NCERT Class 7 Social Science Exploring Society India and Beyond Part 1 Chapter 11 From Barter to Money PDF Download

Chapter 11: From Barter to Money

The importance of money flows from it being a link between the present and the future.

- John Maynard Keynes, 20th century economist

The Big Questions

1. How did exchange take place before money?
2. Why did money come into existence?
3. How has money transformed into various forms over time?

In the theme "Tapestry of the Past", you read about the crops that people grew, such as food grains or goods they made like carnelian beads. How do you think they exchanged these goods for things that they needed?

[Figure 11.1: Two people exchanging goods in a field, See in your textbook]

People exchanged goods or services for other goods and services. This system is called the barter system. How did this work? Suppose you need a pencil and have an extra eraser. Meanwhile, your classmate forgot to bring their eraser but has an extra pencil. You could exchange your extra eraser for the extra pencil that your classmate has. Wouldn't this satisfy your and the classmate's needs? This is how the barter system works.

Today, we use coins and notes to buy and sell things. People also use their mobile phones and computers for such transactions.

The barter system was the earliest form of exchange. There is a lot of evidence of it from around the world. People used commodities such as cowrie shells, salt, tea, tobacco, cloth, cattle (cows, goats, horses, sheep), seeds, etc.

[Figure 11.2.1: Stone Money: Giant discs of rock - called Rai stones - were used as money on the Yap Island, in the Pacific Ocean country of Micronesia, See in your textbook]

[Figure 11.2.2: The Aztec copper Tajadero (Spanish word for chopping knife) was a form of money used in Central Mexico and parts of Central America, See in your textbook]

[Figure 11.2.3: Tevau (Red feather coil made from birds' feathers) used as money on the Solomon Islands, See in your textbook]

Teacher's Note

The barter system seems simple, but it had real problems. Notice in the farmer example that one ox cannot be fairly split into shoes, a sweater, and medicine. This is why we needed money - to solve the problem of having to find someone who wants exactly what you have and has exactly what you need. When you see exam questions about barter, always look for these problems: finding a willing partner, fair exchange, and dividing goods.

Why Do we Need Money?

LET'S EXPLORE

Imagine that you are a farmer and that people use a barter system where you live. You need a whole variety of things - a pair of new shoes, a sweater, and medicines for your grandmother. But you only have an ox that you can spare. How would you be able to exchange the ox for all the different things you need from different people or places? What difficulties are you likely to face?

For one, you would have to find someone who needed an ox. Now, swapping your ox for a pair of shoes would hardly be a fair exchange! You may have had to go through a series of exchanges - for example, find someone to exchange your ox for several bags of wheat. You would then have to transport all that wheat to several places; first, find someone willing to exchange a part of the wheat for shoes, another person for the sweater, and yet another for the medicines.

[Figure: A farmer with an ox at a signpost showing medicines, sweater, and shoes, See in your textbook]

[Figure: A farmer with wheat bags and thought bubbles showing ox, wheat, and other goods, See in your textbook]

Teacher's Note

Pay close attention to why the barter system breaks down in this scenario. The farmer has one valuable item (an ox) but needs three different things from three different people. Money solves this by being something everyone accepts, so the farmer can exchange the ox for money, then use that money to buy anything he needs, whenever he needs it. This is the key benefit of money over barter.

Key Points

• In the barter system, people exchanged goods or services directly for other goods or services without using money.
• Barter required both people to have what the other wanted (a "double coincidence of wants"), which made exchanges difficult and inefficient.
• Money solved the problems of barter by providing a common tool that everyone accepts for buying and selling goods and services.
• Throughout history, different societies used various commodities as money, such as cowrie shells, salt, cloth, cattle, and even large stone discs.

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