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David Graeber: On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics

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A Reply to Robert Murphy’s ‘Have Anthropologists Overturned Menger?

By David Graeber, who currently holds the position of Reader in Social Anthropology at Goldsmiths University London. Prior to this he was an associate professor of anthropology at Yale University. He is the author of ‘Debt: The First 5,000 Years’ which is available from Amazon

Last week, Robert F. Murphy published a piece on the webpage of the Von Mises Institute responding to some points I made in a recent interview on Naked Capitalism, where I mentioned that the standard economic accounts of the emergence of money from barter appears to be wildly wrong. Since this contradicted a position taken by one of the gods of the Austrian pantheon, the 19th century economist Carl Menger, Murphy apparently felt honor-bound to respond.

In a way, Murphy’s essay barely merits response. In the interview I’m simply referring to arguments made in my book, ‘Debt: The First 5000 Years’. In his response, Murphy didn’t even consult the book; in fact he later admitted he was responding at least in part not even to the interview but to an inaccurate summary of my position someone had made in another blog!

We are not, in other words, dealing with a work of scholarship. However, in the blogsphere, the quality or even intention of an argument often doesn’t matter. I have to assume Murphy was aware that all he had to do was to write something—anything really—and claim it rebutted me, and the piece would be instantly snatched up by a right-wing echo chamber, mirrored on half a dozen websites and that followers of those websites would then dutifully begin appearing across the web declaring to everyone willing to listen that my work had been rebutted. The fact that I instantly appeared on the Von Mises web page to offer a detailed response, and that Murphy has since effectively conceded, writing an elaborate climb-down saying that he had no intention to cast doubt on my argument as a whole at all, only to note that I had not definitively disproved Menger’s, has done nothing to change this. Indeed, on both US and UK Amazon, I have seen fans of Austrian economics appear to inform potential buyers that I am an economic ignoramus whose work has been entirely discredited.

I am posting this more detailed version of my reply not just to set the record straight, but because the whole question of the origins of money raises other interesting questions—not least, why any modern economist would get so worked up about the question. Let me begin by filling in some background on the current state of scholarly debate on this question, explain my own position, and show what an actual debate might have been like.

First, the history:

1) Adam Smith first proposed in ‘The Wealth of Nations’ that as soon as a division of labor appeared in human society, some specializing in hunting, for instance, others making arrowheads, people would begin swapping goods with one another (6 arrowheads for a beaver pelt, for instance.) This habit, though, would logically lead to a problem economists have since dubbed the ‘double coincidence of wants’ problem—for exchange to be possible, both sides have to have something the other is willing to accept in trade. This was assumed to eventually lead to the people stockpiling items deemed likely to be generally desirable, which would thus become ever more desirable for that reason, and eventually, become money. Barter thus gave birth to money, and money, eventually, to credit.

2) 19th century economists such as Stanley Jevons and Carl Menger [1] kept the basic framework of Smith’s argument, but developed hypothetical models of just how money might emerge from such a situation. All assumed that in all communities without money, economic life could only have taken the form of barter. Menger even spoke of members of such communities “taking their goods to market”—presuming marketplaces where a wide variety of products were available but they were simply swapped directly, in whatever way people felt advantageous.

3) Anthropologists gradually fanned out into the world and began directly observing how economies where money was not used (or anyway, not used for everyday transactions) actually worked. What they discovered was an at first bewildering variety of arrangements, ranging from competitive gift-giving to communal stockpiling to places where economic relations centered on neighbors trying to guess each other’s dreams. What they never found was any place, anywhere, where economic relations between members of community took the form economists predicted: “I’ll give you twenty chickens for that cow.” Hence in the definitive anthropological work on the subject, Cambridge anthropology professor Caroline Humphrey concludes, “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing” [2]

a. Just in way of emphasis: economists thus predicted that all (100%) non-monetary economies would be barter economies. Empirical observation has revealed that the actual number of observable cases—out of thousands studied—is 0%.

b. Similarly, the number of documented marketplaces where people regularly appear to swap goods directly without any reference to a money of account is also zero. If any sociological prediction has ever been empirically refuted, this is it.

4) Economists have for the most part accepted the anthropological findings, if directly confronted with them, but not changed any of the assumptions that generated the false predictions. Meanwhile, all textbooks continue to report the same old sequence: first there was barter, then money, then credit—except instead of actually saying that tribal societies regularly practiced barter, they set it up as an imaginative exercise (“imagine what you would have to do if you didn’t have money!” or vaguely imply that anything actual tribal societies did do must have been barter of some kind.

So what I said was in no way controversial. When confronted on why economists continue to tell the same story, the usual response is: “Well, it’s not like you provide us with another story!” In a way they have a point. The problem is, there’s no reason there should be a single story for the origin of money. Here let me lay out my own actual argument:

1) If money is simply a mathematical system whereby one can compare proportional values, to say 1 of these is worth 17 of those, which may or may not also take the form of a circulating medium of exchange, then something along these lines must have emerged in innumerable different circumstances in human history for different reasons. Presumably money as we know it today came about through a long process of convergence.

2) However, there is every reason to believe that barter, and its attendant ‘double coincidence of wants’ problem, was not one of the circumstances through which money first emerged.

a. The great flaw of the economic model is that it assumed spot transactions. I have arrowheads, you have beaver pelts, if you don’t need arrowheads right now, no deal. But even if we presume that neighbors in a small community are exchanging items in some way, why on earth would they limit themselves to spot transactions? If your neighbor doesn’t need your arrowheads right now, he probably will at some point in the future, and even if he won’t, you’re his neighbor—you will undoubtedly have something he wants, or be able to do some sort of favor for him, eventually. But without assuming the spot trade, there’s no double coincidence of wants problem, and therefore, no need to invent money.

b. What anthropologists have in fact observed where money is not used is not a system of explicit lending and borrowing, but a very broad system of non-enumerated credits and debts. In most such societies, if a neighbor wants some possession of yours, it usually suffices simply to praise it (“what a magnificent pig!”); the response is to immediately hand it over, accompanied by much insistence that this is a gift and the donor certainly would never want anything in return. In fact, the recipient now owes him a favor. Now, he might well just sit on the favor, since it’s nice to have others beholden to you, or he might demand something of an explicitly non-material kind (“you know, my son is in love with your daughter…”) He might ask for another pig, or something he considers roughly equivalent in kind. But it’s almost impossible to see how any of this would lead to a system whereby it’s possible to measure proportional values. After all, even if, as sometimes happens, the party owing one favor heads you off by presenting you with some unwanted present, and one considers it inadequate—a few chickens, for example—one might mock him as a cheapskate, but one is unlikely to feel the need to come up with a mathematical formula to measure just how cheap you consider him to be. As a result, as Chris Gregory observed, what you ordinarily find in such ‘gift economies’ is a broad ranking of different types of goods—canoes are roughly the same as heirloom necklaces, both are superior to pigs and whale teeth, which are superior to chickens, etc—but no system whereby you can measure how many pigs equal one canoe. [3]

3) All this is not to say that barter never occurs. It is widely attested in many times and places. But it typically occurs between strangers, people who have no moral relations with one another. There is a reason why in just about all European languages, the words ‘truck and barter’ originally meant ‘to bilk, swindle, or rip off.’ [4] Still there is no reason to believe such barter would ever lead to the emergence of money. This is because barter takes three known forms:

a. Barter can take the form of occasional interactions between people never likely to meet each other again. This might involve ‘double coincidence of wants’ problems but it will not lead to the emergence of a system of money because rare and occasional events won’t lead to the emergence of a system of any kind.

b. If there are ongoing trade relations between strangers in moneyless economies, it’s because each side knows the other side has some specific product(s) they want to acquire—so there is no ‘double coincidence of wants’ problem. Rather than leading to people having to create some circulating medium of exchange (money) to facilitate transactions, such trade normally leads to the creation of a system of traditional equivalents relatively insulated from vagaries of supply and demand.

c. Sometimes, barter becomes a widespread mode of interaction when you have people used to using money in everyday transactions who are suddenly forced to carry on without it. This can happen, for instance, because the money supply dries up (Russia in the ‘90s), or because the people in question have no access to it (prisoners or denizens of POW camps.) This cannot lead to the invention of money because money has already been invented. [5]

So this is the actual argument, which Prof. Murphy could easily have ascertained with a glance at the relevant chapter of the book.

It’s easy to see from this that his counter-arguments range from extremely weak to completely irrelevant. Let me take them on in turn, such as they are

• Murphy argues that the fact that there are no documented cases of barter economies doesn’t matter, because all that is really required is for there to have been some period of history, however brief, where barter was widespread for money to have emerged. This is about the weakest argument one can possibly make. Remember, economists originally predicted all (100%) non-monetary economies would operate through barter. The actual figure of observable cases is 0%. Economists claim to be scientists. Normally, when a scientist’s premises produce such spectacularly non-predictive results, the scientist begins working on a new set of premises. Saying “but can you prove it didn’t happen sometime long long ago where there are no records?” is a classic example of special pleading. In fact, I can’t prove it didn’t. I also can’t prove that money wasn’t introduced by little green men from Mars in a similar unknown period of history. Given the weight of the evidence, the burden of proof is on the Murphys of the world to produce some plausible reason why all observable cases of moneyless societies fail to operate the way Menger predicted, and therefore, why we have any reason to believe some unknown age would have been any different; and this, he does not even attempt to do.

• Murphy then goes on to produce a straw man saying that a system where people borrow things from one another and then turn to political authorities to regulate the system would not produce money. True enough, but it seems a bit irrelevant considering (a) I never say people would be “borrowing” from each other in the way he describes, (b) I never attribute any role to political authorities in this process, and (c) rather than saying the informal system of favors I do describe would lead to the invention of money, I explicitly say that it would not.

• He then restates Menger’s argument about how money could emerge from barter, an argument that given the weight of evidence so far presented would only be relevant if there was some reason to believe money could not have emerged in any other way. He gives no such reason, other than that he cannot personally imagine money emerging any other way.

• Murphy ends by noting the famous study of how widespread barter between prisoners in POW camps seem to have led to the use of cigarettes as money—an argument which, if he had bothered to read the entire interview, let alone the book, he would have known is actually a confirmation of my argument (see 3c above) and not a refutation.

To be fair, Murphy has one other argument—he adopts the position, first proposed by Karl Marx [!], that money first emerged from barter in the process of international trade. The evidence is as follows: while the first records we have of money are administrative documents from Mesopotamia, in which money is used almost exclusively in keeping accounts within large bureaucratic organizations (Temples and Palaces), the system is based on a fixed equivalence between barley and silver, and that since silver was a trade item, this shows that Mesopotamian merchants must have been using silver as a medium of exchange in spot transactions with long-distance trade partners for that system to then be adopted as a unit of account in administrative transactions within Temples. This merits a bit more of a response—not because it is a particularly cogent argument (it’s basically circular: “since money can only have arisen through barter, if silver was money, it must have arisen through barter”), but because it raises some interesting questions about how money actually did emerge.

As I remarked above, occasional, irregular exchange between strangers will not generate a money system—since irregular, occasional exchange will not produce any kind of system. In ancient times, if you do see regular exchange between strangers, it’s because there are specific goods that each side knows they want or need. One has to bear in mind that under ancient conditions, long-distance trade was extremely dangerous. You don’t cross mountains, deserts, and oceans, risking death in a dozen different ways, so as to show up with a collection of goods you think someone might want, in order to see if they happen to have something you might want too. You show up because you know there are people who have always wanted woolens and who have always had lapis lazuli. As noted above, logically, what such a situation would lead to is a series of conventional equivalences—so many woolens for so many pieces of lapis lazuli—equivalences which are likely to be maintained despite contingencies of supply and demand, because all parties need to reduce risk in order to be able to continue to the trade at all. And once again, what logic would predict is precisely what we find. Even in periods of human history where money and markets did already exist, merchants often continue to conduct high-risk long distance trade through a system of conventional equivalents, or if money is used, administered prices, between specific commodities they know will be available, or in demand, at certain pre-established locations.

One might of course ask, could not such a system generate something like money of account—that is, the use of one or two relatively desirable commodities to measure the value of other ones, once more items were added to the mix (say, our merchant is making several stops)? The answer is yes. No doubt in certain circumstances, something like this did happen. Of course, it would have meant that money, in such cases, was first created as a means to avoid market mechanisms, and that it was not used mainly as a medium of transactions, but rather, primarily as a means of account. One could even make up an imaginary scenario whereby once you start using one divisible/portable/etc commodity as a means of establishing fixed equivalents between other ones, you could start using it for minor occasional transactions, to measure negotiated prices for spot trade swaps on the side, in a more market-driven way. All that is possible and likely as it did happen now and again—after all, we’re dealing with thousands of years here. Likely all sorts of things happened over this long period. However, there is no reason to assume that such a system would produce a concrete medium of exchange regularly used in making these transactions—in fact, given the dangers of ancient trade, insisting that some medium like silver actually be used in all transactions, rather than a credit system, would be completely irrational, since the need to carry around such a money-stuff would make one a far, far, more attractive target to potential thieves. A desert nomad band might not attack a caravan carrying lapis lazuli, especially if the only potential buyers were temples which would probably know all the active merchants and know that you had stolen the stuff (and even if you could trade for them, what are you going to do with a big pile of woolens anyway, you live in a desert?) but they’d definitely go after someone carrying around a universal equivalent. (This is presumably the reason why the great long-distance traders of the Classical World, the Phoenicians, were among the last to adopt coinage—if money was invented as a circulating medium for long-distance trade, they should have been the first.)

The other problem is that there is no reason to believe that such a mechanism—which would presumably only be used by that tiny proportion of the population who engaged in long distance trade, and who tended to treat such matters as specialized knowledge to be guarded from outsiders—could possibly create a money system used in everyday transactions within a society or any evidence that it might have done so.

