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Before there was money, there was barter. In barter, people exchange goods and service directly in exchange of goods and service offered by others. An individual possessing a material object of value, such as an animal, a measure of grain or farmed produce, could exchange that object for another object perceived to have equivalent value.
In ancient history, all forms of goods were used in barter. Items include amber, beads, eggs, chicken, corn, rice, hoes, ivory, leather, pigs and even oxen. The list goes on.
However, barter was a rather cumbersome form of trade and ineffective way to exchange goods and services. The capacity to carry out ideal transactions is severely hampered and restricted since it is dependent on a coincidence of “wants” from both parties.
The person who has a chicken to barter for some beads may not find a person with the beads who is looking for a chicken.
There is no common medium of exchange in which tradable commodities can be converted into or a standardized system of value applied to those commodities.
Imagine getting paid in chickens, pigs or oxen today. Try exchanging the pigs or the ox for a train ticket home or food at the supermarket. It would be utter chaos but I suspect very entertaining to watch.
As civilization grows, the barter system became too clumsy and was discarded in favor of other forms of currency.
Here’s a short, entertaining and funny clip from SchoolHouse Rocks that explains the basic concept of Bartering.
Other articles explaining the history of Barter can be found here
Although bartering is not a standard way in which we do business or trade today, it still exists in one form or another.
There are 5 main transitions in the evolution of money (click to read more):