Frederic Bastiat's Essay What Is Money

1521 Words 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
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Mercantilism is the idea that countries should limit imports and maximize exports to have the greatest money inflow into the country, and then collect the money to finance war. Bastiat explicitly mocks the system, with statements such as “to prevent the dollars from going out of the country is the way to prevent the wealth from diminishing, but it is not the way to increase,” and later states how mercantilism leads to war, and a limited amount of available goods. Even without these statements, the reader would still definitely know that Bastiat did not agree with the principles of mercantilism. Mercantilism assumes that money is wealth, while Bastiat knows that resources and goods are wealth, and money is merely a way to trade labor for those

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