Video Transcript: Money and the Development of Human Society: From Barter to Bitcoin

Well, good morning, everybody. We said we would start at 9:55, so we shall like  to thank you all for being here. I recall last year was a beautiful, sunny spring  day, and today's a little more gloomy. So feels like a little bit better day for an  indoor event. We got a good crowd here this morning, and we are anticipating,  excuse me, anticipating a couple of 100 online viewers, both high school  students and homeschoolers. So we are glad to have our online audience this  morning, and we'd very much like to thank the Tatum family for their financial  support of this event this morning. So as many of you might know one of the  founders of this building and this institution. His name's Murray Rothbard,  passed away in the 90s, but he's a famous economist, and he had a quote that  is also famous. He said, It's no crime to be ignorant of economics, which, after  all, is a specialized discipline that one that most people consider to be a dismal  science, but it is totally irresponsible to have a loud and vociferous opinion on  economic subjects while remaining in the state of ignorance. So to paraphrase  Murray, this seems to be a condition that we have throughout America today.  Everyone thinks they're an expert on everything. We're flooded with information  and data through the internet, through social media, et cetera. So we have  information, but we don't always have understanding. And I'm sure some of you  raise your hands if you're not, but some of you are truly familiar with Ted Talks.  This is a series of talks given by, I'm going to say, sort of trendy thinkers, put on  by a nonprofit organization. Ted Talks have actually existed since the 1980s Ted  stands for Technology, Entertainment and Design. I've heard, or I've read TED  Talks referred to, and this is, this is a bit much, so you're gonna have to  understand where I'm coming from. I've heard TED Talks referred to as soul  nutrition. So that seems a little a little over the top for me anyway, because if i i  view TED talks with a little more jaundiced eye, perhaps, but TED talks to me,  are proof that you can have a speaker who's brilliant, highly intelligent, Who's  exceedingly knowledgeable about their subject, who's very well intentioned,  who's very well spoken, gives a really dynamic presentation on a particular  topic, a speaker who can be all of these things and still be spectacularly wrong.  That, to me, is what TED talks often stand for. In other words, there's a certain  vanity to TED Talks that the speakers in the topics, they tend to appeal to  current popular thinking, the thinking of the day, the zeitgeist, you might say, of  the age. And in doing so, they really try to appeal to a mindset that says we're  sort of an insider or hip audience. And I think in doing so, TED talks are actually  almost incredibly conformist. I think that TED Talks oftentimes make the fatal  error of trying to capture the just the thinking of the day and to shape the  thinking of the day, rather than addressing the fundamental or timeless  knowledge and wisdom. And I think, I think one of the roles and one of the goals of the Mises Institute is really to stick to fundamental knowledge and wisdom  that stands the test of time. So all of you, as you make your journey through  high school and college, time and youth are on your side. So whether you're 

