If you go into a store today and buy something, you’re almost certainly doing it one of two ways: either you’re handing over one or more pieces of paper with no intrinsic value to speak of, or you’re handing over nothing at all, just swiping or inserting or tapping and then voila, they give you stuff.
How did we get here, from the gold and silver coins of yore?
I talked last week about paying for things with Valuable Stuff, of which gold and silver are common examples. This is what economists call commodity money. That is, the money is made from a commodity, something considered to be intrinsically valuable, apart from its role as a medium of exchange. Originally people handed around lumps of gold and judged their value by weight; then things got standardized, first with ingots (like the gold bars in Fort Knox), then with coins.
But commodity money has a problem, which is that it’s a pain in the neck to carry around. Maybe literally: you could sprain something trying to lift a chest full of gold coins. (When you see one in a movie that’s the size of a footlocker and filled to the brim, you should laugh. Real strongboxes were generally small not just because it gave them greater structural integrity against someone trying to bash the lid in, but because that meant you could actually move them when you needed to.) For poor people this might not be much of an issue, because they didn’t have a lot of coins to begin with, but rich people? They weren’t going to stroll down the street with a hundred gold coins in their belt pouch. It would bruise their leg with every swing and try to pull their belt right off their body. When they wanted to buy something expensive from a shop, therefore, a lot of the time they didn’t actually hand over the cash; they just promised somebody would bring it by later.
This is the origin of credit. The Latin word creditus means “trusted;” granting someone credit means granting them trust, believing that they’ll pay their debts later. (Some of them did. A lot of them didn’t. At least not until after their creditors hounded them to the ends of the earth.) And this could operate not just in a business establishment, but in situations like a game of cards. Young Lord NoLuck wagers a thousand pounds on his hand; it turns out to be not quite as good as he hoped, and now he owes his opponent. Since he’s bloody well not carrying a stake of that magnitude around with him, he writes out and signs a note: “Lord NoLuck owes one thousand pounds.”
Here’s where it gets interesting. Maybe Sir Quickfingers owes a few debts of his own. He doesn’t have the money to pay them . . . but he has this note from Lord NoLuck. Rather than trying to bludgeon the money out of his buddy, then paying his debts, he just hands over the note. Maybe to an honest merchant; maybe to Billy Bruiser, who gives Sir Quickfingers nine hundred for it (Billy’s gotta eat, after all), who then will scandalize the town by showing up on Lord NoLuck’s doorstep demanding his grand. What with one thing and another, that piece of paper with Lord NoLuck’s handwriting on it is now operating almost as if it were actual money, the thousand pounds one presumes — or at least hopes — Lord NoLuck has in his strongbox at home.
Such an approach only works for as long as the person has credit, i.e. is trusted to pay their debts. If they have a history of failing to do so, or you get beyond the sphere of people who know who they are, that piece of paper is as worthless as their promises. Which is why in the long term this stopped being a game played by individuals, with ad hoc notes scribbled here and there, and started becoming the purview of larger and more stable institutions: governments and banks. Store your piles of extremely heavy metal with the bank, where they have thick walls and stout doors and guys with weapons to protect it, and just conduct most or all of your transactions with pieces of paper that stand in for the Valuable Substance.
This is called representative money, and it’s actually a very old idea — older than coinage, in fact — because these things are rarely as linear in their development as a brief essay would suggest. But there’s a key thing to note about representative money in the strict sense, which is that the thing it represents is still valuable. Those banknotes used to be redeemable for the piles of metal, if for some reason you really wanted to lug all that weight around. The gold standard, the silver standard, bimetallism — these are different ways of backing the value of paper money. Because, the thought went, of course there needed to be something of actual worth involved. Otherwise, why should that paper be worth anything?
And yet, here we are today, paying for stuff with pieces of paper that have no intrinsic value to speak of and don’t represent anything valuable, either. That’s fiat money, from the Latin verb for “let it be done”: money that’s worth something simply because we as a society have said it’s so. It’s a great big game of make-believe. And when people stop believing . . . well, that’s when you get exciting types of economic collapse I’m not really qualified to speak on.
So why do I bring this up in the context of worldbuilding? Because in speculative fiction, the middle part of this chain seems to vanish. Fantasy societies use metal commodity money; far-future science fictional societies use “credits,” abstract units that often lack any physical representation at all; and stories set in the present day or near to it use fiat money of the type you and I are accustomed to. You rarely see individual credit playing much of a role, unless the setting is sixteenth to nineteenth century England, where of course dissolute young men are forever being chased by their creditors. You rarely see representative money, with its promissory notes issued by trustworthy institutions, even though the idea is ancient. Hell, the first documented attempt at fiat money was during the eleventh century, in China — but we think of the idea as too modern to pass muster in a pre-modern society.
But contrary to what Dungeons and Dragons and countless video games would have you believe, people vary rarely walked around with dozens of coins in their pockets, much less hundreds. We developed much more convenient systems. And contrary to what a lot of science fiction would have you believe, there’s a great deal of utility in physical objects whose wanderings cannot be so easily traced. If the government installs trackers in every chit, somebody’s going to invent representative substitutes for those chits, so you can conduct your shady business with more discretion. Those forgotten types are useful; I’d like to see them used.