"You see, most textbooks define magiconomics as something like the flow of magicapita from supply to demand," Professor Verlix remarked. "But this isn't what truly lies at the heart of what we are trying to study. What magiconomics really is, is…"
He turned around to them, gesturing to the definition that he had written down on the board.
[The study of human behavior as a relationship between ends and scarce means with alternate uses.]
"This," the professor continued with a fascinated expression, "this is what magiconomics is truly about. It's about human decision-making in any form of transaction we among each other. For instance, our desire for basic needs such as food and shelter manifests in a decision to persuade somebody to offer them to us by offering something of value in return. These days, it's currency, but once upon a time, it could have been anything. For instance, in the ancient Serrian Kingdom in modern South Elendir, people often exchanged shells with each other. For shells used be regarded as omens of good fortune and were aesthetically beautiful. However…"
He shrugged exaggeratedly. "It could have been anything. And indeed, for a long time, it was anything. Food, grains, iron, clothes, slaves, livestock, and tools. Anything of value. This is an outdated form of transactions that everybody knows as the barter system. Although there are some skeptics who actually argue that the barter system is overstated, we shall not go into that today. More importantly…"
His expression lit up with fascination. "Of course, for most of history, it wasn't possible to study human behavior relative to ends and scarce means with alternate applications. The reason for this was because of the subjectivity involved regarding relative value. How many loaves of bread are worth one hut? How many weapons are equal to one horse? How many seashells are equal to one bag of rice?"
He shrugged with an expression of exaggerated ignorance. "Nobody truly knew! It was all up to instinct! Subjective intuition as opposed to an objective measure. However, that became more convenient as the scale of exchange grew larger and larger, and people began to exchange with each other more and more. It became increasingly infeasible to rely on a subjective and intuitive balancing of value. Not to mention, what truly made this infeasible was that it prevented the accumulation of value, after all…"
His arms spread open. "Everything has a lifespan. Food, grains, livestock, seashells, huts, structures, and just about everything withers with time and becomes worthless. It was impossible to store value in a harvest of wheat and rice because these are biological products that eventually rot and go bad. The same is true for non-organic products; no matter how durable and tough they are, almost nothing can withstand the test of time. And thus, almost nothing could be used before to store value in the long run. Almost nothing could preserve the fruits of one's labor."
A knowing, excited smile emerged on his face.
"The keyword being 'almost.'"
"You see, there is one thing that was valued," he raised a finger. "That could be transactioned and exchanged, had a limited supply, and most importantly, was something that could serve as a store of value that could withstand the test of time. Does anybody know what that is?"
"Gold," a young man in the first row answered. "Gold is what people choose to store their value in."
"Correct!" he pointed at the young man with jubilant energy. "Gold does not rust or wane with time. It does not crumble. It does not decrease in its beautiful luster. And thus, people eventually realized that the only way to ensure that the fruits of their labor did not rot, crumble, erode, or collapse was to store them in the form of gold. Prior to that point in history, gold was merely regarded as an aesthetic curiosity. It was beautiful and reflected light in an unusual but mesmerizing color that made it popular among women and even men. In those ancient times, gold did not possess the kind of value that we place in it now. In fact…"
He leaned forward, as if afraid his students would not be able to hear him. "… This might stun you, but there was even a record of an ancient small settlement in the South of the Suvera Continent abandoning all their gold because of how heavy it was when running away from a volcano that had grown active and dangerous. They chose to carry other items, rather than the useless, heavy, shiny metal."
Several students lit up with a hint of intrigue.
"And the reason for that is that gold did not have the kind of value that it does now until people realized that they could store value in and ensure that that value didn't dissipate with time, and thus…" he paused for a moment as he directed a sweeping gaze across all his students. "…began the age of gold across all fourteen continents in the world, almost entirely independently. The more people sought gold to store their value, the more of what we call 'demand' for gold rose. The more people wanted the gold, the more people who had gold could get away with charging, and thus…"
He leaned back with a satisfied smile. "…the value of gold in our minds began rising and rising as the demand for it continued to rise, before alchemy was created, of course. And of course, what may as well be a fundamental law in magiconomics happened."
He raised a finger. "'Where there is demand, supply will follow suit.' In other words, ask and ye shall receive! Hahaha."
