The Barter System and Evolution of Money dates back to the early days of man and has evolved from society to society.
The Barter System
In the primitive days of men, exchange of goods was the only method of transaction which we have come to know as the barter system or period.
The Barter system was the non-money economy era which means that people would not have been able to obtain all the goods and services they wanted during this period.
People in this era used the swapping-methods of exchange to survive.
Money seems as old as man itself but what we can say that constitute money differs from society to society and from epoch to epoch.
The Barter System and Current Society
In societies where all transactions are planned by the state, it is possible to do without physical cash since payments can be in kinds.
One can then come to the conclusion that a fully planned economic system can exist without the use of physical cash called money.
It should be pointed out that as societies get more complex and transactions increase, there is the ultimate need to find a medium of exchange common as seen under the barter system.
Exchange becomes more complex without an agreed medium of exchange.
The desire for man to satisfy all his needs gave rise to the barter system.
As explained above, the barter system shows a non monetary period, in this epoch, when barter system was made possible, our modern cities and towns had not existed rather, people were organized in small society called bands.
These so called bands survived by hunting and picking fruits. The bands were more self-sufficient from nature and hunting of animals.
It is possible however to imagine some form of exchange between individuals within the same community – between relatives and friends as the case may be.
The value of those gifts was not probably important and the whole transaction lacks any traits of business as we find in todays system.
However, these exchanges between friends and relatives could be seen as the early forms of barter system.
At the dawn of civilization however, and as human societies developed and grew more complex, the small band of hunters and food gathers discovered the secret of agriculture and began to live a more settled life.
In the process also, they discovered the advantages of diversion of labour and specialization of skills.
Some developed the skill of making stones or other tools while others the art of pottery or basket making.
In fact it became apparent from this discovery that if some people devoted themselves to hunting while others to farming, it will in turn make exchanges easier.
Since money was unknown at this time in such society, goods then exchanged for goods directly in the fashion of a barter system until when the exchanges became very complex to carry out.