Money Makes Civilization

Money Makes Civilization

By Connor Nepomuceno

Life and nature foist upon us a constant but ever-changing state of uneasiness. To correct this uneasiness and conquer nature, man acts. The paleolithic men, predating civilizations or even rudimentary societies, acted entirely self-sufficiently; anything they wanted they had to produce for themselves. This existence was hard and intensely laborious. By fulfilling our biological imperative to reproduce and form family units, the individual could offload part of his labor onto another. They divided their labor. One half of the family would specialize in securing meat by hunting, and the other would gather readily available plants such as fruit and grain. As multiple families accumulated and worked together in this process, we developed the first hunter-gatherer societies.

Going back to the state of uneasiness: How do men decide to act to fulfill their uneasiness? They decide based on their individual value judgment. Value cannot actually be measured because it is entirely subjective. Values can only be evaluated in an ordinal fashion, and each individual ranks these values differently in different circumstances.

A man in his normal state may value an engagement ring at three months salary and wouldn’t imagine parting with it for something as mundane as a bottle of water, or even a thousand bottles of water. But if you put him in the desert and deprive him of water for 24 hours, you could probably persuade him to trade the same engagement ring for the single bottle of water. His value scale has changed. We individually evaluate the marginal utility of goods in different circumstances and are constantly ranking them accordingly.

This process, even if subconscious, is a vital part of every decision we make. Man’s time and resources are always finite and limited, yet our wants and desires are limitless. Thus, man is always economizing his time and resources to fulfill the highest order demands in their value scale.

While every individual makes these value judgements constantly, ordinal lists of values don’t do much good in their own right. To be useful for purposive action in a society with the division of labor, individual valuations are turned into prices by the market process: The bidding of individuals’ value judgements against each other for the distribution of scarce resources.

An individual specializes in a mode of production and has wants determined by their value scale. Thus everyone has goods to offer in exchange for the goods which they demand. Every seller of a good wants the highest possible price for his product, and every buyer wants to pay the lowest possible price for that same product. Each seller has a minimum price and each buyer has a maximum price which cannot be exceeded for this transaction to go forward. Said another way, an exchange does not happen unless both the buyer and the seller both value the utility of the good they are receiving more than the good they are yielding. Exchange does not happen unless both buyer and seller benefit from it. When you have multiples of buyers and sellers, each exercising their individual valuations, we start to see prices form at the nexus of the aggregate supply and demand curves.

Before we had money, buyers and sellers had to trade goods with each other through direct exchange: This good for that good. In addition to being impractical, setting prices in direct exchange is complicated because demand for any particular good is at all times variable. In order for exchange to happen, each party must value and demand the good they are exchanging for. If demand for your good is low at a particular time, you have no hope of exchanging it for another good. Not all goods are readily divisible, making exchange scaling very difficult. The solution to these problems was to have a fiduciary medium of indirect exchange: Currency or money.

At first, these were goods or commodities, such as grain or salt. They were common, always in demand for use as food (and thus valuable to everyone), and very easily divisible by weight, allowing people to quickly and efficiently measure and exchange them. We then realized that we needed higher value, more durable, and long lasting commodities for money. Soon we were using shiny rocks which yielded metals that had many exceptional qualities and usages, not the least of which was for making more valuable, durable, and uniformly sized coinage. These fungible coins and commodities allowed us to measure prices and commence with indirect exchange.

When we had that ability, man was able to trade and exchange with each other in a much more efficient fashion. But they were not merely convenient; These measures allowed us to record price data. Some of the oldest survivng written documents from early man are price lists and personal accounting ledgers. This recorded data allowed man to calculate their finances, enabling man to calculate and plan the course of his life and production.

Producers now had the ability to record inputs and outputs, and deduce profits and losses. By being able to record this information, the process of making profit became intuitive and accessible to all. As producers made profit they could fulfill their immediate needs much more readily. As immediate wants were fulfilled, man could spend less time laboring for the present and more time planning his future. In planning for his future, he saves money, goods, and resources so that he may execute that plan.

This division of labor continued as acting man sought to fulfill ever more complex wants and needs in accordance to our planning for the future. As our needs get more complex, we need more sophisticated goods and production processes to fulfill them. This took more time, new skills and techniques, and different materials which had to be collected and turned into usable forms. This necessitated that individuals get more and more specialized to fulfill the production process. We had to coordinate supply chains of raw materials and source specialized labor. Chains of production grew longer and more complex. Eventually, it became untenable for the hunter/gatherer society to fulfill these complex wants and needs, so societies changed to facilitate these chains of production.

The processes of making value judgements, planning for the future, analyzing price data, coordinating production, acquiring and saving resources are all purposeful economic calculations. While we may not recognize them as such, every human makes these rationalistic economic calculations to guide everything that we do.

All that we have as a society is only possible because our system of production is facilitated with economic calculation coordinating the division of labor and resources via market processes. This economic calculation is only possible because of prices in money. Thus money facilitates civilization itself.

Connor Nepomuceno is the Region 3 Alternate on the Libertarian National Committee. He has been a Libertarian activist for 5 years and a passionate student of libertarian theory for over a decade.