Reply to Selgin on the Origin of Electrum Coinage, Part 2

This is part 2 of my response to George Selgin’s post here:

George Selgin, “‘Lord Keynes’ contra White on the Beginnings of Coinage,” Alt-M Ideas for an Alternative Monetary Future, August 30, 2017.

Selgin refers to various new data from the past 20 years or so, and much of the new evidence was presented at a conference called “White Gold: Revealing the World’s Earliest Coins,” held from 25–26th June, 2012 (International Congress at Israel Museum, Jerusalem).

Wartenberg (2017), for instance, refers to the edited proceedings of this conference: White Gold: Studies in Early Electrum Coinage (edited by Peter Van Alfen and Ute Wartenberg). But this book will not be published until December 31, 2017, so I can hardly evaluate the evidence there, but have to go on published summaries of the papers.

The new data can be described as follows:

(1) new archaeological work on the Artemisium of Ephesus discussed in Cahill and Kroll (2005) demonstrates that electrum coins already existed in the last quarter of the 7th century BC (625–601 BC), which confirms the older dating of the invention of coins to the period around 630 BC (de Callataӱ 2013: 13).

(2) recent investigation of electrum coins with advanced scientific techniques indicates to some scholars that these early electrum coins were minted from combining gold and silver, and so were not minted from natural electrum alloys (de Callataӱ 2013: 9).

Wartenberg (2017) reports that laser ablation inductively coupled plasma mass spectrometry (LAICP-MS) analysis of early electrum coins shows that their gold-to-silver content was more uniform than previously thought: e.g., a panther or lion head series had a gold-to-silver ratio of 55–45%, with 1–2% copper. A striated coin series (which might be a later series) has a gold-to-silver ratio of about 60–40% ratio.

Wartenberg also concludes that LAICP-MS analysis shows that early electrum coins were not minted in naturally occurring electrum, but deliberately minted by “combining pure gold and silver, which was previously refined” to achieve stable gold-to-silver ratios, even in the late 7th century (Wartenberg 2017: 27).

(3) there is much more evidence for lower denomination coins in the early electrum series, even down to 1/192 of a stater (Wartenberg 2017: 27), though it remains true that many higher denomination coins were also minted.

Datum (1) does not refute older interpretations.

Datum (2) and (3) do provide evidence against the some versions of the orthodox Chartalist hypothesis that individual early electrum coins (supposedly minted from natural electrum) had a much more variable gold-to-silver content (Price 1983: 5), and so were fiduciary to the extent that the gold content varied between individual coins, and was not always the same as the face value.

But do these data provide good evidence that private agents were the innovators in coining electrum coins, under the Mengerian theory of the emergence of money? The answer is: not really.

First, let us re-state some important points. The first coins were minted in the second half of the 7th century BC (650–600 BC) in what is now western Turkey (what was called “Asia Minor” by the Classical Greeks) in ancient Lydia, and in the Greek colonies in Ionia.

Both the ancient writers Xenophanes (as cited in Pollux, Onom. 9.83) and Herodotus (Histories 1.94) report this. This region was dominated by the ancient kingdom of Lydia, with the royal capital at Sardis, which was populated by an Indo-European speaking people, and the extent of the Lydian kingdom can be seen in this map:

The earliest coins consisted of stamped pieces of electrum, an alloy of gold and silver with trace amounts of copper, but with a roughly uniform weight. Here is an example of an early Lydian electrum coin with lion-head:

Ancient Lydia was rich in electrum, which was panned from the rivers, as well as mined. It is established that Lydian alluvial electrum (that is, electrum taken from the rivers) had a natural variable gold content from about 65% to 85% (Konuk 2012: 44; Meeks 2000: 145–148).

However, natural electrum was peculiarly unsuited to be the most saleable commodity that emerged as the general money commodity in line with Menger’s theory of the origin of money. We can review why this is the case.

For one thing, small-sized electrum and electrum dust could not be easily tested for purity (Kroll 2012: 38):

“When offered in a transaction, the quality of the [sc. electrum] metal first had to be tested visually from the color of streaks made on a touchstone (No. 16), and while such testing presented no problems with larger lumps of electrum, it would have been practically impossible to test a bagful of dozens of small nuggets and crumbs of the metal. Even if each small piece were separately tested, it would have been exceedingly difficult to determine with any accuracy the value of an entire bag of pieces, each with a different weight and fineness. Over time, as the complexities and unreliability of electrum bullion became widely recognized, Lydians and their Greek and Carian neighbors who had accumulated large stocks of this metal must have found it increasingly difficult to utilize it in payments that others would accept.”
Kroll, John H. “The Coins of Sardis,” Sardisexpedition.org
http://www.sardisexpedition.org/en/essays/latw-kroll-coins-of-sardis

In light of this, natural electrum can hardly have been Menger’s “most saleable commodity,” since many people will have required small size electrum or electrum dust for ordinary, low-value transactions in trade and in the market-place (or in the agora, as the Greeks called it).

The average percentage of gold in natural electrum was probably about 70–75% (Konuk 2012: 44), whereas, as we have seen, the most recent analysis of the early lion-head electrum coin series (likely from Lydian kings) shows that they tended to have a stable but lower percentage of gold at about 54% with about 2% copper (Cowell and Hyne 2000: 170–171; Keyser and Clark 2001: 114). Another panther or lion-head series (probably early Lydian coins), analysed with laser ablation inductively coupled plasma mass spectrometry (LAICP-MS), had a gold-to-silver ratio of 55–45%, with 1–2% copper (Wartenberg 2017: 26; see also Velde 2012: 19).

So whoever was minting these coins struck them with an alloy in which the gold content – although consistent – was lower than the average found in natural electrum (Konuk 2012: 44).

The stable gold content gave these coins a definite consistent colour, and, along with their standard weight, can be seen as part of the process of standardising them. Perhaps copper was even added to give them a colour like that of electrum with a higher gold content.

Unless they were explicitly given a face value at the monetary value of the gold-to-silver content, early electrum coins would still have been fiduciary to some extent if the issuing authority tried to give them a value at the average gold content of electrum, and if the public expected them to contain the average gold content of natural electrum (about 70–75%). However, in reality the early coins clearly did not have that gold value, since they had a relatively stable but lower gold content of 54%.

Many modern scholars – and probably a majority – continue to argue that the actual exchange value of the early electrum coins was larger than their intrinsic metallic value, perhaps by as much as 20% (Le Rider 2001: 94–95; Cahill and Kroll 2005: 612–613; Kroll 2008: 21; Konuk 2012: 44; Kroll 2012: 39; Furtwängler 2011: 17; for older views on the overvaluation of electrum coins, see Bolin 1958: 11–45, who saw it as a secret fraud by the Lydian kings).

So, in view of this, the Chartalist view is hardly refuted by the discovery of a more stable gold content in the early coins, since the Lydian kings may well have accepted them in payment at the higher face value.

In short, if the Lydian kings deliberately minted early electrum coins with a gold content of 54%, but gave them a conventional face value in line with the average 70% gold value of natural electrum, and then accepted the coins back again in taxes, fines or other payments, then they could still have been fiduciary coins, to some extent, in a closed monetary system in Lydia and its subject Greek city-states (Rider 2001: 94–95, 116).

