Dry goods | Nick Szabo: The origin of money (Part-6): spoils and infringement compensation


In the orangutan community and even in the hunting-collection culture (and its approximate culture), the mortality caused by violence is much higher than the corresponding value in modern civilization. This situation can at least be traced back to our common ancestor with chimpanzees – the orangutan community is always in confrontation.

Wars include killings, disability, torture, kidnapping, rape, and extortion of tributes with such fate. When two neighboring tribes are in peace, usually one party will contribute to the other party. Tributes can also be used to conclude alliances and achieve economies of scale in war. Most of the time, this is a form of exploitation that gives the victor a greater benefit than applying further violence .

Generally speaking, after the victory in the war, it is followed by the real value transfer of the winner to the winner. Formally, this shift is usually manifested by the plundering of the victors and the desperate hiding of the defeated. More commonly, the loser must tribute to the winner on a regular basis. At this time, there was a triple coincidence problem. Sometimes, this problem can be avoided by reconciling the supply of the defeated and the needs of the victor in a complex way. But, in real time, the original currency provides a better way – a well-recognized value medium that can greatly simplify payment terms – which is important in an era when terms cannot be recorded or remembered . In some cases, such as shells in Iriquois Confederacy, collectibles can also be used as original souvenirs, although not as precise as words, but can be used to help recall the terms. For the winner, the collectible offers a way to get as close as possible to the Laf's optimal tax rate when collecting tributes (Translator's Note: Laffer is a well-known economist who proposed tax cuts, his theory Yes, within a certain range, as the tax rate increases, the tax collected by the government will rise; but after a certain degree, the tax will fall because of the increase in tax rate, because people do not want to work.) For the losers, because the collectibles can be hidden, they can "underreport the property", so that the winners do not have so much wealth, so they levy some tributes. The hidden collection also provides an insurance against the insatiable predators . It is because of this hidden nature that the wealth of primitive societies has escaped the attention of missionaries and anthropologists. Only archaeologists can discover these hidden wealth.

The concealment of collectibles and other strategies has given collectors and predators a common problem faced by modern tax collectors – how to estimate the wealth they can extract . Although value measurement is a problem in many types of transactions, it is more than a hostile taxation and tribute. After doing a very difficult and unintuitive trade-off, coupled with a series of visits, audits and collections, the tribute finally maximized the benefits, even though the results were very expensive for the tribute.

Suppose a tribe wants to levy tributes to several nearby defeated tribes, and they must estimate how much value can be extracted from each tribe. The wrong way of estimating will allow some tribes to hide their wealth, while over-squeezing other tribes, causing the damaged tribes to gradually shrink, and the gaining tribes can be relatively less tribute. In all of these cases, the victors are likely to get more out of them by using better rules. This is the guiding role of the Laffer curve on tribal wealth.

The Laffer curve was proposed by the distinguished economist Arthur Laffer to analyze the tax revenue problem: as the tax rate rises, the tax revenue will rise, but it will rise more and more slowly, because there will be more and more tax evasion And, most importantly, it inhibits the motivation of people to participate in taxable activities. For the above reasons, there is a certain tax rate that can maximize tax revenue. Increasing the tax rate above the Laf's optimal tax rate will reduce government revenue. Ironically, the Laffer curve is often used to advocate low tax rates, although it is itself a theory of maximizing government tax revenues, rather than a tax theory that maximizes social welfare or maximizes individual satisfaction.

On the scale of extension, the Laffer curve is perhaps the most important economic principle in political history. Charles Adams [A90] used it to explain the prosperity and decline of the dynasty. The most successful governments are always guided by their own interests and maximize their income based on the Laffer curve – their interests include both short-term income and long-term success for other governments. The levy of government, such as the Soviet Union and the late Roman Empire, was eventually annihilated in history; governments with low tax rates were often conquered by more financing neighbors. In history, democratic governments often only need to use peaceful means to maintain high tax revenues without launching foreign wars; they are the first countries in history to have such high tax revenues relative to foreign enemies, so that they can put a lot of Money is spent on the non-military sector; their tax system is closer to the Laf's optimal tax rate than most of the previous government types. (There is also another view that this kind of leisure spending around is brought about by the deterrent of nuclear weapons, not because of the increasing tax revenue maximization demands of democratic governments.)

When we apply the Laffer curve to examine the relative impact of tributary contracts on different tribes, we can conclude that the desire to maximize income leads the victors to accurately calculate the income and wealth of the conquered tribe. The way in which value is measured critically determines how tributaries can escape the burden of tribute by hiding wealth, fighting or escaping; there are many ways for attackers to fool these estimates, such as hiding their collections in the cellar. Collecting tributes is a game in which the incentives of both sides are inconsistent around the estimation of value.

