The Story is Just More Interesting than We Thought
By Aaron Cuevas
There has been an incessant attack
on economic theory from left leaning academics. According to anthropologists,
there is no observable evidence that monetary exchanges arose from barter.
Actually, they have not found any ancient society that ever practice barter.
Therefore, they conclude that economic science has been debunked—and so
Austrian Economics disagree.
What anthropologist have
discovered is that members of small rural communities would use gift-giving and
promises of future payment in specie as medium of exchange among themselves.
And so we agree, people inside of communities of trust practiced barter, but
inter-temporal barter. The critics of economic science just do not know that
money is a time management mechanism. To be more precise, money is the tool
that arose from social interaction to manage consumption over time. It was just
natural that money would arise from inter-temporal barter because money is an
inter-temporal tool, and so it became an accounting tool because of its wide
acceptance.
The more nuance story of the
genesis of money is that in dealing with strangers, on spot barter happened in
the tribal life. Why? Because inter-temporal barter—unsophisticated credit if
you wish—was impossible between strangers. Following David Graeber, a critic of
economic science himself, we affirm that the “barter scenario might be absurd when applied to transactions between
neighbors in the same small rural community, but when dealing with a
transaction between the resident of such a community and a passing mercenary,
it suddenly begins to make a great deal of sense" (pg. 213). When you wanted
to trade with a stranger to your community, there was no way to see him again nor
have the social bond connection that would facilitate the fulfilment of the barter
promise later in time. Therefore on spot barter happened.
If you wanted to convince a
stranger to trade his extra, say, fur for your milk or other perishable
product, he would reject it together with your promise to pay him with milk or
the like in the future. So, what else could have be thought out to be a good
medium of exchange for the stranger to use later, far away from the place of
the trade? The natural medium of exchange with a stranger in the tribal life
would be to exchange ornaments or jewelry for specific products. Jewelry or
ornaments would function as goods that would last long enough to be exchange
for consumer goods later, long after the monetary/jewelry exchange happened. A
good reason why gold is the natural money. You can use it as jewelry or as a
medium of exchange over time, not only on spot. The wide acceptance of gold as
medium of exchange, even and mostly among strangers, turned gold into the
medium of account, and so it became money. Gold has an inter-temporal quality,
it last long and is portable.
Therefore,
gold becomes money when money is needed the most, during difficult times (i.e. among
strangers or during war time). Graeber helps us see it. "For much of human
history…an ingot of gold or silver, stamped or not, has served the same role as
the contemporary drug dealer's suitcase full of unmarked bills: an object
without a history, valuable because one knows it will be accepted in
exchange for other goods just about anywhere, no questions asked"
(ibid). If Graeber could only see that he just made the case that gold makes
the greatest medium of exchange because it will be accepted, no questions asked,
even under environments of mistrust. Money, not promises, is used to deal with
strangers on any circumstance. And historically the best money—an inter-temporal
medium of exchange—is gold.
"As a result, while credit systems tend to dominate in periods of
relative social peace, or across networks of trust (whether created by states
or, in most periods, transnational institutions like merchant guilds or
communities of faith), in periods characterized by widespread war and plunder,
they tend to be replaced by precious metals" (ibid). In explaining the function of precious metals,
Graeber gave us the key to understand the genesis of money—exchanges among
strangers. This we call commerce, not friendship, and that is fine. Following Hayek,
the anxiety that socialist types suffer when dealing intellectually with e
concept of money “is based on ignorance
of the indispensable role money plays in making possible…human cooperation”
through its communication, calculation, and incentive power. “Money is indispensable for extending
reciprocal cooperation beyond the limits” of the tribal life. So by
expanding the opportunities to trade with strangers that we might never know,
civilization ensued and we left the tribal life.
In conclusion, money did in fact arose
from barter, but inter-temporal barter. Although communities of trust could
rely on exchange promises among their members, cooperating with strangers was difficult.
So money arose out of the necessity to avoid unfulfilled promises, to control
consumption over time, and to aid in the calculation of demand and supply in
distant unknown places to trade with. Gold’s inter-temporal qualities and wide acceptance
for other uses, made it the perfect unit of account, and so the best commodity money
available.
