The Evolution Of Money Economics Assignment Paper (Essay Sample)

The Evolution of Money
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The Evolution of Money
Introduction
Money is the basis for all financial operations in the modern world. Without any doubt, its functions allow distributing goods and services, receiving profits and performing other financial operations in the most convenient ways. Historically, the concept of money has endured significant changes that made it one of inseparable features of the state. Therefore, it is essential to trace money evolution to highlight the critical milestones of the process. Moreover, it is clear that the money image of the past has changed into something different. Gradually, people developed the first finance concepts instead of the direct exchange of goods and services. Therefore, the current term paper is aimed at developing a comprehensive framework of the money evolution from the Ancient Greece all the way up to theories of Karl Marx. Moreover, it will provide a comparison as for how money and its functions were seen by the Greeks and the classical economists, Adam Smith, John Locke and David Hume within classical quantity theory of money.
Economic Thought of the Ancient Greece
In ancient times in Greece just like elsewhere, the trade took the form of direct exchange of material goods. Later, people began to pay for goods with pieces of precious metals. Such a way of payment was spread in Mesopotamia and Egypt, the islands of the Aegean Sea, and in other countries (Vasek, 2015). Greeks were using them until the coins with the symbols of individual states carved on them started to be produced. The value of shapeless pieces of metal was determined by their weight. Only when the value of these ways of payment has become certified by a special stamp on the coins, a system that is close to the modern currency has been developed (Einzig, 1949, p.45). As soon as the coins became the main way of payment, the need to introduce a stable monetary system and to establish some principles of their circulation has aroused.
In the Ancient Greece, economic thinking was reflected mainly by the works of the ancient Greek thinkers, Xenophon, Plato and Aristotle in the V-IV century. BC (Einzig, 1949, p.53). They linked economic phenomena with scientific analysis, attempting to identify patterns of social development. The thinkers of the Ancient Greece not only stated the most complex economic problems but also found the solutions to them. They introduced the term "savings" and "the economy." Saving was understood as a science, which could be used to enrich the economy. Also, they proposed an idea of the division of labor and hazarded a conjecture that the basis of equality between the goods has something common that makes them comparable (Einzig, 1949, p.53). For the first time, Greek thinkers made a distinction between simple commodity circulation and circulation of money as capital.
The economic discoveries of the thinkers of ancient Greece have contributed to the further development of economic science. Xenophon (430-354 BC.) gave a description of a perfect model of the economy and created a model of a perfect citizen (Cohen, 2014). Plato (428-347 BC.) established the theory of an ideal social order and presented it in his book "The State" (Cohen, 2014, p. 79). The fundamental idea of the settings provided in this work is the idea of justice which involves the concept that everyone should do the business to which he/she is more adapted.
Aristotle’s Theory of Money
The greatest thinker of antiquity, Aristotle has advanced much further than Plato and Xenophon in his researches. Aristotle made the greatest contribution to the development of the economic thought of Ancient Greece. Aristotle was a student at the Academy of Plato; however, he did not share the Platonic idealism. Demonstrating vacillation between materialism and idealism, he was more inclined to support materialism. Aristotle attempted to penetrate into the essence of economic phenomena and establish their laws. Aristotle was significantly different from his predecessors Xenophon and Plato since he gave the start to the economic analysis, which was manifested in the definition of the subject of economy, the study of the exchange, the cost of forms, etc.
As a supporter of a subsistence economy based on the exploitation of slaves, Aristotle considered the economic phenomena in terms of the greatest benefit. Everything that was consistent with the interests of strengthening the economy was considered natural and fair. Thus, he based his economic theory on the premise that slavery was a natural phenomenon and ought to be the basis of production (Grenville, 1997, p. 125). On the other hand, everything that shook and decomposed the economy belonged to the category of unnatural phenomena. Wealth, its sources and means of meeting the needs of society were evaluated from this perspective.
Aristotle connects natural phenomena with the economy and the source of "true wealth", which consists of use value. Economy provides the ways to strengthen subsistent economy and the possibility to expand the production of use value. This was consistent with the maintenance of moderate size of wealth advocated by Aristotle. He rejected the excessive accumulation of money, over-enrichment, speculative trading, usury, etc. He stood for barter, as it did not violate the predominant role of use value (Grenville, 1997, p. 126).
In his works, Aristotle contrasted savings and chrematistics. Saving is the acquisition of wealth that ensures entirely comfortable existence for man and his family. Chrematistics is the accumulation of money in excess of what is necessary for human habitation. The thinker divided chrematistics into two types:
1) ability to retain what the man will need for housekeeping;
2) excessive accumulation of everything, including money (Grenville, 1997, p. 136).
Aristotle linked unnatural phenomenon to the excessive development of the sphere of circulation and included it into chrematistics, which was seen as the art of "making money", facilitating enrichment, which had no borders. He rejected large, speculative trading, the aim of which was the accumulation of monetary wealth, and condemned usury. As a supporter of the farming based on the economy, the great thinker of ancient times strongly opposed everything that belonged to chrematistics.
Aristotle expressed brilliant thoughts about the exchange and its values. He understood that the goods could not be exchanged without the identity of their essences. Thus, they could not be related to each other as the commensurate values. According to Aristotle, the exchange cannot take place without equality, and equality cannot exist without commensurability (Grenville, 1997, p. 158). All crafts and arts are equated in exchange, and use values, participating in it, have something in common, although Aristotle could not explain such equalization. Aristotle’s genius manifested itself in the fact that he revealed the equality relation in the form of the value of the goods. Only the historical boundaries of the society, in which he lived, prevented him from discovering what the essence of the ratio of equality was.
Also, it is interesting to know how Aristotle saw the form of value. A monetary form of goods was taken as the development of a simple form of value. Although he could not scientifically explain the origin and essence of money, he associated it with the development of the exchange and started to consider the functions of money as a measure of value and medium of exchange (Luo, 2011, p. 168).
Aristotle blamed money becoming an end in itself rather than a means to achieve positive goals, especially for those who were engaged in commercial trading and usury. In his works, Aristotle constantly mentions that hates usury. After all, money exists for completely different purposes (for example, to help those who live in difficult and unacceptable conditions). According to Aristotle, money emerged due to the need for trading in more convenient way without finding out how certain goods can be exchanged for some amount of other goods.
The very need for trade has aroused because of the division of labor. People began to use the division of labor because every person has some abilities and skills that are more prominent than those of other people. Therefore, the ancient Greeks realized that exchanging a product for another one is much more profitable than learning how to produce this product skillfully (Brunner & Meltzer, 1964, p. 260). According to Marx, “in the history of economic thought, ancient Greek thinkers show the same genius and originality as in all other areas. Therefore, historically, their views formed the theoretical starting points of modern science."
Summarizing all above-mentioned information, one can define the key points of economic thought of the Ancient Greece, which are mostly expressed in Aristotle's works:
- The availability of private property;
- All activities are divided into two groups: savings and chrematistics;
- Money plays the role of a measuring instrument in the exchange, and, therefore, it cannot be lent (coin cannot give rise to a coin). Aristotle believed that the money was "a universal medium of exchange" as a result of the agreement (Hasker & Tahmilci, 2008).
Evolution of Money in the Middle Ages
In medieval theory, there are no economic activities, which are not connected to the moral purpose. In the middle Ages, conditionally, the evolution of money was related to the development of sources of economic thought. Thus, the evolution was going in two directions due to the use of the sources as a basis for economic theory. These directions can be described as follows:
• in Western Europe: the ideas of Thomas Aquinas (1225-1274 years);
• in the Arab world: the Quran (610 - 632 years); a...