Why We Need Money — The Wealth of Nations

After people specialize, almost no one lives on only what he makes. Everyone trades surplus goods for what others make. That sounds fine until the timing is wrong. The butcher has extra meat. The brewer and baker want it. But the butcher already has all the bread and beer he needs. No deal happens. Everyone is worse off.

To fix this problem, societies tried many stand-ins for money: cattle, salt, shells, tobacco, even nails in a Scottish village. Metal won because it lasts, divides easily, and can be melted back together. Even metal was awkward until governments stamped coins to prove weight and purity.

Kings often clipped or debased coins, keeping the old face value while sneaking out metal. That cheated lenders and helped borrowers, and it wrecked many private fortunes. Abraham paid for land with silver by weight, not by counting coins. Saxon kings once took taxes in food before rulers demanded coin.

At the end Smith names his famous puzzle. Water is vital but cheap. A diamond is barely useful but costs a fortune. Useful is not the same as expensive. Money keeps trade moving when barter fails, but the next chapter asks what things are really worth when measured in labor.