The actual evidence is that in Mesopotamia—the first case we know anything about—these more widespread pricing systems in fact emerged as a side-effect of non-state bureaucracies. Again, non-state bureaucracies are a phenomenon that no economic model would even have anticipated existing. It’s off the map of economic theory. But look at the historical record and there they are. Sumerian Temples (and even many of the early Palace complexes that imitated them) were not states, did not extract taxes or maintain a monopoly of force, but did contain thousands of people engaged in agriculture, industry, fishing, and herding, people who had to be fed and provisioned, their inputs and outputs measured. All evidence that exists points to money emerging as a series of fixed equivalent between silver—the stuff used to measure fixed equivalents in long distance trade, and conveniently stockpiled in the temples themselves where it was used to make images of gods, etc.—and grain, the stuff used to pay the most important rations from temple stockpiles to its workers. Hence, as economist and Naked Capitalism contributor Michael Hudson has so brilliantly demonstrated [6], a silver shekel was fixed as the amount of silver equivalent to the numbers of bushels of barley that could provide two meals a day for a temple worker over the course of a month. Obviously such a ration system would be of no interest to a merchant.

So even if some sort of rough system of fixed equivalences, measured by silver, might have emerged in the process of trade (note again: not a system of actual silver currency emerging from barter), it was the Temple bureaucracies that actually had some reason to extend the system from a unit used to compare the value of a limited number of rare items traded long distance, used almost exclusively by members of the political or administrative elite, to something that could be used to compare the values of everyday items. The development of local markets within cities, in turn, came as a side effect of these systems, and all evidence shows they too operated primarily through credit. For instance, Sumerians, though they had the technological means to do so, never produced scales accurate enough to weigh out the tiny amounts of silver that would have been required to buy a single cask of beer, or a woolen tunic, or a hammer—the clearest indication that even once money did exist, it was not used as a medium of exchange for minor transactions, but rather as a means of keeping track of transactions made on credit.

In many times and places, one sees a similar arrangement: two sorts of money, one, a common long-distance trade item, the other, a common subsistence item—cattle, grain—that’s stockpiled, but never traded. Still, Temple bureaucracies and their ilk are something of a rarity. In their absence, how else might a system of pricing, of proportional equivalents between the values of any and all objects, potentially arise? Here again, anthropology and history both provide one compelling answer, one that again, falls off the radar of just about all economists who have ever written on the subject. That is: legal systems.

If someone makes an inadequate return you will merely mock him as a cheapskate. If you do so when he is drunk and he responds by poking your eye out, you are much more likely to demand exact compensation. And that is, again, exactly what we find. Anthropology is full of examples of societies without markets or money, but with elaborate systems of penalties for various forms of injuries or slights. And it is when someone has killed your brother, or severed your finger, that one is most likely to stickle, and say, “The law says 27 heifers of the finest quality and if they’re not of the finest quality, this means war!” It’s also the situation where there is most likely to be a need to establish proportional values: if the culprit does not have heifers, but wishes to substitute silver plates, the victim is very likely to insist that the equivalent be exact. (There is a reason the word ‘pay’ comes from a root that means ‘to pacify’.)

Again, unlike the economists’ version, this is not hypothetical. This is a description of what actually happens—and not only in the ethnographic record, but the historical one as well. The numismatist Phillip Grierson long ago pointed to the existence of such elaborate systems of equivalents in the Barbarian Law Codes of early Medieval Europe. [7]For example, Welsh and Irish codes contain extremely detailed price schedules where in the Welsh case, the exact value of every object likely to be found in someone’s house were worked out in painstaking detail, from cooking utensils to floorboards—despite the fact that there appear to have been, at the time, no markets where any such items could be bought and sold. The pricing system existed solely for the payment of damages and compensation—partly material, but particularly for insults to people’s honor, since the precise value of each man’s personal dignity could also be precisely quantified in monetary terms. One can’t help but wonder how classical economic theory would account for such a situation. Did the ancient Welsh and Irish invent money through barter at some point in the distant past, and then, having invented it, kept the money, but stopped buying and selling things to one another entirely?

The persistence of the barter myth is curious. It originally goes back to Adam Smith. Other elements of Smith’s argument have long since been abandoned by mainstream economists—the labor theory of value being only the most famous example. Why in this one case are there so many desperately trying to concoct imaginary times and places where something like this must have happened, despite the overwhelming evidence that it did not?

It seems to me because it goes back precisely to this notion of rationality that Adam Smith too embraced: that human beings are rational, calculating exchangers seeking material advantage, and that therefore it is possible to construct a scientific field that studies such behavior. The problem is that the real world seems to contradict this assumption at every turn. Thus we find that in actual villages, rather than thinking only about getting the best deal in swapping one material good for another with their neighbors, people are much more interested in who they love, who they hate, who they want to bail out of difficulties, who they want to embarrass and humiliate, etc.—not to mention the need to head off feuds.
Even when strangers met and barter did ensue, people often had a lot more on their minds than getting the largest possible number of arrowheads in exchange for the smallest number of shells. Let me end, then, by giving a couple examples from the book, of actual, documented cases of ‘primitive barter’—one of the occasional, one of the more established fixed-equivalent type.

The first example is from the Amazonian Nambikwara, as described in an early essay by the famous French anthropologist Claude Levi-Strauss. This was a simple society without much in the way of division of labor, organized into small bands that traditionally numbered at best a hundred people each. Occasionally 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 and 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 worthless, thus showing his desire to keep it. ‘This axe is no good, it is very old, it is very dull’, he will say… [8]

In the end, each “snatches the object out of the other’s hand”—and if one side does so too early, fights may ensue.

The whole business concludes with a great feast at which the women reappear, but this too can lead to problems, since amidst the music and good cheer, there is ample opportunity for seductions (remember, these are people who normally live in groups that contain only perhaps a dozen members of the opposite sex of around the same age of themselves. The chance to meet others is pretty thrilling.) This sometimes led to jealous quarrels. Occasionally, men would get killed, and to head off this descending into outright warfare, the usual solution was to have the killer adopt the name of the victim, which would also give him the responsibility for caring for his wife and children.

The second example is the Gunwinngu of West Arnhem land in Australia, famous for entertaining neighbors in rituals of ceremonial barter called the dzamalag. Here the threat of actual violence seems much more distant. The region is also united by both a complex marriage system and local specialization, each group producing their own trade product that they barter with the others.

In the 1940s, an anthropologist, Ronald Berndt, described one dzamalag ritual, where one group in possession of imported cloth swapped their wares with another, noted for the manufacture of serrated spears. Here too it begins as strangers, after initial negotiations, are invited to the hosts’ camp, and the men begin singing and dancing, in this case accompanied by a didjeridu. Women from the hosts’ side then come, pick out one of the men, give him a piece of cloth, and then start punching him and pulling off his clothes, finally dragging him off to the surrounding bush to have sex, while he feigns reluctance, whereon the man gives her a small gift of beads or tobacco. Gradually, all the women select partners, their husbands urging them on, whereupon the women from the other side start the process in reverse, re-obtaining many of the beads and tobacco obtained by their own husbands. The entire ceremony culminates as the visitors’ men-folk perform a coordinated dance, pretending to threaten their hosts with the spears, but finally, instead, handing the spears over to the hosts’ womenfolk, declaring: “We do not need to spear you, since we already have!” [9]

In other words, the Gunwinngu manage to take all the most thrilling elements in the Nambikwara encounters—the threat of violence, the opportunity for sexual intrigue—and turn it into an entertaining game (one that, the ethnographer remarks, is considered enormous fun for everyone involved). In such a situation, one would have to assume obtaining the optimal cloth-for-spears ratio is the last thing on most participants’ minds. (And anyway, they seem to operate on traditional fixed equivalences.)

Economists always ask us to ‘imagine’ how things must have worked before the advent of money. What such examples bring home more than anything else is just how limited their imaginations really are. When one is dealing with a world unfamiliar with money and markets, even on those rare occasions when strangers did meet explicitly in order to exchange goods, they are rarely thinking exclusively about the value of the goods. This not only demonstrates that the Homo Oeconomicus which lies at the basis of all the theorems and equations that purports to render economics a science, is not only an almost impossibly boring person—basically, a monomaniacal sociopath who can wander through an orgy thinking only about marginal rates of return—but that what economists are basically doing in telling the myth of barter, is taking a kind of behavior that is only really possible after the invention of money and markets and then projecting it backwards as the purported reason for the invention of money and markets themselves. Logically, this makes about as much sense as saying that the game of chess was invented to allow people to fulfill a pre-existing desire to checkmate their opponent’s king.

* * *

At this point, it’s easier to understand why economists feel so defensive about challenges to the Myth of Barter, and why they keep telling the same old story even though most of them know it isn’t true. If what they are really describing is not how we ‘naturally’ behave but rather how we are taught to behave by the market—well who, nowadays, is doing most of the actual teaching? Primarily, economists. The question of barter cuts to the heart of not only what an economy is—most economists still insist that an economy is essentially a vast barter system, with money a mere tool (a position all the more peculiar now that the majority of economic transactions in the world have come to consist of playing around with money in one form or another) [10]—but also, the very status of economics: is it a science that describes of how humans actually behave, or prescriptive, a way of informing them how they should? (Remember, sciences generate hypothesis about the world that can be tested against the evidence and changed or abandoned if they don’t prove to predict what’s empirically there.)

Or is economics instead a technique of operating within a world that economists themselves have largely created? Or is it, as it appears for so many of the Austrians, a kind of faith, a revealed Truth embodied in the words of great prophets (such as Von Mises) who must, by definition be correct, and whose theories must be defended whatever empirical reality throws at them—even to the extent of generating imaginary unknown periods of history where something like what was originally described ‘must have’ taken place?

REFERENCES
[1] Jevons, W. Stanley, Money and the Mechanism of Exchange. New York: Appleton and Company, 1885, and Menger, Carl, “On the origins of money.” Economic Journal 1892 v.2 no 6, pp. 239-55
[2] Humphrey, Caroline, “Barter and Economic Disintegration.” Man 1985 v.20: 48. Other anthropologists have gone even further, for instance Anne Chapman, “Barter as a Universal Mode of Exchange.” L’Homme 1980 v22 (3): 33-83), argues that if pure barter is to be defined as only about the things, and not about the people, it’s not clear that it has ever existed—as the cases cited at the end of this essay indeed illustrate.
[3] Gregory, Chris, Gifts and Commodities. New York: Academic Press (1982): pp. 48-49. On gift economies, the classic text is Mauss, Marcel, Essai sur le don. Forme et raison de l’échange dans les sociétés archaïques.” Annee sociologique, 1924 no. 1 (series 2):30-186. On spheres on exchange in general see Bohannan, Paul “Some Principles of Exchange and Investment among the Tiv,” American Anthropologist 1955 v57:60-67; Barth, Frederick, “Economic Spheres in Darfur.” Themes in Economic Anthropology, ASA Monographs (London, Tavistock) 1969 no. 6, pp. 149-174; cf Munn, Nancy, The Fame of Gawa: A Symbolic Study of Value Transformation in a Massim (Papua New Guinea) Society, 1986, Cambridge, Cambridge University Press, and Akin, David and Joel Robbins, “An Introduction to Melanesian Currencies: Agencies, Identity, and Social Reproduction” in Money and Modernity: State and Local Currencies in Melanesia (David Akin and Joel Robbins, editor), pp. 1-40. Pittsburgh: University of Pittsburgh Press.
[4] Servet, Jean-Michel, 1994 “La fable du troc,” numero spécial de la revue XVIIIe siècle, Economie et politique, n°26: 103-115
[5] The classic work on the economics of POW camps, whence this argument derives, is Radford, R. A., “The Economic Organization of a POW Camp.” Economica 1945 v.12 (48): 189-201. There is an excellent critique of the assumptions underlying it in Ingham, Geoffrey, “Further Reflections on the Ontology of Money,” Economy and Society 2006 v 36 (2): 264-65, which notes among other things the obvious point that the entire camp environment was created and maintained by a bureaucratic organization that supplied all actual necessities—food, shelter, etc—through administrative distribution.
[6] Hudson, Michael,“The Development of Money-of-Account in Sumer’s Temples.” In Creating Economic Order: Record-Keeping, Standardization and the Development of Accounting in the Ancient Near East (Michael Hudson and Cornelia Wunsch, editors, 2004), pp. 303-329. Baltimore: CDL Press.
[7] Grierson, Phillip, “The Origins of Money.” In Research in Economic Anthropology 1978, v. I, pp. 1-35. Greenwich: Journal of the Anthropological Institute Press.
[8] Levi-Strauss, Claude, “Guerre et commerce chez les Indiens d’Amérique du Sud.” Renaissance. Paris: Ecole Libre des Hautes Études, 1943 vol, 1, fascicule 1 et 2.
[9] Berndt, Ronald M., “Ceremonial Exchange in Western Arnhem Land.” Southwestern Journal of Anthropology 1951 v.7 (2): 156-176.
[10] See for instance Dillard, Dudley, “The Barter Illusion in Classical and Neoclassical Economics”, Eastern Economic Journal 1988v14 (4):299-318.

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341 comments

  1. K Ackermann

    My travels at the Von Mises Institute blog often gave me the creeps. Time after time I encountered people who have constructed a world just so. Any intruder into that world who strays off the clearly marked path, is, according to them, “a fucking moron who deserves to be castrated” just like all believers in institutions.

    They’re conditioned to adhere to an axiomatic system of beliefs, but the calculus they use breaks down when mapped to logic.

    They are very, very dangerous people because they feel they must smash anything that doesn’t conform to their inconsistent beliefs.

    As far as I can tell, they are the ultimate binary thinkers. Neocons are huggable and flexible by conparison.

    1. Skippy

      Economists don’t do digs, nor do they travel far and wide, observing, recording, correlating, cross referencing data, letting the data speak for its self, always open to new data. Instead they reverse engineer the world around them to their biases (mystic cerebral injections…see rand et al), by seeking information from deceased, soon to be, and present occultation actuators with good crowd control presence (kool-aid drinker or rational maximizer it matters not).

