Economics : Importance of Money

Importance of Money : Money is one of the most fundamental inventions of mankind 'Every branch of knowledge has its fundamental discovery. In mechanics, it is the wheel, in science fire, in politics the vote. Similarly in economics, in the whole commercial side of Man's social existence, money is the essential invention on which all the rest is based (Crowther).

Money is indispensable in an economy whether it is capitalistic or socialistic. Price mechanism plays a vital role in capitalism. Production, distribution and consumption are influenced to a great extent by prices, and prices are measured in money. Even a socialist economy, where the price system does not play so important a role as under capitalism, cannot do without money. For a while, the socialists talked of ending the money, i.e, abolishing money itself, because they considered money as an invention of the capitalists to suppress the working class. But later on they found that even under a system of planning, economic accounting would be impossible without the help of money.

In the early stages of civilization, different people used different things as money. Cattle, tobacco, shells, wheat, tea, salt, knives, leather, animals such as sheep, horses and oxen and metals like iron, lead, tin and copper have been used as money. Gradually precious metals such as gold and silver replaced other metals such as iron, copper and bronze as money. And now paper is used as money. We may describe one more form of money, that is, bank deposits which go from person to person by means of cheques.