studying economics, our topic today, or any other topic, I would really encourage you to ignore trends, ignore trendiness, and develop and start to build an  intellectual foundation for yourself that'll stand the test of time, that'll last you  throughout your lifetimes. So ignore trends, and this oftentimes means some  hard work. Unfortunately, it means that whatever topic you choose, or have an  interest in or major in you have to read the classics. You have to read the  foundational, fundamental texts of that particular discipline. In other words, you  might have to read some Aristotle if you're interested in philosophy, and not just  learn about philosophy from some guy on YouTube. You might have to read both sides, or all sides of a particular topic. If you take one of our PhDs here in  academics, excuse me, in Economics here at the Mises Institute, at Joe Salerno and Mark Thornton, these gentlemen have read plenty of Austrian economics,  but they've read plenty of Marx. They've read plenty of Keynes as well. So this is really something an obligation in front of you. If you're going to choose a field or  a discipline, you have to be very well read on all sides of that particular  discipline. And again, you have to do some hard work. You don't be like the  person in this slide that Willy Wonka is addressing. You can't learn philosophy  necessarily from. A TED talk, and you can't necessarily learn science from the  New York Times. So I think Willy Wonka's point here is that you're talking about  something like climate change and weather. You're talking about topics that are  deeply complex and that people study for their entire lives. So it's fine to have an opinion or thoughts about global warming. We all should what perhaps is not  fine is to is to develop an opinion on global warming based on an 18 minute TED talk or based on 10 minutes of reading of a New York Times article. So with that  said, we'll go ahead and introduce Mark Thornton, the aforementioned Mark  Thornton, who is one of our senior fellows, someone who's been here with us for many, many years. He's a professor of economics both at Auburn University and at Columbus State in nearby Georgia, and his topic today is development of  money and the development of human society from barter to Bitcoin. So a round of applause for Mark. Please. You. Jeff. Thank you, Jeff. It's a pleasure to be  with you here today. Thank you for coming. Thank you for tuning in on the  internet to this fine conference on sound money. You know, money is a really  weird thing. Everything else has sort of unique properties, but money is just  everywhere. And so we we see people going out to restaurants to hardware  stores, to church, and they go in there and they talk to perfect strangers. And  those perfect strangers, give them food, give them clothing, give them tools to  work with, and then money is exchanged. So every day we're out there going  around, exchanging our money for goods and services, and then we're going to  work in exchange for a paycheck. Money is the one and only thing that  everybody uses, you know, so some people like to wear bow ties. Other people  like to wear regular ties. Other people like to wear no ties, but all of them use  money. So money is a pretty unique thing in our world, in our life, it's also 

associated with a lot of our problems, not enough money, too much debt. Can't  pay the debt. Employers don't have enough money. They have to lay people off.  Prices go up. The price of gasoline goes up to $4 a gallon. Causes a problem.  What we're going to see here today, in a few very brief minutes, I'm just going to  be covering the time span from the Stone Age to the present, but we're going to  look at how money has been very important for the development of human  society. The world we live in exists because we have money. So given that,  given that we all use it. We use it every day for everything we do practically.  Now, of course, you don't have to, you didn't have to pay money to come to this, so that's a little bit different. But a donor actually paid money so that you could  be here for free, because they thought that what we're going to teach you here  today is so darn important. So everybody in here, I've calculated, has had at  least 10 years of education. Some people in here have 15 years of education,  as many as 20 years of education. So if money is all this, then you would think  that you would have been told and retold and tested on the issue of money, and  who invented it? But you weren't were you? No, you weren't told who invented  money. Talk about the problems of the education system, my goodness. So to  tell you what money is and why it's this important. I'm going to go back to the  Stone Age before there was money. There was a time when money did not exist, so the caveman didn't have money. And. Economic conditions were very  primitive for people back in those times, almost animalistic. Your food, your  clothing and your shelter were things that you had to produce, whereas in here,  probably nobody built their own shelter. Probably nobody actually made their  own clothing, and you probably produce very little of the food you consume. But  back then, they had to produce all of their food, all of their clothing and all of  their shelter. And as a result, they had a limited range of goods to consume.  They had very short life expectancies. Tribes of people were actually killed off on a regular basis due to famine not having enough to eat, where everybody in  their little societies did not have enough to eat, and existence was characterized by general warfare between these tribes, so things weren't good in pre money  society. Fortunately, people learned to get along and to trade with one another,  both within the tribes and ultimately between different tribes. And this was based on barter. They didn't have money, but they could still trade goods for goods.  The problem with that, the problem with me trying to trade this pointer with  somebody else here is that it would be very difficult. Probably not too many  people want the pointer permanently. I mean, it's fine for, you know, making the  dot go around the screen and things, but we hard for me to find somebody who  really wanted this pointer, and then it would be even harder for that person to  have something that I actually wanted. So a barter situation requires a double  coincidence of wants, so that this person here in the front row has a bow tie,  wants the pointer, and I just happen to want his bow tie. Okay, those kind of  situations, those double coincidences of wants, are very difficult to discover. But 

