(1) my posts on the origin of money and the debate between David Graeber and Robert P. Murphy;First, however, I will give a quick summary of Graeber’s view on the origin of money in his recent book (Graeber 2011). It is curious that, in discussion of Graeber’s book, many people cannot even get his arguments right. It is important to note that Graeber does not deny that money in some historical circumstances can emerge from barter between strangers, especially in long distance trade. Graeber cites the cacao money of Mesoamerica and the salt money of Ethiopia as instances of money emerging through barter (Graeber 2011: 75; on Ethiopian salt money, see Einzig 1949: 123–126). Graeber also cites the views of Max Weber (1978: 673–674) and Karl Bücher (1901), who argued that money emerged from barter between different societies, not within societies (Karl Polanyi may also have held a position close to this). What Graeber denies is that the Mengerian or the barter spot trade theory is a universal theory of the origin of money.
(2) some external links on the debate between David Graeber and Robert P. Murphy, and
(3) a bibliography on the origin of money.
Money-less societies are frequently dominated by debt/credit transactions, or “gift exchange,” not by barter spot trades. Even in cases where goods exchange for goods in spot trades, social relations can complicate matters considerably, and historically barter seems to have been prevalent between one community and another, or, that is to say, between people who were strangers and where relationships were implicitly or explicitly hostile (Graeber 2011: 29–30).
While a non-enumerated system of debts/credits or gift exchange might not give rise to money, there is clearly a role for debt in the history of money (Graeber 2011: 40). In the real world, gift exchange and debt/credit arrangements existed long before money, and societies could develop an abstract unit of account in which debt/credit transactions were still the predominant system (Graeber 2011: 40). The use of coinage, when it was developed, could remain uneven and coins scarce.
In a society where debt/credits are the major transaction, IOUs/debts can be transferable and used as a means of payment or medium of exchange. Graeber thinks of an example:
“Say, for example, that Joshua were to give his shoes to Henry, and, rather than Henry owing him a favour, Henry promises him something of equivalent value. Henry gives Joshua an IOU. Joshua could wait for Henry to have something useful, and then redeem it. In that case Henry would rip up the IOU and the story would be over. But say Joshua were to pass the IOU on to a third party—Sheila—to whom he owes something else. He could tick it off against his debt to a fourth party, Lola—now Henry will owe that amount to her. Hence money is born.” (Graeber 2011: 46).A type of medium of exchange could emerge in theory in this way in small communities, or communities of specific people like merchants where IOUs can be verified. The empirical evidence demonstrates that this is precisely how promissory notes and bills of exchange become a medium of exchange. A kind of debt money can emerge in communities where there exist people willing to accept it or cancel the debt IOUs (Graeber 2011: 74). Graeber notes how for centuries English shops issued their own wood, lead or leather token money as debt money redeemable at the particular merchant’s store (Graeber 2011: 74). Graeber’s eclectic view on the origins of money is expressed in this way:
“Throughout most of history, even where we do find elaborate markets, we also find a complex jumble of different sorts of currency. Some of these may have originally emerged from barter between foreigners: the cacao money of Mesoamerica and the salt money of Ethiopia are frequently cited examples. Other arose from credit systems, or from arguments over what sort of goods should be acceptable to pay taxes or other debts. Such questions were often matters of endless contestation.” (Graeber 2011: 75)Graeber, however, doubts that local or community debt/IOU money systems can “create a full-blown currency system, and there’s no evidence that they ever have” (Graeber 2011: 47). But this is where Georg Friedrich Knapp’s (1842–1926) chartalist theory of money comes in (see Knapp 1905; Knapp 1973 ). When the state issues IOUs it can do so on a large scale, and then demand the same IOU tokens back as payment of taxes. Graeber notes the use of tally sticks in the Middle Ages: the British exchequer could issue them, and they would circulate as tokens of debt owed to the government (Graeber 2011: 48–49), but also circulate as a medium of exchange within England accepted for payment of taxes (Davies 2002: 146–151). Graeber (2011: 59–62) also refers to the thesis of Grierson on how wergeld-like customs could create a system of measurement of relative values (Grierson 1978: 11; Grierson 1977).
The origins of money, then, lie in different sources, and not simply in a barter origin of money theory.
Graeber also notes how primitive monies (called non-commercial money or social currency) – like shell money in the Americas or Papua New Guinea, cattle money in Africa, bead money, feather money, and so on – are often rarely used to buy everyday items in the societies that use them. Instead, they are employed in social relations like marriages and to settle disputes (Graeber 2011: 60). A commercial money can most probably arise through non-commercial money.
The story of money is thus rather more complex than neoclassical economists or Austrians imagine.
My list of posts on the origin of money and the other links are below:
“Debate on the Origin of Money,” August 25, 2012.
“The Origin of Money in the Digest of Justinian,” August 21, 2012.
“Alfred Mitchell Innes on the Credit Theory of Money,” March 24, 2012.
“A Note on Menger on the Nature and Origin of Money,” July 28, 2012.
“Philip Grierson on the Origin of Money,” March 21, 2012.
“Observations on Non-Commercial Money,” February 18, 2012.
“Money as a Unit of Account and its Origins,” February 11, 2012.
“Quiggin on the Origin of Money,” February 10, 2012.
“David Graeber on Debt and Money, Part 2,” February 9, 2012.
“David Graeber versus Robert Murphy: A Review,” January 24, 2012.
“David Graeber on the Origins of Money,” January 23, 2012.
“Bibliography on the Origins of Money,” January 19, 2012.
“Alla Semenova on the Origins of Money,” January 15, 2012.
“Mises on the Origin of Money,” January 12, 2012.
“The Origins of Money,” January 8, 2012.
“Menger on the Origin of Money,” January 5, 2012.
“Money as Debt,” December 26, 2011.
“David Graeber’s Response to Robert Murphy,” September 9, 2011.
“The Origin of Coinage in Ancient Greece,” April 29, 2011.
Graeber, David, 2009. “Debt: The First Five Thousand Years,” Eurozine.com, 20th August.
An early summary of Graeber’s work on debt.
“What is Debt? – An Interview with Economic Anthropologist David Graeber,” Nakedcapitalism.com, August 26, 2011.
The original interview with Graeber that sparked the debate.
Gene Callahan, “Fiat Currency,” Saturday, August 27, 2011.
A summary of Graeber’s interview that sparked off a debate between Gene Callahan and Robert Murphy.
Robert P. Murphy, “Have Anthropologists Overturned Menger?,” Mises Daily, September 1, 2011.
This is Robert P. Murphy’s response to Graeber’s interview at Nakedcapitalism.com.
Robert Murphy, “David Graeber’s Response to My Article,” Mises.org, September 8, 2011.
This is a summary of David Graeber’s comments on Robert P. Murphy’s article “Have Anthropologists Overturned Menger?.”
Robert Murphy, “Murphy Replies to David Graeber on Menger and Money,” Mises.org, September 8, 2011.
This is Murphy’s reply to David Graeber’s comments.
David Graeber, “On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics. A Reply to Robert Murphy’s ‘Have Anthropologists Overturned Menger?,’” September 13, 2011.
David Graeber’s final response to Murphy, published on Nakedcapitalism.com.
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