I had a great time writing about premodern society and warfare, and people had some great suggestions on what to do next. One good one I saw was economics, so I’ll try to tackle that here. For those who might be nervous: I’m not going to be getting into stuff like interest rates and fiscal policy. I’m currently getting an MBA, so I have to deal with that, but this’ll just be the sort of stuff that’ll be interesting for worldbuilders. Bonus: the last section has my method for creating detailed economies in my worlds!
My usual conditions apply: as much as possible, I’m going to try to stick to things that hold true across most premodern (here roughly meaning pre-industrial) civilizations. There’s obviously a lot of variation, so keep that in mind. Also, magic shakes things up a lot, which won’t be explored here. Lastly, you could make an argument that many fantasy settings are technically early modern; I’m not going to complicate things by going there.
One thing I regret in these posts is that like most Americans, my historical knowledge is overly focused on Europe and the Mediterranean. Because of that, I might’ve identified something as being universal when it’s really just from that narrow geographical area; if that happens, let me know and I’ll edit accordingly. I’m doing my best to rectify that lack of general knowledge, but I would appreciate any suggestions. (Han China was especially interesting in the research for this article; many Eurocentric are prone to underestimate the sophistication of Imperial China. Personally, I think we should spend just as much there as on the Romans, but oh well.)
Our sections today are currency, markets, merchants, trade, and economic sectors.
- Before we talk about regular currency, let’s discuss what happens when there isn’t currency. Most people think that the most popular kind of non-money transactions are barters, but those are actually fairly inefficient. A successful barter requires a “coincidence of wants,” where you and another party happen to have exactly what the other needs—this can be hard to coordinate (money makes it way easier).
- Instead of bartering, many premodern cultures used what’s called a “gift economy.” This means that most needs are met by giving your surplus to others without an explicit arrangement to reciprocate. There are strong social forces governing implicit reciprocation; someone who receives a lot and never gives in return may be shunned. Bartering still existed, but it was mostly used for outsiders who weren’t subjected to the same social pressures as the local community (like itinerant merchants).
- There are three kinds of money. The first is “commodity currency,” which is when the money is valuable by itself. Some systems of metal coinage worked like this: you’re actually trading specifically measured quantities of precious metals. A gold coin that weighs one ounce is worth exactly one ounce of gold; you could melt the coin down and nothing would change. This is one reason why many currency words are weight-related (pounds, shekels, talents, etc.). The stamps on coins were originally to verify that they’d been appropriately measured: “The royal treasury verifies that this is pure silver and weighs exactly 3 ounces.” Stamps provided an easy way to spread propaganda throughout an area, which is why you get so many mythological and governmental figures on coins. Well-made coins had clearly defined edges so you could tell if someone had clipped or shaved some of the metal off for your own use.
- The second kind of money is “representative currency,” where the money stands in place of something of tangible value. Examples of these were everywhere, from Babylonian clay tables that gave the holder a claim to a portion of grain in the temple to relatively modern currencies that represent an amount of gold in the federal reserve. This is one way to get around some of the limitations of commodity currency, like not having enough of the precious material to go around. You’re free to make the money out of whatever you want.
- The last is “fiat currency,” where the only reason the money is worth something is because the government says it is and everyone goes along with it. Most modern currencies work like this. The US dollar used to be tied to gold, but now it’s just important because the government says so. These systems are the most flexible, but can be difficult to execute. For one thing, the government has to have reliable authority, or no one’s going to care what they say is valuable. For another, the fact that this money isn’t tied to anything tangible makes it really tempting to just make more when you need it, leading to catastrophic inflation. Both the Roman Empire and Imperial China were prone to doing this.
- Very small point: while it’s usually governments that are minting your money, that’s not always the case. Imperial China frequently contracted with private companies to make their money for them.
- It might be obvious, but it’s worth saying: your money doesn’t have to be coins. Money can be paper, shells, or even knives (yes, that was a thing). In very small economies (like trade within a village), grain sacks of a standardized weight can be used like a very primitive commodity currency.