when they are discovered, we do know that both parties to the exchange are  going to be better off. I want the bow tie. He wants the pointer. We agree to that  situation, we make the trade, and we're both better off. I'm better off because  I've given up the pointer, but I've got the bow tie. He's better off because he  gave up the bow tie, but he really wants this pointer. So that's a good thing. We  end up getting access to more goods, different goods, and also people who are  making trades on a regular basis, tend to start to respect each other's property.  Okay, if you're providing me with a benefit every year and I'm providing you with  a benefit every year by making these trades, then I'm going to tend to respect  your property, not want to invade you and kill you and enslave you. And you're  going to have a similar type of respect for my property rights. And under these  conditions of respect for property rights parties, these different parties, these  different tribes, can start to specialize in what they are proficient or efficient at  doing. And so societies can start again to specialize and to divide the labor  between each other, and we spend more time doing what we're good at and less time doing what we are inefficient at. We can divide up the fishing, the hunting,  the gathering, the farming between different individuals, and indeed, between  different tribes. And as we start to specialize and divide up the labor in society,  we can also with the help of saving to develop better tools to use better tools for  digging, better tools for hunting, for fishing. We can make nets for fishing. We  can sharpen sticks for hunting or digging for farming purposes, longer sticks to  gather fruit that it's high up in the trees. And so that's what happened in society.  Many, many years ago, people started specializing. People started dividing the  labor up within the tribe and between tribes. They started to develop metal,  excuse me, better tools, and eventually they discovered the use of metal tools.  And it was this trading, the specialization, this discovery of better tools, that  allowed the standard of living to rise, to produce more food, to produce more  clothing, to produce better and more shelter to stabilize society and to reduce  warfare between societies. So an example of this more advanced barter  situation would be say, I'm raising cattle, and I'm specializing in the raising of  cattle. I've got so many cattle that I could really use a shovel. So I go to the  blacksmith and I said, you know, I'm interested in acquiring shovel for you. And I  have cattle in exchange, but certainly a cow is much more valuable than one  shovel. So would you mind giving me four shovels for one cow? And the guy  says, Well, I'm not going to give you four, but I'll give you three. And I say, Okay,  now, what must I be thinking to agree to give up one of my cattle for three  shovels. Surely I can't use three shovels at one time, so I must be thinking,  what? Any ideas Perfect? Perfect trade the extra shovels for something else. I  could trade one of the shovels with a beekeeper that I know for a gallon of  honey, possibly, maybe not a whole gallon. And I know this other person who's a weaver who I can trade one of the shovels for to obtain a blanket. And so what  I've done is used those shovels as a medium of exchange. I'm facilitating the 

exchange of the cow that I don't really need for the shovel, which I do really  need because of all those cows. And I'm going to I know in advance that I've got a good chance that I can trade one of my shovels for honey and one of my  shovels for a blanket. So I've used the shovels as really a medium of exchange,  which is an intermediary that is used in trade to avoid the difficulties of barter. If I relied only on barter, I wouldn't have been able to discover a valuable trade for  both me and the blacksmith. The blacksmith would be happy giving up one  shovel for one cow, but I wouldn't, but I would be happy to get three knowing  that I'd end up with the shovel for farming, the gallon of honey for sweetening,  and the blanket for warmth. So that's the medium of exchange. And as we  developed, as society developed, basically what happens as we move from a  hunter gatherer society to a sedentary, agricultural and domesticated animal  society? So instead of moving around, killing wild animals, gathering nuts and  fruits and having to move constantly in order to find new sources of animals,  nuts and fruits, we can now stay sedentary, stay in one place, engage in  agriculture, the growing of crops and raising domesticated animals. So we have  a constant source of food. And societies do not tribes do not die off because of  famine, but they become larger and more productive and more interactive and  so mediums of exchange in these early societies included various types of  animals such as cows and sheep, various types of grains which could be stored. Salt was an early medium of exchange because there was no refrigeration. Um,  the only way to preserve most foods was with salt, and so everybody used salt  in large quantities. So if you traded for salt, you knew you could always re trade  the salt for the things that you wanted. Later on, tools became a medium of  exchange, so axes, shovels, knives and so forth became mediums of exchange, because there was always plenty of people who wanted these tools, because  the tools increased your productivity. In the early American colonies, North  Carolina, Virginia, Maryland, Delaware, etc, they used blocks of tobacco as a  medium of exchange. So the tobacco farmers would, you know, sell their crops,  and the stores would use the blocks of tobacco to make exchanges for their  inventory with people who raised eggs and so forth and so. Tobacco was an  early form of money in America. And basically what you see happening through  the use of money, which allows the specialization and division of labor to take  place. You see civilization as we know it emerge. This is several 1000s of years  ago in the Bronze Age, basically when this starts to take place, when metal tools greatly increased our productivity and we had the specialization and division of  labor present so that we could have things like blacksmiths making these tools.  And so what we find that, because metal tools were so important, metal  emerges as an important medium of exchange. You could always use bits and  pieces of metal to go to the blacksmith, if nobody else to exchange the bits of  metal for tools, for finished tools, and other people began to accept metal as a  medium of exchange as well. Now, money is basically the best medium of 