The Lydian kings would have had substantial expenditures, since they fought major wars and engaged in huge building programs at Sardis, their capital (on the archaeology of Lydia, see Roosevelt 2009; Greenewalt 2011; Roosevelt 2012), so that they surely made payments to soldiers, labourers, and artisans on a large scale.

Price (1983) suggested that the early electrum coins were intended as gifts that only later became monetised, but the discovery of many more smaller denomination electrum coins than previously thought in the early issues strongly suggests that these coins were intended for exchange and monetary transactions.

The Lydian kings are still the best candidates for the inventors of the coins, since (1) the Lydian kings had large stocks of the necessary electrum, (2) could accept the coins back as payment as taxes or obligations (if they were intended as money), and (3) had many large-scale payments to make.

Furtwängler (2011: 18) argues that – over time – the Lydo-Milesian standard electrum coins with their 54% gold content (below the average gold content of natural electrum) did not win widespread acceptance in the Greek city-states outside the Lydian empire (see also Kroll 2012: 39). Croesus – perhaps as much for political as for economic reasons – implemented a currency reform around 560 BC (or perhaps even earlier if his accession was around c. 585 BC, as argued by Wallace 2016), and recalled his electrum coins, and, by cementation techniques, used them to mint a new pure gold and silver coinage to restore confidence (Furtwängler 2011: 18).

Evidence for the higher face value of the older electrum coins has been adduced from peculiar data about Croesus’ new gold stater issues.

During the reign of the last Lydian king Croesus (who ruled from c. 585 or 560–546 BC), the king minted a new pure gold and silver coinage called “Croeseids” (and recent archaeological evidence proves that this coinage reform had been implemented by the time of Croesus, and not later under the Persians as some scholars have argued; see Cahill and Kroll 2005).

But the weight and two specific issues of the new gold staters are suggestive:

(1) probably at first, the new gold staters (sometimes called “Heavy Croeseids”) were issued and struck with 10.8 grams of gold. Given the value of gold to silver was probably about 1:13.3 in this period, the new gold stater of 10.8 grams would have been equivalent to an electrum stater of 14.15 grams, but only if the electrum staters were artificially overvalued at the gold content of natural electrum (which stood at about 70–75% gold). Since the value of the electrum staters had been partly fiduciary and possibly confidence in them was in question by this period, this exchange ratio with the new gold coins would have maintained the government guarantee of accepting them at their artificial face value. This was intended to recall the old electrum coins (Konuk 2012: 50; Cahill and Kroll 2005: 612–613; Kroll 2001b: 201–202).

(2) however, at some point – presumably when a large quantity of electrum coins had been recalled – Croesus minted a new pure gold stater with a reduced size, and struck at 8.1 grams (the so-called “Light Croeseids”). This reflected the value of the actual gold content of the old electrum coins, whose gold content had been fixed at about 54% and 44% silver (Konuk 2012: 50; Cahill and Kroll 2005: 612–613; Walburg 1991). The Lydian kings now abandoned their experiment with overvalued electrum coins, perhaps for political as much as economic reasons, and instead minted a pure gold and silver stater coinage, along with smaller denominations of each gold and silver stater type.

The fact that Croesus’ “Heavy Croeseids” (presumably minted before the light kind) seem to match the postulated artificial value of the early electrum coins is considered by many scholars to be strong evidence that they really had been overvalued by state guarantee, and this seems to be the best explanation of the data.

Finally, the absence of electrum coins from the list of precious metal revenue on a lead tablet dated to the period around 600 BC from the Artemisium temple of Ephesus – before Ephesus was conquered by the Lydian king Croesus and politically subject to Lydian suzerainty – suggests that the early Lydian electrum coins were not accepted at the temple, probably because they were understood to be overvalued (Kroll 2008: 18–21).

So, all in all, the case for a qualified Chartalist interpretation of the earliest electrum coinage of Lydia is still strong.

Furthermore, recent analysis of the electrum coinage of Samos has established that the gold content of Samian coins was much more variable, and ranged from 46 to 86%, and the electrum coinage of Phocaea also had a highly variable gold content (Konuk 2005; Wallace 2013: 2359; Avaldi et al. 1984). In short, both the Samian and Phocaean electrum coinage can still be explained by means of a Chatalist explanation too.

But let us assume – for the sake of argument – that the early Lydian electrum coins were given a face value equal to their real gold-to-silver content (so making the Chartalist explanation false), does this rule out the Lydian kings as the inventors of coinage? Again, the answer is: not at all.

The Lydian kings may well have struck these coins as prestigious payment objects for their soldiers, mercenaries and other employees and guaranteed a stable metal content consistent with market value, just as they – and numerous Greek city-states – later struck pure gold and silver coins.

We know that the most common type of early electrum coins shows the lion-head or lion paw, which is the royal symbol of the Lydian kings (Wartenberg 2017: 15 and 24; Konuk 2012: 45; Spier 1998), which in turn strongly suggests that most of these coins were stamped with the symbol of the Lydian state.

Bresson (2009: 3–4) points out that the Lydia kings conquered or forced the political submission of a large number of Greek city-states on the coast of Asia Minor, and that consequently that Lydian kings may well have established a monetary union with their electrum coins being a standard. The Lydo-Milesian (or often simply called the “Milesian”) standard was based on the stater with a weight of about 14.30–14.40 grams. The Lydian kings would then have set up this standard and demanded it of their subject Greek city-states, so that it was the state that was driving force behind a monetary standard, and that allowed the elimination of transaction costs such as heavy exchange fees between coins of a different standard.

Bresson (2009: 3, citing Cowell et al. 1998: 529–530 and Cowell and Hyne 2000: 169–174) also puts the gold content of early Lydian electrum coins at about 53% with most coins not deviating more than 1% from this.

Under this view of Bresson, the state weighed, standardised, and guaranteed the value and weight of electrum coins to reduce transaction costs for private individuals who no longer had to engage in the expensive process of checking the value of the coins (Bresson 2006; Bresson 2009).

The fact that the Lydo-Milesian standard was adopted in areas under the political domination of the Lydian kings does not suggest that the standard was a spontaneous development from the private sector. So, even if we assume that electrum coins were given a monetary value consistent with their gold content, the evidence that the private sector was the driving force behind this is still feeble.

As we seen, however, most scholars do still think that the early electrum coins were overvalued, and a qualified Chartalist explanation is still convincing.

Let us now turn to the final section: a critical review of the arguments made by those who contend that private sector agents first invented coins.

The Evidence for the Private Sector as Inventor of Electrum Coins is still Feeble
Modern defenders of the private sector as the inventor of electrum coins make the following arguments. They contend that the early coins seem to have had a large number of series with different obverse types and reverse punches, perhaps as many as 250–300 (van Alfen 2014: 2–3). Peter van Alfen takes this as evidence of many private elite issuers, such as goldsmiths, bankers or merchants (van Alfen 2014: 2–3, 3, n. 11).

But we know for a fact that later state-issued coinage by Greek city states like Cyzicus, Mytilene and Phocaea did regularly change their obverse types, and as often as once a year (which van Alfen 2014: 3, n. 11 himself admits; Price 1983: 4). The multiplicity of obverse types is not a strong argument for private sector coining at all, since there is no reason why both the Lydian kings and early Greek city-states could not have minted large numbers of obverse types with different symbols and insignia (de Callataӱ 2013: 11).