- One of the basic quandaries of the ancient world was how to coordinate commerce. Most occupations (such as the ubiquitous subsistence farmers of the first post) had to work almost all the week, so you had to be sure that if you were leaving the house for a day to do shopping, the merchant was going to be there. At the same time, most merchants couldn’t stay in one place all the time; they needed to move around to get new goods and find new customers. Urban marketplaces made things easier, but being in the same place doesn’t guarantee that you’ll be there at the same time.
- Many cultures solved this with “market days.” These were specific days that everyone—merchants and consumers—would come to the marketplace to trade. They were usually weekly affairs, though the length of a “week” varied between cultures. Frequently, there would be circuits of market days: Monday for City 1, Wednesday for City 2, Friday for City 3, etc. These allowed merchants to travel around, following the circle of cities for new customers.
- For very valuable and hard-to-acquire goods, there might be annual or semiannual fairs. There would be fairs for specific industries, like clothes or metalworks. These were usually coordinated to be at the same time and place as a prominent religious or cultural festival to ensure that as many buyers and sellers would be in the same place as possible.
- Urban marketplaces themselves had a lot of variety. Early marketplaces rarely had permanent shops (since merchants would be moving around), but would just be open spaces that would be used for other social purposes on non-market days (like the Greek agora or Roman forum). As cities developed, there would be proper alcoves for the traveling merchants to set up in. Covered marketplaces were an excellent way to keep buyers and sellers comfortable, and were common in hot environments. Some larger cities had multiple marketplaces, each for different goods (Rome had three).
- It took a long while for shops to transition to permanent buildings. This happened around the same time that market days stopped being used, and for the same reason: a middle class was developing that could afford to shop whenever it wanted. However, permanent shops still didn’t look like we imagine them (buildings where you walk in, look at the merchandise, and then buy your wares at a retail counter). That style requires a lot of space. Instead, in many areas at least, customers would deal with the owner (or a representative) at the door/window, and they would bring what you wanted and finish the deal there. The rest of the ground floor could be for storage or manufacture. (Medieval England shops had a neat setup: shop windows would have horizontal shutters, with the top flipping up to be an awning and the bottom folding town to be a counter.) Owners, workers, and their families would live in upper floors.
- Frequently, artisans would live in alleys near the marketplace, making it easier to transport bulky wares on market days. There were some exceptions; smithies and tanneries were very stinky, so many towns had laws that kept them out of the city walls. Livestock required too much space to store in the dense city proper, so they were walked “on the hoof” there on market days.
- We discussed this in the first post on premodern society, but it’s worth revisiting that merchants are disliked in almost every premodern culture. By violating community norms they alienated commoners, by accruing wealth they alienated nobles, and by buying low and selling high—something that was usually considered fundamentally dishonest—they alienated everyone. This had a couple effects. The first was that there were often tense power struggles between rich merchants and nobles, sometimes leading to harsh legislation. The second was that groups that were disliked for other reasons—ethnicity or religion, for example—often became merchants, since more popular groups wouldn’t take the job. This is called the “middleman minority” effect, and can serve to exacerbate existing prejudices.
- I identify three basic classes of full-time merchants: urban, trader, and itinerant. We’ve touched on urban merchants already, but it’s worth saying again that for much of the premodern world, these people didn’t have permanent shops. We might classify them as “peddlers” for having portable stores; they would bring these to the marketplace on market days. Again, some of these would travel to other cities for their market days, but others would stay in the town, moving their shops to other high-traffic areas like city gates or wealthy estates. Urban merchants often got more business than itinerants, but they also had to pay a fee to the city to set up their stalls.
- Traders are long-distance merchants that tend to be highly specialized. They make trips between specific urban centers, buying and selling certain goods that they focus on. Some of them will bank most of their livelihoods on success at fairs. We’ll go into detail about the mechanics of long-distance trade in a bit.
- Itinerant merchants are easy enough to understand. Instead of focusing on single urban marketplaces (or a market day circuit), they would wander around less populated areas, occasionally stopping in to a marketplace when they had goods that were worth it. In general, itinerants couldn’t afford to specialize in specific goods. Instead, they would buy whatever was cheapest and sell whatever was most expensive, making them travelling general stores. Seaborne trade like this is called “cabotage” (which has a different, very specific legal definition nowadays).
