The nature of money is tragically one of the most unexamined and vital questions in modern society. Over the course of history, different monetary systems have risen and fallen as technology progressed and new forms of money emerged that were superior to what came before. To help us understand money, we must examine the question: “who controls the ledger?” As we explore the technological history of money and its various incarnations, from informal social credit to commodity-backed systems, we can gain insight into how control over the monetary ledger impacts individual liberty, economic prosperity, and human flourishing.
In the Austrian tradition, figures like Carl Menger, Ludwig von Mises, and many others have written extensively about the function of money. At its core, money enables indirect exchange as a medium to facilitate transactions. In small communities, social credit systems can adequately regulate resources through direct exchange. However, as these communities grow, indirect exchange through money becomes essential. Expanding the division of labor and specialization requires more complex economic calculations. The increasing sophistication of wants necessitates indirect transactions between distant parties. Most crucially, direct exchange relies on trust and familiarity between counterparties, which erodes with scale. Money arose to enable growing communities to reap the benefits of economic expansion through indirect exchange. Without sound money, rising productivity and specialization cannot be effectively coordinated. The Austrian tradition recognizes how critical the monetary framework is in an evolving economy.
Naturally, certain commodities are selected as monies within the market economy due to their optimal monetary properties as a monetary technology. Said differently, The most salable good, which has the lowest rate of declining marginal utility will be chosen to facilitate indirect trade. The primary monetary properties of scarcity, durability, portability, divisibility, fungibility, and verifiability give way to the salability of goods across time and space. Sea shells, beads, silver, and gold are all examples of different commodities that have historically been used as different mediums of exchange for their respective strengths in these monetary properties.
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In the Austrian tradition, figures like Carl Menger, Ludwig von Mises, and many others have written extensively about the function of money. At its core, money enables indirect exchange as a medium to facilitate transactions. In small communities, social credit systems can adequately regulate resources through direct exchange. However, as these communities grow, indirect exchange through money becomes essential. Expanding the division of labor and specialization requires more complex economic calculations. The increasing sophistication of wants necessitates indirect transactions between distant parties. Most crucially, direct exchange relies on trust and familiarity between counterparties, which erodes with scale. Money arose to enable growing communities to reap the benefits of economic expansion through indirect exchange. Without sound money, rising productivity and specialization cannot be effectively coordinated. The Austrian tradition recognizes how critical the monetary framework is in an evolving economy.
Naturally, certain commodities are selected as monies within the market economy due to their optimal monetary properties as a monetary technology. Said differently, The most salable good, which has the lowest rate of declining marginal utility will be chosen to facilitate indirect trade. The primary monetary properties of scarcity, durability, portability, divisibility, fungibility, and verifiability give way to the salability of goods across time and space. Sea shells, beads, silver, and gold are all examples of different commodities that have historically been used as different mediums of exchange for their respective strengths in these monetary properties.
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