Audio Clips

23 July 2012

A History of Money

I am fascinated by the idea of money as a means of exchanging my labor for someone else's.  James Surowiecki wrote a pretty interesting article about the origins of currency and the directions it may head.  Here are some excerpts:

Modern economists typically define it by the three roles it plays in an economy: 

It’s a store of value, meaning that money allows you to defer consumption until a later date. 

It’s a unit of account, meaning that it allows you to assign a value to different goods without having to compare them. So instead of saying that a Rolex watch is worth six cows, you can just say it (or the cows) cost $10 000.

And it’s a medium of exchange—an easy and efficient way for you and me and others to trade goods and services with one another.

But as money became more common, it encouraged the spread of markets. This, in fact, is one of the enduring lessons of history: Once even a small part of your economy is taken over by markets and money, they tend to colonize the rest of the economy, gradually forcing out barter, feudalism, and other economic arrangements. In part this is because money makes market transactions so much easier, and in part because using money seems to redefine what people value, pushing them to view things in economic, rather than social, terms. 

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