      Cloistered Clerics whom in establishing their reality upon everyone else, can easy manipulate it, as its convoluted construct requires only belief…methinks not required.

      Skippy…“When you buy into something that seems to explain everything, you can soon be coaxed into doing almost anything”

      —Marc Sageman

      1. ebear

        I wouldn’t place any more faith in anthropology than I would economics. That field is just as tainted with fraud, misinformation and personal bias. Don’t forget, what you have in anthropology is one culture examining another. Pretty hard to be objective about that. Read some of Marvin Harris, especially “Cultural Materialism” to get a sense of what I mean.

        ebear

        1. Skippy

          Surely you jest. Whilst I’m aware of what you point out fraud, misinformation and out right misrepresentation (what human endeavor isn’t when paycheck and status are at stake). Advances in protocol, review process, data storage and cross referencing added by computational power – internationally – in real time. Well compared to classical – neo – economics I’ll stick with the physical world, refining opinion as new evidence and consensus permit.

          I would add as noted below in comments that there are folks that call themselves economists or be called one (ha ha Yves looks like your stuck with it), yet search for a different truth, time will tell.

          Skippy…have you seen the revisions in core economic data for the last two years…yikes!

    2. tkwelge

      Explain why Graber received so many upvotes and positive comments from the von mises types then? You people are so full of hatred that it pisses me off just the same.

  2. LRT

    The two things the Austrian economists saw and see clearly that no-one else does, or at least not as clearly are:-

    1) The underlying cause of great bubbles and crashes is the prior creation of credit. Without the oversupply of low priced credit, the bubble would not happen. So Rothbard for instance on the twenties starts his account with the change in reserve requirements which attended the founding of the Federal Reserve, and he quantifies and documents this. You cannot read this without realizing that there had been a step change in the power of banks to lend. Without this, the great credit boom of the late twenties could not have happened.

    Related to this, they ask the right question which other accounts fail to answer. If we explain the great boom by human greed, computer trading, the innovation of the remote office ticker tape, the availability of radio broadcasts of prices, the thing you find yourself unable to explain is why it happened when it did. The Austrians point out that perfectly reasonable people in the same jobs who have conducted their own affairs and those of their companies soberly and prudently, suddenly appear to lose their heads and start speculating furiously, going into hare brained business ventures, taking on massive amounts of debt, bidding up each others’ houses.

    Not, why do they do it? That’s the wrong question. The right question is, why did they do it THEN? The Austrian answer is that the behavior of the credit markets gives them cues associated with normal economic growth and opportunity. But in fact, this is the flush of fever being mistaken for the glow of health.

    2) The second thing the Austrians get right is that once you have this huge load of bad debt and useless investment, its going to have to be written off as a prelude to recovery. You can do it, like Japan, over twenty years of stagnation, or you can do it quickly, but in the end, the investments are gone, and there’s no way to rescue it.

    The Austrian remedy for Greece, for instance, would be default and write it all off. The Austrian remedy for the US housing loan mess would be mark to market and take the writeoffs.

    I do agree with the earlier post, that there is something very unpleasant about the social attitudes of many of the Austrian bloggers, but there is a fundamental insight in the economic school about the role of debt in very large booms and busts.

    One of them, was it Mises? is said to have come home to his wife and said he had good news and bad news. The good news was he had been offered a significant promotion to work at Credit Anstalt. The bad news was he had turned it down because they were going to go bust….

    If you accept the Austrian view, then lots of the proposed remedies for the future seem at best useless, because they do not address the real problem, credit and debt creation. A plethora of stringent regulation combined with excessive credit creation will simply lead to evasion and corruption. You can’t regulate your way out of it, any more than you can medicate your way out of waterborne epidemics. Clean water is the answer.

      1. John Hall

        Well the Austrians wrote decades before Minsky. But the Austrian relevant to this discussion didn’t write about those issues. Menger’s economics is the critical issue here.

        1. buermann

          “Well the Austrians wrote decades before Minsky”

          The original poster argued that “no one else” makes these two observations correctly but for Austrians, not that they merely made them first. Irving Fischer’s debt deflation, Minsky’s financial instability hypothesis, the subsequent work of the neo-chartalists and circuitists all make more or less the same arguments regarding private credit driving speculative bubbles, with the added benefit that they’re not incurable gold bugs.

    1. Foppe

      The second thing the Austrians get right is that once you have this huge load of bad debt and useless investment, its going to have to be written off as a prelude to recovery. You can do it, like Japan, over twenty years of stagnation, or you can do it quickly, but in the end, the investments are gone, and there’s no way to rescue it.

      Oh please. Austrians are far too happy to sponsor the private sector at the expense of the public (while moralizing about the corrupt role the government plays in the affair at the instigation of their pals) to ever advocate that.

      And to provide something of a further antidote to your Austrian hagiographizing, here’s a nice post by bill Black that neatly exemplifies how principled and rigorous those Austerians really are.

      1. tkwelge

        Why do you have to go out of your way to generalize Austrians as “stupid and evil?” You people are just as insulting as the Austrians you despise. Ideologues just as any other.

    2. K Ackermann

      I believe you are correct in what you say, but there are other factors as well.

      Something influencing the bailouts is a reluctance to piss off power institutions and individuals, and systemmic failure.

    3. Cahal

      This’ Austrians predict everything’ narrative needs to be dealt with.

      ’1) The underlying cause of great bubbles and crashes is the prior creation of credit. Without the oversupply of low priced credit, the bubble would not happen. So Rothbard for instance on the twenties starts his account with the change in reserve requirements which attended the founding of the Federal Reserve, and he quantifies and documents this. You cannot read this without realizing that there had been a step change in the power of banks to lend. Without this, the great credit boom of the late twenties could not have happened.’

      Completely incorrect. The money supply is endogenous i.e. banks create credit before the federal reserve expands its balance sheet. This completely contradicts the Austrian story that ‘artificial’ central bank expansion causes booms.

      The reason investment was so volatile in the late 20s was because of the large spike in long term interest rates.

      ‘Related to this, they ask the right question which other accounts fail to answer. If we explain the great boom by human greed, computer trading, the innovation of the remote office ticker tape, the availability of radio broadcasts of prices, the thing you find yourself unable to explain is why it happened when it did. The Austrians point out that perfectly reasonable people in the same jobs who have conducted their own affairs and those of their companies soberly and prudently, suddenly appear to lose their heads and start speculating furiously, going into hare brained business ventures, taking on massive amounts of debt, bidding up each others’ houses.’

      Sounds like Minsky’s instability hypothesis to me. Stability is destabilising. Please explain why Post WW2 was so stable when interest rates were consistently low, and why Post-80s has been so much more volatile with higher interest rates (we are NOT talking about the base rate here).

      ’2) The second thing the Austrians get right is that once you have this huge load of bad debt and useless investment, its going to have to be written off as a prelude to recovery. You can do it, like Japan, over twenty years of stagnation, or you can do it quickly, but in the end, the investments are gone, and there’s no way to rescue it.’

      Correct, this is the Post-Keynesian position.

      ‘The Austrian remedy for Greece, for instance, would be default and write it all off. The Austrian remedy for the US housing loan mess would be mark to market and take the writeoffs.’

      Partially. The Austrian remedy would be to write off then ‘do nothing’ and let the economy ‘rebalance’. The correct thing to do would be to write off and then engage in fiscal and monetary stimulus. Austrians would be opposed to this because GOVERNMENT.

      I do agree with the earlier post, that there is something very unpleasant about the social attitudes of many of the Austrian bloggers, but there is a fundamental insight in the economic school about the role of debt in very large booms and busts.

      ‘One of them, was it Mises? is said to have come home to his wife and said he had good news and bad news. The good news was he had been offered a significant promotion to work at Credit Anstalt. The bad news was he had turned it down because they were going to go bust….’

      Here is what actually happened:

      ‘From 1924, every Wednesday afternoon as we walked through the passage for pedestrians he said: ‘That will be a big smash.’

      In other words, Mises had predicted about 300 of the last 1 recessions.

      ‘If you accept the Austrian view, then lots of the proposed remedies for the future seem at best useless, because they do not address the real problem, credit and debt creation. A plethora of stringent regulation combined with excessive credit creation will simply lead to evasion and corruption. You can’t regulate your way out of it, any more than you can medicate your way out of waterborne epidemics. Clean water is the answer.’

      ‘Excessive’ – more excessive than what? There is no Austrian fantasy world where everything is ‘neutral’ or ‘natural’.

      1. LRT

        Mises’ wife, Margit, wrote in her husband’s biography that he rejected in the summer of 1929 a high position in Credit Anstalt, one of the largest banks in Europe at the time. His explanation was simple: “A great crash is coming, and I do not want my name in any way connected with it.”

      2. LRT

        “Please explain why Post WW2 was so stable when interest rates were consistently low, and why Post-80s has been so much more volatile with higher interest rates (we are NOT talking about the base rate here).”

        I think the Austrian explanation would be the source of the lending. Isn’t the Austrian view that the problem happens when credit is expanded beyond the propensity of the population in the economy to save?

        There is something which needs explaining, and the Austrian explanation may not be the right one, but it does at least direct its explanation at the phenomenon in need of explanation. We are looking for something that is present either with or as a precursor to credit bubbles.

        Its not interest rates, as Cahal points out they are not correlated. Its not human psychology, which is the same in all periods. Its not technologies, which are merely enabling. Its something else. The Austrians think its debt, and they argue that while debt could perhaps theoretically be created in sufficient volume by non-Government action, the cases we know of in history have always involved governments, maybe because they are the only players with enough resources to create enough of it.

        We should be careful not to have a knee jerk reaction to economic theories because we dislike who they have been taken up by. I don’t feel any need to defend the Austrians as personalities, or the Mises web pages, or all of Austrian theory in general. I do find parts of Rothbard’s writings on the twenties and thirties very thought-provoking.

        The formative experiences of the Austrians was the great bubble and the great depression. You can see why, if that is what you saw at first hand, you’d be struck by the role of debt and debt creation. The formative observations of Keynsians were of equilibrium at a low capacity utilisation in a low debt environment.

        The problem comes when you seek to apply the remedies in a world which is different in important respects. Its a mistake to think that Keynsian stimulus will work in the same way in a high debt environment, as it did in the mid thirties, Similarly, the Austrians probably offered their remedies for many years to environments which they fitted rather badly. I think the present environment is much closer to the one their theories or some of them were formed to explain.

        As I say, many of their social attitudes are very unattractive. That does not make their economic views on the role of debt in the cycle wrong. Its just irrelevant, at worst its a distraction. Ad hominem arguments don’t produce any sort of understanding, its only the issues that count.

        I am not sure what modern Austrians would argue in the case of Greece after the default. Probably they would argue for some way of facilitating the redeployment of the malinvestments. I don’t think there is any necessary association of Austrian ideas about the role of debt and any particular view of government intervention. Though in the case of Greece, one has to say that its very doubtful whether they are really better off for having that particular government trying to stimulate their economy. Its a question of competence there, not government. One doubts if that lot could stimulate their way out of a paper bag.

        1. Cahal

          Your response is good and I apologise for my slightly jaded response beforehand – I mistook you for a Mises Institute guys.

          ‘Its not human psychology, which is the same in all periods.’

          I disagree. Shifting expectations of an uncertain future change liquidity preference and demand for credit. Of course this cannot be stated as a positive policy prescription.

          Also bear in mind a debt write off is the mother of all Keynesian stimuli.

          The basic thing most can agree on is that investment is the component of aggregate demand that fluctuates, and causes recessions. The problem is that since most investment is created as debt it will exceed the ability of the economy to pay at some point.

          Low interest rates are one way to keep investment relatively stable and repayments low, but I don’t think they can stop the credit cycle completely.

        2. Binky the Bear

          I think you may have misapprehended the social and economic context of both Keynes and Von Mises, both of whom lived through an era that was heir to the sequence of investment failures that ran from perhaps the 1870s to the 1929 events as colored by the First World War, rampant colonialism, speculative collapses resulting from colonialism and infrastructure development, and the rampant fraud of the business classes.
          The technocratic responses of the New Deal era (which was concurrent with and not a result of Keynes’ work) provided the first extended period where markets were regulated and there were possible punishments for fraud. What we are experiencing now is the result of decades of those with fraudulent impulses having successfully derailed the technocratic reforms while “badmouthing the referee” such that the popular notion is that government cannot regulate businesses and finance-because they won’t be allowed to, given the funds to do the job, or prevented from acting by self-interest (e.g. the revolving door).

          Looking forward to the author’s book. Some fundamental issues in economics could be addressed with ethnographic and anthropological insights in an enriching way.

      3. tkwelge

        >Completely incorrect. The money supply is endogenous i.e. banks create credit before the federal reserve expands its balance sheet. This completely contradicts the Austrian story that ‘artificial’ central bank expansion causes booms.

        Uh, one of the most famous Austrians, Rothbard, would be the first to point out what you just said. The austrian argument is not that only central bank expansion causes problems. The Austrians pointed out the nature of “private” banks long ago.

        Yes, banks create credit all on their own, but the central bank puts this process on steroids and creates a giant corporatist tool.

        1. Cahal

          But the fact is that central banks and fiat currency have a much better record than gold standards and private banking. If central banks are corrupt then that is a practical problem that needs addressing.

          1. tkwelge

            DO they? I see no evidence of this.

            According to measuringworth.com the US economy grew at an annual pace of 1.7 percent from 1840 to 1913. Since then, the economy has grown at an annual pace of about 2 percent. Mind you that’s during a period of much higher government borrowing and paying off public and private debts with credit expansion, ie defrauding foreigners.

            The old studies that claim to prove that the central bank has made the US economy more stable tended to put too much weight on price decreases. In real terms, people’s lives generally improved during periods such as “the long depression” of 1873 to 1896. During this period, the economy grew faster than it did during the last 23 years, and the growth was far more equitable.

