This document discusses the history and evolution of money. It begins by outlining the classic narrative that money originated from barter systems and evolved through various credit and commodity forms. It then examines ancient examples from Sumeria of commodity and credit-based currencies. The document traces how money became centralized under kings and governments to facilitate taxation, trade, and armies. It introduces fiat currency and explores decentralizing influences like cryptocurrencies and community currencies. The summary concludes by considering whether new financial technologies could tip the status quo or lead to greater decentralization and innovation in money and finance.

1. WHAT IS MONEY?
Claire Ingram
PhD Student and Researcher,
Stockholm School of Economics

2. The Classic Narrative
• Before there was money, there was barter

3. Alternative theory
• State and Credit
theories of money
(Mitchell-Innes)
• Money as the
promise to pay
something of
equivalent value
• Relies on trust –
trust that the
person will pay the
IOU

4. Calculated in ”money”
• But paid in whatever
was handy
• In Sumeria,
denominated in silver
shekels (by temple
bureaucrats)
• Based on trust –
community knew each
other

5. Goods as money
Tobacco
Virginia Colony, USA, 1600s
Cowry Shells
China, from 2000 BC
Africa, up to ca. 1850

6. Interest-bearing loans
• Sumerian Temples
(2700 BC) collected
local produce (grain
livestock etc)
• Lent to merchants who
travelled and sold these
goods to obtain wood,
metal and silver
• Charged interest as a
way of sharing in profits

7. Amnesty and Kings
• In the face of bad
harvests, system breaks
down
• Amnesties granted by
Sumerian and, later,
Babylonian Kings
• Enforcement also
increasingly done by
centralised authorities
NationalPortraitGallery,London:NPG4980(2)

8. Armies, trade and taxes
• Taxes on exports and
imports (called portoria
under the Roman Empire)
• Taxes on inheritances
• Taxes
imposed on
local
populations
who were
conquered
• Taxes also
imposed on
own
populations
to finance
wars
ChinesearmyinIndia-Burmacampaignpictorial-http://cbi-theater-1.home.comcast.net/~cbi-theater-1/cai/cai.html

9. Characteristics of Money

10. Money = Fiat Currency
Fiat Currency
• Derives value from
government
• Fiat money as country’s
main currency

11. Centralisation
http://students.brown.edu/ai/aboutus.htm
• Interest-bearing loans
• Laws and authorities
• Various Taxes
• Fiat currency

12. Decentralised, local solutions

13. From Ricajomarie on Flicka https://www.flickr.com/photos/junipermarie/4422514124

14. A New Wave
From “How Bitcoin Works, Under the Hood” by CuriousInventor https://www.youtube.com/watch?v=Lx9zgZCMqXE

15. Benefits of Cryptocurrencies
• Improved transaction security
• Trust in cryptography rather than institution(s)
• Transparency (for those who understand)
• Lower transaction costs
• Cross-border, faster transactions
• No outside intervention
• No inflation (although market volatility)

16. Drawbacks
• Tax concerns
• Security issues
• Consumer uncertainty
• Market volatility (commodity or currency?)
• Potential for illicit use
• High electricity consumption to “mine”/verify
• No ”chargebacks”

18. Decentralisation and Innovation

21. Increasing pressure due to variety of
new financial instruments
The
status
quo
Forces for stability
• Governments
• Central banks
• Multinational
financial actors
• Legal system
• Mindset
Forces for change
• Cryptocurrencies
• Community
currencies
• Crowdfunding
• Microfinance
• P2P lending
• Sharing

22. What does it mean?

24. Will there be a tipping point?
http://coinmap.org/
Depends on….
- Switching costs
- Network effects
Bitcoin accepted here
http://mercatus.org/sites/default/files/Luther_CryptocurrenciesNetworkEffects_v1.pdf

25. Easier to crowdfund
Accumulation of small investments in individual projects by large
number of individuals (the “crowd”) via or with help of Internet and
social networks (De Buysere et al., 2012)

26. Distributed problem-solving

28. People
• “Net generation”
• 24x7 “mobile” workforce
• Social entrepreneurship
Technology
• Broadband access
• 3D printing
• Robotics
Open Source
• Software
• Hardware
• Physibles
Convergence
Finance
• Microlending/microfinance
• Crowdfunding/equity
• Digital, non-fiat currencies

29. Thank You!
Claire.Ingram@hhs.se
@Claire_EBI