A developmental history of markets: How forms of economic exchange can be harnessed to support thrift and generosity

Few forces have more profoundly shaped the modern social order than the shift from systems of barter to advanced markets employing “fiat money,” i.e. money which neither has nor represents a claim on something with widely accepted value (such as wheat or gold). Fiat money has been associated with rapid economic expansion but also increases in inequality and materialism. Yet the cognitive processes underlying and enabling this shift are poorly understood. Here we ask whether there are links between forms of economic exchange and psychological functioning, and whether different forms of exchange differently relate to the cultivation of central virtues such as the use of those resources to benefit others (generosity) and the tendency to thoughtfully preserve resources (thrift). We take an experimental developmental approach, investigating the cognitive underpinnings of barter, use of a valuable commodity as a common means of exchange (“commodity money”), and the use of fiat money. In the first part of the proposal we examine the cognitive requirements underlying the use of each of these increasingly advanced forms of exchange, and in the second part of the proposal we examine links between making use of these different forms of exchange and the emergence of the core economic virtues of generosity and thrift. This project will produce high-impact empirical research publications and presentations to disseminate this research. Moving beyond the academy, we will pursue several ways of bringing together scientists, educators, and media to gather strategies to promote economic virtue in the next generation of adults and to catalyze future research directions. Thus, insight gained from this inquiry will not only illuminate one of our species’ most impressive and productive institutions but will also identify and develop means of educating about money and markets that foster positive virtues in future generations.