          2. Cahal

            ‘According to measuringworth.com the US economy grew at an annual pace of 1.7 percent from 1840 to 1913. Since then, the economy has grown at an annual pace of about 2 percent. Mind you that’s during a period of much higher government borrowing and paying off public and private debts with credit expansion, ie defrauding foreigners.’

            This seems to mean: yes, they do, but *special pleading*

            ‘The old studies that claim to prove that the central bank has made the US economy more stable tended to put too much weight on price decreases. In real terms, people’s lives generally improved during periods such as “the long depression” of 1873 to 1896. During this period, the economy grew faster than it did during the last 23 years, and the growth was far more equitable.’

            Hmm. A look at this graph: http://upload.wikimedia.org/wikipedia/en/a/a4/US_Unemployment_1890-2008.gif

            shows more volatility under gold standards and w/o central banks than since. I couldn’t find anything going further back.

            There have been 8 depressions under a GS and 0 (OK, some might argue 1) under fiat.

  3. DiSc

    I will be honest: I have always thought anthropology to be many words about nothing in particular, mixed with some guilty-consciousness about white men’s colonial past. This has led to some problems at home, since my wife is a hard-core anthropologist.

    However it really is a pleasure to read Prof. Graeber’s posts, and for once I get a glimpse of what anthropology could actually be good for.

    And the fact that Prof. Graeber attracted the ires of the Koch brothers’ propaganda machine just makes it all the more enjoyable.

  4. Linus Huber

    Your explanations are very easy to understand and feel right on an intuitive level.

    One question remains however, namely, who did start the use of money in actuality. As far as I can observe from my past readings is that money is a system that was enforced onto a society in order to allow domination. Without a ruler who makes such a system enforcable there is no way money will florish. Could you please comment on this kind of assumption, Yves.

    1. Brian

      Linus- traditionally, the first use of coined money is attributed to the Lydians, who used it to pay their troops, – the first coin was a months pay for a soldier. Coinage!= money, of course, but the earliest historical adoptions of the greeks and the Persians were precisely that situation- it allowed the ruler/ruling class to declare a value for an item, rather than wait to be told what the value of the item was by the marketplace.
      IN the Lydian and Gook cases, they used electrum, which was a tricky trade material because the value depended on the gold/silver ratio-(Archimedes was still a couple centuries off) which was difficult, expensive, and costly to quantify.

      Coinage is fiat money, regardless of what the gold bugs tell you.

      1. SidFinster

        So if all money is fiat, why not use cat turds, wood chips and acorns instead of electrum, which was still comparatively hard to get hold of and hard to counterfeit?

        1. Tiercelet

          Why not use easily-obtainable objects as the fiat currency instead of hard-to-obtain ones?

          Because the point of a fiat currency is that the state has a monopoly on issuing money. You don’t want to use something any joe can go grab a bunch of if he spends his afternoons tailing cats.

          That’s like asking why Benjamins have security features when there’s no inherent value to the paper.

      2. Linus Huber

        Thanks Brian, you basically confirm my assumption. Especially the aspect that money was first used to pay troops means that it is in the context of domination by a ruler of some sorts.

        1. Foppe

          It’s not so much the domination that matters, but rather the fact that mercenaries come from abroad. As I recall, this played a large role in the Greek golden age, but I don’t recall the specifics, and only have a hunch at where I heard it, so I’d have to try to find that again before giving a more elaborate answer. Anyway, Graeber also talks a bit about the function of mercenaries here

          1. Linus Huber

            Well, it is not really important if mercenaries or troops. When you say that it is not about domination and think you definitely are wrong. One does not need troops to farm but to DOMINATE (or rule) their own or other people.

        2. readerofTeaLeaves

          Note that coinage seems to have been invented on the coasts of Ionia in Asia minor around 800 BC. This was a period in which alphabets were being invented, and the mathematics that had been developed originally by astronomy in the Near East was capable of calculating rates of exchange for things as complex as the ratios of metals within electrum. (Cuniform writing was about 2,000 years old, but has different thought processes from alphabets, which enable novelty at a much more rapid pace.)

          Circa 800 BCE was a time when the merchant princes, or tyrants, became ascendant and the old warrior clans of Homer fade into the background. The power of the merchants was quite likely connected with the rise of coinage.

          Significantly, this was also the period of the origin of Western science in the same region: Thales was a merchant in Miletus, and Pythagoras was from a successful merchant family on the nearby Isle of Samos. The rise of science was intimately connected with the development of mathematics. The rise of coinage should also be seen in this context of aristocratic literacy and numeracy. Remember — numbers at that time were written as letters; literacy and numeracy were twins. Think of the ratio 3.14, which was written as the letter-character phi. (The Arabic numerals would not be used in Western science for another 1600 years, around 800 AD.)

          In 800 BEC, the merchants of Phrygia and Lydia, on the coast of Asia minor near Samos, seem to have exploited the gold and silver mines of that region to invent coinage.

          The most familiar historical tales related to this innovation involve Midas and Gyges. Note the etymology of the MI prefix to the name of Midas, which may well correspond with Minos, Minotaur, and the older forms of kingship.

          Their invention of coinage was surely exceedingly strange to the local, largely illiterate communities. Most people would have thought to exchange for food items; after all, you can’t eat metal. So the desire for coinage may have struck the illiterates as rather peculiar. (“What? He doesn’t want my fat heifer?! He wants metal from a cave…? What a weird dude…’ strikes me as roughly the illiterate’s view of Midas.)

          One of the extraordinary, and to my mind fascinating, tales from the ancient world is that of Midas the King who died of starvation because everything he touched turned to gold. This is almost certainly a tale of people confronting rapid technical and social change during the shift from ancient tribal warring clans to urbanized merchant princes who controlled coinage.

          I would argue that this story of Midas provides the illiterates’ perspective on the emergence of coinage. A brief review of the story suggests that the illiterates lacked the mathematical and reading skills required for them to fully make sense of money – certainly to understand the numeracy required to master compound interest.

          I will comment further below on where I think Graber’s antagonist completely miss understands the role of literacy and numeracy in the development of money. But simply to highlight why I believe this issue of Midas, and its implications for numeracy and literacy is still relevant, note the extensive political sabotage focused on Prof. Elizabeth Warren. What she is fundamentally doing is helping people navigate information. Note that the majority of people screwed by mortgage fraud were minorities and immigrants; education, numeracy, and literacy are still important for economic success. Warren understands that.

          My personal experience is that the people in my own life most stable to grasp the nature of CDOs and CDSs are people with degrees in engineering, particularly aeronautical and mechanical, who have a lot of experience with derivative equations. Arguably we are currently in a world where we might call the ability to manipulate derivatives a kind of meta-mathematics. Most of us don’t spend our days writing or reading derivative equations.

          In this sense, we should have a lot of sympathy with those ancient illiterates, who were bamboozled by the innovation of coinage–which became a form of social control by the merchant princes, or tyrants, of ancient Asia minor.

          In other wordsm, Graber is on to something — and his antagonist may be a nice person, but is evidently oblivious of the key issue of literacy that is invisible but lurking in economic conversations.

          Midas and coinage = numeracy and writing.

          1. steelhead23

            Dear Reader – Wow. By comparison to you and Graeber, I am illiterate. You make an interesting argument as regards the role of ignorance in subjugation. This is quite clear in the subjugation of women in some cultures. From the perspective of the subjugators, this ignorance is intractable, a necessary precursor for their rule and thus, if some do-gooders (like Ms Warren) decide to inform the vulgar masses, that do-gooder is the blood enemy of the vulcans – and by corollary, a hero to the vulgar. It would seem that through time, the vulgar often do not honor their heroes until it is too late.

    2. Peripheral Vi

      Linus, I was going to make the same comment. It is something of an unhappy fact, but money as such likely came about through systems of domination rather than through egalitarian systems of exchange.

      The best examples are the most simple: a king demanding tribute or a priest demanding offerings on behalf of the gods. Tribute or offerings paid “in kind” can be readily measured when it comes to cattle and slaves (like I said, we are talking about unhappy facts here), but would need to be measured when it came to grain and precious metals and stones. At the same time, collecting of tribute would be cumbersome if it was all “in kind”, and distribution of the same, to soldiers, priests, etc., would likewise be cumbersome.

      A more simple system would be to allow for substitutions, based on standardized measures. The same would apply to both systems of tribute and offerings and systems of justice. For clear examples, see the various statutes in the Law of Moses where monetary equivalents (specifically, weights in silver) are allowed for the temple tax, for certain religious obligations, and for damages in civil cases.

      The one point where I disagree with the author is in his argument that “bureaucracies” were the origin of such system. While such bureaucracies certainly existed, they would very likely to have been subordinate to a ruling king or a controlling priestly class, with the bureaucracies being an extension of the sovereign. The idea that semi-autonomous societies originated money as a means of regulating their own economies has a whiff of historical revisionism which does not agree with the brutal realities of the ancient world, where domination, either by force or by more subtle coercion, was the primary factor in human relations.

  5. BigBadBank

    How interesting. So credit came before money – you are prepared to give me what I want and wait until I have something you want. And in a smallish community – which is never only two people – the accounting need not be so exact that money is neccessary, because everybody knows everybody else. But if I don’t pay you back sufficiently I will not be trusted by the other participants and may even be excluded from the system.

    Reminds me of something…

  6. attempter

    At this point, it’s easier to understand why economists feel so defensive about challenges to the Myth of Barter, and why they keep telling the same old story even though most of them know it isn’t true. If what they are really describing is not how we ‘naturally’ behave but rather how we are taught to behave by the market—well who, nowadays, is doing most of the actual teaching? Primarily, economists. The question of barter cuts to the heart of not only what an economy is—most economists still insist that an economy is essentially a vast barter system, with money a mere tool (a position all the more peculiar now that the majority of economic transactions in the world have come to consist of playing around with money in one form or another) [10]—but also, the very status of economics: is it a science that describes of how humans actually behave, or prescriptive, a way of informing them how they should?

    That sums it up. The barter lie is part of the economists’ general campaign to eradicate all humanism and replace it with a totalitarian system of cogs. The goal is a mode of existence (not a society, I don’t even want to use the word “civilization”) where everywhere economic power is the one and only reality, which functions in a purely Might Makes Right fashion familiar from Hobbes and Thucydides.

    Therefore, ideology must claim, contrary to 100% of the evidence, that this actually is the way human beings are. So it must lie its vile desiderata into our natural history. Thus the barter myth.

    Contrary to this, the evidence provides a strong template for where economic relocalization can go. The workable possibilities are innumberable. We’ll organically develop our new economic ways in the course of resisting and rejecting the old and building the new.

    Let me again suggest time banking as a promising transitional alternative framework which goes a considerable distance toward the practice of true community credit and a gift economy.

    1. Sam Adam1234

      You have just described a largely Victorian construct: all things are a cog in a larger loom machine in the factory. Economists are stuck in assumputions from the 1830s industrialization. Gifts within a community and long-term consequences did not fit the needs of industry, hence a new mythology.

      1. readerofTeaLeaves

        Economists are stuck in assumputions from the 1830s industrialization. Largely.
        Before electronics, transistors, modern physics, cell biology…or modern anthropology.

    1. Frank Powers

      Economists actually ARE priests, and “economics” is nothing more than the name of some pretty prominent religion. Science it definitely is NOT. It’s a believe system certain people cling to in order to make sense of the world. What they actually do is, of course, try to change the world in their image.
      They will go on as long as a sufficient number of other people still buy into their crap. It’s good that Graeber and others are demonstrating economics’ real nature, although rather accidentally.

      1. Huh?

        I understand why you say that economists are “priests”, but people need to differentiate between neoclassical/Austrian economics and other schools. I think people tend to think of neoclassical economics as “economics” because of how dominant it has been within economics departments, think tanks, central banks, in the media. Many economists are beyond description and can’t be pinned down ideologically, unlike the school of thought that has for dominated the profession for the better part of the last 100 or so years. Their predictions have been accurate and their aims humane and “progressive” if you will. People like Michael Hudson, Steve Keen, Yves Smith. Others have been doing very innovative work and their insights really can inform and strengthen social movements, the left and working people. The radical economist Robin Hahnel comes to mind when talking about that. There are others who have been doing very important and needed work by combining economics with other disciplines, like ecology, thermodynamics, anthropology. The book here, which I have wanted to read for some time but don’t have the money to buy, is an example. Ecological economists like Herman Daly, Karl William Kapp, Frederich Soddy, John Bellamy Foster are examples of these types of economists. You aren’t going to get abstract theory, divorced from reality from these people, like you will with neoclassical economists.

        The simple fact is that even if people wanted to do away with what they call economics all together, there is no way to do so until we understand economics itself. You can’t replace something as powerful as the economics profession, or at least neoclassical economics, without having a deep understanding of the field of study and proposing alternatives. I, myself, am an anti-capitalist, but I have to answer to people who ask me: if not capitalism then what? I, and others like me, can only answer that question if we study what capitalism IS and study and use our creativity to come up with coherent alternatives. That is one reason I like Hahnel, he has come up with a coherent alternative, participatory economics.

        Any rate, just saying that economics is a far broader, more interesting, reality based subject than people think it is. Neoclassical economists have dominated the profession and we are all worse off as a result.

    2. sgt_doom

      Yes, Prof. Graeber is truly one brilliant fellow, and I believe he understands that all this prattle about “investment” (especially in America) is really all about speculation, as the vast majority of capital flow globally is speculative in nature, just as 95% of commodity futures trades is pure speculation (according to a recent study by the Commodity Futures Trading Commission [CFTC] — thereby putting the lie to all this nonsense about “hedging.”

      Furthermore, for anyone interested, the magical three unlimited numbers which allow all this rapacious and vile speculation and financial manipulation are:

      (1) an unlimited number of credit default swaps can be purchased against a specific entity (naked swaps);

      (2) an unlimited number of commodity futures contracts can be purchased against a specific entity or commodity category; and,

      (3) an unlimited number of investors can be involved with a single hedge fund (Investment Company Act of 1996, amended).

