On trade

I suddenly thought about this: In a Pareto optimal state for a society, that is, a society where everyone has all the resources and goods perfectly allocated among all the members of the society, there would be no more trading between members. All this is so far in accordance to the definition of a "Pareto optimal state". And there would be no use for currency is such a system. Why would anyone hold paper notes, if there is nothing else to exchange for?

But clearly, this is not a state that we observe in any economy, in any country. Trading is still occurring every minute, every second? Why should this be? Because resources and goods are not perfectly allocated among all the members of the society. oO. You mean after all these years of trading, human civilisation still have not achieved Pareto optimality? There are several ways this can occur:

1. Resources and goods keep appearing in new amounts in society, randomly placed. That means that resources/goods can not be optimally distributed in the society. Hence, the need to trade.

2. Change in population. Birth and deaths occur, and hence, distribution cannot be expected to remain optimal.

3. Our wants are changing with time, and is not constant. You would trade for food whenever you are hungry, and will continue to buy food because you will be hungry some time later. Hence, distribution of food cannot be expected to remain optimal.

4. We are simply not super computers, and cannot process all the information available. There is a cost to storing, processing and finding information. It is simple impossible to optimise everything in such a short time(length of human civilisation) because the amount of goods and resources in the economy is simply too much to count.