Today, a history of 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 any invention. And no invention was more
abstract than the idea of replacing real goods and
services with a medium of exchange. Money is the
ultimate abstraction of material things. It
represents a mental leap that had to take place in
stages. The first stage predated recorded history.
As people from different places traded produce,
they needed frames of reference to set the value of
goods. They started referring all goods to such
commonplace merchandise as cattle or metal.
We generalized that process at least as early as
4400 years ago. By then we were using the weights
of certain metals, usually gold, silver, or copper,
as a reference. The Biblical talent was actually a
unit of weight. Fifty or sixty-pound copper talents
were a regular medium of exchange around the
Mediterranean by the 9th century BC. The original
shekel wasn't a coin at all. It was a lump of
silver weighing about a third of an ounce
In the next stage, governments certified a
particular medium of exchange. The Chinese did that
in the 8th century BC, when they put their
inscriptions on certain exchange goods. The Ionians
began putting their government stamps on talents a
century later. The Lydian Greeks minted the first
coins just after 650 BC. Coins led to a huge leap
in abstraction. Once rulers inscribed a lump of
valuable metal with its guarantee of value, that
lump began to have value apart from its own
substance.
Our phrase "Rich as Croesus" comes from the
5th-century BC Lydian King Croesus, who minted
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 stage of abstraction was paper money, a
symbol of material goods with no value of
its own. The Chinese used private paper notes as
early as the 8th century AD. In the 12th century,
the Chinese government issued its own paper money.
Paper money has been widely used in Europe only
during the last 300 years or so.
Now we've taken yet another step in the process of
abstraction. We call the whole process of barter
into computers. We reduce our balance of cows,
autos, and labor to electronic record keeping. At
this level, all our goods and services are
converted into 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, at
last, become so abstract as to be completely
invisible.
And that cannot be the end of abstraction. We have
further to go. More complex measures of value will
emerge. The next medium of exchange will surely
give trade value to immaterial information. The old
term intellectual property, which tries to equate
information and property, will give way to
something more sensible. But what? It may become
clear in my lifetime; I expect it will in yours.
I'm John Lienhard, at the University of Houston,
where we're interested in the way inventive minds
work.
(Theme music)