      Live and learn, my friends…. And much thanks to this blog posting with the formidable Prof. G.

  7. Patriot

    “The actual evidence is that in Mesopotamia—the first case we know anything about—these more widespread pricing systems in fact emerged as a side-effect of non-state bureaucracies. Again, non-state bureaucracies are a phenomenon that no economic model would even have anticipated existing. It’s off the map of economic theory.”

    So basically what you are saying is that multiplayer online games replicate the origin of money in Mesopotamia in that these are pricing systems for non-state bureaucracies. Fascinating.

  8. Toby

    “In many times and places, one sees a similar arrangement: two sorts of money, one, a common long-distance trade item, the other, a common subsistence item—cattle, grain—that’s stockpiled, but never traded.”

    See Bernard Lietaer’s article on resilience and efficiency (http://www.lietaer.com/images/Journal_Future_Studies_final.pdf) and his output elsewhere (e.g. YouTube) on how to implement multiple money-types planet-wide. He proposes a mix ranging from a global demurrage currency for global trade, to multiple local/regional currencies such as Ithaca Hours and the Swiss WIR. Charles Eisenstein has a very coherent set of proposals in “Sacred Economics” which deserve open and thorough discussion. (If Eisenstein is not mainstream enough to warrant an interview, perhaps he could be invited to post and article here. He can be contacted at http://charleseisenstein.com/.)

    (I know, I’m like a stuck record. But this is important stuff.)

    In ECONned I came across the quote–“yet the entire body strides vigorously forward”–and it has stuck with me. The entire body of economics has been striding forwards by sticking its fingers in its ears and yelling “LA LA LA!!”, and yet I believe, now, its vigour is fading fast, as is its appetite to maintain the bullshit charade. I could be wrong, but this seems singularly damning:

    “a. Just in way of emphasis: economists thus predicted that all (100%) non-monetary economies would be barter economies. Empirical observation has revealed that the actual number of observable cases—out of thousands studied—is 0%.

    “b. Similarly, the number of documented marketplaces where people regularly appear to swap goods directly without any reference to a money of account is also zero. If any sociological prediction has ever been empirically refuted, this is it.”

    And underneath this repellent ‘discipline,’ the core assertion that humans are profit maximizing machines coolly calculating all interactions with their fellows to game everything they do to their individual advantage, while, as if by magic, The Invisible Hand ensures such scheming is Good for Everyone, couldn’t be further from my experience of my own life, and of all people I have come to know. That obscene and totalitarian vision must too be on its last legs. Good riddance.

    “Debt: The First 5,000 Years” is excellent. I had a lingering criticism throughout but it was addressed on the last two pages. I doubt (apart from typos) I will find anything wrong with it when I read it again. It warrants multiple readings I believe.

    1. Bernard

      I have the same reaction to “Debt” – bears (needs) multiple re-readings. Fortunately I first read it on my computer, not my stand-alone Kindle, so I was able to highlight key portions for easy reference.

      A work of genius.

  9. Foppe

    Or is economics instead a technique of operating within a world that economists themselves have largely created?

    Not sure if you’ll be responding here again, David, but isn’t this sort of a consequence of globalization? I have only just received Debt, but as you’ve noted, money mostly makes sense in systems of international trade, where personalized relationships are much harder if not impossible to maintain, while increasing complexity (due to scaling & Adam Smith’s vaunted specialization) seems to make it rather more essential that ‘buyers and sellers’ don’t stiff each other. This seems to me to encourage economic thinking (if perhaps not thinking in terms of homo economicus, but perhaps that’s a feature of depersonalization as well). (Or perhaps that obnoxious fellow Hobbes was just right in asserting that modern humans have all become very frightful, fearful and distrusting people.)

    1. David Graeber

      Sure, any reasonable-sized city even, let alone a global system, will have to involve all sorts of impersonal relationships. The peculiar version of market relations that sprang up in Western Europe though – this is the argument of the book, anyway – is not just any impersonal logic, but a strange combination of a market populism that traces back to Medieval Islam, but adopted for the much more competitive, indeed, militarized markets typical of the Christian West.

  10. F. Beard

    One of my problems with the Austrian Economists is hypocrisy wrt gold. They insist that a free market would choose gold as money but also insist that government must accept gold as money. But whatever government accepts as money BECOMES money whether it be gold, tally sticks or anything else.

    1. pws4

      They also want to eliminate the minimum wage, but have every body pay their employees in gold. How does that work?

      1. F. Beard

        Austrians desire to limit the money creation rate to the mining rate of gold. However, if that rate was less than the population growth rate then wages must fall.

        1. Huh?

          In a world in which we are dealing with a number of very severe ecological problems which could cause ecological collapse, in a capitalist market economy that is imploding and is very uneven thanks to extreme wealth inequality, it makes total sense to have purchasing power and consumption determined by how much of a metal a country owns. Never, ever, should we change our minds or think critically about our pet theories or biases. That’s why I respect the Communists who stayed in the Party after Stalin’s crimes were admitted.

      2. JustAnObserver

        I’ve often had the image, after being harangued yet again by goldbugs, of me at the Safeways checkout with my gold bar (and bodyguard) scraping a few shavings onto the scales with that ever-handy Swiss Army knife …

        1. F. Beard

          Good one!

          Many of the gold-bugs are in fact betting that the US Dollar will be remonetized by government fiat (intentional irony). Then their gold hoards would instantly be worth many times their present price.

          1. aet

            Yeah, wouldn’t a return to a “gold standard” necessarily entail Government seizure of all privately-held gold, and gold mining operations? Did the USA not do so in the 1930s?

            Like Venezuela has recently done?

          2. F. Beard

            I doubt the US would outright confiscate gold since it has 8000 tons already. But any future money creation would require gold which would have to be bought on the open market at an inflated price.

    2. bmeisen

      Mr Beard, I was mistaken to belittle your position the other day and to drive your position to a choice between the extreme of money or barter. You countered by asserting that there was another way (the share of ownership in a stock corporation, as I recall). This wonderful essay has shown me the light. I regret not having taken your position more seriously.

      1. Skippy

        Unless you have enforced laws, no amount of free association cough individual contracts cough common stock attached to variable market price, will stop fraud cough deceptive weights and measurements.

        Skippy…you ether have standardized weights and measures in a impersonal market or sooner or later you end up like today. History is chocker block with this stuff, literally, individuals have zero negotiating power, come together or get blown away.

        1. F. Beard

          …you ether have standardized weights and measures in a impersonal market or sooner or later you end up like today. Skippy

          A movie ticket is a form of money. It is typically made of cheap paper. Would the performance be better if the ticket was made of gold or silver or would it be worse as more resources were devoted to making the tickets and less for the performance?

          1. skippy

            Did I say commodity’s? Look private issuance would be like buying stock from predators, I have know plenty of them. Hell on any inescapable island maybe, nowhere too run thingy but, a nation the size of the US or internationally good luck.

            Skippy…big reset button to undo all the previous social programming, maximize profits, rational actors et al, I wish. Look lots of people are born into, programmed from day one, blind sided by incessant media, all to gain economic advantage over others. Some act begrudgingly where others with zeal, whatcha gonna do[?], give em cart blanch?

          2. F. Beard

            Look private issuance would be like buying stock from predators … Skippy

            Fiat would still be available and abundant since:

            1) The population would have been bailed out with it as part of the reforms.
            2) The government could spend more freely since deficit hawks could no longer complain about the “stealth inflation tax”.

            Most people would continue to use fiat for all debts UNLESS the government abused its power to issue as it is currently doing to save the banks.

  11. Dan Duncan

    Alan Iverson, formerly of the Philly ’76ers, offers a trenchant analysis of this David Graeber post:

    ________
    Sure, economics is not really a science. But Graeber’s similarly unfalsifiable rant really ain’t about science either.

    Look, it’s easy to sum it up if you’re just talking about anthropology.

    We’re sitting here, I’m a franchise scientist and we’re supposedly discussin’ science, and we’re talking about anthropology.

    I mean listen, we’re sitting here talking about anthropology, not a science, not a science, not a science, but we’re talking about anthropology.

    Not the science that I go out there and die for and study every day like it’s my last…but we’re talking about anthropology man. How silly is that?

    Now I know that I’m supposed to lead by example and all that…and I’m not shoving that aside like it don’t mean anything. I know it’s important, I honestly do. But we’re talking about anthropology.

    We’re talking about anthropology man. (laughter from the scientists in the crowd).

    We’re talking about anthropology.

    We’re talking about anthropology.

    We’re not talking about science. We’re talking about anthropology.

    When you come to the arena, and you see me play…you’ve seen me play right? You’ve seen me give everything I’ve got, but we’re talking about anthropology right now. (more laughter)
    ____________

    [End Note: Evidently, Prof Iverson isn't overly impressed with practice, either:

    http://www.youtube.com/watch?v=eGDBR2L5kzI ]

    1. Philip Pilkington

      Graeber never claimed that his post was ‘science’. Honestly, where do you come up with this stuff?

      1. okie farmer

        Philip,
        Duncan doesn’t know the difference between science and history. You can’t have meaningful conversation with someone that limited in their cognitive functions.

        My great philosopher neighbor, rancher Rusty Halverson, once told me after several weeks of swapping labor, horses, hired hands, and cattle handling equipment to quit worrying about who owed what to whom, “the cattle business, maybe the whole world, is built on uneven trades”. He’s the same guy that told me years before the reason our young neighbor to the north had gone bankrupt despite being “set up for life” in the cattle business by his father-in-law, was because he didn’t “have any maternal instinct” – mother cows as “cogs”, and calves as accounting devices.

    2. Yves Smith Post author

      If you are trying to show that all that Iverson can muster against Graeber is an extremely lame ad hominem attack, you’ve succeeded. This is babbling, not an argument.

      1. Sy Krass

        Actually guys that Iverson thing is a joke. That’s an actual conversation he had complaining about practice roughly a decade ago. He was a baskeetbol playah not a prof. HAHAHAHAHAHA!!!!!!!

  12. Skippy

    Are we, by some misfortune, living a reality imposed upon humanity (and all life, things) by history’s well capitalized thieves. Divinity authorized by the sword, codified into law, temples wrath, tribalism turned into nationalism, DNA forced to fight its self, only defined by a geographical feature, resources.

    Skippy…too many temples methinks, what ever the stripe.

    1. David Graeber

      Actually the literate classes in ancient Sumer seem to have consisted of priests, administrators, *and merchants.* The problem is the merchants show up a bit late because in the earliest period, it seems most merchants actually were Temple functionaries.

      Even if true, saying there’s no reason to believe there would be evidence of something is not the same as saying there’s any reason to believe that thing existed. The only evidence anyone has produced for barter regimes has been that 19th century economists uniformly believe they “would logically have” existed. They also assumed they would logically have existed in lots of times and places where we can actually check, and it turns out, they don’t. Why then should we believe Mesopotamia was any different?

        1. Skippy

          Ha. Be careful where you park your comments, association thingy.

          Skippy…thanks for your efforts, unfortunately more is needed.

  13. John Hall

    Personally it makes perfect sense to me that barter transactions weren’t as well-documented as debt contracts or writing at a temple. I’m not going to write down every time I trade a chicken for a goat, especially if I can’t read or write. You have evidence on the Temple b/c they were the people who knew how to read and write.

    1. GeorgeNYC

      “Personally it makes perfect sense….” Well of course. That pretty much says it all. I can feel it to be true so therefore it must be true. We have absolutely no sense anymore of what is a “fact” what might be an “opinion” or a “theory” and what might just be a belief. They get all mixed together.

      I am just finishing up David Graeber’s book and it is truly remarkable. I have an economics degree and could never see it as anything more than math dressed up with an enormous number of assumptions. The whole “predictive” quality of any of these schools of thought seem to resemble the “predictive” qualities of ancient religious beliefs. Believe in our god as he will give us victory.

      I live in Manhattan and think that someday people will look upon our “temples of commerce” the way that we now look upon ancient Cathedrals. Maybe the Austrian school will be studied the way that we now study the antinomian heresy?

  14. Jefe

    An economist, a chemist, and a pysicist wash up on a desert island. They discover a crate of canned goods.

    The chemist says, ‘Easy peasy, we put some salt water on the can, the can will rust, and we will have dinner!”

    The physicist says,’Much too delayed, we can build a fire,put the can in the fire, the heat will pop it open.’

    The economist is amused at their conclusions: he states,
    ‘Simply imagine you have a can opener!’

    1. Cahal

      Actually it’s supposed to be more like:

      Chemist: ‘We can put salt water on the can but some rust might rub off into the beans’

      Physicist: ‘We can put the can in the fire but it might burn some of the beans’

      Economist: ‘Let’s just assume a tin opener’

      Point being that economists assume a perfect world then act like it exists, instead of acknowledging there are imperfections and modeling around those.

      (I’m honestly not trying to be a pedantic twat here, even if I’m doing a good job of it).

  15. Pat Shuff

    For the past 2½ millennia, the Lydian king Croesus has been a byword for fabulous wealth, the prime beneficiary of vast riches accumulated partly by the trading skills of his subjects and partly as a result of the copious alluvial deposits of electrum — a naturally-occurring alloy of gold, silver, and copper — which were to be found in the country’s rivers (placed there when the even more legendary Midas washed away the curse of his golden touch, we are told).

    Indeed, it was here in Lydia that the first stamped and standardised coins began to circulate, at the turn of the 6th century BC; a development which allowed for a wider monetization of trade and hence unleashed what some historians have called a “commercial revolution” across the Ancient world.

