Thursday, May 17, 2012

Money and government

It is worth remembering that capitalism requires some form of currency:
Trade is important because, without it, it would be pretty difficult for some of us to survive only consuming what we produce well, especially those of us who haven’t figured out how to eat economics lessons yet. Technically, however, trade only gets us part of the way to what we would consider capitalism, since direct trade (i.e. barter) still requires a double coincidence of wants. 
 The problem with money is that it needs to be guarenteed or to have value independent of social contracts.  The second is the whole idea behind a gold standard.  But even with small and valuable items, it is hard to imagine the vast levels of wealth we see in the modern world existing if you had to store tonnes of gold in vaults.  It would be too simple to be robbed and options for recourse would be quite limited. 

So even the very well off require government to function in order to live in a modern society.  It think that we should remember this when we wonder whether or not we benefit from the existence of governing bodies. 

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