Economy and Introductions

[barrowyarrow]

Hi guys, I'm new here so apologies if this isn't the right place for this. I've been working on a world build for about a year now. For this part of it I really wanted to challenge myself to making a dizzying economic system that makes enough sense that someone who put their mind to it would be able to make a lot of money within this system. I was hoping I could get some input from someone who understands economics fairly well. Here's a basic shell of what I think sounds right:

In this world you have Crowns and Cutt. Crowns are coins minted in gold, silver, or copper and pressed with the stamp of the ruling body. Value is denoted by number of sides on the coin.

gold pentagons
gold hexagons
gold octagons
silver pent
silver hex
silver oct
copper pent
copper hex
copper oct

Currency is based on the principle that one copper pent will always buy one pint of water or equivalent weight of grain. Because the office of the king accepts crowns it has stable spending power anywhere within the king's influence.

Alternatively, noble houses within the kingdom will mint their own currency called cutt. Used to be everyone only minted cutt but once the ruling body took over it tried to standardize the currency with crowns. Cutt is kind of a holdover from the old days of independent city states. Basically cutt is made from gemstones mined within the territory of a particular house. The stones are cut and polished into easily carryable "coins" by artisans hired by the individual houses. Each house's cut is unique to that house and difficult to replicate without being a master jeweler.

The value of a house's cutt depends on a lot of factors like rarity of the stone, influence of the owning house, political dealings, and public acceptance. For example one major house is House Wrost. House Wrost has an abundance of sapphires and rubies so most of their cutt is minted in those stones. Another house, House Bargoit, has very few rubies in their territory so a Bargoit ruby is worth much more than a Wrost ruby. However, due to political turmoil Wrost stops accepting Bargoit cutt making all Bargoit rubies within Wrost territory effectively only worth it's weight as an uncut ruby.

All cutt is accepted by the king in crowns. So in this event the owner of a Bargoit ruby in Wrost territory would have to travel elsewhere or eat the cost of the ruby.

That's what I've got so far. I'm just hoping someone with some understanding of economics might be able to poke holes in it or find some way to make it less confusing.

 

[pmmg]

Well...first, I dont think anyone really understands economics.

But, I can poke holes in it.

First being, a ruby is a ruby. The abundance or scarcity of rubies will more likely determine its value than the place where it was mined. Saying that Ruby is not welcome here because it was mined from the hill over there might happen if one had some very strange and strict ideas of money, but no one is going to pass on accepting rubies for payment if rubies are before them.

Second, number of sides on coins should be less important than weight and purity of coins. Its not the shape, but the gold itself that is valuable.

However, no reason you cannot have a complicated method of currency. What story purpose does this serve?

One principle that has a lot to do with the value of things is the law of supply and demand.

If rubies are rare, and food is plentiful, one ruby can buy a lot of food, but if rubies are common and food is scarce, a fist full of rubies will not convince someone to part with the food they have.

In a real world sense, coins are worth whatever someone is willing to trade for them, and if the government makes it hard, people will just do it under the table.

 

[barrowyarrow]

Well...first, I dont think anyone really understands economics.

But, I can poke holes in it.

First being, a ruby is a ruby. The abundance or scarcity of rubies will more likely determine its value than the place where it was mined. Saying that Ruby is not welcome here because it was mined from the hill over there might happen if one had some very strange and strict ideas of money, but no one is going to pass on accepting rubies for payment if rubies are before them.

Second, number of sides on coins should be less important than weight and purity of coins. Its not the shape, but the gold itself that is valuable.

However, no reason you cannot have a complicated method of currency. What story purpose does this serve?

One principle that has a lot to do with the value of things is the law of supply and demand.

If rubies are rare, and food is plentiful, one ruby can buy a lot of food, but if rubies are common and food is scarce, a fist full of rubies will not convince someone to part with the food they have.

In a real world sense, coins are worth whatever someone is willing to trade for them, and if the government makes it hard, people will just do it under the table.

Thanks for the reply even though it's kinda late.

The story idea for this is to establish a country that is an economic powerhouse with a heavy sense of cut throat politics. I want characters to be blindsided by sudden changing values on the goods or money they carry. Plus I just think making systems like this is kinda fun.

This is for fantasy universe dwarves if that helps. The in universe justification is that these gemstones are heavily abundant and cutting them into pretty jewels would've been how these major houses gained their wealth and power. Their value is increased because a ruling body guarantees it's value, but in the event the stone loses it's inflated spending power, it's still worth the lump of stone it was carved from. Maybe a bit more just for the nice pattern it was cut into, but it might not be worth nearly as much as the local power's own cut pattern of the same gem. At the end of the day, these are just shiny rocks and people know this.

