this post was submitted on 06 Dec 2024
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Gold has a lot of practical applications now (although is of course still treated as a 'precious' metal of value), but hundreds of years ago it was just a shiny metal. Why did it demand value, because of it's rarity? Why not copper, because it was too easily found? What made it valuable ahead of other similar metals?

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[–] sharkfucker420@lemmy.ml 6 points 1 week ago* (last edited 1 week ago) (2 children)

I do not have the time to explain the entire labor theory of value to you so you'll just have to trust me when I say that the labor required for extraction enabled gold and silver to possess a value abstracted from how they can be used. This is known as exchange value and it can only be measured when 2 commodities are prepared. exchange value is quantitative not qualitative so an expression of exchange value looks like: 20yds of linen = 1 coat. This is only true in a society if it takes the same social labor time to produce 20 yards of linen as it does to produce 1 coat, only then are they exchangable. It is the labor that gives them value. So then it may become obvious that having a universal commodity to compare everything to would be useful. Gold fulfills this role well because it is labor intensive to produce (high value due to labor time required), it can easily be divided into smaller and smaller parts to more adequately express precise values, it is rare, and it doesn't tarnish. Silver is similar but not as rare and tarnishes quicker, both work though.

Copper is abundant and tarnishes quickly

[–] ABCDE@lemmy.world 3 points 1 week ago (1 children)

Thanks, I've done a short course on labour markets (https://www.conted.ox.ac.uk/courses/inequality-and-labour-markets-online) and my master's (currently 1/3 in) is touching on it, so this is actually helpful, thank you.

[–] sharkfucker420@lemmy.ml 3 points 1 week ago

:D I am glad I could help

[–] Tar_alcaran@sh.itjust.works 2 points 1 week ago

Also, it helps for a currency to not only be hard to duplicate (the costly/difficult extraction and refining process helps here), but also for it to have no other purpose.

When you've got money that you can directly use, people will use it for that, and not as money, which is bad for the flow of money. And you run into divisibility issues: a tiny gold coin is fine, but 20cm of cloth is pretty useless.