Question

In: Economics

In a novel by Douglas Adams people in primitive societies were trying to set up an...

In a novel by Douglas Adams people in primitive societies were trying to set up an efficient economy and needed some form of money. They decided to use tree leaves. What problem do you think they faced after? Why? Explain through the concept of functions and forms of money.

Solutions

Expert Solution

In order to analyse the problematics in using tree leaves as a form of money in an efficient society, we need to understand the definition of money first. Then we will see its forms and functions.

Formal Definitions of money: various formal definitions to define or describe money are explained here:

1. Legal definition: Money is what the law say it is. people may refuse to accept the things that are legally defined as money. they may even refuse to sell goods and services to those who offer legal tender in payment. this may invite punishment under the law. Further, things that are not legally defined as money may come to be generally acceptable in payment, which may become a major part of circulating medium, e.g. example commercial bank deposits

2. Functional definitions: Walker has defined it in terms of its functions According to him “money is what money does”. this functional definition is too simple vague and extensive in the sense that it does not explain what money actually is or does. instead of defining what money is he makes the reader to understand money by referring to the functions which money performs. according to Robertson. “money is anything which is widely accepted in payment for goods or in discharge of other kind of business obligations”. this definition although exhaustive is one sided in the sense that it stresses only on one aspect of money namely its wide acceptability to settle transactions . general acceptability is though one of the essential characteristics of money but it is not the only quality that makes money proper. Seligman has also defined money stressing on this quality as “one thing that possesses general acceptability”. The definitions given by Cole and Kent also lay stress on the general acceptability characteristic of money besides some functions of money. the definition given by Cole stresses on the function of the standard of deferred payments. he defines money as “anything that is habitually and widely used as a means of payments and is generally acceptable in the settlement of debts”. according to Kent, money is “anything which is commonly used and generally accepted as a medium of exchange or as a standard of value”. this definition of Kent emphasizes two functions of money, medium of exchange and standard of value.

3.Behavioral definitions: None of these definitions is complete and satisfactory. a comprehensive definition of money must emphasize not only the important functions of money but also its basic characteristic that is general acceptability. from this criterion, the definition of Crowther is the most suitable. he defines money as “anything that is generally acceptable as a means of exchange and that at the same time acts as a measure and as a store of value”. this definition covers all the three important functions of money and also stresses its basic characteristic namely, general acceptability.

Now given these definitions we will analyze the problems of using tree leaves as money through its functions.

The central function of money is “medium of exchange”. Here the tree leaves can fulfill this function. It can be used as a medium of exchange but the only condition is who controls the supply of tree leaves. If it is specially controlled/ cultivated under certain responsible authority. Then in that case it can sustain this function of money. But if the leaves are from local tress, grown everywhere, then in that case it cannot fulfill this definition and function of money.

The second criterion where the tree leaves fail as a form of money is “money as a measure of value”. We all have seen in paper currency, different denominations are available and hence it acts as a standard or measure of value. Tree leaves fail strictly in this domain as they are not available in any form of denominations.

The third criterion where the tree leaves fail as a form of money is “money as a store of value”. Money is a way of transferring purchasing power from the present to the future. People hold money as they can trade the money for goods and services at some time in future. In the absence of this function, people would have to maintain huge stocks of goods for use in future. Since tree leaves are perishable, it cannot be used as a store of value. Hence fails this criterion as well.

The fourth criterion where tree leaves partially fail as a from of money is “money as used in transfer of value”. It passes this test if it fulfills the first criterion of medium of exchange otherwise it again fails here. Because money helps us to transfer values from one person to another and from one place to another up to any amount due to its general acceptability.

Just to summarize the main problems associated with tree leaves as a form of money is because it does not possess the essential characteristics of money i.e. divisibility, durability, portability, scarcity, homogeneity etc.


Related Solutions

In primitive societies, the entitlements to use land were frequently possessory rights rather than ownership rights....
In primitive societies, the entitlements to use land were frequently possessory rights rather than ownership rights. those on land could use it as they wished, but they could not transfer it to anyone else. one could acquire a new plot by simply occupying and using it, leaving the old plot available to someone else. would this type of entitlement system cause more or less incentive to conserve the land than an ownership entitlement? why?
The UP events office is trying to make a rough estimate of how many people will...
The UP events office is trying to make a rough estimate of how many people will attend graduation ceremonies on campus this spring. Help them out! Estimate the 95% confidence interval for the probable number of attendees / visitors at UP graduation ceremonies based on this random sample of graduation attendance figures from recent years. 9596 9831 1391 2892 6674 1938 4906 4009 6127
I need to set up and run a goodness of fit test. I am trying to...
I need to set up and run a goodness of fit test. I am trying to learn more about the type of novels that people prefer to read. Please include null and alternative hypotheses. Show all work and please explain if you use any excel tests. Total number of responses is 30. Romance: 18 Sci - Fi: 7 Fiction: 5
The COVID 19 Rapid Response fund was set up to alleviate the suffering of the people....
The COVID 19 Rapid Response fund was set up to alleviate the suffering of the people. “In March 2020, the Government of Canada announced $1 billion to support a whole-of-government COVID-19 Response Fund, which supports federal public health measures such as enhanced surveillance, increased testing and ongoing support for preparedness in First Nations and Inuit communities” Government of Canada (2020). The policy aims to reduce the suffering of people hit by COVID 19 that led to the loss of jobs...
Set up - You were hired in the role of accounting lead a couple of years...
Set up - You were hired in the role of accounting lead a couple of years ago by a privately held company. You report directly to the CEO. The company sells its products through a dealer distribution network. Revenue is booked at the time shipment occurs. Under standard practice, revenue will be booked as of the last day of the month if the shipment will occur within 1 or 2 days of the new month. On occasion, revenue may be...
Some people argue that the only way to save rare species is to set up private...
Some people argue that the only way to save rare species is to set up private game reserves to which wealthy hunters can travel. How could this help save endangered species?
1. The Spanish empire set up a castas system (caste, separation of groups of people). Based...
1. The Spanish empire set up a castas system (caste, separation of groups of people). Based on the reading, explain the following terms in just 1-2 sentences: -Creoles -Peninuslares -Meztizo/Mestiza -"Indians" -Mulattos 2. What was the relationship between the Creoles and Peninsulares often like? 3. Based on the last couple of pages of the reading and my lecture video, how were the motivations between Spanish Catholics, French Catholics, and British/English Protestants different?
(Business Structures) If you were to set up a small business in Hobart upon completing your...
(Business Structures) If you were to set up a small business in Hobart upon completing your current degree, what type of business structure might you decide to set up and why?
On New Year’s Eve, Police set up a sobriety checkpoint at which drivers were stopped. The...
On New Year’s Eve, Police set up a sobriety checkpoint at which drivers were stopped. The police did a visual check to see if the driver was impaired. They found that there was probable cause to inspect 12 of the 225 vehicles stopped. a)Find a 95% confidence interval for the proportion of drivers in the county that have their cars inspected at a sobriety checkpoint. Do not make these calculations by hand. Instead, use the 1-PropZInt command in your graphing...
A group of 268 overweight people signed up for a weight loss program. Participants were asked...
A group of 268 overweight people signed up for a weight loss program. Participants were asked to choose whether they wanted to go on a vegetarian diet or follow a traditional low-calorie diet that included some meat. 153 people chose the vegetarian diet, and the rest chose to be in the control group and continue to eat meat. There was a greater weight loss in the vegetarian group. What is the sample size of each group? What percentage of people...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT