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The evolution of money?

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Lydia, early 6th century BC/ Classical Numismatic Group, Inc.

Recently, a complex social game experiment was conducted at Chapman University in Orange, California, to find out if the evolution of money inspired us to co-operate.

Camera theorizes that money makes cooperation possible when people cannot rely on reputation or kinship. He speculates that money drives cultures toward money-based economies by helping to support larger populations.

The study is convincing evidence that money promotes cooperation among Camera’s research subjects, says Paul Rubin, an economist at Emory University in Atlanta. But he points out that they “were undergraduates, meaning they have lived in a money economy all their lives.” The cooperation-boosting power of money may not hold for people with no exposure to modern monetary systems, he says.

Camera agrees that this is a limitation of the study. “We have given some thought to the possibility of running the same experiment with subject pools that are ‘nonstandard,’ ” he says, such as isolated Amazonian tribes. Despite some “nontrivial logistical issues”—such as importing a version of this computer-based game into the jungle—Camera hopes to test the cooperation-inducing effect in groups who live more like our hunter-gatherer ancestors.

Hmmm. A big conceptual problem here is that money is a function of central government. That is why heads of state or their symbols have been pictured on coins from earliest times. Governments create the value of money by underwriting an orderly marketplace in which units of money can have an agreed value. In a state of emergency or violent chaos, people would want food, medicine, guns, gold, or something, not the currency of a failed government. Hunter-gatherer societies typically don’t make much use of money because they localize rather than centralize.

Here’s a guess: Gabriele Camera will discover that greater use of money resulted from the growth of market towns and cities. ;)

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4 Responses to The evolution of money?

  1. It would be more precise to say that standardized money—especially fiat currency—is a creature of government. Primitive forms of money have arisen in places with no government to speak of.

  2. True, but those primitive forms tend not to develop because it is not clear just who backs the system or how.

  3. Money emerges from a barter economy as a universally preferable good, relative to all other goods, that can be exchanged for the widest variety of other goods within the economy. Post-hunter-gatherer, the division of labor was still very narrow and so people could trade between each other within their few specializations – i.e. the fisherman could trade his fish for help cutting down some trees, etc.

    As this continues to expand and new solutions to problems are discovered, the number of possible products and services continues to grow. Once an economy becomes complex enough, it becomes very impractical to barter. If I want copper pipes and I am a pig farmer, and all we have is a barter economy in the strictest sense of the term, I have to find someone who either has, or produces, copper pipes, who is specifically willing to trade them for a pig. Not a bunch of wood, or a barrel of tar, or whatever else, but specifically what I have to offer.

    Money emerges because this becomes so impractical that an economy can only grow/specialize so much before the limits of barter are reached, and a new method of allocating resources needs to be used. People start taking a few of the things that they know most people want, and trading for those. This is why you almost always have some sort of commodity start off within the economy that emerges as money – generally several of them.

    There are other factors that an outside observer with the advantage of the hindsight of history can point to and say “these attributes will make a thing more likely to be used by people as money”. If something has these attributes, it will probably be used as money within an economy:

    - desirable by a plurality of individuals within an economy
    - easy/convenient to transport and secure
    - divisible in a “universal” way – i.e. by weight, which
    - difficult to destroy or erode
    - scarcity
    - non-replicable or extremely difficult to counterfeit

    Sorry for the long diatribe, but what I was saying all of that to get around to is a few points about both the cited study’s main premise and conclusions, and the commentary by News regarding it.

    i.e. government monopolization of money is not money, it is just what happens within a society that swallows the “benevolent overlord” pill. There is a long and rich history of private mintage of precious metals, trade guilds issuing their own currencies, banks issuing warehouse receipts on stored money, etc., completely outside of government purview and jurisdiction. Furthermore, it is arguable that in eras where such things existed, economic expansion occurred at a far greater rate than in eras where states co-opted the lifeblood of the economy and imposed a monopoly on money using coercion and violence.

    Not to mention converting from a literally-impossible-to-counterfeit element into an infinitely-replicable digital medium/vastly replicable paper money system that only happens when a government monopolizes money.

    Your final conclusion is proven to be historically true, simply because it becomes far too cumbersome for barter to be effective as people become more concentrated within a small geographic region and the division of labor explodes.

    https://mises.org/document/6785/Economics-in-One-Lesson

    If you have any interest in economics, I’d suggest someone start there (free, to boot!).

    P.S. This is my first ever post on here. I’ve been a reader for months but just never bothered to sign up, because I wouldn’t have a ton to contribute to the very informative comments on here. Economics is more my thing, so I thought here would be a good place to start. Hello to all, and thanks to UD for the excellent stuff you post. I’m enthralled by watching the death throes of NS and metaphysical naturalism occur before my very eyes. It’s like a slow motion car crash, but better – I don’t want to look away, even if I could!

  4. Money has really emerged out of barter to unify the options for consumers to purchase goods. What we have nowadays actually can not be called money as dollar is not redeemable in gold and consequently has no value. Nowadays money monopolized by the government are just pieces of paper, plastic or digitalized currency, which can lose it’s assigned value any day and it no time.

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