With collectibles, the victor can ask the tribute to pay for the (strategic) most appropriate time, without having to reconcile the time available to the tribute or the time the victor needs. With collectibles, the victors are free to choose a certain time to consume these wealth, rather than accepting tributes while not spending .

In 700 BC, trade was already common, and the form of money was still a collectible. Although the currency was made of precious metals, its basic characteristics (lack of uniform value scale) were still the beginning of most self-wise people. The original currency is very similar. This situation was changed by Anatolia (now Turkey) and the Greek-speaking Lydians. In the archaeological and historical records, King Lydia was the first producer of metal coins.

From then until now, the government itself gave its monopoly power and then minted the currency, rather than private coinage, becoming the main distribution method of metal currency. Why aren't private companies (such as private banks, who have never missed these quasi-market economies) to control currency casting? The main reason people have proposed is that only the government can enforce anti-counterfeiting measures. However, they can enforce such measures to protect competitive private mints, just as you can ban counterfeiting of trademarks while using the trademark system.

Estimating the value of a metal currency is much easier than estimating the value of a collection – the transaction costs are much lower. With currency, trade can be much more trade-off than just barter; in fact, many types of low-value transactions are possible because the first small amount of these transactions is greater than the transaction costs. Collectibles are low- volume- currency currencies that participate in only a few high-value transactions; metal currencies are more circulated and can assist with a large number of low-value transactions .

Considering the benefits we see in the original currency as a tributary system and tax collectors, and the inevitable value estimation in the process of optimizing the mandatory payment, the tax collectors (especially the King of Lydia) become the first Batch metal currency issuers won't surprise us. The king's income comes from taxes, and he has a strong incentive to more accurately estimate the wealth that his people hold and exchange. On the other hand, market transactions also benefit from cheaper value measurement, which creates a system that is close to efficient markets. For the first time in history, individuals can also participate in large-scale markets; these are outside the King’s plan. side effect. The greater wealth that comes with the market has become a taxable project, and the income the King has earned has even surpassed the Laffer curve effect caused by the reduction of measurement errors under the given tax resources. In other words, a more efficient means of taxation, supplemented by a more efficient market, results in a substantial increase in overall tax revenue . These tax collectors, like the gold mines, have a rich reputation with the kings of Lydia, Midas, Croesus and Giges.

Centuries later, the King of Greece, Alexander the Great, conquered Egypt, Persia, and most of India, by looting Egyptians and Persian temples to raise money for their expeditions. Specifically, it was the low circulation of the temples. Sex collections are taken out and cast into highly liquid coins . He summoned an efficient economy and a more efficient tax system.

The tribute itself cannot form a closed loop of collectibles. These tributes will be of value if and only if the victor can exchange the collectible for something else (such as in-laws, trade or collateral). However, the victor can force the loser into the manufacturing industry to obtain the collectibles, even if this does not meet the initiative of the defeated.

Disputes and compensation

The ancient hunting-collecting tribes did not have our modern tort or criminal law, but they had a similar way of mediating disputes, that is, to have clan or tribal chiefs, or to vote for referee, and the referee covered modern law as a crime. And the scope of the infringement. Resolving disputes through punishment or fines can prevent the clan from both sides of the dispute from falling into the cycle of vendetta . Many pre-modern cultures, from the Iroquois of the United States to the Germans of the pre-Christian era, have decided that compensation is better than punishment. From petty theft to rape to murder, all achievable infringements have a price (such as the Germanic "weregeld" and the Iroquois blood money). Where money can be used, compensation will be paid in currency. Animals are also used in animal husbandry. In addition, the collection is the most versatile.

Compensation for damage in litigation or similar complaints once again leads us to the three coincidences of events, supplies and needs, just as problems in heritage, marriage and tribute. If there is no solution, the judgment must compromise the ability of the defendant to pay compensation and the opportunity and desire of the plaintiff to benefit from it. If the compensation is a consumer product that the plaintiff already has in large quantities, then although the compensation also constitutes a punishment, it may not be satisfactory to the plaintiff – so it cannot stop the cycle of violence. Here, we can use the collectibles to solve the problem – let the compensation always solve the dispute and end the cycle of revenge.

If compensation payments can completely eliminate hatred, then they cannot form a closed loop. However, if compensation payments do not completely calm hatred, then the collection cycle will be a vendetta cycle. Because of this, it is possible that this system will achieve a state of equilibrium – reducing but not eliminating the cycle of vendettas until a more connected trading network emerges.


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Author: Nick Szabo

Translation: Ajian

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