Money & The Law Of Exchange

The law of exchange states that money is a medium through which people exchange their labour in the production of goods and services for the goods and services of others.

Before There Was Money

Before money was invented people used to barter. This involved exchanging goods or services for other goods or services.

For example, if you came to my house to fix my plumbing in exchange I would agree to fix your car. This is barter and is how people used to get things done without money.

As societies grew larger it became far more convenient for goods or services to be exchanged into a medium like coins. This way these coins could later be exchanged for the goods and services of others.

Today we do exactly the same thing. We work for a set amount of time and receive a set amount of money in return.

We then use that money to buy goods or services from other people who are also exchanging their goods or services into medium which they will then use to buy goods and services from others.

Money Is A Measure Of Value

The law of exchange dictates that the amount of money you receive for a product or service depends on how valuable it is.

The more something is needed and the more important it is, the higher its value will be and the more money you will get for it.

Value is largely determined by what someone is willing to pay for something, and can therefore vary depending on that person’s feelings, attitudes and opinions of what you have to offer.

For some people they may consider your product or service to be extremely valuable and so will be willing to pay a lot for it. Whilst others may consider it of no value, and so will pay you very little or nothing at all.

Generally speaking there are three factors which determine value: the type of work you do, how well you do it and the difficulty in finding what you do elsewhere.

Labour Is Viewed Merely As A cost Of Production

If you work at something you will develop an attachment to it and appreciate the hard work you put into it.

But as far as other people are concerned they don’t really care, as they just see this as part of the production process.

As a result, customers want the very most for the lowest price possible regardless of how much labour was involved.

What this means is that you cannot put an objective value on how much time it took you to make or do something.

That is just part of the production cost. It is only what people are willing to pay you for your labour in the marketplace that will determine what you are worth in financial terms.

To Make More Money You Must Add More Value

In order to make more money you must increase the value of what you do. This may mean you must increase your knowledge, skills or the amount of work that you do.

Whatever you can do to add more value to others will make you more money. The highest paid people in society continually improve what they do so that they can continually earn more money.