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Rory Brown, Managing Partner of Nicklaus Brown & Co., Talks about the Barter System History Before the Lydians Created Coins

Originally published on inspirationfeed.com

The Lydian Empire introduced their stater coins in the middle of the 7th century BCE, ushering in the age of true coinage. Their innovative design, with the inclusion of a government-backed seal that guaranteed the coins’ value, was a major improvement over the proto-coins of the day.

However, this advancement paled in comparison to the seismic shift that took place in the exchange of goods when humans moved to coinage and currency from the barter system.

Barter?

Barter was or is used for acquiring goods and services without using an intermediary such as money. Instead of selling something for money and using that money to buy something you need, you offer your goods or services in direct exchange for the products you require. 

It was the primary mode of exchange for most of human history.  With limited mobility, tribes would trade among themselves and any other tribes located within reasonable walking distance.  If you needed something, chances are you could find someone nearby that had it, and if you couldn’t, it simply wasn’t available to you. 

Barter was, in fact, the motivation for specialization. To satisfy the needs of a local village, you needed hunters, farmers, leather workers, and several other trades. Then each could barter for the goods and services they didn’t produce themselves.

Barter worked very well until it didn’t.

The Pros and Cons of the Barter System

The barter system works best in local communities where the number of goods and services available are limited. In most cases, every member of the tribe or village has things they need and things to offer in exchange. These limited inequalities provide the grist barter needs to function. 

As societies became more complex, and the number of goods and services traded grew geometrically, barter became far more difficult. Let’s say that person A needs ten specific items. The chances that they’ll find one person that has them all is low, so they’ll need to locate multiple people. 

With sufficient complexity, barter quickly becomes an unworkable system of exchange requiring far too many individual swaps to be efficient. As a result, intermediary currency systems eventually replaced it — eventually bringing history to the Lydian Empire and their groundbreaking stater coinage.

About Rory Brown: Mr. Rory Brown is a Managing Partner of Nicklaus Brown & Co., the Chairman of Goods & Services, Nearshore Technology Company, and a member of the board of directors of Desano. He is passionate about delving into the history of money and how our modern currency has evolved into what it is today. In his spare time, he writes about the history of the Lydians - the first civilization to use gold and silver coinage.

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