exchange whatever emerges in a society as the most generally accepted  medium of exchange, and the types of things that tend to win out in this  competition for the most generally accepted medium of exchange are things that are durable. You want money to be durable. You don't want to break down or  decay or degenerate in any way. You want money to be divisible. You know, I  could have, you know, theoretically thought, well, 1/3 of one of my cows could  equal a shovel. But of course, if I cut 1/3 off of the cow, it wouldn't be very  durable. At that point, it would start to rot. So a lot of these early forms of money, other than salt, were not divisible. It also has to be easily transportable. So you  have to have a high value in a small size package, and salt really didn't fit that  bill, because salt, you know, if you know you talked about something to  exchange for a cow, well, I mean, you'd have to have a tremendous amount of  salt in order to make an exchange of that size. So salt really didn't work very  well in long distance trading, only in short distance trading, and because you  need those factors, durability, divisibility and transportability, metals won out in  the worldwide competition for a medium exchange. Early on, it was copper and  bronze, and then eventually silver and gold emerged as the most generally  accepted medium exchange and really the only thing that worked in terms of  international trade. And so far, we haven't even gotten to the issue of coins. But  metal Smiths, like the blacksmith, started to make these coins about 3000 years  ago, where they made little discs shaped as what we know is round coins that  would be he Pound US a stamp into it so that it was easily identifiable as a  particular blacksmith's coin. And these coins were roughly the same size and  weight. They were roughly the same composition of metal. The early ones were  a combination of gold and silver and. And as a result of the uniformity of these  coins, we had, for the first time, a unit of measurement or a value for those  coined monies. And as a result, we could then develop things like counting,  accounting and pricing. And as a result, civilization could be ever more complex, and trade could go ever further distances. And as a result we saw increases,  tremendous increases in the standard of living. And some of the early great  civilizations emerged as a result in the Middle East, in Egypt and in Greece and  so forth. So coins are like roughly 3000 years old. Banking only came about.  Modern forms of banking only came about in the year, in the 1400s so that's a  relative, relatively early, excuse me, recent development where you could store  your money, where you could borrow your money, where you could exchange  your money from, say, Greece with the money of Egypt or some other place,  there's an explosion of economic growth as a result, bank notes only came  about in the mid 1600s so bank notes were basically receipts that represented  an amount of gold or silver. So you would take your gold or silver to the  goldsmith or the silversmith where he could safely store it, and you would be  issued a receipt, a written receipt that says you have certain amount of gold  there. And as a consequence, we had, for the first time, a form of paper money 

that was easily more easily transportable and much safer. Now, what we're  going through right now, of course, Bitcoin and Bitcoin and bitcoin and  blockchain technology is going to further revolutionize our economy in the  future. Bitcoin is sort of based on the principles of Austrian economics to a  certain extent, it came about because of the financial crisis of 2008 and many  people think it's going to revolutionize the way we do Money, Banking and  Financial services going forward. The big advantages of it is three things, it  gives you zero cost transactions. It gives you zero fraud, or hopefully zero fraud. And it also gives us a private form of money, rather than a government form of  money, for the first time in many, many years. So in conclusion, as money gets  better, society can get better. Money is critical for an advanced complex  economy characterized by the specialization and division of labor and monetary  problems cause big macroeconomic problems for us all. Thank you very much.