People interested in economics may enjoy reading historian David Graeber's
excellent book, *Debt: The First 2000 Years*.  (Available free at

Graeber argues that a) no actually-existing historical society used barter
as a primary component of their economic system; and b) debt-money
significantly predates both hard currency and markets.

Full text of the relevant chapter follows:

Chapter Two


For every subtle and complicated
question, there is a perfectly simple
and straightforward answer, which is

— H.L. Mencken

WHAT IS THE DIFFERENCE between a mere obligation, a sense that
one ought to behave in a certain way, or even that one owes something
to someone, and a debt, properly speaking? The answer is simple:
money. The difference between a debt and an obligation is that a debt
can be precisely quantified. This requires money.

Not only is it money that makes debt possible: money and debt ap-
pear on the scene at exactly the same time. Some of the very first writ-
ten documents that have come down to us are Mesopotamian tablets
recording credits and debits, rations issued by temples, money owed
for rent of temple lands, the value of each precisely specified in grain
and silver. Some of the earliest works of moral philosophy, in turn, are
reflections on what it means to imagine morality as debt — that is, in
terms of money.

A history of debt, then, is thus necessarily a history of money — and
the easiest way to understand the role that debt has played in human
society is simply to follow the forms that money has taken, and the
way money has been used, across the centuries — and the arguments
that inevitably ensued about what all this means. Still, this is neces-
sarily a very different history of money than we are used to. When
economists speak of the origins of money, for example, debt is always
something of an afterthought. First comes barter, then money; credit
only develops later. Even if one consults books on the history of money
in, say, France, India, or China, what one generally gets is a history
of coinage, with barely any discussion of credit arrangements at all.
For almost a century, anthropologists like me have been pointing out



that there is something very wrong with this picture. The standard
economic-history version has little to do with anything we observe
when we examine how economic life is actually conducted, in real
communities and marketplaces, almost anywhere — where one is much
more likely to discover everyone in debt to everyone else in a dozen
different ways, and that most transactions take place without the use
of currency.

Why the discrepancy?

Some of it is just the nature of the evidence: coins are preserved in
the archeological record; credit arrangements usually are not. Still, the
problem runs deeper. The existence of credit and debt has always been
something of a scandal for economists, since it's almost impossible to
pretend that those lending and borrowing money are acting on purely
"economic" motivations (for instance, that a loan to a stranger is the
same as a loan to one's cousin); it seems important, therefore, to begin
the story of money in an imaginary world from which credit and debt
have been entirely erased. Before we can apply the tools of anthropol-
ogy to reconstruct the real history of money, we need to understand
what's wrong with the conventional account.

Economists generally speak of three functions of money: medium
of exchange, unit of account, and store of value. All economic text-
books treat the first as primary. Here's a fairly typical extract from
Economics, by Case, Fair, Gartner, and Heather (1996):

Money is vital to the working of a market economy. Imagine
what life would be like without it. The alternative to a mon-
etary economy is barter, people exchanging goods and services
for other goods and services directly instead of exchanging via
the medium of money.

How does a barter system work? Suppose you want crois-
sants, eggs and orange juice for breakfast. Instead of going to
the grocer's and buying these things with money, you would
have to find someone who has these items and is willing to
trade them. You would also have to have something the baker,
the orange juice purveyor and the egg vendor want. Having
pencils to trade will do you no good if the baker and the or-
ange juice and egg sellers do not want pencils.

A barter system requires a double coincidence of wants for
trade to take place. That is, to effect a trade, I need not only
have to find someone who has what I want, but that person
must also want what I have. Where the range of traded goods
is small, as it is in relatively unsophisticated economies, it is



not difficult to find someone to trade with, and barter is often
used. 1

This latter point is questionable, but it's phrased in so vague a way that
it would be hard to disprove.

In a complex society with many goods, barter exchanges in-
volve an intolerable amount of effort. Imagine trying to find
people who offer for sale all the things you buy in a typical trip
to the grocer's, and who are willing to accept goods that you
have to offer in exchange for their goods.

Some agreed-upon medium of exchange (or means of pay-
ment) neatly eliminates the double coincidence of wants prob-
lem. 2

It's important to emphasize that this is not presented as something
that actually happened, but as a purely imaginary exercise. "To see
that society benefits from a medium of exchange" write Begg, Fischer
and Dornbuch {Economics, 2005), "imagine a barter economy." "Imag-
ine the difficulty you would have today," write Maunder, Myers, Wall,
and Miller {Economics Explained, 1991), "if you had to exchange your
labor directly for the fruits of someone else's labor." "Imagine," write
Parkin and King {Economics, 1995), "you have roosters, but you want
roses." 3 One could multiply examples endlessly. Just about every eco-
nomics textbook employed today sets out the problem the same way.
Historically, they note, we know that there was a time when there
was no money. What must it have been like? Well, let us imagine an
economy something like today's, except with no money. That would
have been decidedly inconvenient! Surely, people must have invented
money for the sake of efficiency.

