Tuesday, August 21, 2012

The Origin of Money in the Digest of Justinian

A quick post of purely historical interest.

The late Roman/early Byzantine emperor Justinian I (or Flavius Petrus Sabbatius Iustinianus Augustus to give him his pompous full throne name), emperor from AD 527 to 565, codified Roman law in his monumental Corpus iuris civilis (Corpus of Civil Law), which was issued from AD 529 to 534. The four parts of the Corpus iuris civilis were as follows:
(1) the Institutions (a type of introductory textbook for students);
(2) the Codex (a collection of constitutions by the Roman emperors);
(3) the Digest or Pandects (a collection of excerpts from the works of earlier jurists that now became law), and
(4) the Novellae (new constitutions issued after AD 534).
In Book 18 of the Digest, we have a passage where lawyers speculate about the origin of money, and this is notable as an early example of the barter origin of money theory:
“The origin of purchase and sale is derived from exchanges, for formerly money was not known, and there was no name for merchandise or the price of anything, but every one, in accordance with the requirements of the time and circumstances, exchanged articles which were useless to him for other things which he needed; for it often happens that what one has a superabundance of, another lacks. But, for the reason that it did not always or readily happen that when you had what I wanted, or, on the other hand that I had what you were willing to take, a substance was selected whose public and perpetual value, by its uniformity as a medium of exchange, overcame the difficulties arising from barter, and this substance, having been coined by public authority, represented use and ownership, not so much on account of the material itself as by its value, and both articles were no longer designated merchandise, but one of them was called the price of the other.”
(Paulus, On the Edict, Book 33 apud Digest 18.1.1).
This is a passage that shows us the following:
(1) When people have thought about the emergence of money, even in ancient times, they tend to think of barter, even though the barter origin of money was only one way by which money has emerged, according to the findings of modern anthropology and history. Curiously, it is not stated by whom the medium of exchange was “selected” historically, but let us assume for the sake of argument the text imagines a private, market process.

People might wish to cite this evidence of the universal barter origin of money theory, but in reality what weight does it have? Not much.

This was written by learned legal scholars and jurists in Constantinople in the early 6th century AD, and they cited an earlier jurist called Paulus Prudentissimus from 2nd and 3rd centuries AD.

But none of these jurists had any real knowledge of how money had emerged over 1000 years before their time in ancient Rome and Greece: this is the equivalent of a modern scholar in 2012 trying to tell us how the Anglo-Saxon economy worked c. 800 AD, with no real evidence, but merely using intuition. But intuition can be deeply mistaken, for some things are simply counter-intuitive.

(2) Even in this passage, it is notable how these late Roman lawyers also believed that the state had a major role coining money and establishing it as a uniform medium of exchange.


  1. from the book Debt: The First 5,000 Years:
    "In fact, our standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems. Barter, in turn, appears to be largely a kind of accidental byproduct of the use of coinage or paper money: historically, it has mainly been what people who are used to cash transactions do when for one reason or another they have no access to currency."


  2. Not so sure about that. Note this sentence:

    "...a substance was selected WHOSE PUBLIC and perpetual VALUE, by its uniformity as a medium of exchange, overcame the difficulties arising from barter, and this substance, having been COINED BY THE PUBLIC AUTHORITY..." [My Emphasis]

    That looks to me like a Chartalist theory. The folks at the Von Mises Institute agree on this. They trace it back to Aristotle and Plato who appear both to be Chartalist. Regarding Justinian's code they quote a different section which, when supplemented with the above, appear to me to make a strong case for the Romans being Chartalists:


    “A substance was selected whose public evaluation exempted it from the fluctuations of the other commodities, thus giving it an always stable external (nominal) value. A mark (of its external value) was stamped upon this substance by society. Hence its exchange value is based, not upon the substance itself, but upon its nominal value.”

    So far as I can see the barter theory of money is one that generally arises in a capitalist society. In just the same way as the only ever semi-pure example of an idealised market economy was the result of prisoners who lived under capitalism previously engaging in barter using aid packages dropped like "manna from heaven".


    1. two things must be separated. see the first chapter of Fountain of Fortune: Money and Monetary Policy in China 1000-1700

      there is two levels of monetary theory that leads to four combinations.

      you have the liability and asset theories of money and you have the exchange or state theories of money. In exchange theories of money, money arises out of the needs of exchange while in state theories of money, money arises out of the needs of the state. asset theories of money tend to think that a physical object (usually gold or silver) can only successfully be money while liability theories of money tend to posit that money only really arises out of someone's promise to pay and if a physical object is involved, it is a symbol for a liability rather then money itself. Modern Chartalism tends to combine a liability theory of money with a state theory of money.

      Plato and Aristotle seem to have a liability theory of money and an exchange theory of money. In other words for them, money arises out of the needs of exchange but since someone's promise to pay needs to establish money, the state's promises provides the stable medium (this seems to be the same for ancient chinese theories of money).

      of course, Austrians have an asset and exchange theory of money.

      I've been playing around with this way of distinguishing theories for a while so please critique.

  3. Actually, it did occur to me when I read the words "this substance, having been coined by public authority, represented use and ownership, not so much on account of the material itself as by its value .. etc", that there might be a hint of chartalism here. In light of the other passage, the case looks even stronger.

    I may need to rethink my conclusion above!

    1. Of course if you do go in that direction the Austrians will start going on about Roman hyperinflation -- while COMPLETELY misrepresenting the cause and ignoring the fact that Rome was the most powerful empire in Europe for centuries.

      Watch out... the comments section is about to be flooded with cherry-picked facts and nonsense...

  4. I have in fact dealt with the inflationary crisis of the 3rd and 4th centuries AD in the Roman empire here:


    1. Refreshing. But the idea that Rome, with its pre-industrial, agrarian economy might fall for economic reasons is completely laughable. Seriously, if you said that to an historian they would probably never even speak to you again it's so crude.

      Can an advanced industrial state like the Soviet Union fall due to economic problems? Yes. Can an agrarian state or a jungle tribe? Absolutely not. The economy was far less important in those times -- indeed, the Greeks understood "economy" as what today we refer to as "home economics", which shows where their concerns lay. The most pressing concern was, of course, war.

      You know, you can say what you will about Marxist historical materialism. It is an interesting, though limited doctrine. But the Austrians practice an amateurish sort of "historical monetarism" -- and it merely shows that they are not simply misguided, but willfully ignorant people blinded by their own ideology; the economic equivalent of a flat-earther or a creationist.

  5. Also notable is the other side of the coin (as it were!): the private debt and debt deflationary crises of the late Republic:


  6. Hi Lord Keynes, you might like our upcoming seminar series:


    The moderator for our first event on the Historial Evolution of Money and Debt (Tuesday Sept. 11 at 7.00pm at CLS) will be William Harris, a history professor at Columbia who is an expert in Roman and Greek monetary systems. He will be available for questions and the event will be livestreamed to allow people to participate online.