Peter van Alfen (2014) argues that the early coinages were minted by wealthy elite individuals who, he thinks, owned mines and had large-scale access to metals, and that the Lydian kings only gradually displaced private issuers and then gained a near monopoly on coin issue by the time of Croesus (who ruled Lydia from c. 585 or 560–546 BC) (see van Alfen 2014: 21).

Unfortunately, many of van Alfen’s claims about private wealth in Lydia are based on data in Roosevelt (2009) from the later Persian and Hellenistic periods (as admitted by van Alfen 2014: 19, n. 64 and 20, n. 68 himself), not the relevant period of the pre-Persian Lydian kingdom.

Moreover, the earliest coins minted from 650 to 600 BC were made of electrum, which was a naturally occurring alloy in ancient Lydia (Kroll 2008: 17–18).

Sardis – the Lydian capital – was dominated by the king’s palace and archaeological evidence seems to show that the processing of gold was dominated by the king, not private merchants (Hanfmann 1983: 73, 76, 83, 85, 246, n. 87). The evidence shows that the Lydian kings either controlled the mines in their kingdom directly (Koray and Lorber 2012: 13; Briant 2002: 400), and/or levied taxes on mining or extraction of metals. Indeed, a certain Lydian called Pythius under the later Persian empire, who owned a number of mines in Lydia, may have been a descendant of the Lydian royal family who had inherited these mines as private family property (Briant 2002: 401). Did private agents really have access to this type of wealth when the kings controlled mining and panning of precious metals?

It follows that, if the Lydian kings extracted and owned much of the silver, gold and electrum (mined or panned from the rivers), it is most probable that the kings also minted the first electrum coinage too, since a very large quantity of this metal was needed for the many coin issues over many years.

Despite Selgin, this is not a non sequitur. It is an inductive argument, on the basis of empirical evidence, and does not claim to yield a certain conclusion, only a probabilistic one.

Finally, let us now review the evidence adduced by the Free Bankers and defenders of the private sector as the inventors of early electrum coinage, and the counterarguments:

(1) Larry White in his original post here argued that:

“Once sovereigns monopolized the mints they took advantage of the propaganda value of stamping their own faces on the coins, of course. But as far as we know coins were already in use among merchants before that happened. Very early coins from ancient Lydia, in what is now Turkey, were not inscribed with human faces but rather animal figures. The Ancient History Encyclopedia states: ‘It appears that many early Lydian coins were minted by merchants as tokens to be used in trade transactions. The Lydian state also minted coins.’”
Larry White, “Why the ‘State Theory of Money’ doesn’t explain the Coinage of Precious Metals,” Alt-M Ideas for an Alternative Monetary Future, August 24, 2017.

But the assumption here is incorrect: early monarchs did not put their images on coins. For a very long time in the ancient world, coins did not carry any images of living human rulers, and rarely carried writing, and there may well have been a superstitious taboo against depicting living people on coins.

In light of this, there is no reason why the kings would have bothered to put their images or names on the coins when people at the time knew perfectly well that they had been minted by the state. Early coins of the state, even produced by kings, mostly depicted gods, seals or other symbols. In Western civilization, one of the first kings to be depicted on coins was Alexander the Great in the 4th century BC, even though it was probably the kings who ruled after him who first put his explicit image on coins (Shipley 2000: 69). But this was centuries after the first electrum coins had been invented.

Notably, Selgin does not seem to dispute this. I assume that on this point Free Bankers will concede White is wrong?

(2) some few early Lydian coins do carry inscriptions, in the Lydian script and language, and refer to .WALWE. (also read as walwet) and .KALI. (Schaps 2004: 96). However, the question of who or what these names refers to is not settled with certainty, though interesting – even plausible – suggestions have been made.

That the coins themselves were of the Lydian kings is strongly suggested by the lion symbol which appears on them – the symbol of the Lydian royal house (Schaps 2004: 96), so that already the notion that private sector agents independently minted them is shaky (although Furtwängler 2011: 16–17 regards them as the names of private electrum coin producers under the Lydian kings). Both coin types are linked by a common punch mark, so that they are likely to be by the same issuer (Wallace 2016: 176–177; Koray and Lorber 2012: 15).

The .WALWE. inscription has been read as Walwetalim, which can be linked to the Lydian king whom the Greeks called “Alyattes” (Karwiese 1991: 8–14; Wallace 2006). Koray and Lorber (2012: 15) state the walwet is now “usually interpreted” as the name of the Lydian king Alyattes. If so, then this is a coin explicitly minted by the king.

In addition, some have read .KALI. as KUKALIM and identified this with the Lydian name “Gyges” (Wallace 2006), and even if this does not refer to the first king of the dynasty, it may well refer to a royal prince during the reign of Alyattes in the late 7th century BC who was also allowed to issue coinage, as argued by Wallace (2006).

Furthermore, Howgego (1995: 3) suggests that the names may be those of mints, not of individuals, and Wallace (1988) argued that walwe could be the Lydian name for “lion” and be a simple noun referring to the lion symbol on the coins.

Finally, even if the inscriptions do not refer to Lydian kings and princes, they could be individuals who minted the coins for the Lydian kings as mint masters (Wallace 1987: 393, n. 51).

But there are good arguments for thinking these coins do name Lydian kings or members of the royal family, as demonstrated by Wallace (2006).

(3) it is true we have about four coins with the Greek inscription Φάνεως ειμί σήμα, which can be translated as “I am the badge of Phanes.” Though they do not carry the Greek inscription, there are supposedly some 250 pieces in the same series in smaller denominations with the same stag symbol (Wartenberg 2017: 17).

If “I am the badge of Phanes” is the correct translation of the inscription, it is unclear who this Phanes was. Peter van Alfen (2014: 23) assumes “Phanes” was an elite private Greek who minted coins, but there is little evidence to support this.

There is a reasonable discussion of the complexities of the issue here.

Konuk (2012: 45–47) makes a good case that the stag emblem on these coins is associated with the goddess Artemis at Ephesus (and Kastner 1986 had already suggested that the name “Phanes” may have been that of a god, not a human being; see Howgego 1995: 4). If the stag symbol is an official emblem of Ephesus, then the coin series in question is likely to have been an official coin issue of the city, since the same symbol reappears in later coin issues of Ephesus (Velde 2012: 10; Velde 2012: 10 also states “There is no consensus on whether Phanes is the name of an individual or refers to Artemis”; cf. Koray and Lorber 2012: 15). The name “Phanes,” far from being that of a human being, may be some cult name or word associated with the cult of Artemis at Ephesus.

By contrast, if “Phanes” is a human being, he is perhaps an official at Ephesus who minted or was responsible for the minting of the coins. Howgego (1995: 4) speculates that, even if Phanes was the name of a human being, he might have been an unknown local tyrant or ruler.

So, as in my original post, I once again conclude that the evidence for the private sector being the inventor, or driving force, behind the creation of the first electrum coinage is feeble.

We have also seen that the new evidence adduced by Selgin does not refute the older interpretation that the earliest electrum coins were overvalued.

Finally, as can be seen from a large sample of modern scholarship here, there is a majority view that the earliest electrum coins were invented by the Lydian kings.

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Price, Martin Jessop. 1983. “Thoughts on the Beginnings of Coinage,” in C. N. L. Brooke et al., Studies in Numismatic Method Presented to Philip Grierson. Cambridge University Press, Cambridge. 1–10.

Ramage, Andrew and Paul Craddock. 2000. King Croesus’ Gold: Excavations at Sardis and the History of Gold Refining. British Museum Press, London and Cambridge, Mass.

