Chapter 8 - International Monetary Unit IMU and Its Adoption

Productivity, as we see it, is not what most people think of when they say "productivity." What we are referring to when we say productivity involves big increases in human standard of living, which will show up as significant increase in real wages.

By this definition, there have only been three drivers of big, underlying productivity improvements. These include:

• Biological substitution (for example, using stone tools instead of using hands or claws)
• Material substitution (for example, using metal tools instead of stone tools)
• Energy substitution (for example, steam power instead of human power)

We will explain these three in detail in our next book. Right now, let's look at Material Substitution.

The basic idea of Material Substitution is that one set of materials is replaced by another set of materials, creating greater productivity.

For example, during the evolution of the Stone Age into the Age of Metals, thermally altered materials, such as metals and ceramics, substituted for natural materials, such as wood and grasses for baskets. To see how this might greatly boost productivity, think of what you personally could do much more effectively and efficiently with a metal ax than you could do with a stone ax. With a stone ax, you can chop plants for food and small trees for building, but you certainly could not build a large stone castle with one. However, with a metal ax, suddenly it becomes possible to build much larger structures, as well as things like wagons, ships, large-scale agriculture, and much more that was not possible or not practical to create with stone tools.

This material substitution, driven by science (our understanding of how to thermally alter metal), created new technologies (like a metal ax) that radically changed the economic landscape. Material substitution increased trade, which changed the economies of the world. As trade increases among larger and larger political entities, money was pushed to evolve to metal coins, which were much more durable and contained more value by weight than, say, shells or salt.

Energy substitution occurred when humans used science to create new technologies that eventually changed economics and society. Examples include evolving from human calculations to calculations done by computers powered by electricity, or evolving from live theater to television or movies, or substituting a washing machine for washing clothes by hand.

As these substitutions occur, many things evolve, including money. Money evolved from barter to trading of goods (salt, shells, rice) to metal coins to electronic money (where we are going next).

Much more on all this in a later book on STEP Evolution, the theory behind America's Bubble Economy and Aftershock predictions.