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.