Justice - though not necessarily happiness - is when everyone possesses
an identical bundle. Happiness - though not necessarily justice - is
when each one of us possesses a "bundle" which reflects his or her
preferences, priorities, and predilections. None of us will be too
happy with a standardized bundle, selected by a committee of
philosophers - or bureaucrats, as was the case under communism.
The market allows for the exchange of goods and services between
holders of identical bundles. If I seek books, but detest oranges - I
can swap them with someone in return for his books. That way both of us
are rendered better off than under the strict egalitarian version.
Still, there is no guarantee that I will find my exact match - a person
who is interested in swapping his books for my oranges. Illiquid,
small, or imperfect markets thus inhibit the scope of these exchanges.
Additionally, exchange participants have to agree on an index: how many
books for how many oranges? This is the price of oranges in terms of
books.
Money - the obvious "index" - does not solve this problem, merely
simplifies it and facilitates exchanges. It does not eliminate the
necessity to negotiate an "exchange rate".
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