    The idea that financial innovation can provide a stimulus to real activity — warranted or otherwise — is one with which we should all be very familiar, but there is a slightly darker parallel at the core of Croesus’ extreme affluence: namely, that the official Lydian coins show a suspiciously low 50—60% gold content, in sharp contrast to the 80% and higher constituency to be found in the unadulterated local alloy.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    In other words the age old practice of currency debasement
    began with the very advent of money.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    David Rolfe Graeber (born 12 February 1961) is an American anthropologist and anarchist who currently holds the position of Reader in Social Anthropology at Goldsmiths, University of London [1] He was an associate professor of anthropology at Yale University, although Yale controversially declined to rehire him, and his term there ended in June 2007. Graeber has a history of social and political activism, including his role in protests against the World Economic Forum in New York City (2002) and membership in the labor union Industrial Workers of the World.

    http://en.wikipedia.org/wiki/David_Graeber

    1. David Graeber

      Actually, you’re talking about the advent of coinage here, not money.

      The idea that debasement comes at the beginning of money (of this sort) would only be true if what money is, is gold, or silver, or what-have-you, and that coins simply are affirmations of the fact that units of gold, silver, bronze, etc, are of a certain uniform weight and purity. This does not appear to be the case. Ancient coins all circulated at a value higher than that of their metal content; they were a combination of the value of the metal, and fiduciary value, in the sense Aristotle identified in saying that money is simply a social convention, a tacit agreement to treat some things as if they had value. The difficulty was in interior versus exterior use – when Roman rulers lowered the silver content of their coins, it did eventually cause inflation, but usually only after the lag of a couple generations, because while Roman coins were still acceptable at face value for payment of taxes, those outside the empire treated them just as pieces of precious metal, and thus the price of imports went up.

      1. sgt_doom

        ” American anthropologist and anarchist..”

        God bless all anthropologists and anarchists….

        And the devil take all that American nepotism:

        FBI Director Robert Mueller, grand-nephew to Richard Bissell, one of three top CIA types fired by President John F. Kennedy,

        Former Secretary of Defense Robert Gates, whose uncle was also a SecDef,

        Timothy Geithner, Treasury Secretary, descended from another malevolent treasury secretary (hint: its on the Moore-Mellon side of the family)

        Diana Farrell, number one jobs-offshoring specialist, whom President Obama appointed to his economics council (she has since left), although not an economics, but an expert in dramatically increasing American unemployment and a destroyer of lives whose father was ?????(highly classified, but she was born in Bogota, Columbia, after all, during some rather strange stuff going on there.

  16. aet

    In defense of Adam Smith, he WAS more of a “descriptivist”, rather than a “prescriptivist”; and his speculations as to the history of money did not, as far as I can tell, lead him to ignore facts concerning the economic relations which were present to him to examine.

    Adam Smith was observing economic activity, more than he was theorizing about its nature.

    In that, he was a true man of the Scottish enlightenment.

    That the torch Adam Smith lit has been used to lead people into the deeper darkness of economic dogmatism, rather than to the rational analysis of economic activity by the light of observation and experience, as in fact Smith wielded it himself, is to be much lamented. IMHO.

    1. sgt_doom

      Anyone who has truly read all of Adam Smith’s work realizes Smith was an ardent supporter of the monopolists of his time, and believed the primary purpose of government was to protect the land owners.

  17. Lil'D

    David,
    I’ve ordered the book… will read.

    I’d advise you not to get too worked up over Murphy et al.
    Your work has touched ideology and superstitious beliefs, which are strongly held and well-defended by emotional means. These polemicists *do not care about the truth*

    you cannot win them over, but you don’t need to. They are, fortunately, a minority, albeit very vocal. Let the rest of us fight the blog comment battles while you do what you do best, which is brilliant scholarship

    1. David Graeber

      Thanks, I’ll get back to work on that!

      (I did win some of them over on the Von Mises Institute blog – which rather surprised me, to say the least.)

      1. jpitt42

        It doesn’t surprise me at all that you won some of them over. I’ve read a lot of their stuff over the past many years, and a key takeaway I’ve found in the Austrian literature is that economics is a soft science, like sociology, not a hard science, like physics. It’s just a study of people and their interactions with respect to resource allocation. Many of the comments on this blog definitely miss this (not yours), and therefore show some ignorance to their viewpoints.

        I don’t really read their daily stuff anymore, not because there is no underlying merit, but mainly because the writers tend to play on the emotions and fears of the readers too much for my liking. I find Murphy particularly grating in that respect. I guess that’s what drives readership.

        Not all right-libertarian types are rabid and dogmatic. The whole Tea Party thing seems to have morphed into some odd populist/religious proxy for right-wing fears and desires, regardless of what it started out as. I guess that’s what makes movements popular: loads of ignorant people flocking to a banner, co-opting it, and dumbing it down.

        In any case, I found your post to be well written and informative. Thanks.

  18. craazyman

    It should be clear simply by looking at the Amazonian Nambikwara that consciousness proceeds through a natural law called “individuation” from a group structure to individual singularities. Money is an individuation accelerator. Profeser D. Tremens of Magonia University has written about this, along with his assistant Savanna Rolla, GED. Not sure where. But that jungle boogie sound like what happened back in college when the drinking started.

  19. nowhereman

    The most interesting take-away for me is the role of the reputation of the individual in transactions within the social group. I can still remember the days when a man’s word was his bond.
    Now, “it’s not personal, just business” is the meme. It’s quite apparent that a man’s “reputation” means nothing. In fact the “greedy cheat” is now looked upon as that which is aspired to.
    How else can you explain what Wall Street did, and what High Frequency Trading accomplishes?
    Yet not one of these sociopaths has been held accountable, and it appears no-one questions their “reputation” as members of this community.

  20. Septeus7

    I’m wondering if it would be possible to extend the bureaucracy first and then market into a general theory based on the concepts of privation and savings.

    If I assume that whatever bureaucracy was in place it was related to the provisioning of some economic needs and markets would naturally develop as a means to short cut the bureaucratic process by means of privation i.e. a personal stockpile or savings of some kind and the merchant therefore could provide the same service without the bureaucracy but only by means creating a shortage or somehow securing a supply above that was available by ordinary means and thus in order to a consistent feature of society it must be based in an unequal distribution of power namely power in the form of privileged access to production.

    In short, markets can only result from social hierarchy. I’m not trying to make a judgement about the a society that works that way but I believe a good Anthropologists would simply be interested in the process of social hierarchy, division of labor and market.

    I’m sure Dr. Graeber has discussed his ideas about this process in more detail in his book. I’m over my monthly book budget but I’ll be sure to add his book to my wish list but perhaps someone could point me to more research on this topic.

  21. Wildberry

    I have blogged often on Mises.org and concur with most of the sentiments expressed here, especially the one that expressed the observation that “they feel they must smash anything that doesn’t conform to their inconsistent beliefs.”

    I will offer another explanation for what is being observed here; although I am a huge fan of L.v.Mises, the economics and Business Cycle Theory, etc. of Mises has been overcome on Mises.org by the political philosophy of Murray Rothbard, who is an Anarcocapitalist.

    At the foundation of this philosophy is natural rights theory that has been formulated largely from speculations based on the Crusoe device; man alone. In this thought experiment, participation in society is voluntary.

    As Katherine Touchstone argues brilliantly in her book, Athena Says, this leads to false conclusions about the nature of humans, since all humans begin as infants, co-dependent on a mother relationship, which is codependent on social institutions for survival. Therefore, the model for analyzing natural rights, if there is such a thing, must consider mother and child the Primary Social Unit, not man alone.

    It is this fundamental lack of appreciation for the very definition of society, cooperating humans, which leads to the kind of hyper-individualistic and uber-rational models for the nature of humankind, and a fundamental misunderstanding of the organizing principles of human society.

    Few would argue, even in this camp of Ancaps, that money, credit OR barter preceded societal institutions based on fostering cooperation over conflict. The anthropological observations cited by Graeber and others seem to confirm this general principle; that cooperation is favored over conflict, and that even primitive social institutions adhere to this principle. It appears to be fundamental and universal characteristic of human society, from which all economic systems must emerge.

    1. David Graeber

      Yes, in the book I try to argue it as provocatively as possible by stating that all social relations, in order to be social relations, are based on a minimal bedrock of communism. Ultimately capitalism itself is just a bad way (in my opinion a bad way) of organizing communism. But that’s a long argument.

      1. Foppe

        Yeah, I found that a very interesting argument, as you presented it here. (Though it’s a bit of a shame the microphone wasn’t placed somewhere closer by.)

          1. Arthur

            David,

            “Thanks makes slaves like whips make dogs.” :)

            Your book is great. Read it over labor day weekend. Thanks for your great work.

            Best,

            Arthur

          2. smellslikechapter11

            Just finished David’s book — one of the best in a long time. The part about the fundemental nature of communism (as he defines it) is very good and I have thought about it a lot since I finished the book. A very refreshing thought for a red diaper baby like me.

            I appreciated how makes a real effort to show that there were no facts to support the barter theory on the origin of money. As such, the book does demonstrate (along with others like “Econnned”) that much of economics, like string theory, is “not even wrong.” See Peter Woit’s book and blog with the same title.

      1. wildberry

        You are right. It is an embarrassment to have gotten both her first name and title wrong. Thank you for the correction.

  22. JTFaraday

    “What they discovered was an at first bewildering variety of arrangements, ranging from competitive gift-giving to communal stockpiling…

    “When confronted on why economists continue to tell the same story, the usual response is: “Well, it’s not like you provide us with another story!” In a way they have a point. The problem is, there’s no reason there should be a single story for the origin of money…

    “Murphy then goes on to produce a straw man saying that a system where people borrow things from one another and then turn to political authorities to regulate the system would not produce money.”

    But there *is* a reason there must be this single story, based on barter. Barter (and “borrowing” pigs, arrowheads, etc) implies isolated individuals slaving away individually, the sole possessors of that which they produce. You produce nothing, you have nothing to barter, you die.

    “Communal stockpiling,” on the other hand, socializes production. The communal ethos also equilibrates, potentially anyway, activity that produces tradable objects with activity that doesn’t produce such tangible objects. (Care of persons, for example. Service work).

    No doubt there were plenty of ways communities incentivized individual productivity and other behavior they wanted to see while punishing slackers— whole moral and religious systems probably (imagine that)— but that kind of traditional assurance is not enough for most contemporary right wing economic ideologues (and so-called conservatives) clinging to the classical liberal strain of thought with its fetishization of the autonomous individual who raises himself and lives or dies according to his own merits.

    Because we know there *is* only one right way to do anything wherever there exists that inevitable group of extremists who fervently desire to go for the option that stands to represent the maximum in sadism. This is given a big assist by the idea that such and so has been ever thus, and the rest of human experience an unnatural perversion to be stomped out from human memory with the appropriate vigor.

    On a related note, today’s reports have it that the right wing faithful cheered the idea of letting people who don’t possess health insurance die at the R-pugnacious debate last night.

    So, this is a timely discussion about the underlying motivations behind the anachronistic propagation of already largely debunked economic parables. Why trouble yourself with anthropological and historical research when you can underwrite such a healthy collective fantasy life?

    1. tkwelge

      >On a related note, today’s reports have it that the right wing faithful cheered the idea of letting people who don’t possess health insurance die at the R-pugnacious debate last night.

      I’m assuming you are referring to the one or two people who shouted “yeah” when Ron Paul was asked if he would let a 30 year old die, because he didn’t purchase health insurance ahead of time. Those “yeah!” responses could have just as easily been people who meant, “yeah, answer that!” as opposed to “yeah, let him die.” Ron Paul’s response was not that he’d let the patient die. He calmly explained that he used to work in medicine before medicaid and they never turned anybody away back then either.

      I think that you just have an axe to grind. It’s pretty obvious from your comments. Your austrian bashing is grating and without substance.

    2. Alan Lockett

      Republicans want to let our seniors die, you say?

      As a Texan, I despise Rick Perry’s adventurist opportunism and his crony corporatist ways. HOWEVER, reforming Social Security or getting rid of it entirely is not tantamount to letting our seniors die by any stretch of the imagination. Families and communities at a smaller level can always step in to help where things get dire.

      What makes no sense is the assumption that as a society we can afford to pay older people to sit idle for 20 years after working for 40, during the course of which most people are in reasonable good health and have a wealth of experience and skills to offer.

      If you want people to do nothing for 20 years after working for 40, then either you need to tax them at 50% for the 40 years they work, not 15%. I’m being very simplistic, I know — seniors use less resources than younger people. But you have to realize that any retirement program of this scale is relying on growth — population growth, productivity growth, etc. — and even Marx acknowledges that this sort of growth is a feature of capitalism. Take away growth, and old people will have to contribute in tangibly productive ways during all but their most severe senescence.

      1. David Graeber

        I don’t know, we pulled it off for most of the last century. What’s changed? We have so much more work we need to do?

        My impression is we’re all working rather too much already, and much of that work is socially unnecessary or even destructive.

      2. F. Beard

        Take away growth, and old people will have to contribute in tangibly productive ways during all but their most severe senescence. Alan Lockett

        It is usury that requires growth. As for taxing people more during their productive years to pay them during their retirement that is silly. Taxes reduce the very economic growth needed to allow people to retire. People earn their retirement by their labor, not by how much the government has taxed them.

        The filthy usury and counterfeiting class has reduced everything to money which they are careful to control.

  23. Susan the other

    And how does this new-old definition of debt see us into the new age? The original meanings of words and actions have been lost to the eons and replaced by our own refined meanings. And we have built our own civilization on those meanings. Total incoherence aside.

    1. Susan the other

      I really do like what Graeber says just a few comments above that “capitalism is just a bad way of organizing communism.” That is the starting point.

  24. beowulf

    “How interesting. So credit came before money – you are prepared to give me what I want and wait until I have something you want.”

