Many a (more or less) big philosopher has racked his brain as to why money has value. Aristotle was of the opinion that good money should come with very high production costs so as to induce people to attach value to it. He claimed that everybody would have to accept it as means of payment, value store, and value benchmark. Along those lines presented by Aristotle, basically an ancient gold bug, the only materials that would fit this description were gold and silver. Marxists would hail the reference to production costs, but Plato found a better explanation: from his point of view, money had no intrinsic value except the one that it was given by people. This reminds us of the marginal theory of value proposed by the Austrian School of Economics…..
“People value units of money because of their expected purchasing power; money will allow people to receive real goods and services in the future, and hence people are willing to give up real goods and services now in order to attain cash balances. Thus the expected future purchasing power of money explains its current purchasing power.” (Robert Murphy)
Carl Menger explained the emergence of money as result of a historical-evolutionary process derived from barter trade. In his Principles of Economics (1871) he writes: “Money is not the product of agreement of economic individuals, or even the product of a legislative act. It is no invention made by the people. Gaining an ever greater insight into their economic interests, the economic individuals in countries everywhere at the same time also realised that by relinquishing goods of lower marketable value for those of higher marketable value they would further their own economic end significantly. This is how money was created at many independent cultural centres along the ongoing development of the economy.”
“Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium.” Murray Rothbard
Why have gold and silver come out on top as money after all those centuries? In his explanation, Roy Jastram refers to two (also anthropologically provable) basic human needs: the appreciation of beauty and the human will to survive. The two metals therefore satisfy two requirements that are situated at the very bottom and at the very top of Maslow’s hierarchy of needs.
Source King World News