Show me the real money: Three monetary myths that need busting
CENTRAL BANK? This article originally appeared in the December edition of Penguin's ThinkSmarter Newsletter . Money pervades our everyday economic interactions. But, despite its importance, it is also pervasively misunderstood. Here are three common monetary myths – frequently perpetuated by economists – that need challenging. Myth 1: Money emerges from barter Economists often tell a tale about how old communities first used barter to exchange goods and services. Bartering throws up tricky situations. Take as an example a farmer trying to exchange a cow for bread from a baker, a clumsy and difficult negotiation. Thus, according the old economists like Adam Smith, money was supposedly 'invented' as a way to get around that inefficiency and confusion. This narrative is ahistorical and inaccurate. Anthropologists have long had a much more convincing account: in small communities without money, exchange does not take place through on-the-spot barter. Rather it takes place throu...