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Originally Posted by Formendacil
And so I would explain how Frodo had an income without actually working. He was the chief landlord in a very fertile and product region, and even nominal fees would keep him satisfied.
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I forgot that the Baggins' might get 'tribute,' to use a somewhat harsher word, from those that worked their lands. I just don't see any example of it taking place (though it may have).
And as the children that greet Gandalf and Bilbo when Gandalf returns to the Shire (pre-Party) expect some pennies, I would say that there is coin currency within the Shire. Lotho buys up a bunch of land and exports the crops south for more wealth, allowing him to buy more land and begin controlling much of the state of the Shire. Who then enforces the laws, as it seems to me that the community is ruled by hobbit-sense, which in a way makes me feel that they really had no need for money.
Hope that that is somewhat clear.