The Evolution Of Physical Money
Earlier it was not that people used paper money for trading. On the contrary, barter system is not likely to be the main type of trade in the premature societies in the past. This is due to the reason that it is rare and difficult for any two persons to have chance of wants in which one person has a commodity that he desires to trade for some readily available good that other person is also looking for to trade.
Thus, instead of trusting to the limited options of barter, people made use of commodity money in which naturally inadequate precious beads, metals and shells were used to be bought and sold for any products.
The existence of commodity money is due to the trouble of happenstance of wants. Suppose for instance, a farmer wants to trade his sheep for mangoes but the second is not available in that season, a third midway good which is not fresh but is in demand such as gold or wine is traded, therefore making the souk more flexible and eliminating or reducing the trouble of the happenstance of wants.
After this, metal alloys came into existence as some countries suffered deficiency of precious metals and others minted the coins with seals of the country so as to depress their people from trading with the outside country.
What the reason to use only paper? This is because earlier when commodity money was used many countries suffered shortage of certain precious metals like copper etc. so, paper came into existence and approved by the government. Also, the metals were scarce and the saleable properties were growing on continuously. This all made trading very difficult.
Moreover, the development of paper money is simpler and cheaper than making precious metals. Also paper is easier and durable to carry as compared to the metals. Government took many steps to make sure that the money cannot be forged and is also very secure and safe.
What is your opinion? Should we throw this paper money and bring into use the electronic or plastic money? There is a lot of discussion as some people disagree concluding that the good that you look to purchase is touchable so the money should also be physical. But you might have seen many people that are using cards for payment rather making it cash. So, both have its pros and cons.
Therefore, if the alternative is good then it is better to replace paper money with that and try to dominate it over the economy for long time.
