Book contents
- Frontmatter
- Contents
- List of tables
- List of figures
- List of maps
- List of boxes
- Foreword
- Introduction: What is economic history?
- 1 The making of Europe
- 2 Europe from obscurity to economic recovery
- 3 Population, economic growth and resource constraints
- 4 The nature and extent of economic growth in the pre-industrial epoch
- 5 Institutions and growth
- 6 Knowledge, technology transfer and convergence
- 7 Money, credit and banking
- 8 Trade, tariffs and growth Karl Gunnar Persson and Paul Sharp
- 9 International monetary regimes in history by Karl Gunnar Persson and Paul Sharp
- 10 The era of political economy: from the minimal state to the Welfare State in the twentieth century
- 11 Inequality among and within nations: past, present, future
- 12 Globalization and its challenge to Europe
- Glossary by Karl Gunnar Persson and Marc P. B. Klemp
- Index
7 - Money, credit and banking
- Frontmatter
- Contents
- List of tables
- List of figures
- List of maps
- List of boxes
- Foreword
- Introduction: What is economic history?
- 1 The making of Europe
- 2 Europe from obscurity to economic recovery
- 3 Population, economic growth and resource constraints
- 4 The nature and extent of economic growth in the pre-industrial epoch
- 5 Institutions and growth
- 6 Knowledge, technology transfer and convergence
- 7 Money, credit and banking
- 8 Trade, tariffs and growth Karl Gunnar Persson and Paul Sharp
- 9 International monetary regimes in history by Karl Gunnar Persson and Paul Sharp
- 10 The era of political economy: from the minimal state to the Welfare State in the twentieth century
- 11 Inequality among and within nations: past, present, future
- 12 Globalization and its challenge to Europe
- Glossary by Karl Gunnar Persson and Marc P. B. Klemp
- Index
Summary
The origins of money
We have learned that one major cause of productivity increase in pre-industrial economies is the gains from division of labour resulting from occupational diversification in an economy where regions and nations exploit their comparative advantages*. But these gains cannot be reaped without exchange between increasingly specialized producers. Money, as a means of exchange, developed alongside the occupational and regional division of labour. The first money, some five or six thousand years ago, did not consist of stamped coins, but rather of standardized ingots of metal which were generally accepted as a means of payment. The Chinese and Greek civilizations introduced coins which were stamped like a modern coin. To understand the advantages of money it is worth looking at its historical antecedent and alternative. Direct bilateral exchange of one commodity for another, so-called barter, requires coincidence of wants* between trading partners. It means that if you want to exchange a pair of shoes for wheat you have to find someone who has wheat and wants a pair of shoes. The matching process necessary to detect coincidence of wants will be very time-consuming, and time matters because it is scarce and has alternative uses. Barter will not only be associated with high search costs, but will also reduce the volume of trade to below its potential level because trade must be balanced. However, the volumes participants want to trade need not balance and in those cases the ‘minimum’ trader will determine the volume of trade.
- Type
- Chapter
- Information
- An Economic History of EuropeKnowledge, Institutions and Growth, 600 to the Present, pp. 129 - 153Publisher: Cambridge University PressPrint publication year: 2010