Roosevelt, Christopher H. 2009. The Archaeology of Lydia from Gyges to Alexander. Cambridge University Press, Cambridge.

Roosevelt, Christopher H. 2012. “Iron Age Western Anatolia: The Lydian Empire and Dynastic Lycia,” in D. T. Potts (ed.), A Companion to the Archaeology of the Ancient Near East. Wiley, Chicester. 896–913.

Semenova, Alla. 2011. The Origins of Money: Evaluating Chartalist and Metallist Theories in the Context of Ancient Greece and Mesopotamia. PhD dissert., University of Missouri-Kansas City, Kansas City, Missouri.

Schaps, D. M. 2004. The Invention of Coinage and the Monetization of Ancient Greece. University of Michigan Press, Ann Arbor.

Schaps, David M. 2006. “The Invention of Coinage in Lydia, in India, and in China,” paper, XIV International Economic History Congress, Helsinki
http://www.helsinki.fi/iehc2006/papers1/Schaps.pdf

Shipley, G. 2000. The Greek World after Alexander, 323–30 B.C. Routledge, London and New York.

Spier, Jeffrey. 1998. “Notes on Early Electrum Coinage and a Die-Linked Issue from Lydia,” in Richard Ashton and Silvia Hurter (eds.), Studies in Greek Numismatics in Memory of Martin Jessop Price. Spink, London. 327–334.

Stingl, Timo. 2000–2001. “Barren oder Münzen? Überlegungen zum Beginn der Elektronprägung in Westkleinasien,” Boreas 23–24: 35–52.

van Alfen, Peter. 2012. “Problems in the Political Economy of Archaic Greek Coinage,” Notae Numismaticae 7: 13–32.
https://www.academia.edu/2237122/Problems_in_the_Political_Economy_of_Archaic_Greek_Coinage._Notae_Numismaticae_VII_pp._13-32

van Alfen, Peter. 2014. “The Role of ‘the State’ and Early Electrum Coinage,” Working Paper v.31.1.2014
https://www.academia.edu/7343906/The_role_of_the_state_and_early_electrum_coinage

van Alfen, Peter. 2017. “Public Benefactor or Profiteer? The Role of “the State” and Early Electrum Coinage,” in P. van Alfen, U. Wartenberg, K. Konuk, H. Gitler and W. Fischer-Bossert (eds.). White Gold: Studies in Early Electrum Coinage. American Numismatic Society and Israel Numismatic Society, New York and Jerusalem, forthcoming 31 December 2017.

van Alfen, P., Wartenberg, U., Konuk, K., Gitler, H. and W. Fischer-Bossert (eds.). 2017 White Gold: Studies in Early Electrum Coinage. American Numismatic Society and Israel Numismatic Society, New York and Jerusalem, forthcoming 31 December 2017.

Velde, François R. 2012. “On the Origin of Specie,” Federal Reserve Bank of Chicago, February 15, 2012
https://www.frbatlanta.org/-/media/documents/news/conferences/2012/monetary-economics/papers/velde.pdf

von Reden, Sitta. 2002. “Money in the Ancient Economy: A Survey of Recent Research,” Klio 84.1: 141–174.

Walburg, R. 1991. “Lydisch oder persisch? Ein Goldobjekt aus der Frühzeit der Münzprägung,” Schweizerische Numismatische Rundschau 70: 5–17.

Wallace, Robert W. 1987. “The Origin of Electrum Coinage,” American Journal of Archaeology 91: 385–397.

Wallace, Robert W. 1988. “Walwe. and. Kali,” The Journal of Hellenic Studies 108: 203–207.

Wallace, Robert W. 2001. “Remarks on the Value and Standards of Early Electrum Coins,” in Miriam S. Balmuth (ed.), Hacksilber to Coinage: New Insights into the Monetary History of the Near East and Greece. American Numismatic Society, New York. 127–134.

Wallace, Robert W. 2006. “KUKALIM, WALWET, and the Artemision Deposit: Problems in Early Anatolian Electrum Coinage,” in P. van Alfen (ed.), Agoranomia. Studies in Money and Exchange. Festschrift for John H. Kroll, The American Numismatic Society, 37–48.

Wallace, Robert W. 2013. “Electrum, electrum coinage,” in Roger S. Bagnall, Kai Brodersen, Craige B. Champion, Andrew Erskine and Sabine R. Huebner (eds.), The Encyclopedia of Ancient History. Volume V. Wiley-Blackwell, Malden, MA. 2359–2360.

Wallace, Robert W. 2016. “Redating Croesus: Herodotean Chronologies, and the Dates of the Earliest Coinages,” Journal of Hellenic Studies 136: 168–181.

Wartenberg, Ute. 2016. “Die Geburt der Münze: Die frühe Elektronprägung. Neue Wege der Forschung,” Mitteilungen der Österreichischen Numismatischen Gesellschaft 56.1: 30–49.

Wartenberg, Ute. 2017. “The Birth of Coinage Old questions – New Answers,” Presentation delivered at Ossolineum, Wrocaw, 3 July 2017
https://www.academia.edu/34043055/The_Birth_of_Coinage._Old_Questions_-_New_Answers

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Larry White on the Origins of Coined Money: A Critique

The free banker Larry White has a recent post here on the origins of coined money:

Larry White, “Why the ‘State Theory of Money’ doesn’t explain the Coinage of Precious Metals,” Alt-M Ideas for an Alternative Monetary Future, August 24, 2017.

White is essentially talking about the origins of coined money in ancient Lydia and Greece.

First of all, there are some points in White’s article that may be freely acknowledged as correct, as follows:

(1) Chartalism does not have a universal theory of the origins of money (as defined as a general medium of exchange, unit of account and store of purchasing power) anymore than Neoclassical economics does. But it does have part of the story.

(2) it is true that the theories of certain MMT economists who wish to argue that ancient states chose silver and gold coins only as state-issued tax-anticipation tokens ignores the subjective value that gold and silver did have for human beings. Precious metals were high prestige goods and did obtain value in the market, to some extent, by the subjective value people had for them. So, in this sense, precious metal gold and silver coins were not simply “mere tokens” for the ancients, although some important qualifications can be said about electrum coins, as we will see below.

But now we turn to the flaws in White’s theory.

To begin with, it is empirically wrong to assert that opposition to the Neoclassical/Austrian barter theory of the origins of money is in resurgence just because of Chartalism. In reality, anthropology had already – by the mid-20th century – presented strong evidence against the Austrian/Neoclassical theory, and modern opponents of it are not all necessarily Chartalists.

Secondly, the really serious and empirically dubious claim in White’s argument is his contention that coined money was invented by the private sector in ancient Lydia and Greece:

“An important technical advance came with the introduction and spread of coinage in Turkey and Greece during the 7th to 5th centuries BCE. Unlike raw nuggets straight from the mine or variously refined precious-metal bars, coined pieces of silver and gold gained a major additional advantage: they became (5) uniform in size and quality, so that traders need not incur the cost of testing (or the risk of not testing) each piece for its weight and its fineness (percentage of pure silver or gold content). Early coining entrepreneurs could have profited, as later mint masters in California did, by charging for the service of converting raw silver or gold into easier-to-spend uniform coins. With the spread of coinage to India, the Middle East, and Europe, merchants found silver and gold payments easier to make and to accept. ….