The story of money for economists always begins with a fantasy
world of barter. The problem is where to locate this fantasy in time
and space: Are we talking about cave men, Pacific Islanders, the Ameri-
can frontier? One textbook, by economists Joseph Stiglitz and John
Driffill, takes us to what appears to be an imaginary New England or
Midwestern town:

One can imagine an old-style farmer bartering with the black-
smith, the tailor, the grocer, and the doctor in his small town.
For simple barter to work, however, there must be a double
coincidence of wants . . . Henry has potatoes and wants shoes,
Joshua has an extra pair of shoes and wants potatoes. Bartering



can make them both happier. But if Henry has firewood and
Joshua does not need any of that, then bartering for Joshua's
shoes requires one or both of them to go searching for more
people in the hope of making a multilateral exchange. Money
provides a way to make multilateral exchange much simpler.
Henry sells his firewood to someone else for money and uses
the money to buy Joshua's shoes. 4

Again this is just a make-believe land much like the present, except
with money somehow plucked away. As a result it makes no sense:
Who in their right mind would set up a grocery in such a place? And
how would they get supplies? But let's leave that aside. There is a
simple reason why everyone who writes an economics textbook feels
they have to tell us the same story. For economists, it is in a very real
sense the most important story ever told. It was by telling it, in the
significant year of 1776, that Adam Smith, professor of moral philoso-
phy at the University of Glasgow, effectively brought the discipline of
economics into being.

He did not make up the story entirely out of whole cloth. Already
in 330 bc, Aristotle was speculating along vaguely similar lines in his
treatise on politics. At first, he suggested, families must have produced
everything they needed for themselves. Gradually, some would presum-
ably have specialized, some growing corn, others making wine, swap-
ping one for the other. 5 Money, Aristotle assumed, must have emerged
from such a process. But, like the medieval schoolmen who occasion-
ally repeated the story, Aristotle was never clear as to how. 6

In the years after Columbus, as Spanish and Portuguese adven-
turers were scouring the world for new sources of gold and silver,
these vague stories disappear. Certainly no one reported discovering a
land of barter. Most sixteenth- and seventeenth-century travelers in the
West Indies or Africa assumed that all societies would necessarily have
their own forms of money, since all societies had governments and all
governments issued money. 7

Adam Smith, on the other hand, was determined to overturn the
conventional wisdom of his day. Above all, he objected to the notion
that money was a creation of government. In this, Smith was the intel-
lectual heir of the Liberal tradition of philosophers like John Locke,
who had argued that government begins in the need to protect private
property and operated best when it tried to limit itself to that function.
Smith expanded on the argument, insisting that property, money and
markets not only existed before political institutions but were the very
foundation of human society. It followed that insofar as government



should play any role in monetary affairs, it should limit itself to guar-
anteeing the soundness of the currency. It was only by making such an
argument that he could insist that economics is itself a field of human
inquiry with its own principles and laws — that is, as distinct from, say
ethics or politics.

Smith's argument is worth laying out in detail because it is, as I
say, the great founding myth of the discipline of economics.

What, he begins, is the basis of economic life, properly speaking?
It is "a certain propensity in human nature . . . the propensity to truck,
barter, and exchange one thing for another." Animals don't do this.
"Nobody," Smith observes, "ever saw a dog make a fair and deliberate
exchange of one bone for another with another dog." 8 But humans, if
left to their own devices, will inevitably begin swapping and comparing
things. This is just what humans do. Even logic and conversation are
really just forms of trading, and as in all things, humans will always
try to seek their own best advantage, to seek the greatest profit they
can from the exchange. 9

It is this drive to exchange, in turn, which creates that division of
labor responsible for all human achievement and civilization. Here the
scene shifts to another one of those economists' faraway fantasylands —
it seems to be an amalgam of North American Indians and Central
Asian pastoral nomads: 10

In a tribe of hunters or shepherds a particular person makes
bows and arrows, for example, with more readiness and dex-
terity than any other. He frequently exchanges them for cattle
or for venison with his companions; and he finds at last that
he can in this manner get more cattle and venison, than if he
himself went to the field to catch them. From a regard to his
own interest, therefore, the making of bows and arrows grows
to be his chief business, and he becomes a sort of armourer.
Another excels in making the frames and covers of their little
huts or moveable houses. He is accustomed to be of use in this
way to his neighbours, who reward him in the same manner
with cattle and with venison, till at last he finds it his interest
to dedicate himself entirely to this employment, and to become
a sort of house-carpenter. In the same manner a third becomes
a smith or a brazier; a fourth a tanner or dresser of hides or
skins, the principal- part of the clothing of savages . . .

It's only once we have expert arrow-makers, wigwam-makers, and
so on that people start realizing there's a problem. Notice how, as in



so many examples, we have a tendency to slip from imaginary savages
to small-town shopkeepers.

' But when the division of labor first began to take place, this
power of exchanging must frequently have been very much
clogged and embarrassed in its operations. One man, we shall
suppose, has more of a certain commodity than he himself has
occasion for, while another has less. The former consequently
would be glad to dispose of, and the latter to purchase, a part
of this superfluity. But if this latter should chance to have noth-
ing that the former stands in need of, no exchange can be made
between them. The butcher has more meat in his shop than
he himself can consume, and the brewer and the baker would
each of them be willing to purchase a part of it. But they have
nothing to offer in exchange . . .

In order to avoid the inconveniency of such situations, every
prudent man in every period of society, after the first establish-
ment of the division of labor, must naturally have endeavored
to manage his affairs in such a manner, as to have at all times
by him, besides the peculiar produce of his own industry, a
certain quantity of some one commodity or other, such as he
imagined that few people would be likely to refuse in exchange
for the produce of their industry."