He jovially laughed to break the immersion a little and lighten the mood. "But indeed, the supply of gold began increasing as we desperately searched land and people for gold. Many great empires of the past scoured the many waters of our world as we frantically searched for more gold, and found it. In fact, we found so much of it that it became possible for everybody to have some amount of gold. We minted coins out of not just gold but also silver that shared similar properties, and we made them a medium of exchange because everybody valued gold and silver, and this…"
He walked back and forth across the podium. "…was perhaps the first time in the history of human civilization that the field of 'magiconomics' was even possible. Can anyone tell me why?"
Several students frowned as they fell into thought.
Cæ raised a hand calmly.
"Ah, Cæ, my boy, go on, why was magiconomics as a field of science as we know it today impossible prior to the adoption of gold as a medium of exchange and a store of value?"
"…You mentioned prior that transactions in the past were based on subjective intuition rather than an objective measure," Cæ continued with a calm tone. "This would mean that collecting data on the transactions and organizing it would be almost impossible due to the fact that there was no universal scale to measure the value of price and goods, and because each individual unit of a loaf of food, livestock, or tools were diverse and different, that made it impossible to have a constant and unchanging unit of measure, making gathering empirical data on the nascent economies of ancient civilizations almost impossible. And without empirical data, you cannot have any scientific inquiry."
"Exactly!" he pointed at Cæ with a hint of pleased triumph. "We measure distance in meters, time in seconds, and weight in grams and kilograms. Each meter is identical to every other meter, and the same is true for each second and each kilogram. However…"
He shrugged with pursed lips. "The same wasn't true for different units of food, livestock, and other goods and services in ancient times. Making everything a chaotic mess of subjective evaluation. And thus, magiconomics wasn't even really possible as the field of science that it is today. And so it was the arrival of gold that made it even possible for the study of human behavior as a relation between ends and scarce means even became possible. After all…"
He grabbed a few coins from his purse. "Each coin was made from nigh-identical molds and was made from the same metal, making each gold, silver, and copper coin as identical to other coins of the same metal. This allowed for a constant unit and scale of measurement, which allowed us to make objective evaluations of the value of goods and services, as decided collectively by all people, to be measured in reasonable constant units of gold, silver, and copper, which became the medium of all exchange. We could measure how valuable everything was relative to gold and measure how that value changed over time. This allowed for people to look into this precious magiconomic data, and this laid the foundation of magiconomics!"
The students were silent, engrossed in his appealing lecture.
He didn't follow a script from the textbooks and jump into definitions and concepts in magiconomics with no context and without building any interest, but instead, conveyed the development of human transactions and how that established the foundations of magiconomics.
"Around that time, one of the very first waves of globalization began spreading as different groups of people formed different polities, usually feudal monarchies, and began trading goods and services with each other," he continued with a calmer tone as he moved on to the next stage of the story. "Traders and merchants from across the world and across all nations had realized that what was in excess and of less value in their nation was in great scarcity in other nations and of great value to them. Thus, one stood to make a lot of money by producing said goods, transporting them to other countries, and selling them for a healthy profit in gold. Each time you sold something to another nation, you made gold. And each time you bought something that came from another nation, you lost gold. And what does that mean for nations that buy and sell?"
One student raised a hand. "…That some nations grew wealthier with gold by selling lots and other nations grew poorer in gold by purchasing a lot?"
"And that is exactly what happened indeed," the professor nodded with an engrossed expression. "Back in the old days, traveling around the world took a long, long time. Months, and in the worst cases, even years! Because it took so much time, other things of value began rotting, crumbling, and rusting. They lost value with time, as we have discussed. That meant that all transactions had to strictly be gold and silver; otherwise, payments were not accepted. This made gold even more precious than it was before, for it was not just a convenient means of exchange within nations, it was the only possible medium of exchange for highly important goods and services in the nascent world economy!"
He paused to take a sip of water before continuing. "Thus, gold became more than just valuable; it became crucial, and countries raced to gather gold at all costs. There were many nations that took this race for gold to the very extreme, practicing an economic system known as mercantilism. What they did was bar all purchasing of foreign goods and services. After all, each purchase of goods and services coming from afar meant more gold leaving the country. The more gold that left the country, the less they would be able to buy of the truly important goods and services in times of great need. Not only that…"
He raised a finger, stressing a point. "But also, by stopping or greatly reducing the purchasing of foreign goods and services, they reduced their value. After all, less demand means low prices because the sellers know they can't get away with high prices because people don't want it very much. And in order to ensure that they had as much gold as possible, they focused all out on producing goods and services and exporting them to the rest of the world. For their basic needs and desires, they focused on producing everything they needed inside the country, while selling everything they produced outside the country. This was the very first economic system and led to some nations becoming wealthier than others. And this, my dear students, is where the story just begins."