Today, let's talk about money. The University of
Houston's College of Engineering presents this
series about the machines that make our
civilization run, and the people whose ingenuity
created them.
Abstraction is at the root
of invention. And one of the more interesting
inventions was replaceing real goods and services
with the abstraction of goods and services that we
call money -- a medium of exchange. Now how do you
suppose that happened?
It actually took place in several stages. The first
stage dates from the dawn of recorded history. As
people from different places bartered and traded
their produce, they needed frames of reference to
set the value of goods. So they started referring
the value of everything to such commonplace
merchandise as cattle or metal.
This process was generalized as early as 4000 BC by
using the weights of certain metals -- usually
gold, silver, or copper -- as a reference. You've
heard the Bible refer to something called a talent.
A talent was actually a unit of weight. 50 or
60-pound copper talents were a regular medium of
exchange around the Mediterranian by the 9th
century BC.
The next step was for governments to certify a
particular medium of exchange. The Chinese did that
in the 8th century BC by inscribing certain
exchange goods. A century later the Ionians put
government stamps on their talents.
And finally, coins -- pieces of valuable metal
inscribed with a government's guarantee that they
had value, even though they were separate from the
actual goods they represented. Coins date from just
after 650 BC, when the Lydian Greeks first made
them.
We use the phrase "rich as Croesus" when we speak
of great wealth, because the 5th-century-BC Lydian
King Croesus was famous for minting standard coins
made of a natural gold-silver alloy. Within a few
centuries, Greek coins had reached an artistic
level that wouldn't be matched until modern times.
The next level of abstraction was paper money,
which has no value itself but which represents
material goods that are held elsewhere. The Chinese
used paper notes as early as the 8th century AD,
but the widespread use of paper came about in
England and France only 200 years ago.
Today, the whole process is being taken into
computers. Our balance of cows, autos, and labor is
being reduced to electronic record-keeping -- to
credit cards and fund transfers. This is a level of
abstraction in which all our goods and services are
reduced to an agreed-upon figure of merit -- call
it the dollar or the yen -- and weighed against one
another in electric pulses. We still barter with
each other, but the medium of exchange has become
completely invisible.
I'm John Lienhard, at the University of Houston,
where we're interested in the way inventive minds
work.
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