So everyone will inevitably start stockpiling something they figure
that everyone else is likely to want. This has a paradoxical effect,
because at a certain point, rather than making that commodity less
valuable (since everyone already has some) it becomes more valuable
(because it becomes, effectively, currency):

Salt is said to be the common instrument of commerce and
exchanges in Abyssinia; a species of shells in some parts of
the coast of India; dried cod at Newfoundland; tobacco in
Virginia; sugar in some of our West India colonies; hides or
dressed leather in some other countries; and there is at this day
a village in Scotland where it is not uncommon, I am told, for
a workman to carry nails instead of money to the baker's shop
or the ale-house.' 2



Eventually, of course, at least for long-distance trade, it all boils
down to precious metals, since these are ideally suited to serve as cur-
rency, being durable, portable, and able to be endlessly subdivided into
identical portions.

Different metals have been made use of by different nations
for this purpose. Iron was the common instrument of com-
merce among the ancient Spartans; copper among the ancient
Romans; and gold and silver among all rich and commercial

Those metals seem originally to have been made use of for this
purpose in rude bars, without any stamp or coinage . . .

The use of metals in this rude state was attended with two very
considerable inconveniencies; first with the trouble of weigh-
ing; and, secondly, with that of assaying them. In the precious
metals, where a small difference in the quantity makes a great
difference in the value, even the business of weighing, with
proper exactness, requires at least very accurate weights and
scales. The weighing of gold in particular is an operation of
some nicety . . . 13

It's easy to see where this is going. Using irregular metal ingots is
easier than barter, but wouldn't standardizing the units — say, stamp-
ing pieces of metal with uniform designations guaranteeing weight and
fineness, in different denominations — make things easier still? Clearly it
would, and so was coinage born. True, issuing coinage meant govern-
ments had to get involved, since they generally ran the mints; but in the
standard version of the story, governments have only this one limited
role — to guarantee the money supply — and tend to do it badly, since
throughout history, unscrupulous kings have often cheated by debasing
the coinage and causing inflation and other sorts of political havoc in
what was originally a matter of simple economic common sense.

Tellingly, this story played a crucial role not only in founding the
discipline of economics, but in the very idea that there was something
called "the economy," which operated by its own rules, separate from
moral or political life, that economists could take as their field of



"The economy" is where we indulge in our natural propensity to truck
and barter. We are still trucking and bartering. We always will be.
Money is simply the most efficient means.

Economists like Karl Menger and Stanley Jevons later improved
on the details of the story, most of all by adding various mathemati-
cal equations to demonstrate that a random assortment of people with
random desires could, in theory, produce not only a single commodity
to use as money but a uniform price system. In the process, they also
substituted all sorts of impressive technical vocabulary (i.e., "inconve-
niences" became "transaction costs"). The crucial thing, though, is that
by now, this story has become simple common sense for most people.
We teach it to children in schoolbooks and museums. Everybody knows
it. "Once upon a time, there was barter. It was difficult. So people in-
vented money. Then came the development of banking and credit." It
all forms a perfectly simple, straightforward progression, a process of
increasing sophistication and abstraction that has carried humanity,
logically and inexorably, from the Stone Age exchange of mastodon
tusks to stock markets, hedge funds, and securitized derivatives.' 4

It really has become ubiquitous. Wherever we find money, we also
find the story. At one point, in the town of Arivonimamo, in Madagas-
car, I had the privilege of interviewing a Kalanoro, a tiny ghostly crea-
ture that a local spirit medium claimed to keep hidden away in a chest
in his home. The spirit belonged to the brother of a notorious local
loan shark, a horrible woman named Nordine, and to be honest I was
a bit reluctant to have anything to do with the family, but some of my
friends insisted — since after all, this was a creature from ancient times.
The creature spoke from behind a screen in an eerie, otherworldly qua-
ver. But all it was really interested in talking about was money. Finally,
slightly exasperated by the whole charade, I asked, "So, what did you
use for money back in ancient times, when you were still alive?"

The mysterious voice immediately replied, "No. We didn't use
money. In ancient times we used to barter commodities directly, one
for the other ..."

The story, then, is everywhere. It is the founding myth of our system of
economic relations. It is so deeply established in common sense, even
in places like Madagascar, that most people on earth couldn't imagine
any other way that money possibly could have come about.

The problem is there's no evidence that it ever happened, and an
enormous amount of evidence suggesting that it did not.



For centuries now, explorers have been trying to find this fabled
land of barter — none with success. Adam Smith set his story in aborigi-
nal North America (others preferred Africa or the Pacific). In Smith's
time, at least it could be said that reliable information on Native Amer-
ican economic systems was unavailable in Scottish libraries. But by
mid-century, Lewis Henry Morgan's descriptions of the Six Nations
of the Iroquois, among others, were widely published — and they made
clear that the main economic institution among the Iroquois nations
were longhouses where most goods were stockpiled and then allocated
by women's councils, and no one ever traded arrowheads for slabs of
meat. Economists simply ignored this information. 15 Stanley Jevons,
for example, who in 1871 wrote what has come to be considered the
classic book on the origins of money, took his examples straight from
Smith, with Indians swapping venison for elk and beaver hides, and
made no use of actual descriptions of Indian life that made it clear that
Smith had simply made this up. Around that same time, missionaries,
adventurers, and colonial administrators were fanning out across the
world, many bringing copies of Smith's book with them, expecting to
find the land of barter. None ever did. They discovered an almost end-
less variety of economic systems. But to this day, no one has been able
to locate a part of the world where the ordinary mode of economic
transaction between neighbors takes the form of "I'll give you twenty
chickens for that cow."

