Modern day exchange is barter done with a medium.  This is called a money.  When you buy something, you are trading your dollars for that good.  The exchange must make you better off.  Otherwise, you never would’ve made the exchange.  Both parties must agree to the exchange.  It’s always a voluntary transaction.  What gets exchanged are not of equal value.  Each party must view the other good to be more valuable.

The difference between the value the actor places on a good and what he pays are the profit.  It’s certainly possible he finds out at a later date it’s a loss.  However, the actor expected to profit.  The loss in this scenario is purely psychic.  The seller of the good is expecting to profit as well, but his profit is not a psychic one.  In the seller’s case, that would be a money profit.  He can also figure out at a later date that it was a loss.

Calculation must take place in money profits.  A balance sheet can’t be recorded with values and various psychic feelings.  Recording subjective values can’t tell you anything about the world.  Contrary to what the statists claim without saying it, values can’t be measured.  Only the individual can determine his own preference, but can’t give it a numerical value.  It must be in terms of money so it can be communicated to others.

Calculation couldn’t emerge under barter.  It couldn’t have been thought of until there was an indirect exchange.  It’s absolutely critical that society allows calculation to operate.  Civilization will crumble without it.  Inflation distorts calculation.  People see prices rise.  That’s not healthy for any economy either.  However, severe inflation will make calculation futile, and will cause the economy to collapse.

The exchanges we experience today are barter with a medium.  A medium—money—is needed to expand the size and scope of the economy.  The existence of a money allows calculation to determine profits and losses.  It must be in a money.  It can’t be in utility or anything else they can come up with.  Inflation distorts a necessary process of the economy.  Distorting this process can lead to an economy wide collapse.

References

Ludwig von Mises; Human Action

Murray Rothbard; Man, Economy, and State