Tuesday, January 24, 2012

David Graeber versus Robert Murphy: A Review

Since I have been dealing with David Graeber’s work in the last post, I will also review the debate he had with the Austrian economist Robert P. Murphy.

Let’s review the debate:
(1) This interview with Graeber (“What is Debt? – An Interview with Economic Anthropologist David Graeber,” August 26, 2011) sparked off the debate.

(2) Robert P. Murphy’s attention was drawn to Graeber’s interview by an inaccurate summary of it by Gene Callahan. Murphy admitted he didn’t even read Graeber’s book.

(3) From the very beginning, Murphy appears to have misunderstood Graeber’s position. Graeber does not deny that money in some historical circumstances can emerge from barter between strangers, especially in long distance trade. On p. 75 of Debt: The First 5,000 Years (2011), Graber cites the cacao money of Mesoamerica and the salt money of Ethiopia as instances of money emerging through barter. It is the view that money can only ever emerge from barter spot transactions that must be rejected. Murphy in his original criticism of Graeber also appeared to charge Graeber with denying that moneyless spot trade (barter) had historical existence. That was a completely false charge.

(4) What Graeber attacks is the idea that money-less communities come to have economies dominated by barter spot trades. He also notes that in reality money-less societies tend to be dominated by debt/credit transactions, and that this can largely avoid the immediate, notorious problem of the “double coincidence of wants” that allegedly leads to money’s origin. Robert Murphy eventually made a rather important concession here:
“This is an excellent point, and Graeber is right: In the standard exposition of a barter economy, economists typically think in terms of spot transactions. But in principle, there’s no reason to restrict ourselves in this way. If we can imagine a farmer trading a pig for an axe, we can also imagine a farmer trading a pig for a promise to deliver an axe in two weeks.

Graeber is also right that the possibility of credit transactions expands the scope of a moneyless economy, and mitigates the problem of finding a double coincidence of wants.”

Robert Murphy, “Murphy Replies to David Graeber on Menger and Money,” Mises.org, September 8, 2011.
(5) Murphy cites the work of R. A. Radford (“The Economic Organization of a POW Camp,” Economica 12.48 [1945]: 189–201) that demonstrates the emergence of a cigarette money in a POW camp. But this evidence does not show what Murphy thinks it does. Situations in which barter is observed in groups of human beings in modern times where some good emerges as a medium of exchange can hardly be regarded as confirming the barter origin of money theory, because the people concerned in these cases were already perfectly familiar with money and a price system (Graeber 2011: 37; see also Ingham 2006: 264–265).

Murphy’s citation of Jeff Tucker’s account of “micro-size Three Musketeers bars” emerging as a medium of exchange amongst children bartering with Halloween candies is also invalid and does not prove anything: older and even young children are perfectly familiar with the concept of money and prices.

In any case, Graeber did not deny that money can emerge this way in the distant past: what he denies is that money can only arise this way. As Graeber remarks:
“The idea that there is a single ‘origin’ of money is rather dubious in itself – if money is simply a mathematical system whereby one can compare proportional values, then something of that sort must have emerged in innumerable different occasions in human history for different reasons. The standard version of how it emerged, however, that goes back to Adam Smith, is repeated by Jevons, Menger, etc, is one of the least likely, in fact, which is strongly counter-indicated by all existing evidence.”

Robert Murphy, “David Graeber’s Response to My Article,” Mises.org, September 8, 2011.
(6) Graeber accepts the idea of long distance or regular trade between strangers generating a money unit of account:
“If you have regular exchange between strangers, it’s because there are specific goods that each side knows they want or need. One has to bear in mind that under ancient conditions, long-distance trade was extremely dangerous. …. You show up because you know there are people who have always wanted woolens and who have always had lapis lazuli. Logically, what such a situation would lead to is a series of conventional equivalences – so many woolens for so many pieces of lapis lazuli – which are maintained despite contingencies of supply and demand, because all parties need to reduce risk or the trade would simply stop. And once again, what logic would predict is precisely what we find. Even in periods of human history where money and markets did already exist, high-risk long distance trade has often continued to be carried out through a system of conventional equivalents, administered prices, between specific commodities that merchants already know will be available, or in demand, at certain pre-established locations.

Now, could such a system generate something like money of account – that is, the use of one or two relatively desirable commodities to measure the value of other ones, once more items were added to the mix (say, you’re making several stops)? Sure. It is likely that in certain circumstances, something like this did happen – but it would have meant that money, in such cases, was created first as a means to avoid market mechanisms, and that it was not used mainly as a medium of transactions, but rather, primarily as a means of account. One could even make up an imaginary scenario whereby once you start using one divisible/portable/etc commodity as a means of establishing fixed equivalents between other ones, you could start using for minor occasional transactions, to measure negotiated prices for spot trade swaps on the side, in a more market-driven way. All that is possible and likely as not did happen here and there. However there is no reason to assume that such a system would produce a concrete medium of exchange actually used in making these transactions – in fact, given the dangers of ancient trade, insisting that some medium like silver actually be used in all transactions, rather than a credit system, would be completely irrational, since the need to carry around such a money-stuff would make one a far, far, more attractive target to potential thieves. …. The other problem is there is no reason to believe that such mechanism – which would presumably only be used by that tiny proportion of the population who engaged in long distance trade, and who tended to treat such matters as specialized knowledge to be guarded from outsiders – could possibly create a money system used in everyday transactions within a society or any evidence that it might have done so.

Robert Murphy, “David Graeber’s Response to My Article,” Mises.org, September 8, 2011.
(7) In trying to reconcile Menger’s barter view of the origin of money with the evidence from ancient Mesopotamia, Murphy contends that temples picked silver as an unit of account because silver was what was used to facilitate trades with foreigners. Yet there is a misunderstanding here: the temples used their own produced goods to obtain silver from foreigners, in long distance trade. Silver was a weight unit (Hudson 2003: 42), a high prestige object, and used in temples for objects associated with the gods. As late as the Old Babylonian period (c. 2000–1600 BC), silver was largely confined to temples and palaces (Nemet-Nejat 2002: 267). It did not circulate much as an actual medium of exchange within Mesopotamia in the third millennium BC. It is highly unlikely that silver emerged as the most saleable commodity in barter spot trades and then indirect trades within Mesopotamia to attain the status of money. Rather, a silver unit of account was developed by temples from its use as a weight unit in those temples.


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.


Graeber, David. 2011. Debt: The First 5,000 Years, Melville House, Brooklyn, N.Y.

Hudson, M. 2003. “The Creditary/Monetarist Debate in Historical Perspective,” in S. A. Bell and E. J. Nell (eds), The State, the Market, and the Euro: Chartalism versus Metallism in the Theory of Money, Edward Elgar, Cheltenham. 39–76.

Ingham, G. 2006. “Further Reflections on the Ontology of Money: Responses to Lapavitsas and Dodd,” Economy and Society 35.2: 259–278.

Nemet-Nejat, K. R. 2002. Daily Life in Ancient Mesopotamia, Hendrickson, Peabody, Mass.

Radford, R. A. 1945. “The Economic Organization of a POW Camp,” Economica 12. 48: 189–201.

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