Once sovereigns monopolized the mints they took advantage of the propaganda value of stamping their own faces on the coins, of course. But as far as we know coins were already in use among merchants before that happened. Very early coins from ancient Lydia, in what is now Turkey, were not inscribed with human faces but rather animal figures. The Ancient History Encyclopedia states: ‘It appears that many early Lydian coins were minted by merchants as tokens to be used in trade transactions. The Lydian state also minted coins.’ Regarding Lydian coins inscribed with the names Walwel and Kalil, the British Museum comments: ‘It is unclear whether these are names of kings or just rich men who produced the earliest coins.’ Regarding a nearly contemporary ancient Greek coin bearing the legend ‘I am the badge of Phanes,’ the Museum comments: ‘We cannot be certain who this Phanes was, but it seems that he was placing his badge on coins as a guarantee of their quality.’”
Larry White, “Why the ‘State Theory of Money’ doesn’t explain the Coinage of Precious Metals,” Alt-M Ideas for an Alternative Monetary Future, August 24, 2017.

White is clearly asserting that coined money was invented by the private sector in ancient Lydia and Greece.

But is this true? The evidence for it is feeble at best, and there is much evidence against it.

The first coins were minted in the second half of the 7th century BC (650–600) in what is now western Turkey (what was called “Asia Minor” by the Classical Greeks) in ancient Ionia and within the ancient kingdom of Lydia. Both the ancient writers Xenophanes (as cited in Pollux, Onom. 9.83) and Herodotus (Histories 1.94) report this.

Let us run through the counterarguments to White as follows:

(1) the earliest coins were made of electrum, which was a naturally occurring alloy in ancient Lydia (Kroll 2008: 17–18). The evidence shows that the Lydian kings either controlled the mines in their kingdom directly (Briant 2002: 400), and/or levied taxes on mining or extraction of metals, and indeed a certain Lydian called Pythius under the later Persian empire, who owned a number of mines in Lydia, may have been a descendant of the Lydian royal family who had inherited these mines as private family property (Briant 2002: 401). It follows that, if the Lydian kings extracted and owned much of the silver, gold and electrum (panned from the rivers), it is most probable that the kings also minted the first electrum coinage too, since a large quantity of this metal was needed.

(2) that the “early coins from ancient Lydia, in what is now Turkey, were not inscribed with human faces but rather animal figures” does not provide good evidence against them having been minted by, or for, the Lydian kings: for a long time in the ancient world, coins did not carry any images of living human beings nor writing, and there is no reason why the kings would have bothered to put their images or names on the coins when people at the time knew perfectly well that they had been minted by the state. Early coins of the state mostly depicted gods, seals or other symbols. In Western civilization, one of the first kings to be depicted on coins in his own lifetime was Alexander the Great in the 4th century BC, but centuries after coins had been invented.

(3) it is true that some early Lydian coins carry an inscription, apparently in the Lydian language, and refer to .WALWE. and .KALI. (Schaps 2004: 96). However, the question of who or what these names refers to is not settled at all in modern scholarship. Howgego (1995: 3) suggests that the names may be those of mints, not of individuals. And, even if they do refer to human beings, they could be individuals who minted the coins for the Lydian kings as mint masters (Wallace 1987: 393, n. 51), and this is strongly suggested by the lion symbol which appears on many such early coins, the symbol of the Lydian royal house (Schaps 2004: 96).

(4) it is true we have about four coins with the Greek inscription Φάνεως ειμί σήμα, which can be translated as “I am the badge of Phanes” or “I am the sign of light.” However, as in the case of (3) above, if “I am the badge of Phanes” is the correct translation, it is unclear who this Phanes was. There is a reasonable discussion of the complexities of the issue here.

Kastner (1986) points out that the name may well be that of a god, not a human being (Howgego 1995: 4). Howgego (1995: 4) speculates that even if Phanes was the name of a human being, he might have been an unknown local tyrant or ruler.

So, at best, the evidence for private individuals or merchants being the driving force behind the first minting of coins is feeble.

What is the case for the Lydian kings having minted the earliest electrum coins?

Although it is true that some early 20th-century scholars supported the view that electrum coins were invented by the private merchants, this was strongly criticised by Cook (1958) and Kraay (1964), both of whom made the case that early coins were minted by the Lydian kings or states to pay state expenses, particularly mercenaries.

Early electrum coins did not circulate much beyond the areas where they were minted, and the most common ones were of very high denomination: perhaps worth more than 10 sheep and not useful for small transactions (Cook 1958: 260). If merchants invented early electrum coins, why were they mostly useless for small ordinary commercial transactions in the market? (Schaps 2004: 97; for recent evidence on later smaller denomination coins, see Kim 2002 and Kagan 2006).

R. M. Cook concluded that early electrum coins were minted by the Lydian kings in order to make large payments in a portable and durable form to people owed a large debt by the king, most probably soldiers or mercenaries (Cook 1958: 261).

This view has won large-scale acceptance in modern scholarship. We can take a standard work for reference here: The Oxford Handbook of Greek and Roman Coinage (Oxford and New York, 2012). In this work, Kroll (2012: 44) concludes electrum coins were created by the kings of Lydia. The view is held by Wallace (1987: 386), Osborne (1996: 256), Kim (2001: 10), Whitley (2001: 193), Hornblower et al. (2014: 182), Freeman (2004: 185), and Howgego (1995: 3, noting that no certain evidence in all of antiquity for coins being produced by private individuals).

There are a few dissenters like Holloway (1978), but their arguments, as can be seen from the scant evidence above, are weak. And, while both Schaps (2004: 100) and Seaford (2004: 133) allow some role for private individuals, both concede a large role for the Lydian state in driving the process and being the impetus for it.

Notably, while these early electrum coins had a surprisingly near uniform weight, they were actually variable in their metallic content, and the proportion of gold to silver varied in these coins: for example, one study has found that the silver content of the electrum coins could range from 20% to 75%, which reflected the natural variability of the electrum alloy itself, or even further dilution with extra silver (Wallace 1987: 386).

The near uniform weight but variable metal content of the electrum coins is an important datum. It would have been very difficult for the public to test the true metal content of early electrum coins (Wallace 1987: 392), or indeed small bits of electrum or electrum dust (Kroll 2008: 18). The great difficulty in ascertaining the gold to silver content and metallic value of electrum even before it was coined is actually good evidence against the Mengerian/Neoclassical explanation of its emergence as money.

Given the variable metal content of electrum and difficulties of assessing its value, one cannot easily argue that early merchants invented electrum coins as standardised money with consistent gold and silver value as the most saleable medium of exchange.

Rather, various scholars (see Wallace 1987: 393, Kroll 2012: 44) concluded that the Lydian kings invented electrum coins as a way of standardising the value of individual issues of electrum (despite the variability of the gold to silver content in the coins) by means of a royal seal on the coin, so that this would stabilise their value by accepting the coins back at the same value, presumably as taxes, fines or payments due to the government.

That is to say, the royal stamp was a sign of redeemability at a fixed value (Seaford 2004: 133; Osborne 1996: 256). In the sense that value was not always equal to the metallic content of the coins, electrum coins were fiduciary and state-guaranteed money (Wallace 1987: 393).

These points count against electrum coinage having been an invention of the private sector, because, as we have seen, the difficulty of ascertaining the gold or silver content of electrum coins, or earlier small electrum portions or electrum dust, does not suggest electrum was the most saleable commodity that emerged as money by the barter spot trade.

