Who invented money? History of Money

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History of Money

Han dynasty coin
Chinese bronze coin from the Han Dynasty

Money is an agreement between people. It is an agreement that this much of something (usually some kind of metal gold, silver, or bronze) will be worth this much bread, and this much cheese, and this many slaves. People also used paper as money, or cocoa beans, or cowrie shells. Anything small, not too heavy, and fairly rare will work.

The earliest metal coins came from China,

Lydian coin
A Lydian gold coin
where people used small pieces of bronze to trade things starting around 1500 BC, possibly to replace the cowrie shells they used before that.

Coins with guarantees were invented around 650 BC. This kind of coin is marked with a promise by somebody (often a government) that this coin is worth what it says it is worth. So you don't have to weigh each coin before you accept it (if you trust that government). The first coins of this kind were from Lydia, in West Asia. They were used to pay mercenary soldiers. But many people preferred to keep on using mainly credit for trading instead.

Corinthian coin
Greek coin from Corinth

When governments began to require people to pay their taxes in money, gradually metal coins became common all over Europe, Asia, and Africa ( except for central Africa and South Africa). In South America, the Aztec empire collected taxes in cocoa beans, in the same way, starting about 1400 AD.

The governments that minted these coins figured out that if they didn't have enough money, they could mix the gold with more silver to make it go further, or mix the silver with more bronze. That way they could make more coins with the same amount of metal, and have more money to pay their soldiers with. The Romans did this in the 200s AD.

Roman coin
Roman silver coins from the 200s AD
Roman coin

But of course people soon figured out that these coins weren't really worth what the government said they were worth, and then they didn't want to take those coins in stores. Or they demanded more coins, so it would be the same amount of gold or silver as before.

Learn by doing: making ancient coins
More about money

Bibliography and further reading about money:

Eyewitness: Money, by Joe Cribb (2000). Not the best in the series, but still a good introduction to exchange systems for kids.

The History of Money: From Sandstone to Cyberspace, by Jack Weatherford (1998). Great on what money is, and how it has changed over time - some conclusions are controversial.

More about money
Make your own Chinese coins
More about economic history
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Copyright 2012-2015 Karen Carr, Portland State University. This page last updated September 2015.

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