Analysis Of Frederic Bastiat 's ' What Is Money ' Essay

1521 Words Sep 30th, 2016 7 Pages
In Frederic Bastiat’s essay “What is Money,” his character named F— denounces money, yet praises riches. The patient bystander, B— is confused, as would be nearly any person of his time, and even the majority of people of today. Bastiat uses this exchange between strangers to prove to the reader that money is not wealth, which contradicted the economic system of the time, mercantilism. Money does have an important function, though, and Bastiat wants to make clear to the reader what money is, and what it is not.
Without money, to facilitate exchange people would need to barter, or directly trade goods for other goods or services for other services. While this system can work well, it also creates high transaction costs. For example, if a carpenter needed bread, he would need to find a baker who needed carpentry done. This ‘double coincidence of want’ is unlikely to occur in a small area in the first place. Second, one carpentry job might take several hours, which would be valued at more bread than the carpenter and his family could enjoy. The difficulty of bartering makes the trade less desirable, and the carpenter might end up wanting to make bread himself.
When money enters the equation, trade becomes much easier. Money, according to Bastiat, works as a voucher. It shows that society owes a person a debt because that person has performed a service. With money, this same carpenter can find anyone who needs woodwork done, and in exchange for the service the carpenter will…

Related Documents