Instead, it was a royal government that selected electrum as a state-guaranteed money or form of payment, and that could overcome people’s concerns about the actual metal content of the coins by fixing value.

Further Reading
“The Origin of Money and Coinage in Western Civilisation: The Case of Ancient Greece,” April 5, 2013.

“George Selgin versus David Graeber on the Origin of Money,” March 30, 2016.

BIBLIOGRAPHY
Briant, Pierre. 2002. From Cyrus to Alexander: A History of the Persian Empire (trans. Peter T. Daniels). Eisenbraun, Winona Lake, In.

Cook, R. M. 1958. “Speculation on the Origins of Coinage,” Historia 7: 257–262.

Freeman, Charles. 2004. Egypt, Greece and Rome: Civilizations of the Ancient Mediterranean. Oxford University Press, Oxford.

Hall, Jonathan M. 2007. A History of the Archaic Greek World, ca. 1200–479 BCE. Blackwell Publishing, Malden, Mass.

Harris, W. V. (ed.). 2008. The Monetary Systems of the Greeks and Romans. Oxford University Press, Oxford and New York.

Holloway, R. Ross. 1978. “La ricerca attuale sull’origine della moneta,” Rivista italiana di numismatica e scienze affini 80: 7–14.

Hornblower, Simon, Spawforth, Antony and Esther Eidinow (eds.). 2014. Oxford Companion to Classical Civilization. Oxford University Press, New York.

Howgego, Christopher J. 1995. Ancient History from Coins. Routledge, London.

Kagan, J. H. 2006. “Small Change and the Beginning of Coinage at Abdera,” in Peter van Alfen (ed.), Agoranomia: Studies in Money and Exchange Presented to John H. Kroll. The American Numismatic Society. New York. 49–60.

Kastner, Wolfgang. 1986. “‘Phanes’ oder ‘Phano’,” Schiunzerische Numismatische Rundschau 65: 5–11.

Kim, H. S. 2001. “Archaic Coinage as Evidence for the Use of Money,” in Andrew Meadows and Kirsty Shipton (eds.). Money and its Uses in the Ancient Greek World. Oxford University Press, Oxford. 7–21.

Kim, H. S. 2002. “Small Change and the Moneyed Economy,” in P. Cartledge, E. E. Cohen and L. Foxhall (eds.), Money, Labour and Land. Approaches to the Economies of Ancient Greece. Routledge, London and New York. 52–66.

Kraay, C. M. 1964. “Hoards, Small Change and the Origin of Coinage,” Journal of Hellenic Studies 84: 76–91.

Kroll, J. H. 2008. “The Monetary Use of Weighted Bullion in Archaic Greece,” in W. V. Harris (ed.) The Monetary Systems of the Greeks and Romans. Oxford University Press, Oxford and New York. 12–37.

Kroll, John H. 2012. “The Monetary Background of Early Coinage,” in William E. Metcalf (ed.), The Oxford Handbook of Greek and Roman Coinage. Oxford University Press, Oxford and New York.

Osborne, Robin. 1996. Greece in the Making, 1200–479 BC. Routledge, Abindon.

Peacock, M. S. 2006. “The Origins of Money in Ancient Greece: The Political Economy of Coinage and Exchange,” Cambridge Journal of Economics 30: 637–650.

Peacock, Mark. 2013. Introducing Money. Routledge, London.

Price, Martin Jessop. 1983. “Thoughts on the Beginnings of Coinage,” in C. N. L. Brooke et al., Studies in Numismatic Method Presented to Philip Grierson. Cambridge University Press, Cambridge. 1–10.

Seaford, R. 2004. Money and the Early Greek Mind: Homer, Philosophy, Tragedy. Cambridge University Press, Cambridge.

Schaps, D. M. 2004. The Invention of Coinage and the Monetization of Ancient Greece. University of Michigan Press, Ann Arbor.

Wallace, Robert W. 1987. “The Origin of Electrum Coinage,” American Journal of Archaeology 91.3: 385–397.

Whitley, James. 2001. The Archaeology of Ancient Greece. Cambridge University Press, Cambridge.

The Origin of Money and Coinage in Western Civilisation: The Case of Ancient Greece

A recent brouhaha has erupted over this article about the nature of coinage and its minting by the state, which also cites a classic article by Goodhart (1998; reprinted in Goodhart 2003). Libertarians like Robert Murphy are outraged.

While I do not agree with everything said in the original article, it does make the excellent point that coins seem to have been invented by ancient states to “pay soldiers … and then made … the only acceptable currency for paying taxes.” This, along with much other evidence, indicates that there is something wrong with the Mengerian account of money.

The whole debate raises three questions:

(1) what was Menger’s theory of money’s origins?
(2) how did coinage emerge in Western Civilisation in ancient Greece?
(3) did any kind of money exist in ancient Greece before coinage and what was its nature and extent?

I answer these questions below.

I. Menger’s Theory on the Origin of Money
We know people exchange goods for goods in spot transactions (barter). What happens when person A wants a good from person B, but the latter does not want the goods the former has to trade? This is the famous problem of the double coincidence of wants.

Menger notes that commodities have “different degrees of saleableness,” and that the thing we call money has a virtually unlimited saleableness (Menger 1892: 242–243). Yet the differences in degrees of saleableness apply to many other commodities. Many goods once bought cannot be sold again except at a loss (Menger 1892: 244).

But what to do with your excess goods once you have obtained what you immediately want in a barter exchange? What if you are unable to obtain what you want through a direct barter spot transaction? It makes sense for you to obtain goods with a high degree of saleableness, and then exchange these in the wider community at present or in the future. By this process, the most saleable good (or goods) becomes the physical medium of exchange (Menger 1892: 249).

Menger concludes that precious metals have arisen as a medium of exchange among many peoples because “their saleableness is far and away superior to that of all other commodities” (Menger 1892: 252).

Now it will not do to argue (as some internet Austrians do) that all a commodity requires before becoming money is to have a market value in some sense (such as occasional use as a normal barter good). That is not Menger’s argument.

In essence, Menger’s process requires the following steps:

(1) a world of significant barter spot trades;

(2) a commodity used significantly in barter spot trades attains a high degree of saleableness: that is, the proto-money commodity must be held and traded to a significant extent in the market;

(3) the proto-money commodity then emerges in the market as a real and actively exchanged medium of exchange to become money, the dominant good of “virtually unlimited saleableness.”

For Menger, money is, above all, a medium of exchange emerging from active and widespread market exchanges. The “unit of account” function of money arises secondarily from its medium of exchange role.

Apart from the fact that there are severe theoretical and empirical problems with Menger’s theory, which I describe here, does our empirical evidence from ancient Western civilisation confirm this in the case of ancient Greece?

II. Money before Coinage in ancient Greece
Coinage in ancient Greece appeared from 650 to 550 BC. But the question that any Austrian or libertarian defender of Menger’s theory of money would ask is this: was there some type of money before coins in Greece, and did it emerge by Menger’s barter spot trade process?

Before the age of Greek coinage, historians have identified certain goods which seem to have some of the functions of conventional money (but not all). But there was no identifiable metal money, or indeed identifiable money in the strict Mengerian sense.

