Interesting links

Shelling out: The origins of Money

Nick Szabo wrote an essay on the origins of money back in 2002. If you are curious about the origin and evolution of money this is a fascinating read.

Nick is a renaissance thinker in the breadth of his intellectual pursuits. He was instrumental in developing thinking on Smart Contracts, and was acquainted with early development of Bitcoin and developed one of its precursors (BitGold). As Nick mentions here hardly anyone understands money:

Hardly anybody actually understands money. Money just doesn’t work like that, I was told fervently and often. Gold couldn’t work as money until it was already shiny or useful for electronics or something else besides money, they told me. (Do insurance services also have to start out useful for something else, maybe as power plants?) This common argument coming ironically from libertarians who misinterpreted Menger’s account of the origin of money as being the only way it could arise (rather than an account of how it could arise) and, in the same way misapplying Mises’ regression theorem. Even though I had rebutted these arguments in my study of the origins of money, which I humbly suggest should be should be required reading for anybody debating the economics of Bitcoin.

Through evolutionary theory, game theory and archeological evidence Nick argues that Homo Sapiens gained a significant evolutionary advantage via ‘money precursors’ and was able to outcompete other hominids by an order of magnitude in terms of the carrying capacity of the environment.

Along the way he ties in art and collectibles, showing how ‘tokenisation’ paved the way to improve trade efficiency, allowing tribes to specialise in hunting certain species and trade surplus for collectibles that could be exchanged for food and other items key to survival. Thus early ‘money’ was a critical part of the competitive advantage that allowed Homo Sapiens to extract greater value from the environment and move into more ecological niches.

It’s a compelling argument.