How does the economy “grow”? Where does the new money comes from?
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Commerce. Say you have a small settlement or commune village in the middle of nowhere that starts out with 10 settlers. You have a small farm, and orchards to sustain your little population. Your tiny local economy is basically your neighbour will give you two potatoes in exchange for one Orange. Harvest season comes and you realise you have a surplus beyond your needs of fruits. The village 20 miles away has a need for those fruits as they can’t grow as many orchards as you, but they have an abundance of wool and cotton and hundreds of sheep and will give you 10 lbs of meat, 3 barrels of cotton and 5 spools of wool in exchange for like 5 of those tasty oranges.
A trade route begins. You begin trading with this village, and form an agreement to exchange goods and be allies. The surplus in fruit allows them to eat and supports reproduction as the food supply can sustain a bigger population for them. Their wool and goods allow your population to make clothes and tasty meat stews which can then be traded and sold to someone else who needs them or grow your population. Eventually through commerce, more people flock to these two little villages that have all the necessities and comforts people need to live a quality of life. So more people means more innovative ideas and production. More production means more goods. More goods means more money or trading for different goods. The money comes from buyers and sellers of commodities. Word gets out to other villages far away, so now people from there come to your village for goods and bring their wares which are rare and exotic.
Well at some point these two original villages merge to form a city because the trade route is not too far and between the villages people settled. So now this one big city needs a government to run it. It needs rules and to establish a fair justice system so that everyone can live in harmony and peace. The citizens all agree to a small tax to support this system. So now there is an influx of money and goods. A wage system is implemented, people now don’t just trade goods, they work for a wage so they can choose which goods they wish to purchase from whomever they want. This brings in more goods, more people, and more jobs.
The villages started out with cotton and orchards, respectively. Now they have all kinds of wares and goods and money from all over the place and … an economy. Or maybe some village with a tiny population has a surplus of gold mines but they don’t have a use for gold as it isn’t valuable to them and others want their gold and are willing to give them lots of goodies they need for it. As the population gets bigger, there are more inventions. What started out as a orchard of 10 orange trees has now expanded to 1,000 and people need to be paid a wage to make sure that commodity is being cared for and flourishes.
However, the cotton no longer grows in your village and now you have to obtain it elsewhere as the original supply wasn’t expanded and it’s demand out weighed it’s production. That’s okay because now that you have an economy, you can trade other goods for some cotton from someone that has a ton of it and no oranges. If they’re not willing to trade, you sound the horns of war.
I’ve played too much Age of Empires.
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