A few realisations I've had over the past few years concerning money:
- Prices are ratios.
- Money is, generally, the most universal exchange medium, within a given region.
- Most currencies take their names from either units of weight or of indicators of quality.
- Many regions and periods have seen what were effectively multi-currency systems.
- There are multiple drivers for currency value.
Economists & economics itself is muddled on much of this.
@Jens Could you give examples of regions in which gift economies dwarf monetised trade?
@Jens That problem mirrors much of my own concern with the claim.
There's certainly a great deal of uncompensated labour; family care, volunteering, informal exchanges. Some of those, most especially spousal care (homemaking, child rearing, caregiving) are large. Few others compare with major economic sectors -- say, manufacturing, construction, transport & distribution, energy, professional services.
Definition, measurement, and valuation are problematic, though approachable.
@Jens Looking at opportunity costs and inputs might give some basis: labour hours, inputs, education, capital. Also factors such as avoided costs or comparable value.
An estimate some years back. of the value of free software looked a labour hours represented, and came up with a sizeable figure. Mind that many of those hours aare actually compensated, it's their output which is indirect.
@Jens If you turn that up, let me. know. Sounds interesting.
"the English currency Adam Smith describes (at ... great ... length) in Wealth of Nations is actually one of three independent currencies largely used for different types of transactions: copper for retail, silver for wholesale, and gold for finance."
That's interesting! Especially for fantasy-RPG scenarios.
@mdhughes Definitions get tricky. Examples of historical money, maybe, but usually not legal tender or currency, at least not today.
Though in post-Roman Europe, Roman coins, or credit systems based on Roman prices, were widely used across Europe for centuries. Meeting my "most universal exchange medium" description.
But 20th C. fiat currency is the outlier, most before this time had some bullion value in their coins or were directly exchangeable, and people lost confidence in any gov't that debased the coins too much.
Even Imperial China, which used fiat currency and base metal cash strings, had silver backing it.
@dredmorbius @natecull Anyway, my point is: Money is only what you can get people to exchange things for. If there's laws that paper with markings is useful for something (Federal taxes, if nothing else), then people may treat that as money.
If the currency's inconvenient, like copper in fantasy RPGs or paper bills in any hyperinflation economy, it's no longer "money", nobody accepts it.
People are just spoiled by modern fiat currency being somewhat stable, inflation just outpacing GDP growth.
I guess what I found fascinating is the observation that different types of metal were used for different industries... it wasn't just that 'gold coins mean a whole lot of silver coins' but that you just wouldn't be using gold at all if you were doing adventuring.. (Unless the adventure was breaking into a vault or robbing a large commercial trader). The type of metal would be a cue to *what the transaction was* and not just 'how many zeros on the end of the number'.
I wonder if this carried through to the early 1900s? eg was the 'free silver' movement in American populist politics driven largely by commercial traders because those were the ones who used silver (gold being for financiers, their natural predator and enemy)? Or was there something weirder going on with states containing silver mines being their own political bloc?
@natecull Yeah, my dark fantasy games set the economy to silver standard because I want tradesman-adventurers, not hob-nobbing with nobility; gutter copper standard games are much too difficult to climb out of socially.
D&D always defaulted to gold with aristocratic arms & armour available, but then you outpace it so fast, carrying around thousands of gold from a lowbie adventure, you have to move up to higher economies, which we didn't have any social model for until millionaires in the 1800s.
@mdhughes A view I've been drawn to (my own alone that I'm aware, though others likely reach similar ideas) is that seignorage is a measure of trust in the minting authority, and that fiat currency represents a very high level of trust -- effectively, against inflation risk.
Note that specie currencies are subject to devaluation. Adam Smith remarked on it as an inevitability.
Flipside: asset-backed currency is a measure of DIStrust in the financial system.
In fiat we trust...
Which works just as well, and stops deflation, until your gov't collapses and if a new currency isn't immediately acceptable, people starve.
Hasn't happened too often: Cuba pre-Castro, Venezuela, Soviet Union pre-Gorbachev (arguably post-, too, but the Ruble is "money" now), Weimar Germany.
@mdhughes But it's not just armed forces and tax authorities.
There are countries around the world, wth no US jurisdiction or tax authority, in which the US dollar is widely accepted, either officially, or *unofficiall*, that is, voluntarily, as a or THE preferred currency.
Over domestic currency (w/ force of law & taxes), or alternatives -- other countries' currency, commodity money, gift economy, barter.
"Armed forces and law enforcement" doesn't pass the sniff test.
Drug dealers don't have to pay taxes to see that the Dollar's stable, but if nobody paid taxes, the dollar would float freely and hyperinflation would take over, and they'd move to the Euro (and some have).
@dredmorbius @natecull Bitcoin's the weird case, where there is *some* physical backing with GPUs, electricity, and mining time, but it's deliberately designed to be not backed or traceable by anyone. Perfect for criminals and computer nerds who have access to those things, except that exchanging it for money anyone else uses is difficult (and US law enforcement in particular shuts down a lot of Bitcoin exchange sites…) so it's not stable.
@mdhughes Critically: BTC has a _cost_ but no intrinsic _use value_.
Contrast specie/ bullion, which has both cost (mining, refinement, assay) _and_ value (utility of the metal), or fiat, which has neither (freely producible, no inherent utility).
BTC ha failed to deliver on its promised benefits, largely.
@mdhughes The notion. of money NOT backed in some valuable commodity was so inconceivable that William Stanley Jevons gave as one of the essential properties of money its underlying (specie) value. Obviously NOT an attribute of. banknotes, credit cards, or bitcoin (though the latter has a work-factor value measured in kWh).
@natecull China has some similar history, and of course one (probably the first) examples of paper-based fiat currency.
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