The economy is, basically, work— what we do to support ourselves.
In primitive societies, everyone does the same work— hunting, fishing, gathering, herding, farming— though there may be sex or age specializations. Even the chief or king lives pretty much like everyone else. Though it accounts for most of the species' history, we hardly think of this as an economy; it's merely a lifestyle. Economies kick in one you have specialization and scarcity. No longer is everyone doing the same thing, which means that there arise mechanisms to share the wealth... probably unequally.
Fantasy writers generally either copy the modern American or medieval English system,... doesn't every town have a market and use coins? But these things were later inventions.
It's also all too easy to introduce a major distortion into the picture and not take account of its economic effects. The standard D&D world has an astonishing amount of currency tied down in dungeons, mined only by adventurers... why don't the kings send in the army? How does Sauron maintain his enormous armies? Reversing Clarke, I'd point out that a sufficiently high magic is equivalent to technology— so why do most kingdoms with magic look like sleepy European fiefdoms?
Means of exchange
The first large-scale organized societies were command economies, organized by the state. Examples include the Wede:i kingdoms, Munkhâsh, Axunai, and classical Uytai. In its most extreme form, all production is centrally organized; luxury goods are a perk of state; key resources are state monopolies; and trade is negotiated with other rulers.
The first market economy in Ereláe was Cuzei; in Arcél, among the Bé. Markets allow goods to be distributed efficiently, without armies of bureaucrats, and allow a looser social system. They also foster and adapt to innovation, whereas command economies prefer to function as they always did.
Nonetheless, till very modern times pure markets are rare. The growing of wheat was communal in Cuzei. There were often state monopolies in such things as salt, silk, gemstones, and metal weaponry.
Anglo-American culture is mercantile; we admire the man who buys low and sells high. This attitude was generally not shared in early societies. Warriors, priests, and scholars were likely to have higher prestige than merchants, and there was often distrust or disdain for people who merely carted merchandise around at profit; seemingly adding no value.
Nations vary in their interest in trade. The Skourenes, the people of northern Eretald (including Verduria, Kebri, and Flora), the Jeori, the Gurdagor, and even the Demoshi have concentrated on trade in Ereláe; in Arcél the corresponding nations are the Bé and the Nyanese. These may handle trade in other nations, often forming colonies in their ports. This can cause resentment in the host nation as the traders are likely to be rich, and their relationship to the local authorities can be frosty.
Modes of travel
A key characteristic of premodern societies is slow transport. Verduria province, just 150 km north to south, takes four days to walk— much more if you don't keep to the roads, or were carrying full military gear. To travel to Aránicer, 900 km, would take 18 days.
A horse could ride across the province in a day, or to Aránicer in six days, or about half that using a relay system; for the most part that's as fast as you can travel on Almea. Note that Arcél had no rideable animals at all till Fananak was founded, so it couldn't even achieve these speeds. And this heady clip applied to communications, not cargo transport. (Magic and military signals could allow faster transmission of messages, but were rarely available to traders.)
Ships have very variable speeds. They can't travel as fast as a horse, but they don't tire. But more importantly, they're compact and safe. A small sailing ship can carry 60 tons of cargo, which would take at least 20 horses to haul; even this comparison is misleading as such an expedition would need a beefy security force. Most long-distance trading is thus done by water, and the transportation system of a country is its waterways.
One economic consequence of all this is simply hassle— the logistics of communications and travel make long-distance trade difficult. In well-organized states that maintain good roads and keep bandits in check, staples like grain and farm animals can be exchanged; in troubled times these can only be traded locally, and only compact high-value items will be traded long-distance.
Another is that prices and economic conditions can vary wildly by region. The price of wheat, or the ratio of gold to silver, may be quite different in different countries. This may or may not create opportunities for traders.
The simplest form of trade is barter, but it's also inconvenient— you may trade your apples for your neighbor's milk, but the goods may not both be available at the right time. A medium of exchange is the obvious solution: something readily available and preferably imperishable.
The Wede:i used oats for this purpose as early as -3500. Other materials used have included shells, salt, spices, tea, wine, oranges, gems, cow horns, bolts of cloth, cattle, and bars of metal. Even today in the Rau jungle, trades may be made using live hamsters.
