ECON 101 Lecture Notes - Lecture 1: Seigniorage, Barter, Bitcoin
26 May 2018
School
Department
Course
Professor
Economics 101
Lori Leachman
Part 1 • Lecture
• History
o First money developed before 2000, evolved in mesopotamian region and spread to mediterranean
through trade routes
o Initial money was metal ring (like spiral)
▪ Size of ring = value
o Around 1000BC - Chinese introduced Fiat money
▪ Money in industrialized currency
▪ Need to control, regulate and institutional structure
o Changed to coinage: stamp and authenticated
o Effect of money
▪ Increase in specialization of labor
▪ Move from personal subsistence production - start trading for food
▪ Enabled concentration of people in urban centers
o Development of money led to development of complex mathematics
▪ Compound interest...etc financial assets
o Characteristics of good currency
▪ Standardized
▪ Portable
▪ Easily recognizable and uniformity in appearance
▪ Authenticated
• Money
o Defined by function, not form
▪ Medium of exchange - money can buy and sell goods and services (transact)
• Eliminates need to barter (exchange goods/services for goods/services) and
lower transaction costs
o Barter requires double coincidence of wants (each person wants what
the other has) - wastes lot of time searching for trade partners
▪ Store of value - enables you to hold wealth, accumulate assets, enable society to alter
consumption stream overtime
• Can save money, don’t have to spend all of it immediately... or spend a lot at
once (you can borrow money)
• Makes savings possible, which allows for business investment
▪ Standard of value - enables society to compare relative worth of different goods based
on price - compare relative scarcity, desirability - information inherent in price - anything
that allows comparison of worth can be considered money
• Lower transaction costs, less information have to search for
• Monetary regimes
o Commodity money - money has intrinsic value (has alternative use)
▪ Examples include gold, silver, shells, cigarettes & stamps (in concentration camps)
▪ Pro
• Pick right commodity, money supply is controlled by availability of money
o Hard to get, cannot make itself, limitation of supply
• Don’t need a central bank or regulation
▪ Cons
• Large opportunity supply (the resources aren’t actually being used)
o The budweiser is not being consumed
• Can be destabilized easily - gotta be able to monitor and control money
o Gold rush example, lead to inflation
o Commodity backed money - dollar on gold standard example
▪ Certificate is circulated and is backed by a commodity (or other currency of a currency
board)
find more resources at oneclass.com
find more resources at oneclass.com