- In both previous posts, we had elements that the popular imagination tends to underestimate. First, it was the amount of subsistence farmers, then it was the amount of non-combatants in an army. Now, it’s the predominance of itinerant merchants. These small-time folks meandering throughout the countryside make up the majority of economic activity. Your characters may be more interested in traders and urban merchants, but remember that they are the minority.
- The last thing worth discussing is guilds, even though this is another area that goes beyond full-time merchants. While not ubiquitous, guilds were common in a lot of areas. They had governmental protection, and they usually required everyone in their jurisdiction who practiced their profession to be a member. They worked to ensure product quality and tried to maximize the profits of their members (often at the expense of the consumer, such as through predatory pricing). Interestingly, division of labor would happen across guilds, not within them: that is, instead of having a “Metalworkers’ Guild,” you would have the “Nailsmith Guild,” “Helmet-makers’ Guild,” “Horseshoers’ Guild,” etc. A couple cities I looked into had well over a hundred guilds.
- This is another thing that was discussed in a previous post, but we need to talk about just how expensive premodern transportation was. Transporting things overland was extremely expensive. It’s not worth getting into specific numbers here (since they change frequently), but what is important is just how much cheaper water transport was. Transport by river was five times cheaper than land, and by sea was twenty times cheaper. Needless to say, you always went by water if it was possible. Goods could reach 5-20x farther on water, powerfully shaping trade and settlement networks. Note that it was still frequently worth it to invest in infrastructure to overcome the costs of land trade—see the famous Roman roads—but the high cost of such construction was often prohibitive.
- There’s another side effect of the difficulties of overland trade. It was rare for edibles to be transported long distances for several reasons. For one thing, they tend to be large and heavy for their worth, making it hard to carry a lot at a time. For another, the animals required to move the goods had hefty food requirements of their own. These factors—plus a few others—meant that aspiring food traders often ended up eating their wares en route. (See Bret Devereaux’s discussion on the Loot Train Battle in Game of Thrones—that army would’ve devoured all that food long before it could’ve done anything useful.) Most of those factors weren’t there for water travel. Rome, for example, had massive food needs. It was cheaper to ship grain from Egypt, across the Mediterranean, than to cart it through Italy, Rome’s backdoor. Water changes everything.
- If you know any world history, you’re probably aware of one example that spat in the face of all the difficulties of overland travel: the Silk Road. It spanned a ridiculous distance (though people often forget about the Black and Caspian Seas; less of it was on foot than people think). The main force here was one of the most powerful ones in economics: scarcity. Peoples on both sides of the Silk Road had goods that were completely unavailable to the others. This made them extremely valuable, and the profits involved made all the costs worthwhile. Of course, this made Silk Road goods very expensive, reserving them for the elite.
- This is a key point to consider in trade: in general, an area’s exports will be something that they can provide that others can’t. That sounds obvious, but the “can’t” part is important. If a different area can make the thing themselves, they will; trade secrets or special knowledge often isn’t enough to stop replication attempts, since transport is so expensive. An area will need unique climate, resources, wildlife, or something similar to sustain a competitive advantage. At the same time, no region will specialize completely in a good. People there will still make all the necessities of life themselves; completely specializing entire regions with no variation is a great way to make everyone starve. (Looking at you, Panem.)
- The final thing to discuss is banditry. An important feature of trade—long-distance and otherwise—is the threat of bandits or pirates. Otherwise-attractive trade routes will go unused if people aren’t safe there. One surprising effect of the Mongol conquest of Asia was that their crack-down on bandits made the Silk Road much safer, creating a “Pax Mongolica” of renewed commerce. Governments that had strong law enforcement were usually more economically successful for this reason.
- The main purpose of this section is to provide a tool for thinking about your world’s economy. Real economists divide industries into three sectors: primary (extraction of raw materials), secondary (processing and manufacture), and tertiary (services). We’ll go through the sectors here and then talk about a way to use them for worldbuilding.