The definitive anthropological work on barter, by Caroline Hum-
phrey, of Cambridge, could not be more definitive in its conclusions:
"No example of a barter economy, pure and simple, has ever been
described, let alone the emergence from it of money; all available eth-
nography suggests that there never has been such a thing." 1 *

Now, all this hardly means that barter does not exist — or even
that it's never practiced by the sort of people that Smith would refer to
as "savages." It just means that it's almost never employed, as Smith
imagined, between fellow villagers. Ordinarily, it takes place between
strangers, even enemies. Let us begin with the Nambikwara of Brazil.
They would seem to fit all the criteria: they are a simple society with-
out much in the way of division of labor, organized into small bands
that traditionally numbered at best a hundred people each. Occasion-
ally if one band spots the cooking fires of another in their vicinity, they
will send emissaries to negotiate a meeting for purposes of trade. If the
offer is accepted, they will first hide their women and children in the
forest, then invite the men of other band to visit camp. Each band has
a chief; once everyone has been assembled, each chief gives a formal
speech praising the other party and belittling his own; everyone puts



aside their weapons to sing and dance together — though the dance is
one that mimics military confrontation. Then, individuals from each
side approach each other to trade:

If an individual wants an object he extols it by saying how fine
it is. If a man values an object and wants much in exchange for
it, instead of saying that it is very valuable he says that it is no
good, thus showing his desire to keep it. "This axe is no good,
it is very old, it is very dull," he will say, referring to his axe
which the other wants.

This argument is carried on in an angry tone of voice un-
til a settlement is reached. When agreement has been reached
each snatches the object out of the other's hand. If a man has
bartered a necklace, instead of taking it off and handing it
over, the other person must take it off with a show of force.
Disputes, often leading to fights, occur when one party is a
little premature and snatches the object before the other has
finished arguing. 17

The whole business concludes with a great feast at which the wom-
en reappear, but this too can lead to problems, since amidst the music
and good cheer, there is ample opportunity for seductions. 18 This some-
times led to jealous quarrels. Occasionally, people would get killed.

Barter, then, for all the festive elements, was carried out be-
tween people who might otherwise be enemies and hovered about an
inch away from outright warfare — and, if the ethnographer is to be
believed — if one side later decided they had been taken advantage of, it
could very easily lead to actual wars.

To shift our spotlight halfway around the world to Western Arn-
hem Land in Australia, where the Gunwinggu people are famous for
entertaining neighbors in rituals of ceremonial barter called the dza-
malag. Here the threat of actual violence seems much more distant.
Partly, this is because things are made easier by the existence of a moi-
ety system that embraces the whole region: no one is allowed to marry,
or even have sex with, people of their own moiety, no matter where
they come from, but anyone from the other is technically a potential
match. Therefore, for a man, even in distant communities, half the
women are strictly forbidden, half of them fair game. The region is also
united by local specialization: each people has its own trade product to
be bartered with the others.

What follows is from a description of a dzamalag held in the 1940s,
as observed by an anthropologist named Ronald Berndt.



Once again, it begins as strangers, after some initial negotiations,
are invited into the hosts' main camp. The visitors in this particular
example were famous for their "much-prized serrated spears" — their
hosts had access to good European cloth. The trading begins when
the visiting party, which consisted of both men and women, enters
the camp's dancing ground of "ring place," and three of them began
to entertain their hosts with music. Two men start singing, a third ac-
companies them on the didjeridu. Before long, women from the hosts'
side come and attack the musicians:

Men and women rise and begin to dance. The dzamalag opens
when two Gunwinggu women of the opposite moiety to the
singing men "give dzamalag" to the latter. They present each
man with a piece of cloth, and hit or touch him, pulling him
down on the ground, calling him a dzamalag husband, and
joking with him in an erotic vein. Then another woman of the
opposite moiety to the pipe player gives him cloth, hits and
jokes with him.

This sets in motion the dzamalag exchange. Men from the
visiting group sit quietly while women of the opposite moiety
come over and give them cloth, hit them, and invite them to
copulate; they take any liberty they choose with the men, amid
amusement and applause, while the singing and dancing con-
tinue. Women try to undo the men's loin coverings or touch
their penises, and to drag them from the "ring place" for co-
itus. The men go with their dzamalag partners, with a show of
reluctance, to copulate in the bushes away from the fires which
light up the dancers. They may give the women tobacco or
beads. When the women return, they give part of this tobacco
to their own husbands, who have encouraged them to go dza-
malag. The husbands, in turn, use the tobacco to pay their own
female dzamalag partners . .

