Those who buy on credit pay interest to money lenders. The money lenders, later the bankers, make their profits by helping others to spend beyond their own means. The money-lender also accepted loans from others, promising to pay them back at a later date, and giving the lender a piece of paper, specifying the amount of the loan. The paper promise to pay became a bank-note, passed from hand to hand. It had no intrinsic value, but as the money lender promised to pay cash for the note on demand, it was accepted in payment of debts or for the purchase of commodities.
When a shirt-maker turns out a product and exchanges it for a pair of shoes made by a shoemaker there are no overhead costs. Each producer adds to his wardrobe an item that makes his life more satisfactory.
Examples of simple barter are seldom found in market economies. Civilized society assembles quantities and varieties of goods and services in the market place, invites consumers to choose among the wares and provides money to make transactions quick and easy. Civilized society supplements money with credit on the principle: buy and use today; pay tomorrow. Civilization goes beyond these bare essentials of merchandizing by furnishing transportation and communication, making long term loans at interest, writing insurance, developing the techniques of accounting and management. Customers who visit the market have basic human needs—the necessities of life. Beyond these necessaries, there are conveniences, comforts, luxuries. The markets of civilization cover the entire range of human needs and human wants from necessaries to luxuries.
Civilized merchandizers take two other steps aimed to activate consumption. They develop new lines of merchandise that will have more customer appeal, leading to new wants. They also advertise new wares that will create new wants, bring back old customers and attract new ones.
For the foot-weary customer who has shopped away his energy and enthusiasm for buying more and more, a civilized marketplace furnishes food and shelter, recreation, entertainment and culture—beer, libraries, concert halls and circuses as well as food, clothing and shelter.
These multiple functions of a civilized economy are part and parcel of the changes which have converted the simple barter deal of exchanging a pair of shoes for a shirt into a specialized, civilized market place. They also cause civilized economies to devote far more time and money to marketing goods and services than they spend in their manufacture. In a broad sense, these supplementary costs are "overhead."
Shirt makers and shoemakers convert raw materials and partly finished goods into shirts and shoes. Operating costs of manufacture are minimal in a civilized economy. The major items that go into the final price of the product are overhead costs.
Current accounting practices include in overhead: taxes, interest, insurance and general items. Actually the price of goods and services in a civilized economy includes minimal charges for raw materials and labor and maximum charges for overhead.
There is another phase of overhead which pyramids with each advance in the extent and complexity of a civilization—taxes to cover the costs of government. As the civilization expands and specializes, governmental services multiply. The number of government workers grows in proportion and often out of proportion to the total production costs. Expenses of government rise and with them the corresponding need to increase taxes.
Overhead costs in the village or small town are low. Much of the "public service" is done by citizens who volunteer their time and energy. In the centers of civilization public service is a profession, often well paid and usually quite permanent.