In short, the state of affairs was this:

(1) cattle or oxen functioned as a largely abstract unit of account (but not a common medium of exchange) and
(2) iron spits might (or might not!) have been a very limited or weak medium of exchange.

Our important evidence for early Greek monetary history comes from the Homeric epics the Iliad and the Odyssey, which were written c. 750–700 BC, and reflect real social practices in the late Dark (or Geometric) Age from c. 1200–800 BC, and early Archaic period (800–480 BC).

In Homer’s epics, cattle or oxen are a type of unit of account, but the actual means of payment tend to be many other types of goods, not just cattle (Peacock 2011: 49–54).

Now one might argue that cattle did become the most common medium of exchange but then receded in importance to become a mere unit of account, but there are serious problems with this view.

First, the emergence of a “cattle/ox” unit of account in Greece appears to be related to religion and cult offerings, not emergence of cattle as the most saleable good (see below).

Secondly, cattle are of rather high value in an agrarian society but cannot be used for small transactions that are often the basis of trade. Cattle are not physically divisible into smaller units (and even conceptually this presents difficulties). Cattle are not always uniform or homogenous either, but come in different ages, breeds, degrees of health, and use. Nor are cattle durable, being mortal animals subject to age and disease, and hardly suited to be a long-term store of value. And finally cattle can be difficult to transport and hardly a very portable good (e.g., do you take one to market or travelling, if you want to buy things?). Will foreign merchants accept cattle for imported goods? What if your cattle run off?

Menger argues that metals are “far and away superior to that of all other commodities” (Menger 1892: 252) for use as money. Although the Greeks did have access to scarce metals such as gold, silver and copper, these do not appear as money in any accepted sense of that term in pre-Classical Greek history, even though the Greeks in private trade had centuries to select some metal as the reigning medium of exchange. But, instead, metal and bullion appear as just another barter good. Yet, according to Menger, metal is what we should expect to have emerged as money being the most saleable good.

So why an ox standard? While cattle no doubt had value in market trades, they were an important sacrificial animal and offering to the gods. The Greeks appear to have developed a cattle or ox unit of account derived from the value these animals had in ritual and sacrifice (Semenova 2011; Seaford 2004: 61; Einzig 1966: 372; Laum 1924). This thesis was put forward by the German scholar Bernhard Laum in Heiliges Geld: eine historische Untersuchung über den sakralen Ursprung des Geldes (1924), and has since won a great deal of acceptance from modern scholars (Semenova 2011: 381). Religious rituals and then temples had a preeminent place in the ancient Greek society, and the city government’s major responsibility was to honour, appease and placate the gods by offering sacrifices. In this sense, the ancient Greek temple and city are not separate entities, but really one and the same. So the emergence of an ox unit of account can be seen as another state-based, institutional process affecting economic life.

As we have seen, cattle seem unfitted under Mengerian theory to be a money commodity. But the ox acquired an importance over and above its mere agricultural use or commercial exchange value, because not only was it a crucial sacrificial animal, but also a means of payment for the services of priests (Semenova 2011: 385).

Priests needed to be paid in cattle for religious services, but it was soon also necessary to calculate the ox-value of other commodities offered for payment to temples or for sacrifice in lieu of oxen (Semenova 2011: 385): hence people came to develop “prices” of other goods in terms of oxen, and an ox unit of account emerged (see Schaps 2004: 9–10; Laum 1924; Heidel 1926; Peacock 2011: 54–63; Peacock 2003–2004).

What has provided crucial evidence of the link is the correspondence between (1) numbers of oxen used in sacrifices and (2) the monetary value of goods in terms of oxen as described in Homeric texts:

“what is so peculiar about Homeric valuation of things in terms of cattle (‘worth a hundred cattle,’ ‘worth ninety cattle’) is the correspondence between the numbers of cattle quoted as the value of various objects to the numbers of cattle sacrificed in Homeric sacrificial rituals (Seaford 2004: 61). More specifically, the numbers of oxen sacrificed are usually hundred, twenty, twelve, nine, four and one. But these units are also the customary units of value in the Iliad and Odyssey (Einzig [1949] 1966: 382; Seaford 2004: 61). This means that there is a distinct connection between the customized numbers of sacrificial victims and the specific quantities of oxen (the specific numbers of the ox-units) in terms of which the worth of various goods was estimated.” (Semenova 2011: 385).

But oxen were not generally used as a physical medium of exchange: they did not emerge as a unit of account from being the most saleable commodity in real and widespread barter spot trades. This is not consistent with Menger’s theory.

Instead, other goods like items associated with sacrifice of oxen such as tripods, cauldrons, double-axes, and spits were used as a means of payment as well as other metal objects (Schaps 2004: 10), all of which were measured in a cattle unit of account. (As an aside, some early fines in Greek city states appear to have been payable in tripods and cauldrons too.) One must also recognise that pre-Classical Greece was a society where gift exchange was an important activity alongside commercial exchange. Some objects were high prestige goods functioning as “gifts” that were neither traded nor “consumed”; instead, gifts were stored and then offered again to a new party as a gift.

What existed in pre-Classical Greece was an economy with an almost abstract unit of account where actual payment could, and usually was, made in many different kinds of goods through conventional barter exchange (and with gift exchange and debt/credit exchange in goods).

The second development of a type of possible proto-money alongside the cattle unit of value was the iron spit (or oboloi). Iron spits were employed to roast bull’s flesh in religious/state sacrificial meals and then used to distribute the meat to the public citizenry. Iron spits appear as dedications in Greek temples and tombs, but they might have had a very limited role as a proto-medium of exchange from the late 8th (or early 7th) to the 6th centuries BC (Seaford 2004: 103–104). But the trouble here is that they never seem to have acquired any universal or even significant medium of exchange value, and still seem to have been used alongside other commonly bartered objects like tripods and cauldrons (Schaps 2004: 85–88; Schaps concludes that spits were just used in barter trade). Spits were not useful for anything more than local barter, and probably useless for international or long-distance trade. Even on the most generous interpretation of the evidence, they can only have been a type of weak proto-money, which never emerged as a real “money thing.” And their religious or sacrificial use suggests a partial non-commercial source of their value anyway in temples, gift exchange, and bride price (Schaps 2004: 87); in other words, they could be a type of non-commercial money familiar from other cultures.

The Mengerian apologists might seize on these points and counter that none of these things discussed above are in fact money in their proper definition of that term; therefore Menger is not refuted. But that has the following consequence: the emergence of coinage is in fact the story of the origin of true money in ancient Greece.

Curiously, heterodox economists might agree that, strictly speaking, there was no widely-used physical good with all the threefold functions of money – as a medium of exchange, store of value, and unit of account – coalescing into a full-bodied money-thing in pre-Classical Greece. But, if one wants to argue this, again the consequences are quite clear:

“In sum, the Homeric world has no money-thing, that is, an object which answers to the description of money. Certain things perform certain functions, e.g., cattle (standard of value) and prestige objects (store of value) but neither performs the role of means of exchange or payment. Only in the Classical Period does a money-thing, coinage, come into existence.” (Peacock 2006: 642).

So what was the origin of coins?

III. The Origin of Coins
The first coins were minted in the second half of the 7th century BC (650–600) in what is now western Turkey (what was called “Asia Minor” by the Classical Greeks) in ancient Ionia and Lydia. Both the ancient writers Xenophanes (as cited in Pollux, Onom. 9.83) and Herodotus (Histories 1.94) report this.