New singers and musicians appear, are again assaulted and dragged
off to the bushes; men encourage their wives "not to be shy," so as to
maintain the Gunwinggu reputation for hospitality; eventually those
men also take the initiative with the visitors' wives, offering cloth, hit-
ting them, and leading them off into the bushes. Beads and tobacco
circulate. Finally, once participants have all paired off at least once,
and the guests are satisfied with the cloth they have acquired, the
women stop dancing and stand in two rows and the visitors line up to
repay them.



Then visiting men of one moiety dance towards the women
of the opposite moiety, in order to "give them dzamalag."
They hold shovel-nosed spears poised, pretending to spear the
women, but instead hit them with the flat of the blade. "We
will not spear you, for we have already speared you with our
penises." They present the spears to the women. Then visiting
men of the other moiety go through the same actions with the
women of their opposite moiety, giving them spears with ser-
rated points. This terminates the ceremony, which is followed
by a large distribution of food. 20

This is a particularly dramatic case, but dramatic cases are reveal-
ing. What the Gunwinggu hosts appear to have been able to do here,
owing to the relatively amicable relations between neighboring peoples
in Western Arnhem Land, is to take all the elements in Nambikwara
barter (the music and dancing, the potential hostility, the sexual in-
trigue), and turn it all into a kind of festive game — one not, perhaps,
without its dangers, but (as the ethnographer emphasizes) considered
enormous fun by everyone concerned.

What all such cases of trade through barter have in common is that
they are meetings with strangers who will, likely as not, never meet
again, and with whom one certainly will not enter into any ongoing re-
lations. This is why a direct one-on-one exchange is appropriate: each
side makes their trade and walks away. It's all made possible by laying
down an initial mantle of sociability, in the form of shared pleasures,
music and dance — the usual base of conviviality on which trade must
always be built. Then comes the actual trading, where both sides make
a great display of the latent hostility that necessarily exists in any ex-
change of material goods between strangers — where neither party has
no particular reason not to take advantage of the other — by playful
mock aggression, though in the Nambikwara case, where the mantle
of sociability is extremely thin, mock aggression is in constant danger
of slipping over into the real thing. The Gunwinggu, with their more
relaxed attitude toward sexuality, have quite ingeniously managed to
make the shared pleasures and aggression into exactly the same thing.

Recall here the language of the economics textbooks: "Imagine a
society without money." "Imagine a barter economy." One thing these
examples make abundantly clear is just how limited the imaginative
powers of most economists turn out to be. 21

Why? The simplest answer would be: for there to even be a disci-
pline called "economics," a discipline that concerns itself first and fore-
most with how individuals seek the most advantageous arrangement



for the exchange of shoes for potatoes, or cloth for spears, it must
assume that the exchange of such goods need have nothing to do with
war, passion, adventure, mystery, sex, or death. Economics assumes a
division between different spheres of human behavior that, among peo-
ple like the Gunwinngu and the Nambikwara, simply does not exist.
These divisions in turn are made possible by very specific institutional
arrangements: the existence of lawyers, prisons, and police, to ensure
that even people who don't like each other very much, who have no
interest in developing any kind of ongoing relationship, but are simply
interested in getting their hands on as much of the others' possessions
as possible, will nonetheless refrain from the most obvious expedient
(theft). This in turn allows us to assume that life is neatly divided be-
tween the marketplace, where we do our shopping, and the "sphere
of consumption," where we concern ourselves with music, feasts, and
seduction. In other words, the vision of the world that forms the basis
of the economics textbooks, which Adam Smith played so large a part
in promulgating, has by now become so much a part of our common
sense that we find it hard to imagine any other possible arrangement.

>From these examples, it begins to be clear why there are no societ-
ies based on barter. Such a society could only be one in which every-
body was an inch away from everybody else's throat; but nonetheless
hovering there, poised to strike but never actually striking, forever.
True, barter does sometimes occur between people who do not consid-
er each other strangers, but they're usually people who might as well be
strangers — that is, who feel no sense of mutual responsibility or trust,
or the desire to develop ongoing relations. The Pukhtun of Northern
Pakistan, for instance, are famous for their open-handed hospitality.
Barter is what you do with those to whom you are not bound by ties
of hospitality (or kinship, or much of anything else):

A favorite mode of exchange among men is barter, or adal-
badal (give and take). Men are always on the alert for the
possibility of bartering one of their possessions for something
better. Often the exchange is like for like: a radio for a radio,
sunglasses for sunglasses, a watch for a watch. However, un-
like objects can also be exchanged, such as, in one instance, a
bicycle for two donkeys. Adal-badal is always practiced with
non-relatives and affords men a great deal of pleasure as they
attempt to get the advantage over their exchange partner. A
good exchange, in which a man feels he has gotten the better
of the deal, is cause for bragging and pride. If the exchange is
bad, the recipient tries to renege on the deal or, failing that, to



palm off the faulty object on someone unsuspecting. The best
partner in adal-badal is someone who is distant spatially and
will therefore have little opportunity to complain. 22

Neither are such unscrupulous motives limited to Central Asia.
They seem inherent to the very nature of barter — which would explain
the fact that in the century or two before Smith's time, the English
words "truck and barter," like their equivalents in French, Spanish,
German, Dutch, and Portuguese, literally meant "to trick, bamboozle,
or rip off." 23 Swapping one thing directly for another while trying to
get the best deal one can out of the transaction is, ordinarily, how
one deals with people one doesn't care about and doesn't expect to
see again. What reason is there not to try to take advantage of such
a person? If, on the other hand, one cares enough about someone — a
neighbor, a friend — to wish to deal with her fairly and honestly, one
will inevitably also care about her enough to take her individual needs,
desires, and situation into account. Even if you do swap one thing for
another, you are likely to frame the matter as a gift.

