We have moved from simple swaps to a trade,
but a trade over time-- my sandals in June for your boots in winter.
But we still have to know each other-- know each other's needs.
And we have to trust each other.
And here comes a possibility of another dead weight loss
almost as big as the first one.
We may be strangers and have no reason to trust each other's promises.
You know perfectly well how we get over that problem.
You wanted my sandals in June, so you gave me money for them in June.
And come winter, I can buy boots.
I didn't have to rely on you for them.
You didn't have to promise me that you're going to give them to me.
In fact, you may not even make boots or have some lying around.
With your money in my pocket, I can go to anyone
who has boots to sell-- not just someone I made sandals for.
And what is this money?
It can be greenbacks or gold or wampum shells, but don't be fooled.
These are all things that have little intrinsic value.
Gold is pretty and it has some industrial uses,
but that's not why it's valuable.
It's valuable because of what it stands for.
It stands for all the promises people have
made in order to get their hands on it.
I take gold or wampum or greenbacks for my sandals
because the greenbacks stand for your promise
to make me boots-- or anyone's promise to give or do something I may want.
Now, I don't have to know you.
I don't have to know or care if you make good boots.
I can buy the boots from anyone who has boots with your-- now my-- money.
I can take your promise, which you paid for my sandals
with, and put it in my pocket.
I don't have to trust you or even know you.
When I give you my June sandals for nothing-- nothing but money--
all I have to do is trust that the dollars are not forgeries,
that the gold is not fool's gold.
So you see how promising is this great, productive invention,
and how its value is amplified more than you
can imagine by the later invention of money?
Nobody knows when or where promising was invented.
In fact, the idea of inventing promising is a little bit odd-- a little
bit like saying who invented speech.
But historians and anthropologists have accounts
about when and where money was invented.
And those are interesting, but we're not going to cover them in this MOOC.