Wild animals need to hunt regularly if not every single day to survive. They hunt, feast on the flesh and leave the scraps for the scavangers. They will again begin their hunting when they are hungry. They have to hunt on a regular basis to survive. Now imagine if they created a way of living wherein they hunt, they feast and then they preserve the carcass for another day or week. They would be saving a portion of the meat to be eaten on another day. Unfortunately, they have to hunt regularly to survive and saving a portion of meat for the future is not an option. The meat saved will get completely rotten and eaten by maggots or other predators would detect the smell and snatch it away. There are fews animals such as artic foxes who dig up a hole in the ground, hide the carcass and eat it some other time.
This element of 'saving' makes a massive difference in the way of life, and this is where the real economics begins. We have been able to produce large amount of grains, vegetables, fruits, crops etc, and have devised means to protect and preserve it for a longer period of time. This additional portion which is saved for future use has now become a marketable commodity. It becomes a marketable commodity because it can be exchanged with other types of commodities. Mr. A has 200 kg of wheat, and Mr B has 200 kg of rice. Mr. A can give away 100 kg of wheat in exchange of 100 kg of rice. Now both, Mr. A and Mr. B has 100 kg of wheat and 100 kg of rice. Now imagine this sort of exchange but on a much larger scale involving hundreds and thousands of people exchanging on a daily basis.
If Mr. A already had 100 kg of wheat and 100 kg of rice, he would not make any deal with Mr. B. But if Mr. A needs sugarcane and Mr. C has 100 kg of sugarcane, then Mr. A may offer some portion of wheat or rice or both to Mr. C in exchange of some sugarcane. As the need increases, more and more people enter into this market of exchange. But as the number of people entering this market increased, there came a time when exchange of commodities were not practical at all. If Mr. A needs 5 kg of mangoes and he is willing to offer 10 kg of wheat, what would happen when nobody requires any wheat. How would Mr. A acquire 5 kg of mangoes when nobody needs 10 kg of wheat? He is stuck. This the beginning of currency. A Currency has been assigned a numerical value which can be given against a commodity. If 5 kg of mangoes has the value of Rs. 400, Mr. A can arrange to give Rs. 400 to someone who has 5 kg of mangoes and is willing to give it in receipt of Rs. 400.
After this point, it was more about valuation of a particular commodity in terms of currency and not about straight exchange of two commodities. Another crucial activity began thereafter was taking a commodity today and paying the currency on a later date. And in some occasions, paying the currency today and getting the delivery of the commodity on the later date. Initially, this sort of dealing was based on trust and reputation of the concerned person in the region. Later on many different methods were devised in order to reduce the default from either party, and sometimes make the default punishable.
Since the person's ability to acquire some commodity was based on currency, the person would want to also protect the currency from theft. Along with commodities, even the currency was required to be preserved or protected from theft or corrosion. This is when a separate place was created where currency was kept in a safe vault with proper recording of whose currency and how much has been stored, and to make it available as and when required. Banks.
As the dealings between people became more complex because of increasing needs and wants, the facilities available for such dealing also became comprehensive. Banks began to do much more than just safeguard the currency of the people. But it was never enough. Once in a while even these facilities that were formed to protect people's currency would goof up. And sometimes people would find ways to cheat the facility. Currency then had another substitute - pay cards. And now all we need is a computer and an internet connection to pay currency to anybody anyplace anytime. But now even these facilities are not free from troubles. One does not need to be physically present to steal something - hacking and phishing etc are something banks are extremely cautious about.
Today there are some of the most complex facilities available to us and some of them are unknown to many people. Now, dealings are not only face-to-face, but across continents and the buyer or the seller may not even see each other ever, before or after the transaction. Complex systems invited complex problems, and complex problems were handled with even more complex systems.
Economics has been and always be the foundation of our civilisation. Without economics, we cannot survive a single day. How we began our civilisation by simple straightfoward exchange of commodities because of the ability to save for future use and how somebody else's requirements of something can indirectly fulfil our requirements of something else. We can transact with anybody around the globe. Needs and wants of people are not so difficult to be met. If there is a want of a commodity or some sort of assistance, you will find dozens of sellers.
If you want to understand economics in its true sense, then try to look at the people's needs and wants from a seller's point of view.
The next post will be on the motives of a seller or "seller's economics".....