To illustrate what I mean by this, let's return to the economics text-
books and the problem of the "double coincidence of wants." When
we left Henry, he needed a pair of shoes, but all he had lying around
were some potatoes. Joshua had an extra pair of shoes, but he didn't
really need potatoes. Since money has not yet been invented, they have
a problem. What are they to do?

The first thing that should be clear by now is that we'd really have
to know a bit more about Joshua and Henry. Who are they? Are they
related? If so, how? They appear to live in a small community. Any two
people who have been living their lives in the same small community
will have some sort of complicated history with each other. Are they
friends, rivals, allies, lovers, enemies, or several of these things at

The authors of the original example seem to assume two neighbors
of roughly equal status, not closely related, but on friendly terms — that
is, as close to neutral equality as one can get. Even so, this doesn't say
much. For example, if Henry was living in a Seneca longhouse, and
needed shoes, Joshua would not even enter into it; he'd simply men-
tion it to his wife, who'd bring up the matter with the other matrons,
fetch materials from the longhouse's collective storehouse, and sew him
some. Alternately, to find a scenario fit for an imaginary economics



textbook, we might place Joshua and Henry together in a small, inti-
mate community like a Nambikwara or Gunwinggu band.


Henry walks up to Joshua and says "Nice shoes!"

Joshua says, "Oh, they're not much, but since you seem to like
them, by all means take them."

Henry takes the shoes.

Henry's potatoes are not at issue since both parties are perfectly
well aware that if Joshua were ever short of potatoes, Henry would
give him some.

And that's about it. Of course it's not clear, in this case, how long
Henry will actually get to keep the shoes. It probably depends on how
nice they are. If they were just ordinary shoes, this might be the end of
the matter. If they are in any way unique or beautiful, they might end
up being passed around. There's a famous story that John and Lorna
Marshall, who carried out a study of Kalahari Bushmen in the '60s,
once gave a knife to one of their favorite informants. They left and
came back a year later, only to discover that pretty much everyone in
the band had been in possession of the knife at some point in between.
On the other hand, several Arab friends confirm to me that in less
strictly egalitarian contexts, there is an expedient. If a friend praises a
bracelet or bag, you are normally expected to immediately say "take
it" — but if you are really determined to hold on to it, you can always
say, "yes, isn't it beautiful? It was a gift."

But clearly, the authors of the textbook have a slightly more im-
personal transaction in mind. The authors seem to imagine the two
men as the heads of patriarchal households, on good terms with each
other, but who keep their own supplies. Perhaps they live in one of
those Scottish villages with the butcher and the baker in Adam Smith's
examples, or a colonial settlement in New England. Except for some
reason they've never heard of money. It's a peculiar fantasy, but let's
see what we can do:


Henry walks up to Joshua and says, "Nice shoes!"

Or, perhaps — let's make this a bit more realistic — Henry's wife
is chatting with Joshua's and strategically lets slip that the state of
Henry's shoes is getting so bad he's complaining about corns.



The message is conveyed, and Joshua comes by the next day to
offer his extra pair to Henry as a present, insisting that this is just
a neighborly gesture. He would certainly never want anything in

It doesn't matter whether Joshua is sincere in saying this. By do-
ing so, Joshua thereby registers a credit. Henry owes him one.

How might Henry pay Joshua back? There are endless possi-
bilities. Perhaps Joshua really does want potatoes. Henry waits a
discrete interval and drops them off, insisting that this too is just a
gift. Or Joshua doesn't need potatoes now but Henry waits until he
does. Or maybe a year later, Joshua is planning a banquet, so he
comes strolling by Henry's barnyard and says "Nice pig . . ."

In any of these scenarios, the problem of "double coincidence of
wants," so endlessly invoked in the economics textbooks, simply disap-
pears. Henry might not have something Joshua wants right now. But
if the two are neighbors, it's obviously only a matter of time before
he will. 24

This in turn means that the need to stockpile commonly acceptable
items in the way that Smith suggested disappears as well. With it goes
the need to develop currency. As with so many actual small communi-
ties, everyone simply keeps track of who owes what to whom.

There is just one major conceptual problem here — one the atten-
tive reader might have noticed. Henry "owes Joshua one." One what?
How do you quantify a favor? On what basis do you say that this
many potatoes, or this big a pig, seems more or less equivalent to a
pair of shoes? Because even if these things remain rough-and-ready ap-
proximations, there must be some way to establish that X is roughly
equivalent to Y, or slightly worse or slightly better. Doesn't this imply
that something like money, at least in the sense of a unit of accounts
by which one can compare the value of different objects, already has
to exist?

