, however, is of course very divisible. A $20 can be divided up into 2 tens, 4 fives, 20 singles, 2,000 cents, or a combination of these. Money is a wonderful invention because it allows people to take full advantage of their holdings. In the society of currency, I can sell my laptop for $800, then divy-up the cash into whatever I need it for; $2 for eggs, $50 for a new pair of shoes, $300 for a tattoo of Justin Bieber on my left thigh, whatever. Here is the key lesson to take away: Money allows people to use their total assets (cash, goods, skills) in the most efficient manner possible.

With the Divisibility of Value, almost nothing you earn has to go to waste. This is a magnificent quality.

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