Definition
Money is whatever serves as the "medium of exchange." That is, as the quotation from Adam Smith says, money is a commodity or token that everyone will accept in exchange for the things they have to sell. Different societies may have different monies. Some historical examples are:
- gold coins (in medieval Europe)
- cowrie shells (in West Africa)
The cowrie shells used in West Africa are small seashells. This may sound "quaint," but cowrie-money was very successful. It continued to be used into the twentieth century, after the West African countries had become colonies. The colonies were required to use European money, and they did -- but when the European monetary systems collapsed in hyperinflation, the West African people went back to using their cowrie-money to get past the crisis. It was the cowrie-money that proved most reliable for many years of the twentieth century.
We should say that the "commodity" that serves as money can be a purely symbolic token, like dollar bills in America. Indeed, all money has primarily symbolic value. Even the gold coins used in medieval Europe were probably valued more for their symbolic value than for the gold they contained.
Symbolic or not, money is an asset. Thus we define
- Money
- In any society, money is the asset, commodity or token, that serves as a medium of exchange.
Types of Money
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