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Shelling Out: The Origins of Money (2002)

17 pointsby ironchiefover 10 years ago

3 comments

nhaehnleover 10 years ago
The article talks a lot about one origin story of money, namely the one revolving around barter: roughly speaking, when there are N types of goods, you don&#x27;t want to keep track of an NxN matrix of relative values of those goods; instead, you want to select a very small number of goods with properties that make them useful to act as a common denomination.<p>There&#x27;s obvious truth to that origin story, but it is also seriously lacking and arguably leads to a lot of misconceptions about our modern <i>credit-based</i> monetary systems.<p>Consider, for example, that societies in the timeframes the article talks at length about (basically, before agriculture) were tiny and most likely rather &quot;communist&quot; in their internal organization. All that stuff about barter is only relevant for the interactions between different tribes.<p>So what happened when humans settled down and developed agriculture? That&#x27;s where the second origin story of money comes from.<p>For the first time, people had to keep track of who owned what, and who owed what, <i>internally in a large group</i> (cf. Dunbar&#x27;s number). And they did that by <i>inventing writing, number systems, and contracts</i>. A lot of the features of modern societies co-developed (rather slowly by modern standards) in those early agrarian cultures, including systems of taxation and credit, and including our modern forms of money.<p>The story then basically goes like this: When you as the king raise an army, you have to compensate your soldiers somehow. Initially, this certainly happens by letting them plunder and keep the spoils of war. But with a standing army - which you need as the society develops - that is no longer an option. So you mint coins which you hand out to your soldiers, at the same time telling your subjects that they have to sell their goods for those coins.[0] As compensation, taxes can be paid using those coins, thus creating the modern cycle of: state creates money to pay employees, employees buy goods from producers using money, producers return the money to the state.<p>Note that you don&#x27;t have to use coins - using shiny metal things is largely a psychological trick. In England, wooden sticks (tally sticks) were used for the same purpose for a long time.<p>[0] Most likely, people were familiar with shiny coin-like objects as art and jewelry, and certainly those objects were valuable. Paying soldiers with coins is a neat psychological hack to piggyback on the pre-existing meme of &quot;this type of thing is valuable&quot;. (Note that throughout a lot of history, coins were worth significantly more than their metal content!)
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o_____________oover 10 years ago
On this subject, I strongly recommend watching an illustrated documentary called &quot;Money As Debt&quot;:<p><a href="https://www.youtube.com/watch?v=jqvKjsIxT_8" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=jqvKjsIxT_8</a>
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mksndzover 10 years ago
See <a href="https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Debt:_The_First_5000_Years</a>