These earliest coins consisted of stamped pieces of electrum with a roughly uniform weight in large numbers. Their value was large: about ten sheep. That is, they were of large denomination: perhaps worth more than 10 sheep and not useful for small transactions (Cook 1958: 260).

The scholar R.M. Cook long ago concluded that:

“From all this it may reasonably be inferred that coinage was invented to make a large number of uniform payments of considerable value in a portable and durable form, and that the person or authority making the payment was the king of Lydia. One solution suggests itself, that the purpose of coinage was the payment of mercenaries.” (Cook 1958: 261).

A reconstruction from the evidence is as follows: royal paymasters of mercenaries began to prepare electrum in lumps or shapes of uniform weight, instead of weighing out electrum pellets or dust as payment. Then the lumps were given uniform shape and marked with some sign and finally an official seal. Thus coins came into existence as the means for paying wages, but as a type of large pay packet for medium to long-term service (Cook 1958: 261).

At this point, the libertarian or Mengerian critic might question whether the earliest coins from Lydia were really minted by the state.

Glasner (1989: 30) contends that since these earliest coins had no names of Lydian kings “we can safely conclude that they were privately minted.” Yet that is a highly dubious argument. For a long time, coins did not carry writing at all, and there is no reason why the kings would have bothered to write their names on the coins when people at the time knew perfectly well that they had been minted by the state. Nor did early coins carry images of the living king: they mostly depicted gods, seals or other symbols. In Western civilization, one of the first kings to be depicted on coins was Alexander the Great in the 4th century BC, but centuries after coins had been invented.

Moreover, the evidence suggests that the Lydian kings either controlled the mines in their kingdom (Briant 2002: 400) or levied taxes on mining or extraction of metals (indeed a certain Lydian called Pythius under the later Persian empire, who owned a number of mines in Lydia, may have been a descendant of the Lydian royal family who had inherited these mines as private family property [Briant 2002: 401]), and it follows that, if they extracted and owned much of the silver, gold and electrum (panned from the rivers), it is most probable that the kings also minted the first electrum coins too.

Coinage spread to mainland Greece around 575 to 550 BC (or the second quarter of the 6th century). The numismatist C. M. Kraay looked at a wider sample of evidence from the whole Greek world and concluded that,

“since most coinages were not exported, and since those that were exported were not among the earliest coinages, the original intention in striking coins was not to facilitate foreign trade, or to provide merchants with a means of purchasing goods or materials not available locally. …. We must conclude that coinage [sc. ancient Greece] was not devised to meet the needs of foreign trade, and that, in so far as it came to do so, this was a secondary development.” (Kraay 1964: 89).

In addition, it does not seem that coins were introduced to facilitate internal trade either, for most states lacked enough small denomination coinage or had no coinage at all, and coinage had originated in Asia Minor and Lydia in large denominations too large for daily and normal retail trade (Kraay 1964: 89).

Everywhere one finds coinage in the early Greek world it has the stamp of the public authority: the issuing government or city state (Kraay 1964: 89).

The purpose of issuing coins appears to be bound up with both government taxation and expenditure: on the one hand, demand for harbour dues, fines and penalties in law codes (as law became increasing public, not private), and taxes, and on the other hand spending of the state on pay to mercenaries or soldiers, salaries to state employees, festivals (both secular and religious) and expenditure on public works (for wages and materials used) (Kraay 1964: 89).

Previously, payments to and from the state may have been made in kind, but as economies become more complex this itself became inconvenient. What was needed was a standard unit of value.

Although bullion was a high prestige commodity, there is no convincing evidence that it functioned as a common medium of exchange before coinage, first because it was rare and secondly because it was not easily divisible into uniform and small enough amounts. What certain kinds of bullion or metal did provide was weight units. The monetary unit of classical Athens, for example, was the drachma. It seems to have emerged as a reformed weight unit – that is, a pre-monetary metal weight unit – used as a common standard for assessing tax payments in kind to the state (Horsmann 2000; von Reden 2002: 153).

The Lydian state first adopted large denomination coins to make payments to soldiers and demanded coins back in tax obligations, and in this manner that coin unit emerged as money. But notice how the process violates the standard Mengerian account of the origin of money: electrum was not already functioning as a common medium of exchange by having emerged as the most saleable commodity in the marketplace.

Before Lydian coinage, a metal like electrum was a high prestige object and was simply one of many goods used in conventional barter trades: there is no convincing evidence that it was the reigning medium of exchange (money) that had already emerged as the most saleable good in spot barter trades.

Instead, electrum was a high prestige commodity selected by the state, standardised and used as a form of payment as wages. Its subsequent rise in market trades on a significant, but still (compared to modern money) limited scale as a common medium of exchange was then induced by the exchange of these coins for goods by soldiers, and the need to acquire the coins themselves to pay taxes. Prices for goods were created as a result of both the state payment of, and demand for, coins. That is, economies with previous barter, gift exchange and extensive debt/credit exchanges in kind were monetised by the state creation of coined money and the state demand for the coins, owing to taxes and other obligations (Peacock 2006: 644).

Furthermore, the earliest coins already seem to have been fiduciary to some extent, in the sense that the conventional (or nominal) value could be somewhat higher than their intrinsic value (Peacock 2006: 643, citing Price 1983: 5 and Wallace 1987: 393). People tended to count coins, not weigh them out (Peacock 2006: 643). What provided the major inducement for acceptance of official, stamped coins was the demand for them to pay taxes, fines and obligations to the state.

Another telling factor is that in many Greek states coins appear to have largely stayed within their national or city state boundaries (Kraay 1964: 90), because this was where the major demand for coins was: again both from the state itself and from citizens and non-citizens having to pay obligations to the state. Curiously, the one of two exceptions was the Athenian silver coinage, which became a type of international reserve currency by the 5th century BC, but because of (1) the overwhelming military and imperial power of classical Athens with its overseas empire and exaction of taxes and tribute from its allies and subject states and (2) the sheer good fortune that Athens was blessed with very productive silver mines.

In general, even by the 6th and 5th centuries BC numismatists have noticed that few areas of the Greek world seem to have had sufficient, lower denomination stocks of coins to meet the ordinary requirements of daily trade and commerce (Kraay 1964: 88). The only exceptions are Athens, Aegina and Ionia, whose economies appear to have been monetised to a greater degree than elsewhere (Kraay 1964: 88; Kim 2002). More recent modification of Kraay’s thesis by Kagan (2006) and Kim (2001 and 2002) does not overturn his fundamental point (Kurke 1999: 8).

IV. Conclusion
In pre-Classical Greece, no definitive “money thing” is found. At most, we have, firstly, a good (cattle) which only partially fulfills the functions of money by being a unit of account, and secondly a good (iron spits) that might (even on the most generous view) have performed a proto-money function as a medium of exchange to a limited extent (but the evidence is weak and it may have been no more than another prestige good used in barter).

But if one denies that either of these were real money, then the origin of money in Western civilisation is the invention of coinage. And coinage was an invention of the state.

Advanced monetised economies developed as the demand for money expanded though the need to have coins to pay taxes and obligations. The state itself provided the money in payments to the community. While one can point to other cases where Menger’s theory might have some empirical support (a fact recognised even by the critical David Graeber [2011: 75]), this is not one of them. In this very important case, Menger’s theory has been tried and found wanting.

FURTHER READING
My list of posts on the origins of money 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.

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