In most gift economies, there actually is a rough-and-ready way
to solve the problem. One establishes a series of ranked categories of
types of thing. Pigs and shoes may be considered objects of roughly
equivalent status, one can give one in return for the other; coral neck-
laces are quite another matter, one would have to give back another
necklace, or at least another piece of jewelry — anthropologists are used
to referring to these as creating different "spheres of exchange." 25 This
does simplify things somewhat. When cross-cultural barter becomes a
regular and unexceptional thing, it tends to operate according to simi-
lar principles: there are only certain things traded for certain others



(cloth for spears, for example), which makes it easy to work out tra-
ditional equivalences. However, this doesn't help us at all with the
problem of the origin of money. Actually, it makes it infinitely worse.
Why stockpile salt or gold or fish if they can only be exchanged for
some things and not others?

In fact, there is good reason to believe that barter is not a par-
ticularly ancient phenomenon at all, but has only really become wide-
spread in modern times. Certainly in most of the cases we know about,
it takes place between people who are familiar with the use of money,
but for one reason or another, don't have a lot of it around. Elaborate
barter systems often crop up in the wake of the collapse of national
economies: most recently in Russia in the '90s, and in Argentina around
2002, when rubles in the first case, and dollars in the second, effectively
disappeared. 26 Occasionally one can even find some kind of currency
beginning to develop: for instance, in POW camps and many prisons,
inmates have indeed been known to use cigarettes as a kind of cur-
rency, much to the delight and excitement of professional economists. 27
But here too we are talking about people who grew up using money
and now have to make do without it — exactly the situation "imagined"
by the economics textbooks with which I began.

The more frequent solution is to adopt some sort of credit system.
When much of Europe "reverted to barter" after the collapse of the
Roman Empire, and then again after the Carolingian Empire likewise
fell apart, this seems to be what happened. People continued keeping
accounts in the old imperial currency, even if they were no longer us-
ing coins. 28 Similarly, the Pukhtun men who like to swap bicycles for
donkeys are hardly unfamiliar with the use of money. Money has ex-
isted in that part of the world for thousands of years. They just prefer
direct exchange between equals — in this case, because they consider it
more manly. 29

The most remarkable thing is that even in Adam Smith's examples
of fish and nails and tobacco being used as money, the same sort of
thing was happening. In the years following the appearance of The
Wealth of Nations, scholars checked into most of those examples and
discovered that in just about every case, the people involved were quite
familiar with the use of money, and in fact, were using money — as a
unit of account. 30 Take the example of dried cod, supposedly used as
money in Newfoundland. As the British diplomat A. Mitchell-Innes
pointed out almost a century ago, what Smith describes was really an
illusion, created by a simple credit arrangement:



In the early days of the Newfoundland fishing industry, there
was no permanent European population; the fishers went there
for the fishing season only, and those who were not fishers
were traders who bought the dried fish and sold to the fishers
their daily supplies. The latter sold their catch to the traders at
the market price in pounds, shillings and pence, and obtained
in return a credit on their books, with which they paid for their
supplies. Balances due by the traders were paid for by drafts on
England or France. 31

It was quite the same in the Scottish village. It's not as if anyone
actually walked into the local pub, plunked down a roofing nail, and
asked for a pint of beer. Employers in Smith's day often lacked coin
to pay their workers; wages could be delayed by a year or more; in
the meantime, it was considered acceptable for employees to carry off
either some of their own products or leftover work materials, lumber,
fabric, cord, and so on. The nails were de facto interest on what their
employers owed them. So they went to the pub, ran up a tab, and when
occasion permitted, brought in a bag of nails to charge off against the
debt. The law making tobacco legal tender in Virginia seems to have
been an attempt by planters to oblige local merchants to accept their
products as a credit around harvest time. In effect, the law forced all
merchants in Virginia to become middlemen in the tobacco business,
whether they liked it or not; just as all West Indian merchants were
obliged to become sugar dealers, since that's what all their wealthier
customers brought in to write off against their debt.

The primary examples, then, were ones in which people were
improvising credit systems, because actual money — gold and silver
coinage — was in short supply. But the most shocking blow to the con-
ventional version of economic history came with the translation, first of
Egyptian hieroglyphics, and then of Mesopotamian cuneiform, which
pushed back scholars' knowledge of written history almost three mil-
lennia, from the time of Homer (circa 800 bc), where it had hovered in
Smith's time, to roughly 3500 bc. What these texts revealed was that
credit systems of exactly this sort actually preceded the invention of
coinage by thousands of years.

The Mesopotamian system is the best-documented, more so than
that of Pharaonic Egypt (which appears similar), Shang China (about
which we know little), or the Indus Valley civilization (about which
we know nothing at all). As it happens, we know a great deal about
Mesopotamia, since the vast majority of cuneiform documents were
financial in nature.



The Sumerian economy was dominated by vast temple and palace
complexes. These were often staffed by thousands: priests and officials,
craftspeople who worked in their industrial workshops, farmers and
shepherds who worked their considerable estates. Even though ancient
Sumer was usually divided into a large number of independent city-
states, by the time the curtain goes up on Mesopotamian civilization
around 3500, temple administrators already appear to have developed
a single, uniform system of accountancy — one that is in some ways
still with us, actually, because it's to the Sumerians that we owe such
things as the dozen or the 24-hour day. 32 The basic monetary unit was
the silver shekel. One shekel's weight in silver was established as the
equivalent of one gur, or bushel of barley. A shekel was subdivided
into 60 minas, corresponding to one portion of barley — on the prin-
ciple that there were 30 days in a month, and Temple workers received
two rations of barley every day. It's easy to see that "money" in this
sense is in no way the product of commercial transactions. It was ac-
tually created by bureaucrats in order to keep track of resources and
move things back and forth between departments.