Rulers may use ingots of metal for large transactions, but coins per se accompany a market economy. The first coins were made in Cuzei around 100. Cuzeian Houses varied in how they handled taxation; Beretos tells us that his native House assigned peasants labor, but that of his lord Zeilisio accepted taxes in labor, produce, or silver.
The first use of paper money was the banknote, invented in the 500s by Skourene banks as an accounting tool, originally used to facilitate transfers of money within a bsepa or clan. As the notes allowed a certain sum to be drawn by the bearer, it didn't take long for them to be given to outsiders; the reputation of the bsepa was the guarantee of the notes' worth. Centuries later the same idea was reinvented in Kebri.
The elements of our own economy— coinage, accounting systems, banks and lending, insurance to pool risk, paper currency, bank drafts, corporations— are all inventions. Nations who innovated in this area often had an influence exceeding their geographical extent: ancient Skouras; Kebri; Belesao; Nyandai and Čwam.
Given slow communications, how does one do business across wide distances and with mistrustful strangers? There are several methods:
- The state undertakes large enterprises. Often it's the only entity with sufficient resources, and it's already solved the problem of getting people to do what it wants.
- As an extension of this, the state may facilitate private commerce by offering security, roads, patents, a postal service, and a court system for resolving disputes. (All these elements are present, for instance, in modern Verduria.)
- An extended family organizes inter-city trade. This was the Skourene system: you didn't work for a company but for your own clan (bsepa).
- Temples provide services for travelers, including financial ones. Temples may have organizational ties in distant regions, they may already need to facilitate pilgrimages, and religious motivations may be assumed to reduce corruption.
- A group of people can pool their money, either starting a business together, or collecting funds regularly and distributing the month's total to one person (who uses the capital to start his own business). The people have to trust one another, which limits the effectiveness of this technique. It works great for minority communities where people know each other for other reasons. In medieval Eretald the Arašei fit this description.
- A guild may pool expertise and risk and bring investors together. The Verdurian Hall of the Sea Traders is an example.
- The corporation per se brings together unrelated strangers. It's safe to say that it only works in financially sophisticated nations with long commercial experience and a robust court system.
A prime motivator for trade is goods available in a restricted area. Goods can diffuse quite a long way even in primitive times; later, traders will bring goods out of the area of origin.
Some patterns are common worldwide:
- Maritime areas provide access to fish, shellfish, pearls and shells, and salt. The mouth of a river may also be a good place to pan gold.
- Nomadic peoples provide cheese, leather, wool, and horses; and if they're close enough to settled areas, milk.
- Minerals, metals, and gemstones are typically found in mountainous areas, often by the elcari.
- Agricultural goods can be traded to nearby nomadic regions, or to areas where a particular item doesn't grow. In Eretald, the north supplies olives and cotton; the south supplies apples and oats.
- Innovative nations have an edge in technology and can export manufactured goods. In early times this may be as simple as pots; today it may mean steam engines, gunpowder, books, and telescopes.
Then there are goods where production is concentrated in a particular area, for one reason or another:
- Silk is largely limited to the northern rim of Ereláe and to two islands off the Bé coast.
- Tea grows only in the highlands of Uytai.
- The Kara desert is the source of borax, sulfur, and petroleum for Eretald.
- In southern Ereláe, the main sources of iron are the Peligir peninsula and the island of Rudeŋ. In Eretald, there are souces in the eastern and western mountains.
- In Nan, tin from the Nyeinyɔm (Sacred Hills) underlay the power of the kings of Ɔmsɔ. Major sources of tin in Eretald include Kebri, Azgami, and the Rhânori Range.
- A number of spices, condiments, and drugs are imported from tropical to temperate regions or from Téllinor to eastern Ereláe: vanilla, cloves, cocoa, mokan, coffee, sugar, trow bean sauce.
- The best wine in northern Ereláe comes from Célenor and Kebri; in the south, from Šura.
- Almost all of eastern Ereláe raises horses, but the finest and fastest are those of the Naviu.
- The largest quarries of marble in Eretald are still those of Hroth.
- The major source of jade is near lake Bérunor.
- Epsom salts are largely restricted to Mirašcaré in Curesi.