The coin sides thing is mostly just so people can tell what the worth is at a glance. Not that a five sided coin is worth more or less because it has five sides but that the five sides tells you what coin it's supposed to be.

But yeah, this is just me attempting to make something deliberately more complicated than it needs to be. Do you think I should drop the gemstones thing?

 

[Diana Silver]

Sounds cool. I like that you go into this detail in your worldbuilding.

But you asked for hole-poking, so here's my stab:

The first hole that glares at me is that the value of a pint of water will spike tremedously in times of drought. Draughts are perilous times in the best of cases, and it seems to me that tying the currency value to the water supply would add unnecessary disturbance on top of hard times. Unless draughts are extremely rare for some reason in your country - but then it would have to be rare to a mythological degree, I think.

Also, I assume that by water you mean safe drinking water, which seems exceedingly easy to fiddle around with. I imagine a whole guild of crooked innkeepers peddling water of questionable quality to desperate folks... Though this is not so much a hole, as an implication: the Crown would need to set up a (possibly armed) Institute of the Standardization of Water Sanity to regulate and enforce what can be sold as 'water'.
(This may be why, historically, gold has proven a good standard: gold has no intrinsic value relating to human needs or health. When you tamper with gold, as dishonest poeple will always try to tamper with the basis on which currency is standardized - your tampering only affect the value of money, not people's lives or health.)

My other thought is based more on my knowledge of governance and power than economics: as you note yourself, the minting and standardizing of coins is usually used as a tool by the people in power. Having everyone use your standard is an essential way to bring people to accept your power and rely on your influence for their economic stability. In that light, I wonder why your governing body allows the continued use of the coinage of smaller houses under their rule.

Apart from that, I wonder how useful these smaller money systems would be to people in everyday life. The area where the local coinage actually buys you something is - by definition - small. I feel like any business owner or private individual would always prefer to be paid in the currency that they can actually spend everywhere, which makes me think that local coinages would quite quickly become obscelete by the natural process of preference. Then, once obscelete, the tradition of crafting "cuts" may still prosper in your society, but more as an ornamental, symbolic, maybe even fashionable thing, rather than as a competing money system.

 

[barrowyarrow]

Sounds cool. I like that you go into this detail in your worldbuilding.

But you asked for hole-poking, so here's my stab:

The first hole that glares at me is that the value of a pint of water will spike tremedously in times of drought. Draughts are perilous times in the best of cases, and it seems to me that tying the currency value to the water supply would add unnecessary disturbance on top of hard times. Unless draughts are extremely rare for some reason in your country - but then it would have to be rare to a mythological degree, I think.

Also, I assume that by water you mean safe drinking water, which seems exceedingly easy to fiddle around with. I imagine a whole guild of crooked innkeepers peddling water of questionable quality to desperate folks... Though this is not so much a hole, as an implication: the Crown would need to set up a (possibly armed) Institute of the Standardization of Water Sanity to regulate and enforce what can be sold as 'water'.
(This may be why, historically, gold has proven a good standard: gold has no intrinsic value relating to human needs or health. When you tamper with gold, as dishonest poeple will always try to tamper with the basis on which currency is standardized - your tampering only affect the value of money, not people's lives or health.)

My other thought is based more on my knowledge of governance and power than economics: as you note yourself, the minting and standardizing of coins is usually used as a tool by the people in power. Having everyone use your standard is an essential way to bring people to accept your power and rely on your influence for their economic stability. In that light, I wonder why your governing body allows the continued use of the coinage of smaller houses under their rule.

Apart from that, I wonder how useful these smaller money systems would be to people in everyday life. The area where the local coinage actually buys you something is - by definition - small. I feel like any business owner or private individual would always prefer to be paid in the currency that they can actually spend everywhere, which makes me think that local coinages would quite quickly become obscelete by the natural process of preference. Then, once obscelete, the tradition of crafting "cuts" may still prosper in your society, but more as an ornamental, symbolic, maybe even fashionable thing, rather than as a competing money system.

That actually might be a really good story beat. A drought causing an economic collapse. I like it.

I kind of see the minting of the standard coins as the attempt evolve this economic system which is very much one of those obsolete systems that refuses to die. The cutt system alive at the behest of wealthy aristocrats who see it as the justification of their status and artisans who've spent their lives perfecting their craft on. As the jewelers who cut these coins age and die off maybe their replacements can't quite do it as well which creates an easy avenue for counterfeiters or god forbid they have to rely on the king's money alone, what would the other houses think?