Short Essay on Money as Encouragement to Division of Labour

Use of money makes exchange process efficient and quick. It eliminates enormous costs and delay involved in searching for the double coincidences of wants.

It breaks up the stationary state of self-sufficiency of the barter economy. Due to the smooth exchange system and market mechanism created by the use of money, the need to produce all goods which one may require is eliminated.

In a money economy, one may specialise in the production of that good only in which he is very proficient and has a greater interest and aptitude. And, he would tend to produce more in excess of self- consumption requirement in order to create a marketable surplus.

By selling his marketable surplus of the commodity, he earns money. Money, thus, is the abode of purchasing power. Through this money he can buy different goods to satisfy his varied wants.

In short, in a money economy, different persons tend to specialise in different goods and through the marketing process, these goods are bought and sold for the satisfaction of multiple wants. In this way, occupational specialisation and division of labour is encouraged by the use of money.

The scope of complex division of labour, however, depends on the extent of the market. Smooth exchange facilities ordained by the use of money, in turn, facilitate increased and diversified production of goods and services and consequent expansion in the size of the market.

The market tends to be widened and spread over the country with the increased monetisation. The increased size of the market and the consequent increase in demand and rising prices encourage more output.

Larger output needs a large scale of operation in the process of production a larger scale of production implies greater specialisation and a greater specialisation and a greater degree of complex division of labour.

It causes improved productivity of labour. This leads to cost economy and lower prices. Cheaper goods attract more demand. This, in turn, means further extension of the market, including further output and so on.

Modern civilisation owes its growth to the economic efficiency of the people. The improvement in economic efficiency is, by and large, the product of the degrees and complexities of specialisation and division of labour in the economic society. The progress of specialisation is, however, determined by the efficient system of exchange.

The system of exchange in a modern economy has become efficient basically because of the institution of money.