I have uploaded a video clip on Vimeo on the basic economic functions of any human society:
We will be proceeding in stages. And the content of this video clip is the first building block of all my economics courses (except for Applied Statistics for Economics). If you are taking any of my courses, please take a look at it as soon as you can. If you are taking my Principles of Microeconomics course, understanding of the content of this video clip is mandatory.
It is a bit longish (37 minutes), but I hope it is useful in dispelling many common misconceptions about the economy. One of the most common misconceptions is that money is an indispensable input for production. No, it’s not! There are many perfectly well-functioning economies (e.g. families, nonprofit organizations, states, and even business firms) that do not utilize money at all in their internal transactions.
Humans have lived for most of their history in money-less economies. Barter (the exchange of one good for another) can be traced back perhaps 100 thousand years. But in the span of human history, money proper is a social institution that has been around for — at most — 10 thousand years, if not less.
I didn’t say it in the video clip, but perhaps the best way to understand which economic functions are truly essential to a human society is to imagine it all united, as if it were a single family, with all its individual members pulling together and no conflicts of interest among them.