I remember learning about bartering in some elementary school, but it didn’t occur to me to ask until now. How the heck does a society collectively agree that “mm yes these metal circles equate to cows”? Does the government just give everyone 100 shmeckles and let supply and demand cover the rest?
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Well, imagine a world where chickens are currency. You have some chickens and I have some cows. You want my cows and I want your chickens, but we can’t agree on how many chickens it takes to get a cow. So we argue and argue until we’re both exhausted and still have no deal.
Then, one day, someone comes along with a bright idea. They say, “Let’s make these shiny little rocks the currency instead of chickens!” And we all look at each other and think, “Sure, why not?”
So we start using the shiny little rocks to buy and sell things, and pretty soon, everyone is using them. They’re easy to carry around and they don’t spoil like chickens do. Plus, they’re shiny and pretty to look at, so we feel good about having them.
Eventually, the shiny rocks become so popular that the government decides to get involved. They start making their own shiny rocks and telling everyone that these are the only ones that are worth anything.
And that’s how we transition from a bartering system to a centralized currency. All it takes is a little creativity and a lot of shiny rocks.
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