Natural numbers are identified with finite von Neumann ordinals: 0 = ∅, 1 = {0}, 2 = {0, 1}, etc. Each ordinal n is the set of all smaller ordinals. This construction embeds ℕ into the ordinal hierarchy, providing a set-theoretic foundation for arithmetic.
Construct the first few ordinals explicitly and verify the successor operation n+1 = n ∪ {n}. Observe that ordinal order coincides with set membership: m < n iff m ∈ n. Verify finite induction corresponds to transfinite induction on finite ordinals.
You know from naive set theory that sets can contain other sets, and from von Neumann ordinals that each ordinal is defined as the set of all smaller ordinals. The construction that identifies natural numbers with finite von Neumann ordinals takes this recursive idea seriously from the ground up, giving arithmetic a purely set-theoretic foundation with no new primitives.
Start from nothing: 0 = ∅ (the empty set — there are no numbers smaller than zero). 1 = {0} = {∅} (the set containing only zero). 2 = {0, 1} = {∅, {∅}} (the set containing zero and one). 3 = {0, 1, 2} (the set containing the three previous ordinals). In general, n = {0, 1, ..., n−1} — each natural number is the set of all smaller natural numbers. The successor operation is s(n) = n ∪ {n}: take the set n and add n itself as a new element. Verify: s(2) = {0, 1} ∪ {2} = {0, 1, 2} = 3. This single operation generates all finite ordinals.
Two structural coincidences make this identification beautiful and useful. First, the less-than order on natural numbers coincides exactly with set membership: m < n if and only if m ∈ n. Checking that 1 < 3 is checking that 1 ∈ {0, 1, 2} — trivially true. This unification of order and membership is not a lucky accident; it is the defining property of von Neumann ordinals. Every ordinal is a transitive set (if m ∈ n and k ∈ m, then k ∈ n), which ensures the membership relation on an ordinal is well-behaved as an order. Second, every finite ordinal is well-founded: there are no infinite descending membership chains, so induction works.
The payoff is that arithmetic becomes definitional. You can define addition by transfinite recursion: m + 0 = m and m + s(n) = s(m + n). Multiplication and exponentiation follow similarly. Mathematical induction on natural numbers is exactly transfinite induction restricted to finite ordinals — the same principle, just applied to a set that happens to be finite and well-ordered. The entire structure of arithmetic — successor, order, induction, operations — emerges from the single act of identifying 0 with ∅ and s with ∪{·}. When you later encounter limit ordinals (ω = {0, 1, 2, ...}, the first infinite ordinal), the finite ordinals you have constructed are its members, and they serve as the ground floor of the entire ordinal hierarchy built above them.