evolution of money and its development analyse and study of the development from the ancient time to present age
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While not the oldest form of money of exchange, various metals (both common and precious metals) were also used in both barter systems and monetary systems and the historical use of metals provides some of the clearest illustration of how the barter systems gave birth to monetary systems. The Romans' use of bronze, while not among the more ancient examples is well documented, and it illustrates this transition clearly. First, the "aes rude" (rough bronze) was used. This was a heavy weight of unmeasured bronze used in what was probably a barter system—the barter-ability of the bronze was related exclusively to its usefulness in blacksmithing and it was bartered with the intent of being turned into tools. The next historical step was bronze in bars that had a 5-pound pre-measured weight (presumably to make barter easier and more fair), called "aes signatum" (signed bronze), which is where debate arises between if this is still the barter system or now a monetary system. Finally, there is a clear break from the use of bronze in barter into its undebatable use as money because of lighter measures of bronze not intended to be used as anything other than coinage for transactions. The aes grave (heavy bronze) (or As) is the start of the use of coins in Rome, but not the oldest known example of metal coinage.
Theories of money
Main article: Monetary economics
The earliest ideas included Aristotle's "metallist" and Plato's "chartalist" concepts, which Joseph Schumpeter integrated into his own theory of money as forms of classification.[13] Specifically, the Austrian economist attempted to develop a catallactic theory of money out of Claim Theory.[14] Schumpeter's theory had several themes but the most important of these involve the notions that money can be analyzed from the viewpoint of social accounting and that it is also firmly connected to the theory of value and price.[15]
There are at least two theories of what money is and these can influence the interpretation of historical and archeological evidence of early monetary systems. The commodity theory of money (money of exchange) is preferred by those who wish to view money as a natural outgrowth of market activity.[16] Others view the credit theory of money (money of account) as more plausible and may posit a key role for the state in establishing money. The Commodity theory is more widely held and much of this article is written from that point of view.[17] Overall, the different theories of money developed by economists largely focus on functions, use, and management of money.[13]
Other theorists also note that the status of a particular form of money always depends on the status ascribed to it by humans and by society.[18] For instance, gold may be seen as valuable in one society but not in another or that a bank note is merely a piece of paper until it is agreed that it has monetary value.[18]
Prehistory: predecessors of money and its emergence
Non-monetary exchange
Barter
Main article: Barter
In Politics Book 1:9[19] (c. 350 BC) the Greek philosopher Aristotle contemplated the nature of money. He considered that every object has two uses: the original purpose for which the object was designed, and as an item to sell or barter.[20] The assignment of monetary value to an otherwise insignificant object such as a coin or promissory note arises as people acquired a psychological capacity to place trust in each other and in external authority within barter exchange.[21][22]
With barter, an individual possessing any surplus of value, such as a measure of grain or a quantity of livestock, could directly exchange it for something perceived to have similar or greater value or utility, such as a clay pot or a tool, however, the capacity to carry out barter transactions is limited in that it depends on a coincidence of wants. For example, a farmer has to find someone who not only wants the grain he produced but who could also offer something in return that the farmer wants. Finding people to barter with is a time-consuming process and this factor is most likely the main driving force in the creation of monetary systems – people seeking a way to stop wasting their time looking for someone to barter with.
There is no evidence, historical or contemporary, of a society in which barter is the main mode of exchange.[23] However, the general presumption that monetary systems evolved from barter systems persists
Evolution of money is as follows:
● The historical backdrop of cash concerns the improvement of social frameworks that give at any rate one of the elements of cash.
● Such frameworks can be comprehended as methods for exchanging riches by implication; not straightforwardly similarly as with deal.
● There are five phases of development – Commodity Money(Goods), Metallic Money(Coins), Paper Money(Bank Notes), Credit Money(Cheques and DDs) and Plastic Money(Credit and Debit Cards).
● "Satisfaction of fundamental needs are done through cash!"