Many people think money was invented to make trading easier. The usual story goes like this: in the old days, people swapped things like food, tools or animals in a system called barter. But barter was messy—what if you had eggs but needed shoes, and the shoemaker didn’t want eggs? So, according to this story, people invented money as a handy way to trade.
But that’s not really how money began. In fact, money didn’t come from markets or trading between people. It started because leaders and governments needed a way to run their communities and collect resources. The first money appeared when rulers—like kings or temple leaders—decided that certain things, like coins or tokens, could be used to pay taxes, fines or other duties people owed to the government.
Here’s how it worked. The government would create coins or tokens, or keep records of how much people owed in things like grain or labour. Then, they would tell everyone that these coins or tokens were the only way to pay their taxes or debts to the state. Because people had to pay taxes, they needed to get these coins. That made the coins valuable—not because of what they were made of, but because people needed them to stay in good standing with the rulers.
Once the government had introduced money, people could start using it to trade with each other. In other words, money came first, and markets followed. Without money being accepted for taxes and other duties, people wouldn’t have had a reason to want it in the first place. Once they did, it became useful for buying and selling goods and services. Markets didn’t create money—money made markets possible.
This system can be seen in ancient places like Mesopotamia, Egypt and Greece. In Mesopotamia, for example, people didn’t use coins at first—they used written records to keep track of who owed what. When coins did appear later, they were mainly used to pay soldiers and workers who helped the government. People accepted the coins because they knew they would need them at tax time.
So, money was introduced by governments to help them organise society and get the things they needed—not just to help people trade at the market.