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“What is a better form of money? A Cow or a $20 Bill?”
Understanding the 6 properties of money helps answer this question.
Understanding the 6 properties of money helps answer this question.
Cow: Quite durable, but it’s a living thing & is always at risk of getting sick or dying.
$20 Bill: Doesn’t get sick or die, and can be easily replaced if worn out.
Property #1: Durability
$20 Bill - 1, Cow - 0
$20 Bill: Doesn’t get sick or die, and can be easily replaced if worn out.
Property #1: Durability
$20 Bill - 1, Cow - 0
Cow: Annoying to carry to the store every week
$20 Bill: Fits in pocket & easy to carry
Property #2: Portability
$20 Bill - 2, Cow - 0
$20 Bill: Fits in pocket & easy to carry
Property #2: Portability
$20 Bill - 2, Cow - 0
Cow: Could be slaughtered to sell parts, but not as easily as $20.
$20 Bill: Can easily be broken into smaller bills of $10s, $5s, $1s…
Property #3: Divisibility
$20 Bill - 3, Cow - 0
$20 Bill: Can easily be broken into smaller bills of $10s, $5s, $1s…
Property #3: Divisibility
$20 Bill - 3, Cow - 0
Cow: Comes in different sizes, shapes, breeds. Each has a different value.
$20 Bill: All are the same size & shape
Property #4: Uniformity
$20 Bill - 4, Cow - 0
$20 Bill: All are the same size & shape
Property #4: Uniformity
$20 Bill - 4, Cow - 0
Cow: Are valuable, but some people may not accept cows as money.
$20 Bill: Accepted as payment anywhere (in the US)
Property #5: Acceptance
$20 Bill - 5, Cow - 0
$20 Bill: Accepted as payment anywhere (in the US)
Property #5: Acceptance
$20 Bill - 5, Cow - 0
Cow: Fairly limited in supply. If we used cows as money & their supply was increased, their value would decrease.
$20 Bill: Supply is regulated by the Federal Reserve & it retains its value over time (at least in theory).
Property #6: Scarcity
$20 Bill - 6, Cow - 0
$20 Bill: Supply is regulated by the Federal Reserve & it retains its value over time (at least in theory).
Property #6: Scarcity
$20 Bill - 6, Cow - 0
Although the $20 Bill clearly wins over using a Cow for transactions, these 6 properties are not required to be met 100% for something to be money.
For example:
There was a small island in Micronesia called Yap. They used huge limestone-discs called Rai stones as money:
For example:
There was a small island in Micronesia called Yap. They used huge limestone-discs called Rai stones as money:
Clearly, Rai stones are not very portable, divisible or uniform. But they were used as money purely through social agreement.
In reality, anything is money so long as there is a stable social consensus to its value.
However, these 6 properties help define what makes a good form of money.
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However, these 6 properties help define what makes a good form of money.
If you liked this thread, you'll love my free crypto course! Sign up here: https://www.preethikasireddy.com/intro-to-cryptocurrency
