Emergence of money
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Emergence of money

Summary
Carl Menger argues that the market induced the emergence of money based on the attractive features of precious metals.  He compares the potential for government edicts to create money but sees them as lacking. 

Following our summary of his arguments RSS is Rob's Strategy Studio frames his arguments from the perspective of complex adaptive system (CAS) theory.  With two hundred years of additional knowledge we conclude that precious metals are not as attractive as Menger asserts.  Government backed promissory notes are analogous to:
  • Other evolved CAS forms of ubiquitous high energy transaction intermediates and
  • Schematic strategies that are proving optimal in supporting survival and replication in the currently accessible niches. 

The Origins of Money
In Carl Menger's journal article 'The Origins of Money' he argues that monetary exchange is mysterious because it is opposed to the regular course of events.

A number of attempts have been made to explain the origin:
  • Plato and Aristotle argued that coins are stamps of authority.  But Menger suggests there would be a record of that fact if this was the case and he claims none is known. 
Menger suggests that the key to the emergence is to be found in the difference in saleableness of different commodities.  And he explains that money is just a special case of this property. 

Since different commodities are more or less saleable because their sale price includes associated risk and elasticity.  This will depend on the demand, supply, divisibility of the commodity, network infrastructure, and any constraints on the flow of supply and demand. 

Menger then asserts that highly attractive commodities will be in high demand and so easy to sell.  People will realize that if they have a store of such commodities they will be able to execute trades for anything else they desire at a time most suited to them. 

Menger argues that gold is the most attractive of commodities and so becomes both desired and a useful medium of exchange.  Gold becomes money because it is broadly desirable, scarce and durable. 

Menger disagrees with Plato and Aristotle.  He concludes money is a market induced social mechanism rather than a state institution.  But he concedes that different communities are likely to need state infrastructure to assist in trade of one currency is legal tender which provides no interest payments to the holder.  It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP.  But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. 
with another. 

This page introduces the complex adaptive system (CAS) theory frame.  The theory is positioned relative to the natural sciences.  It catalogs the laws and strategies which underpin the operation of systems that are based on the interaction of emergent agents. 
John Holland's framework for representing complexity is outlined.  Links to other key aspects of CAS theory discussed at the site are presented. 
Complex adaptive system (CAS) theory
can model the
This page discusses the mechanisms and effects of emergence underpinning any complex adaptive system (CAS).  Key research is reviewed. 
emergence
of money by comparison with other equivalent emergent facilities.  By selection of a CAS without human
Plans are interpreted and implemented by agents.  This page discusses the properties of agents in a complex adaptive system (CAS). 
It then presents examples of agents in different CAS.  The examples include a computer program where modeling and actions are performed by software agents.  These software agents are aggregates. 
The participation of agents in flows is introduced and some implications of this are outlined. 
agents
we can look more directly at the strategies,
This page discusses the effect of the network on the agents participating in a complex adaptive system (CAS).  Small world and scale free networks are considered. 
networks
and
Flows of different kinds are essential to the operation of complex adaptive systems (CAS). 
Example flows are outlined.  Constraints on flows support the emergence of the systems.  Examples of constraints are discussed. 
flows
.  An intra-cellular metabolic CAS includes:
An equivalent model of Menger's market is analogous:
In this comparison money is seen to be equivalent to ATP:
Of course our comparison strips away the specifically human aspects: the
Computational theory of the mind and evolutionary psychology provide Steven Pinker with a framework on which to develop his psychological arguments about the mind and its relationship to the brain.  Humans captured a cognitive niche by natural selection 'building out' specialized aspects of their bodies and brains resulting in a system of mental organs we call the mind. 

He garnishes and defends the framework with findings from psychology regarding: The visual system - an example of natural selections solutions to the sensory challenges of inverse modeling of our environment; Intensions - where he highlights the challenges of hunter gatherers - making sense of the objects they perceive and predicting what they imply and natural selections powerful solutions; Emotions - which Pinker argues are essential to human prioritizing and decision making; Relationships - natural selection's strategies for coping with the most dangerous competitors, other people.  He helps us understand marriage, friendships and war. 

These conclusions allow him to understand the development and maintenance of higher callings: Art, Music, Literature, Humor, Religion, & Philosophy; and develop a position on the meaning of life. 

Complex adaptive system (CAS) modeling allows RSS to frame Pinker's arguments within humanity's current situation, induced by powerful evolved amplifiers: Globalization, Cliodynamics, The green revolution and resource bottlenecks; melding his powerful predictions of the drivers of human behavior with system wide constraints.  The implications are discussed. 

human mind and body
; which enable effective competition for the cognitive niche is Tooby & DeVore's theory that reflects a flexible competitive strategy, described by Steven Pinker, which leverages the power and flexibility of intelligence to defeat the capabilities of genetically evolved specialists focused on specific niches.  .  This dramatically expands the environments which support our survival.  And the associated
Plans emerge in complex adaptive systems (CAS) to provide the instructions that agents use to perform actions.  The component architecture and structure of the plans is reviewed. 
schematic
strategies captured by
This page reviews the implications of selection, variation and heredity in a complex adaptive system (CAS).  The mechanism and its emergence are discussed. 
evolution
, and expressed as: percepts, ideas, emotions, & relations; shape what we value and make it contingent on the situation. 

Menger aims to explain the emergence of money.  His argument is not altogether convincing from a CAS model of emergence.  As a plausible alternative we propose Mat Ridley's
Matt Ridley demonstrates the creative effect of man on the World. He highlights:
  • A list of preconditions resulting in
  • Additional niche capture & more free time 
  • Building a network to interconnect memes processes & tools which
  • Enabling inter-generational transfers
  • Innovations that help reduce environmental stress even as they leverage fossil fuels

Rational Optimist
which describes the emergence of economic is the study of trade between humans.  Traditional Economics is based on an equilibrium model of the economic system.  Traditional Economics includes: microeconomics, and macroeconomics.  Marx developed an alternative static approach.  Limitations of the equilibrium model have resulted in the development of: Keynes's dynamic General Theory of Employment Interest & Money, and Complexity Economics.  Since trading depends on human behavior, economics has developed behavioral models including: behavioral economics. 
man.  Ridley argues that '
This page describes the consequences of the asymmetries caused by genotypic traits creating a phenotypic signal in males and selection activity in the female - sexual selection.   
The impact of this asymmetry is to create a powerful alternative to natural selection with sexual selection's leverage of positive returns.  The mechanisms are described. 
sexual selection
' facilitated the sharing of ubiquitous carbohydrate foods gathered by women and less available high protein animal 'kills' hunted by groups of men.  This separation of roles facilitated the provision of time to dedicate to further specialization.  The specialization can be seen to enable the trading of resources and time for precious metals if desired.  But it also allowed time to
Tools and the businesses that produce them have evolved dramatically.  W Brian Arthur shows how this occurred.
develop the tools
to represent
Plans emerge in complex adaptive systems (CAS) to provide the instructions that agents use to perform actions.  The component architecture and structure of the plans is reviewed. 
memetic plans
.  Once printing became available the cost of representing and enforcing promises was massively reduced. 

Menger outlines a framework for money based on precious metals attractiveness as a tradable commodity.  His logic and example is a useful springboard for application of CAS principles based on 200 additional years of knowledge to explain the emergence of money. 




























































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