The origins of trading appear to have no real beginning and seemingly no real end. Without it, our society, as a whole, would not advance at the pace it has. The story of trade is a fascinating one that spans thousands of years and touches every corner of the globe.
In more recent times, the growth of the internet has revolutionized the way that people buy and sell goods and services, making it easier than ever to connect buyers and sellers from around the world. It is clear that trading has played a vital role in the development and advancement of societies throughout history, and will continue to do so in the future.
So what is it about trade that makes it so vital and how have we benefited from it? Here we’ll go through some of the core reasons why we trade and its link to time using some examples.
The Independent
So, why do we trade at all? Well, some of us don’t need to. If you’re like Bear Grylls, you’ll probably do everything yourself. You’re completely independent. It’s just you and the 24 hours in your day. With this fixed amount of time, you’ll divide up your tasks for the day.
| Task | Hours |
|---|---|
|
Tend to Crops |
3 Hours |
|
Hunt Food |
4 Hours |
|
Build & Maintain Shelter |
3 Hours |
|
Create Tools & Weapons |
4 Hours |
|
Secure Water Supply |
2 Hours |
|
Sleep |
8 Hours |
Let’s take the “Hunt food” task as an example. Here you’ll have to Hunt food for the day and look into making your hunting tools and skills more efficient, but within the 4 hours you’ve allocated. If you wanted more time to make hunting more efficient, it would have to be at the expense of another task.
Trade and Time
Arguably, the true explosion of civilization began when humans started to settle. Settlement was possible due to agricultural developments that allowed our food source to be controlled in one location and in surplus. This attracted other people with various skills to live close to the food source.1
So where does time play into this?
Let’s take Bob, our wheat farmer in this settlement, as an example. He’s decided to specialise in wheat farming. He’s come to the point where he is so productive that he has more wheat than he or his family could consume. If he doesn’t eat it, it’ll go off and he would have wasted his precious time producing it. Instead, he does the smart thing and trades it.
1. Bob gives his extra wheat to Mark, in exchange, Mark is happy to maintain Bobs’ fence, a task that takes an hour a day to do. Bob now has this hour free.
2. Bob allocates this hour to making his wheat farm more efficient (now that he sees the benefits of having a surplus of wheat).
3. After a month this pays off and results in Bob developing a Horse Plough System
4. His harvests can be produced quicker and with less effort than before, resulting in a larger surplus of wheat.
5. Bob uses his new found surplus to trade for other goods/services. Tasks he would otherwise spend his own time doing.
The cycle continues back to step 1 and this occurs endlessly. You might be thinking “Yes, but you can only do this until Bob frees up all 24 of his hours (minus the necessities of sleeping and eating), now there is no more time to be had for Bob and therefore not endless”. That’s where sub-specialization comes in.
Bob can use the extra surplus to trade for someone else to take care of the planting aspect of the farm, This allows Bob to focus all his hours on the milling process. Now the total farming process is divided between two people (or a total of a possible 48 hours of human time). While Bear Grylls is stuck at 24 hours a day, with trade, the only real limitation to the number of hours that can be utilized is the number of humans who contribute to the process. You can accomplish this without trade, but slavery is not considered particularly ethical these days.
Not only does trade accelerate human innovation, it also allows us to pursue skills that wouldn’t otherwise exist. There are occupations today, that would not be possible if people didn’t specialise and dedicate their entire lives to them (e.g. becoming a master violinist would take up several hours a day of dedicated practice for decades).2
Innovation and Cost
Bob’s trading doesn’t just benefit him, in fact, they can benefit others in the settlement too. They also help Alice, the local blacksmith in the settlement. She, just like bob, has specialised and spends most of her time in metal work.2
With her specialization, she has accrued some spare time to solve some of Bob’s wheat problems (for some of Bob’s wheat of course). She creates tools for his farm that make Bob’s wheat production more efficient, bringing down his costs. This makes it more feasible for Bob to trade his stock at a lower price. 1 bag of wheat is worth three hammers instead of four. Alice benefits from cheaper wheat. She saves one hammer (per bag of wheat) to trade for other goods and services. By using the saved stock to trade for things she would have to do herself, she now has more time to spend on metal work. The cycle continues even between the two.
This is a very basic example of what occurs between two participants in an economy. This scales by many magnitudes the more participants you have in an economy. Over time, trade accelerates innovation and innovation drives costs down (by making things easier and cheaper to produce). This is why technology is deflationary. If all else is equal, we should see a fall in prices over time.3
Limits of Human time & Trade
Could Bear Grylls Innovate? Absolutely. He, unlike Bob, would have to sacrifice another task to find the time. So if he had four hours to hunt food he may sacrifice an hour (at the expense of less meat), to dedicate to innovating. After a few weeks he creates a cross-bow. This allows him to hunt with more efficiency, saving more time to innovate and that initial sacrifice pays off. He does his own cycle of innovation and time saving up to the point where (at most) he develops an automated hunting robot. Now his full four hours are free to focus on other things. He can do this for all his tasks if he lives long enough. But that is a big if.
Time is the only real constraint. In an infinite universe, It is the most finite of all resources available to us. If we were immortal, we wouldn’t need to trade. Living a life without the constraints of time allows us to innovate infinitely. At some point, by yourself, you would have developed every technology possible within the confines of the laws of physics governing our universe. It would only be a matter of time.
Unfortunately, the reality is we live in a world where our time is limited and scarce. Thankfully, trade accelerates innovation and allows us to utilise more of these technologies within our lifetime to better spend the time we have left.
Bartering
Some of you would have realized that what we’ve discussed so far is known as Bartering, the act of trading one good or service for another. For all its flaws, bartering was the initial push forward our civilization needed. It is a great tool and works well in very specific situations, but it has some pretty significant limitations which we’ll discuss in our next article.
References
- Khan Academy. Introduction: What is civilization? [Internet]. Khan Academy; [cited 2022 Jan 11]. Available from: https://www.khanacademy.org/humanities/world-history/world-history-beginnings/birth-agriculture-neolithic-revolution/a/introduction-what-is-civilization (Keynesians don’t get everything wrong, just most things).
- Breedlove, R. (2020, July 5). Masters and Slaves of Money. Medium. https://breedlove22.medium.com/masters-and-slaves-of-money-255ecc93404f
- Booth, J. (2020). The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future (p. 23). Stanley Press.
These articles were designed to make these concepts more palatable. If you’re interested in reading a more in-depth perspective on the concept of money, consider the following:
Robert Breedlove, “Money, Bitcoin and Time“
Saifedean Ammous, “The Bitcoin Standard: A Decentralised Alternative to Central Banking”. Wiley, 2018
Vijay Boyapati, “The Bullish Case for Bitcoin“
Robert Breedlove, “Masters and Slaves of Money“
Nick Szabo, “Shelling Out: The Origins of Money“
Ruki is a passionate Bitcoin educator who firmly believes in the principles of the Austrian School of Economics. As a sound money advocate he recognises its benefits to individuals and society as a whole. He is dedicated to empowering those without financial access to take control and build a more secure future.