- The primary sector encompasses all industries that create raw materials: food, wood, ore, etc. In the premodern world, these industries are extremely inefficient, and so take up the vast majority of labor and resources. Food is by far the worst offender: remember from the first post that 80-90% of the entire population will be subsistence farmers. Note the word “subsistence” there—these people generate barely enough food to get by, leaving barely any surplus to sell to the economy at large. It takes a lot of these people to make the foodstuffs required to support the other sectors. Forestry and mining are activities that belong here, though they don’t take up nearly as much labor. (As a brief aside, premodern miners didn’t have the same stabilization technologies that we do, so they couldn’t really make mines that were like cave systems. Instead, mines were just big, relatively shallow pits in the ground. Sorry, dungeon designers.)
- One other thing: there’s a massive industry in the primary sector that is almost always ignored in fantasy settings—charcoal. Charcoal is valuable for fuel, useful in all metalsmithing, and required in advanced smithing. A lot of charcoal is required to meet these needs, and a lot of wood goes into making just a little charcoal. I’m not going to go into the charcoal-making process now, feel free to look it up. There were entire forests dedicated to charcoal to fuel the Romans’ all-consuming metal industry. Saruman would’ve had to fell all of Fangorn to make the gear for his Uruk-hai.
- The secondary sector is responsible for taking those raw materials and transforming them into finished physical products. The processes that transform ore into breastplates, wood into ships, and wool into fine clothing all belong here. This is another labor-intensive area—remember that clothesmaking dominates the lives of commoner women. In general, these industries require a lot of work and specialist knowledge because they’re relying on artisans instead of factories.
- Remember how I said that regional specializations required that an area have something that can’t be replicated by anyone else? Most of these are due to differences in the primary sector, since raw materials are heavily location-dependent. Large forests, extensive mineral deposits, unique wildlife, and favorable agricultural climates all work here. In some cases, transporting those raw materials is impractical, maybe because they’re bulky or delicate. When this happens, the region will export finished products instead of the raw materials. This is why Rome imported iron ore from Britain, but silk cloth from China.
- Finally, the tertiary sector is the services: the industries that provide value without creating physical products. Merchants, politicians, clergy, and professional soldiers belong here. Note “professional” soldiers: remember that most armies were made up of workers from other sectors who were briefly recruited into the military. That’s a pattern for tertiary laborers in the premodern era. It’s relatively rare for people to be full-time tertiary laborers: artisans will sell their goods directly, for example. Still, a lot of wealth and commerce flows through workers here. They are often the richest and most powerful members of their societies.
- There’s one tertiary sector industry I want to mention in particular: bankers. Except that in the premodern world, banks as we know them took a long time to form. The profession started with money-changers, who were valuable in areas where multiple forms of currency were used. They naturally charged for their services, which left them with lots of wealth in coins. It didn’t take long for money-changers to become money-lenders, providing them with another source of income. (I can’t corroborate this, but I’ve heard that the English word “bank” comes from Italian “banca,” the benches that money-changers sat on.) Eventually, these money-lending and -changing services were offered to key families in important cities, elevating the trade in society and pushing toward proper institutional banks.
- For completeness reasons, I guess I should mention that in modern economies, there’s technically a quaternary sector describing knowledge workers: people who use specialist education to produce intangible goods. This barely existed at all in the premodern world. Universities were a very late addition, though you could make an argument that monasteries and other full-time educated, religious workers counted. I would still make this a very slim minority in your worlds.
- With this framework in mind, devising your world’s economy is fairly simple. All you have to do is go through the sectors. Start with the primary sector, paying attention to regional availability of resources. Once that’s done, you can take a look at transportation patterns: where are your waterways? Your relatively easy overland routes—valleys and plains as opposed to mountains and forests? Next is the secondary sector. If raw materials are hard to transport, place production in the same area as extraction; if they’re cheap to transport, place production at the population centers. Finally, look at the tertiary sector. Labor here will be strongly concentrated in more populated areas, though there will be low-level activity everywhere. Have a look at what you’ve made and see if it makes sense, tweaking if necessary.
And that’s all I’ve got for now! A bit less organized than previous ones, but I hope it’s just as informative.
Let me know if there’s anything I should add or correct, and feel free to suggest future posts!