Eli5: How did money come about?


Eli5: How did money come about?

In: 1

Originally people bartered. If you grew fruit at your home and you need meat, you have to not only find someone who sells meat, but is willing to take fruit as payment.

Money is something that anyone will take (if it is stable). It serves as something anyone can get to trade for what they need.

Money arose when human societies shifted from a hunter-gather economy to an agrarian one. It takes time to grow plant and animal products, but oftentimes farmers need to engage in trade before those products are ready. Money, in the form of a record of account, developed to allow farmers to make deposits of grain and receive a receipt in exchange that they could then use to trade for other goods.

1. hunter/gatherer and early agrarian societies are pretty equal and operate communally, gift economy type stuff (if you need something i can supply i give it to you with the pretense that if/when the situation is reversed you will do the same). this is a pretty fragile equilibrium and when it breaks you better hold onto your ass. that’s true about every system though, there’s nothing wrong with gift economy, at least not more wrong than every other economy.
2. advancements in technology improve some people/group’s ability to create value but this is uneven, breaking the system. equality is lost, the production of needful things now has winners and losers.
3. losers turn to banditry, killing winners and stealing their stuff
4. bandits discover that you can only slaughter a sheep once, but you can fleece it over and over
5. a longer-term view of their prosperity leads these bandits to start doing more than just steal. they use the resources they gather to remove rivals, especially roving bandits, protect their “sheep,” etc. the other rule of sheep is that if you’re not just eating the sheep right away you actually have to take care of them to get the full value. bandits become shepherds.
6. taking tribute in the form of money instead of agricultural products means the subjects of your banditry must fully integrate with this state you’re building, since they have to convert their produce into coins which can only be done by participating in your economy.
7. for bonus points integrate this with religion to make your banditry the unimpeachable word of the gods
8. congrats, you’ve invented money. also government.