Temple bureaucrats used the system to calculate debts (rents, fees,
loans . . .) in silver. Silver was, effectively, money. And it did indeed
circulate in the form of unworked chunks, "rude bars" as Smith had
put it. 33 In this he was right. But it was almost the only part of his ac-
count that was right. One reason was that silver did not circulate very
much. Most of it just sat around in Temple and Palace treasuries, some
of which remained, carefully guarded, in the same place for literally
thousands of years. It would have been easy enough to standardize the
ingots, stamp them, create some authoritative system to guarantee their
purity. The technology existed. Yet no one saw any particular need to
do so. One reason was that while debts were calculated in silver, they
did not have to be paid in silver — in fact, they could be paid in more
or less anything one had around. Peasants who owed money to the
Temple or Palace, or to some Temple or Palace official, seem to have
settled their debts mostly in barley, which is why fixing the ratio of sil-
ver to barley was so important. But it was perfectly acceptable to show
up with goats, or furniture, or lapis lazuli. Temples and Palaces were
huge industrial operations — they could find a use for almost anything. 34

In the marketplaces that cropped up in Mesopotamian cities, pric-
es were also calculated in silver, and the prices of commodities that
weren't entirely controlled by the Temples and Palaces would tend to
fluctuate according to supply and demand. But even here, such evidence
as we have suggests that most transactions were based on credit. Mer-
chants (who sometimes worked for the Temples, sometimes operated



independently) were among the few people who did, often, actually use
silver in transactions; but even they mostly did much of their dealings
on credit, and ordinary people buying beer from "ale women," or lo-
cal innkeepers, once again, did so by running up a tab, to be settled at
harvest time in barley or anything they might have had at hand. 35

At this point, just about every aspect of the conventional story of
the origins of money lay in rubble. Rarely has an historical theory been
so absolutely and systematically refuted. By the early decades of the
twentieth century, all the pieces were in place to completely rewrite
the history of money. The groundwork was laid by Mitchell-Innes —
the same one I've already cited on the matter of the cod — in two essays
that appeared in New York's Banking Law Journal in 1913 and 1914.
In these, Mitchell-Innes matter-of-factly laid out the false assumptions
on which existing economic history was based and suggested that what
was really needed was a history of debt:

One of the popular fallacies in connection with commerce is
that in modern days a money-saving device has been intro-
duced called credit and that, before this device was known,
all, purchases were paid for in cash, in other words in coins. A
careful investigation shows that the precise reverse is true. In
olden days coins played a far smaller part in commerce than
they do to-day. Indeed so small was the quantity of coins, that
they did not even suffice for the needs of the [Medieval Eng-
lish] Royal household and estates which regularly used tokens
of various kinds for the purpose of making small payments. So
unimportant indeed was the coinage that sometimes Kings did
not hesitate to call it all in for re-minting and re-issue and still
commerce went on just the same. 36

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 acciden-
tal 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.

The curious thing is that it never happened. This new history was
never written. It's not that any economist has ever refuted Mitchell-Innes.
They just ignored him. Textbooks did not change their story — even if



all the evidence made clear that the story was simply wrong. People
still write histories of money that are actually histories of coinage, on
the assumption that in the past, these were necessarily the same thing;
periods when coinage largely vanished are still described as times when
the economy "reverted to barter," as if the meaning of this phrase is
self-evident, even though no one actually knows what it means. As a
result we have next-to-no idea how, say, the inhabitant of a Dutch
town in 950 ad actually went about acquiring cheese or spoons or hir-
ing musicians to play at his daughter's wedding — let alone how any of
this was likely to be arranged in Pemba or Samarkand.'

On Sat, Aug 5, 2017 at 10:53 PM, Razer <> wrote:

> Hackermoon...
> 13.7 billion years ago, the Big Bang brought the universe into existence.
> 3.8 billion years ago, life first appeared on our planet. 1.9 million years
> ago, Earth witnessed a hominid species, Home erectus, walking upright for
> the first time.
> And, 7,000 years ago, money was invented.
> But first, people bartered.
> Not everyone had everything. We always had something in surplus, and we
> always needed something that the other person had. As the common sense
> would have said, we started exchanging our surplus assets for what we
> needed.
> Imagine I had extra apples and you had extra oranges, we could simply
> exchange fruits with one another.
> What if I had a surplus of apples, and didn’t want your oranges, but I’d
> love to have some strawberries.
> You would go and find someone who can give you strawberries in exchange
> for your oranges. Luckily you find your friend, Joe, to barter with you.
> Then, you’d bring me those strawberries, and I’d give you some apples.
> Joe, you and I are all happy.
> (Did I mention the lovely illustrations?)
> But what if Joe had a surplus of bananas, but he didn’t want your oranges
> either? That would be a problem.
> The smart among us started asking a profound question, “Can there be
> something that everyone wants?”
> Then, there was commodity money.
> There were a few things that almost everyone used, like salt, seeds,
> sheep, and cows. They became the commodity money. If we had any of these,
> we could use them to get whatever we wanted....
> In full at hACKERMOON:

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