What Makes Something Useful as Money?

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Let’s explore a little economics. One day, Tyrone, the great backyard explorer, was digging a hole when he found a small bag filled with shells. What a great discovery!

He remembered that in history class his teacher, Mrs. Applebaum, said people use shells as money. This gave Tyrone a great idea.

Tyrone took his bag of shells to the local bike store to buy a cool new bike, but they wouldn’t sell him a bike for shells.

Then, he went to the toy store to buy a new video game, but they wouldn’t sell it to him for shells.

Finally, he went to the candy shop to buy his favorite chocolate bar, but once again, they wouldn’t sell it to him for shells.

Tyrone was confused. Why couldn’t he use the shells to buy the stuff he wanted? Was Mrs. Applebaum wrong? No, Tyrone’s teacher wasn’t wrong. People used certain types of shells as money in the past, but not anymore.

In fact, throughout history, people have used all sorts of things as money, including beads, cows, grain, cubes of salt, dried fish, and copper. Why don’t people still use shells as money and what makes something useful as money?

To answer these questions, it’s important to understand the characteristics of money. To begin with, an item used for money must be relatively scarce, meaning there are limited amounts available. If people have easy access to the item, they could have as much as they want and the item would lose its value.

The item must also be durable or long-lasting. Copper is a type of metal, and it’s usually more long-lasting than salt or grain. Salt will dissolve if it’s wet and grain can get moldy or eaten by mice.

The item must be easily divided, in order to make change. Cows are not easily divided.

The item must be easy to carry around or portable. It might be easy to carry beads or shells, but it’s difficult to put a cow in your pocket.

The item must be accepted as payment for a good or a service. Suppose you walked your neighbor’s dog and they tried to pay you with dried fish. Would you accept dried fish as payment? Probably not, because you can’t use dried fish to buy a movie ticket and a bank won’t let you deposit dried fish in your savings account.

Finally, does the item have a standard shape and size? If the item is uniform, people can trust in its value. If one salt cube was much smaller than another, it might be less valuable.

These days, people take money for granted, but money is actually a fascinating human invention that allows you to buy goods and services easily. Plus, it’s much easier to fit in your pocket than a cow.