    “Bonasera: Let them suffer then, as she suffers. How much shall I pay you?
    Don Corleone: Bonasera, Bonasera. What have I ever done to make you treat me so disrespectfully? If you’d come to me in friendship, then this scum that wounded your daughter would be suffering this very day. And if by chance an honest man like yourself should make enemies, then they would become my enemies. And then they would fear you.
    Bonasera: Be my friend – Godfather.
    [The Don shrugs, Bonasera bows toward the Don and kisses the Don's hand]
    Don Corleone: Good. Someday, and that day may never come, I’ll call upon you to do a service for me. But until that day – accept this justice as a gift on my daughter’s wedding day.
    Bonasera: Grazie, Godfather”

    http://en.wikiquote.org/wiki/The_Godfather

    1. geerussell

      Good call. As I read the post and the comments I had the ever building sense I was reading the mafia origins of money. Which of course dovetails nicely with the notion of money as an instrument of domination by the state or equivalent authority.

    2. JR

      Exactly what I was thinking.

      >Don Corleone: Call Bonasera. We need him now.
      >Tom Hagen: [on the phone] This is Tom Hagen, calling for >Vito Corleone at his request. Now, you owe your Don a >service. He has no doubt that you will repay him. In one >hour he will be at your funeral parlor to ask for your >help. Be there to greet him.

      And from the sequel:

      >Vito Corleone: [in Italian] Do me this favor. I won’t >forget it. Ask your friends in the neighborhood about me. >They’ll tell you I know how to return a favor.

      1. Toby

        Exactly.

        Money is, first and foremost, a medium of control. It is tightly bound to state processes which seem to have emerged primarily as protection rackets, around which all sorts of ideologies to do with reciprocity and ‘freedom’ have emerged. The state is a mafia operation, as are corporations, and money is their main tool of extraction, violence or its threat being the other. As an unintended consequence of these protection rackets we have Perpetual Growth and its driver Usury, which threaten our extinction. We are effectively slaves to processes which, if not arrested, will wipe us out, likely this century.

        To break this dynamic we need a new money system. But ain’t that the challenge!

        1. F. Beard

          To break this dynamic we need a new money system. But ain’t that the challenge! Toby

          Actually, a single money system is the problem. We need separate government and private money supplies per Matthew 22:16-22 (“Render to Caesar …”).

          The government can simply create, spend and tax (as necessary to control price inflation) its own fiat. As for the private sector, it can surely create money supplies that the public would willingly accept.

          1. tkwelge

            Basically, you are advocating free banking. This is something that many Austrians, if not all of them, support.

          2. F. Beard

            “Free banking” is just one possible source for private money. They are non-usury based forms of private money too such as common stock.

  25. Joe Rebholz

    “This not only demonstrates that the Homo Oeconomicus which lies at the basis of all the theorems and equations that purports to render economics a science, is not only an almost impossibly boring person—basically, a monomaniacal sociopath who can wander through an orgy thinking only about marginal rates of return—but …”

    Well done, David. And so is your book “Debt: THe First 5000 Years”, which I just finished reading yesterday. I highly recommend this book to anyone interested in how the world has come to its present state. It is amazing that for 5000 years we have been having debt crises, crashes, halts where the rich lend with interest to the poor who cannot repay and the system has to be reset by wiping out the debts. Then we start it all over again. And Economists and most everyone else are surprised when we get the same results. And they call themselves scientists!

  26. readerofTeaLeaves

    From the Mises.org link from post:

    It is true that Carl Menger’s account of the origin of money is largely a form of armchair reasoning. In that respect, anthropologists with economic training have much to offer in filling in the story with actual historical details.

    Unfortunately, David Graeber’s rejection of the standard account leads me to believe that he doesn’t really understand the claims that people like Menger and Mises made. Furthermore, his own explanation flies in the face of not only basic economic logic but also well-documented examples of the emergence of a new money.

    Man, I read a passage like this and feel really grateful that my father, a retired emeritus professor, was okay with my dropping out of college to go out and actually see the world. The amount of inaccurate thinking produced by “armchair reasoning” really sticks in my craw some days.

    But on what specific so-called “well-documented examples of the emergence of a new money” does Graber’s antagonist support his “armchair reasoning”?

    Finally, we have actual case studies of communities developing money prices from scratch: namely, prisoners who end up using cigarettes as the common medium of exchange. The classic work here is Radford’s 1945 article, “The Economic Organization of a P.O.W. Camp.” There is nothing in Radford’s account that conflicts with the standard economists’ story about the origin of money.

    Oh goody.
    The classic 1945 study was based on prisoners in a POW camp.
    So let me guess – those prisoners before they ended up in that camp had probably been to school, where they learned at least basic reading and arithmetic skills.

    in other words, Graber’s antagonist expects us all to ignore the fact that he is comparing apples to icicles.

    In other words, the 1945 prisoners had probably been in public schools in Western democracies during the 1920s and 1930s. They would’ve learned to read well enough to read a newspaper article, a magazine article, or a basic book. In other words they were literate. They were Probablyamong the 1st generation in their families to attend publicly funded and operated schools, which were a 20th century phenomena in Western democracies. Prior to that time, good schooling had been the privilege of the elites.

    But the prisoners in this classic study, upon which all this armchair reasoning is based, were also numerate. They could make change for a dollar. They could probably read a basic balance sheet, even back in 1945 before the advent of Excel spreadsheets.

    So the whole structure of von Mises thinking is based on a classic 1945 study of people who were *already literate and numerate*?! OF COURSE they would have created monetary like interactions and social exchanges. That’s what they’d been socialized to do since the time they were about 5 years old. Anyone who thinks that is some kind of basic insight into all human behavior, going back to the Neolithic, going back in time and across cultures where most people of an illiterate is really, really naïve and ignorant.

    Am I to honestly believe that war prisoners in the 1940s who were both *literate and numerate* are somehow equivalent in economic theory to a member of an aboriginal tribe whose understanding of physics derives from locating a certain angle of branching on a tree limb, and obtaining that limb in order to make this sort of boomerang he needs? The aboriginal knowledge of physics is based in personal experience, in manipulating the tools that he needs in order to accomplish his objectives. At no time does that aboriginal ever, ever write down a derivative formula to measure the approximate velocity and angle of motion is boomerang will produce. I’ll be aboriginal has is what might be called craft knowledge. Obviously, it kept the aboriginals alive for a very very long time, despite their lack of writing and systems.

    Consider that the aboriginal is descended from people who managed to survive, often in precarious and marginal environments, for over 40,000 years on the continent of Australia. At no time in that vast realm of time is there any record that they developed writing systems. This means that cognitively they viewed the world and their economic exchanges differently–in a fundamentally, cognitively different way–then any literate 20th century human.

    And this means that all the armchair reasoning in the world produces muddled confusion, because it is comparing 2 things that are in fact fundamentally vastly different from one another. Obviously, an armchair thinker would not comprehend the distinction that they are missing. To do that, one has to actually be humble and engaged enough to spend time with real, actual illiterates. It does not surprise me in the least to discover on this lovely morning that the Viennese academics had no interest in being offered unfamiliar foods in a dusty, hot, foreign location. So instead of actually understanding what they seek to theorize about, they take it upon themselves to lecture the rest of us as if they know everything. And as if our knowledge counts for nothing.

    Man, I am becoming a huge huge fan of David Graber if for no other reason than he actually tries to engage with and understand the things he talks about. What a breath of fresh air!

    The theoreticians who seem to be getting themselves into a frenzy over Graber’s work do not appear to recognize that it is neither realistic, nor practical, nor scientific by any stretch of the imagination to compare the activities of postindustrial, literate people with the economic exchanges of people whose cultures have been literate for–at most–4 generations, and sometimes only one.

    I’m sure the von Mises allies are well-intentioned people, but my good heavens they are thinking is exceedingly muddled. I honestly don’t think they understand the amount of mischief their good intentions and “armchair reasoning” have caused.

    1. JTFaraday

      “So the whole structure of von Mises thinking is based on a classic 1945 study of people who were *already literate and numerate*?!”

      Well, maybe we don’t know how literate or numerate they were. But saying people in prison in 1945 spontaneously used cigarettes as money is– like, duh!– I don’t even know what it is they think that’s supposed to demonstrate it’s so ridiculous.

      1. ReaderOfTeaLeaves

        Apparently, the Von Mises think it demonstrates the creation of a whole new system of money. Total nonsense!

        It demonstrates that prior to prison camp, the prisoners were numerate and had been socialized to assume monetary exchange was the norm.

        “duh”, indeed.

    2. David Graeber

      Yes people used to using money all their lives will, given no access to existing forms of money, invent a new one. Amazing yet true. I read somewhere in most US prisons, people use actual money, at least as a unit of account, a cigarette is worth a dollar, or whatever it may be. Presumably in POW camps it wouldn’t have been as easy as you have Brits, Americans, French, etc, people used to using multiple different sorts of currency so they had to create a new denomination from scrath.

    3. Sy Krass

      Actually I work in the nursing home for the mentally ill I can tell you that 2 cigarettes is roughly equivalent to a dollar. This shows that we have had some inflation since the financial crisis. Back in 2004, when I first started a dollar was worth 4 cigarettes, which means at today’s exchange rates a zimbabwean dollar is still…WORTHLESS!!!

      HAHAHAHAHA!!!!!!!

      1. Blunt

        “I can tell you that 2 cigarettes is roughly equivalent to a dollar. This shows that we have had some inflation since the financial crisis. Back in 2004, when I first started a dollar was worth 4 cigarettes ….”

        Interesting, the locations where I’ve been working since 2001 also in mental health, the value of a cig is invariably been rated at $.50 from around 2004 to 2009. Since 2009 they’ve sold at $.75 and sometimes for $1.00 a piece. Of course at the grocery the prices are anywhere from $8-10 for 20 cigs.

        Perhaps you live in some tobacco state where the price is less for 20 than where I live. The prices here have been raised exorbitantly by state government taxes as well in efforts to stop smoking altogether by everyone.

        Exchange rates vary with circumstances. And even the mentally ill have been well-conditioned to a money economy. Poverty tends to condition them as well to making others pay premium prices.

    4. tkwelge

      See, I really think that this is the problem. You make a good point and it does seem to require a slight readjustment of the austrian view to come into line with anthropological evidence. However, you go about bringing this information to light in a purposely antagonistic way that is meant to raise a fuss.

      Everyone suffers from muddled thinking from time to time, not just Austrians. Let’s work with each other and not against each other. How about it?

      1. ReaderOfTeaLeaves

        I hope it raises a fuss, a ruckus, a whirlwind of clearer thinking.

        We all muddle at times, but those of us who are conscientious try to locate and correct our mistakes. If the Austrians are doing so, it’s news to me. But I do wish them well as they correct their many muddles.

      2. ReaderOfTeaLeaves

        Please bear in mind that extreme exaspeation may sometimes perhaps sound antagonistic. I can only speak for myself, but antagonism was never my intention. I was so exasperated that my own comment may have come across as cross.

        I was cross. I still am. Being told that I am a purely rational, profit maximizing, calculating automaton drives me bonkers.

      3. tkwelge

        @reader

        Nobody is arguing that you are totally rational :)

        In all seriousness, that is not the austrian position.

        I am quite familiar with austrian economics and have read Human Action, most of Rothbard’s books, and a couple of Hayek’s books. I’m hardly an expert on the entire school, but I know enough to know that the Austrian insights do not depend on credit being invented after coinage.

  27. solo

    I have CAPITALIZED the weasel words in Graeber’s own account of his scholarly contribution: “Here let me lay out my own actual argument: 1) IF money is SIMPLY a mathematical system whereby one can compare proportional VALUES, to say 1 of these IS WORTH 17 of those, which MAY or MAY NOT also take the form of a circulating medium of exchange, then SOMETHING along these lines MUST HAVE emerged in INNUMERABLE DIFFERENT circumstances in human history for DIFFERENT reasons. PRESUMABLY money as WE KNOW IT today came about through a long process of convergence.”

    First please note that instead of defining “money,” Graeber gives a conditional (IF); then a vague qualifier (SIMPLY) referring to “a mathematical system”. Alas, the humble reader is brought up short, for it is evident that Graeber does not know the difference between, on the one hand, a “mathematical system” simpliciter, which is a deductively developed axiomatized system, all a priori; and, on the other hand, physical science’s usage of systems of dimensionally independent physical quantities, such as the Systeme Universal d’Unites (SI units of length, mass, time, etc.). Being a posteriori, such systems culminate much natural-scientific labor and are literally a world apart from any “simply” mathematical system. Any good physics text could inform Graeber of the distinction that he lacks; he would do well to consult P.W. Bridgman’s classic article, “Dimensional Analysis,” in the Encyclopedia Britannica. The situation is even more complicated in economics. The commodity, which is the cynosure of the capitalist system, presents unique problems of dimensional analysis; as explored by the classical economists (Smith, Ricardo, Marx et al.) in their distinguishing between the commodity as simultaneously a physical (“use value”) and a social (“exchange value”) product. This topic is to this day a matter of fundamental controversy. Graeber might consult Frits De Jong’s 1967 book, “Dimensional Analysis For Economists”; Wm. Barnett’s article, “Dimensions And Economics: Some Problems,” available free on the web; and the Cambridge Capital Controversy, again accessible on the web. –Graeber next speaks of VALUES in connection with his IS WORTH. Again the reader is stopped: “Values” in mathematics “simply” refers to unspecified members of a class, as in “values of the independent variable.” But Graeber also wants to adduce “value” in the economic sense of “is worth”; which, alas, recurs precisely to what Graeber utterly lacks, namely, a theory of economic value. Instead we have Graeber’s a priori conclusion from his “simply” mathematical conditional: SOMETHING “along these lines” MUST HAVE EMERGED in . . . historical, repeat, historical, circumstances! Graeber’s colleagues in the Philosophy Dept. could have informed him that no space-time theorems can be validly deduced from a priori premises; “correspondence rules,” exactly the purview of real science, are required. Graeber’s descent from his conditional a priori heaven to mundane economic reality comes with another weasel word: PRESUMABLY, he says, money AS WE KNOW IT came about “along these lines”–i.e., along the “lines” of Graeber’s confused thinking concerning money, of which he literally knows nothing. (Knowing is assertoric; the consequent of a conditional is not.)
    This humble reader has spent ten minutes unpacking the only the first few lines of what, we are assured, is Graeber’s considered position. (The rest of his contribution follows in character.) I conclude that the claim that Graeber lodges against his Austrian opponent fully applies to Graeber himself; in Graeber’s words, “We are not, in other words, dealing with a work of scholarship.”

