What kind of things should I think about when creating fictional economies and currencies for my world?

-Shane

Hey Shane, thanks for writing in. Fictional economies are something I think about a lot, even though in most stories they fade into the background. They’re like calendars and sewer systems – incredibly important but also easy to take for granted. In most stories, you can use a simple system readers are comfortable with: precious metal coins for fantasy, credits for scifi, etc. However, if your story focuses more on the setting’s economy or you just want to make sure you have a realistic system under the hood, there are a few things to keep in mind.

First, consider what your setting uses for currency. In small communities, currency isn’t really needed. People can get by on a system of exchanged favors. In more connected worlds, currency becomes important because it’s too hard to remember all the people you might owe favors to, and vice versa. Contrary to popular belief, barter systems are not an intermediate stage between favors and currency. Barter is just too unwieldy to work on a large scale. What your setting will use as a currency can vary widely, but in general, a few things about it will always hold true:

  1. It needs to be fairly common but not too common. Rocks don’t work for currency because they’re everywhere, but neither does uranium because no one has any.
  2. It needs to be durable. If the money is always breaking, then it’s no good.
  3. It shouldn’t have any other uses. Iron makes a poor currency because people are always making horseshoes and swords out of it.
    • This rule has exceptions of course, like how merchants from different countries will sometimes use trade goods like tea as a currency, but that’s usually a stop-gap measure.
  4. It helps if the currency is pretty. This isn’t a requirement, but it is common.

Next, considered who makes your money and how the supply is limited. In order for currency to be taken seriously, whoever makes it has to be pretty powerful; otherwise, the currency is only worth what it’s made of. In order to have paper money, then the central authority must be powerful, indeed, and have at least some restraint in how much currency it creates. Otherwise, you get runaway inflation, which has happened several times throughout history.

For the economies as a whole, think about who has purchasing power and how much. Is your wealth shared among the populace, or do the rich have most of the cash? You can get more creative, too, if you’re ambitious. It’s not unheard of for pre-modern societies to have a class of merchants that handles all the commerce for the nobility, and the nobility maintain power even though the merchants have all the money.

It’s also important to think about how restricted your economy is. We’re used to an economy where anyone with money can buy all but a handful of banned items and services, but this isn’t always the case. Historically, it’s been common for the purchasing power to be limited to the elite. Feudal peasants were often banned from buying various things, but that’s only one way it could manifest. The Incan Empire practiced such a tight form of state control over the economy that most people would never buy or trade for anything in their entire lives.

Finally, consider what is scarce in your setting, because if something isn’t scarce, it probably isn’t going to cost much, if anything. If wizards or replicators can create food out of thin air with no cost, then food is probably either extremely cheap or free. Of course, people will sometimes try to impose artificial scarcity on things that aren’t scarce, like the way our society handles the sale of digital files, but that rarely lasts past the transition phase.

That’s barely scratching the surface, but it should be enough to get you started. A few other resources you might find helpful:

May your words flow freely,

Oren

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