TheTrueEconomist
Hello, this is our first TheTrueEconomist episode on the topic of Origin of Money. Previously you had the opportunity to see our reference to the audio book example from Dr. Milton Friedman's book Money Mischief. We believe that the particular example serves well to the purpose of better understanding of the whole concept of "Origin of Money".
"Origin of Money"
There were people and primitive societies at first. In those societies people had needs, so they worked to fulfill those needs. They created values to fulfill those needs, as they hunted animals and caught fish and cut trees and collected plants. From animals they got meat, fur and bones for tools, from fish they got food and decoration. Trees and plants were used for various purposes and other new and derived activities.
People fulfilled their needs with what they produced. As time passed the knowledge about production grew as did the amount of produce they produced. This eventually has lead towards creation of first unkeep, meaning there were goods that the producer could not use for himself, so he had to trade them.
At first only barter trade was possible, meaning trading goods for goods. Barter trade was very hard to accomplish and amount traded at first was very little. To get together the double coincidence of wants was almost impossible, because it meant that a person wishing to trade a hat for bread, had to find a person willing to sell the bread for a hat. This meant that the seller and the buyer had to be willing to buy and to sell, the goods they both wanted, meeting at the same place and at the same moment in time.
This kind of trade was hardly possible to accomplish, so the economic activity was low and incentive to produce unkeep was minimum.
However people did produce unkeep and some of that unkeep was used in trade.
Most traded goods at first were cows and sheep, as everybody wanted them and were sure of their value. In later societies, in various civilizations throughout history, different goods took place of most traded commodity. Like were cowrie shells, stones, pieces of metal etc.
Those goods which at some point in time have become the most readily acceptable goods in the market, have actually taken the function of being money. What happened was, in example...
Person willing to buy bread, would trade a cowrie shell, for a bread. Then, a person who received the cowrie shell would use it to buy clothing or tools. Again, the third person to receive the cowrie shell would use it in trade again, hence it was traded until someone used it not for trade but for its commodity purpose. (The same would go for a cow, sheep, piece of wood, stone, deerskin, cigarettes or any other commodity)
The most traded commodities in this sense took the function of money, or became as it is known commodity money. This meant that none or very little nb. of people would use commodities for their real purpose, but would rather use them for trading.
This was adopted at first for cowrie shells, pieces of stone and deerskin, but later it evolved to trading pieces of metal, copper, silver and finally gold.
As the economies evolved, kingdoms rose, societies expanded along with trade in great magnitudes, the uniformity of money was necessary to further increase security and velocity of trade. So kings issued and forged first forms of "professional" money, uniform silver and gold coins special for the kingdom they represented.
From this point on money evolved into what we have today...
In essence the origin of money resides in the basic idea of solving the complexity of the barter trade, as the sole purpose of money is at this point mediation between trading parties.
Let's imagine an example, if people had a perfect mind to use in trade. Meaning If they had the ability to perfectly communicate and perceive the trading process within their economy with each other. If people could perfectly remember and transfer ownerships and debts between themselves telepathically, understanding that once produced and traded has a value transferable to others in process of buying and the other way around, would absolutely mean that people would have no need for money at all.
As is in the example of "Fei", stone money example presented in the Milton Friedman's book Money Mischief. If people could understand that the trade has taken place, while imagining and understanding some measure of value regarding the trade and if that information could be transferred and confirmed with the third party upon making agreement of next trade, then with a perfect mind able to do these tasks, there would be no purpose of having money.
However, as this is not the case, people have to use money instead of the perfect mind, meaning it is clear that the origin of money essentially is to mediate in trade and help us in our process of buying and selling things...
TheTrueEconomist
Stay tuned!
Loading...
3 videos
Synchronize your video to your voice better. Anyway nice work.
GIANNY0GG0 8 months ago 2