    1. Foppe

      How cutely pedantic. Am I correct in deducing that you are under the impression that economics is a real science, and that you’re trying to prove this by throwing around references to physics-y (that is, real/hard science) sounding stuff?
      I don’t really see the point in engaging with your misreading of the post, but I would humbly suggest that you ask yourself why you are so agitated.

      1. solo

        @Foppe: Thank you for admitting that you are not “engaging with” my post. “The best defense against reason is to have nothing to do with it.” –G.W.F. Hegel

        1. Calgacus

          Being a fanatical pupil of GWFH, it may be worth bringing up his frequent ridicule of using Big Words & Big Names to say – what? To namedrop? To prove you know them? To look smart? .. David Graeber says things differently from the way I do, or from the way you do. The scholarly and gentlemanly (aka nasty and creatively? destructive :-) ) way to proceed is to argue with him on his own terms. Say what you think he said overall and say what you think is wrong.

          Why pick out a passage and obscurely criticize it from an obscure position – for what? – not expounding the Whole Truth All At Once? not hippety-hopping down the citation trail in a preferred style? The sad thing is that you appear to have something to say despite yourself, although how it contradicts Graeber is obscure and unlikely.

          Using ordinary words as in ordinary language, not necessarily the way they are used in a discipline as afflicted with pseudo-science and unintentionally sloppy thinking as economics, can be a virtue.

          1. Philip Pilkington

            He doesn’t have anything to say. He’s just spinning off his own ‘theories’ — if you can call them that. It’s like masturbating. And you can be sure he’s obtaining immense pleasure from it.

            He doesn’t want to engage. He wants to sit there masturbating.

            You see this defensive activity time and again from certain people — usually weirdos that cannot communicate properly outside using mathematical language.

            They come across — in their bastard inability to understand others and engage with them on their own terms –like Montaigne’s prototypical Schoolman, hiding from the world behind the rigid definitions that give him the surety he requires just to get up in the morning:

            “Why does a man with his superior mastery of matter and style intermingle his sharp thrusts with insults, indiscriminate arguments and rage? Let him remove his academic hood, his gown and his Latin; let him stop battering our ears with raw chunks of pure Aristotle; why, you would take him from one of us — or worse. The involved linguistic convolutions with which they confound us remind me of conjuring tricks: their sleight-of-hand has compelling force over our senses but it in no wise shakes our convictions. Apart from such jugglery they achieve nothing but what is base and ordinary. They may be more learned but they are no less absurd.” — Michel de Montaigne

            Pity these people. They have nothing to say. Nothing. As they have fallen out of the human circuit of communication proper.

    2. Philip Pilkington

      Here they come! This is what happens when you shatter illusions. Everyone thinks they’re Wittgenstein. But they’re not. They just cannot deal with the argument on it’s own terms so they start attacking sentence structure like an aphasiac.

      1. David Graeber

        Yeah the guy did the same thing for the interview. Where Murphy merely argued that I can’t prove that Neolithic farmers didn’t do what Menger said they’d do, without providing any reason to believe they should have done it, this guy seems to feel I can’t even prove that I said what I think I said! What a waste of time.

        I could create a logical model of how money could have emerged from the playing of computer games in Neolithic Syria too. Or how “solo’s” posts could actually have been generated by a psychotic weasel. If so, the only response is, who cares?

        1. Philip Pilkington

          “Or how “solo’s” posts could actually have been generated by a psychotic weasel.”

          You may have a point there… if you drop the term ‘weasal’ from that sentence…

          I know well where this sort of line of ‘reasoning’ comes from. And I will say no more than that. I will merely allude.

          Let’s just be very cryptic and say that, like Solo, I am not engaging in metaphor…

      2. solo

        @Pilkington: In fact I addressed, and quoted, Graeber’s argument in its own terms, verbatim; and demonstrated its incoherence. And you don’t have to be a Wittgenstein to know that incoherent expression shatters nobody’s illusions; rather, in academe the former is typically an expression of the latter. Withal, like Foppe and Graeber, you nicely manage to avoid any honest response to the points that I raise. Like any PR-coached politician, you evade embarrassing questions by substituting prefabricated “talking points”–in your case, fetched from your ad hominem file.

        1. Skippy

          When one attempts to engage with a religious moralistic believer – ideology – economics, one is reduced to their dialect, they have no other. Any considerations not already covered by their duly appointed orators, peer reviewed by their betters, is duly awarded priori premises al la heresy.

          Nice of you not to engage in any physical evidence, the observations therefore of it in your minds eye (tough to refute the winds). But straight off into the godhead’s last refuge, dialectic mystic sophistic philosophy…barf.

          Skippy…Dimensional Analysis For Economists…sigh…or how do you measure the effects of a purely human construct (temple caretakers), its roots in faith, and call it a law of the universe. Alternatively how many believers can you get to kill each other and convince them its in their best interest, an undeniable reflection of their own DNA.

        2. Yves Smith Post author

          Your “analysis” was intellectually dishonest and slipshod, which is why no one here it treating it seriously. You start by capitalizing what you call “weasel words” an unscientific and wholly subjective judgement on your part. And the statement you attack is perfectly reasonable and coherent.

          Basically, you put your foot in your mouth and chewed it, and expect us to be impressed.

        3. Philip Pilkington

          I understand all the points you raise — insofar as you can — and they are idiotic and evasive.

          You’re bending his language into what you want it to be and taking away from the main thrust of the argument. What you’re doing is packing his language with a meaning that he didn’t give it.

          You’re not making clear arguments. Instead you’re trying desperately to pick holes which is why your comment comes across as borderline incomprehensible. You’d do well to write in clearer terms, otherwise no one will listen to your solipsistic rot.

          That you spent so much time scrutinising Graeber’s construction of sentences says only something about how deeply (sorry, DEEPLY) the argument has affected you.

          I leave it only up to other readers to decide which argument they find more viable. Meanwhile you can stew in your own narcissism, happy in the surety that you are cleverer than everyone else. Pathetic. Bordeline autistic almost.

        4. David Graeber

          ‘Persuades no one?’ ‘Is not scholarly?’
          Yes, that would explain why
          a) most people who read the piece were in fact persuaded by my argument, not Murphy’s, and this was true even on the Von Mises blog!
          b) my position represents the overwhelmingly predominant scholarly view
          c) the view you propound is current held only by a tiny majority who hold it mainly for ideological reasons (i.e., because Menger said it, or because they see it as essential to a view of human nature to which they have constructed a political edifice they feel they must defend.)

    3. JTFaraday

      I think those WEASEL words, as you put it, are an acknowledgment that we’re NEVER going to have THE one simple answer to a lot of things like “how money was invented.” This seems to me to be a true assessment of life on planet earth.

      Why you assume we MUST all assume we do have THE answer, despite contemporary scholarship having significantly complicated, if not having refuted, your chosen one simple answer is the real question under consideration at this point.

      I’m sure if you poke around in the dustbin of 19th century history, you’ll find plenty of other one simple answers.

      What’s wrong with those?

      1. David Graeber

        Was it not H. L. Mencken who wrote “for every subtle and complicated question there is a perfectly simple, straightforward answer – which is wrong”?

        Or something to that effect.

        1. Calgacus

          Yes, that’s Mencken, but I think it is singularly inapposite here. For Galbraith’s phrase “so simple it repels the mind” is right on the money. The problem is that people, especially recent academic fashion – especially modern mainstream economists – make things too complicated, more complicated than they really are, not too simple. Was solo really being too simplistic? Anybody can use Big Complicated Words & Sentences. The more useful and satisfying thing is to understand the simple short words, to take the time to write short letters.

          Economists who learn a bit of MMT commonly criticize it as trivial. If they really knew any mathematics, rather than being addicted to misuse of rather hoary mathematics in an astrological fashion, they would know that while it can also be a term of opprobium ‘(entirely) trivial’ is the highest term of praise in mathematics.

          1. David Graeber

            Actually what I was driving at was the economists take very simple, indeed, simplistic views of human nature, or of what money is and how it came about, and then make them _seem_ almost unimaginably complicated. It’s like looking at a painting, chopping only two blocks of color from it, then trying to reconstruct something like the original painting by putting different versions of those two blocks back in and endlessly complex variety of combinations…

      2. Philip Pilkington

        When one is so closed to dialogue as the aptly named ‘solo’ one needs assurance that there are simple truths — pereferably oness that no one else can understand.

        In times past we called these people mystics. Today we call them… no, I won’t say it…

    4. Blunt

      Ah, a summary execution of one’s self by the quintessentially American graduate student who manages to confuse jargon, hyperbole and logorrhoea with intelligence, wit and argument.

      Amazing how that sort of bullshot arises like maggots on dead birds in a yard in various wannabe science curricula in the American Academy, including my own, psychology.

      The deftness of speaking straight and being understood is never appreciated by such grad students as they have never lasted three consecutive days in anything remotely resembling a real job among real people since they entered undergrad schooling. *sigh*

  28. MyLessThanPrimeBeef

    I still think daily ‘economic’ transactions started first with barter…when we were primates.

    When one primate picks lice off of some other primate’s back, he is bartering one service for another – namely the other primate’s grooming service.

    One might argue that that is a ‘purchase on credit’ transaction, to the extent if you hand over arrowheads before receiving your pelts ‘not cash,’ i.e. not simultaneously.

    Again, focusing on services, not just on goods, I think when one primate alpha male promises spoils when raiding another troop, the troopers’ service is purchased ‘on credit’ – you work for me now and get paid later. I guess you can argue the whole episode is an economic transaction. If that was the case a long, long time ago, then you could argue credit arrived at about the same time as barter, but not necessarily earlier.

    1. David Graeber

      It seems to me that all you are saying is that there is always a principle of exchange in human interaction and that this is true of primates as well. Sure. Probably all social animals. I would add that there are also principles of communism and hierarchy in all human societies and social animals as well. They mix in endless complicated ways. What I’m not sure I understand is what bearing this has on the origins of money.

      1. MyLessThanPrimeBeef

        I am still trying to get around your claim that barter came after credit.

        If bartering of services went back to our prmiate ancestors, I don’t see how it could come after credit.

        As for the origins of money, can we really know unless we can go back earlier than Mesopotamia?

        1. ReaderOfTeaLeaves

          Barter, as I understand it, requires calculations – which requires math.
          Last I checked, chimps had not mastered math despite being social critters capable of reciprocity.

          1. MyLessThanPrimeBeef

            Let’s just say it’s the simplest form of barter – you scratch my back and I will scratch your back.

            We each get something we don’t have or we can’t do ourselves.

            Later, it could be, you give me what is in your hand and I will give you what is in my hand.

        2. David Graeber

          I said barter economies – in the sense of places where everyone is using barter as their principle way of acquiring goods and services – where they are documented, occur only where or among those for whom the use of money was once widespread and that money becomes unavailable

          1. MyLessThanPrimeBeef

            I think for primates, grooming is a big part of their every economic life. I can easily imagine that to be also the case for early humans.

            Your exmaple of pigs for a daughter-in-law – isn’t that bartering? Aren’t favors on credit really more a form of barter than pure credit? When I say you can have another drink on credit, I expect to be paid by with some US dollars. I associate credit with money. Most people, I imagine, don’t associate credit without money. And when I say you can borrow my car, I don’t expect you to return a camel that has the same or similar economic value. When you return to me a camel, either on the spot or later, that’s barter. Credit doesn’t come to mind immediately. The same with my doing a favor by taking an exam for a girl in the afternoon in exchange for her favor of going out with my roommate that same evening – it reminds me more of barter than credit, be it the same day, a week later or a year later.

          2. MyLessThanPrimeBeef

            For instance, Sumerians, though they had the technological means to do so, never produced scales accurate enough to weigh out the tiny amounts of silver that would have been required to buy a single cask of beer, or a woolen tunic, or a hammer—the clearest indication that even once money did exist, it was not used as a medium of exchange for minor transactions, but rather as a means of keeping track of transactions made on credit.
            ======

            If I read this correctly, while it rules out the use in minor transactions, it doesn’t rule out the use in transactions that were not minor, i.e. normal transactions or major transactions.

          3. David Graeber

            Yes, it is quite clear that merchants, for instance, did use weighed silver in dealing with each other in certain sorts of transaction—though the fact that they never produced a system of uniform weighed units however is telling. Credit was the primary form of money between, say, 3200 and 700 BC. Not the only one.

          4. David Graeber

            The particular type of gift exchange I described is the one closest to bartering, yes, but all you are saying is that there are many human transactions that involve a principle of reciprocity. That’s true. There are others that don’t. Why single out those that do as having special significance? My argument in the book is that we become obsessed by reframing all interaction as exchange as a result of our becoming accustomed to the use of money and we start ignoring all the others, or trying to twist them around to claim they’re somehow “really” exchange, barter, etc too.

        3. MyLessThanPrimeBeef

          But really, it’s our lack of knowledge about what happened pre-Mesopotamia that we can not say anything definitive about the origins of money. The barter-money-credit and the equally neat and clean credit-money-barter hypotheses may not accord with the messy nature of human development.

          1. David Graeber

            Actually I start by making this point – that there were doubtless convergent lines of development interacting in complicated ways and therefore no single “origin of money.” This being said, those who look to barter economies or even barter between strangers as the origin of money have yet to provide a single reason why this was likely to have been the case – other than that certain 19th century economists came up with models, based on provably false assumptions of how all non-monetarized societies “must” work, on how it could have happened.

      2. Clonal Antibody

        The origins of the phrases “Thank You” or “Danke Schoen” will tell you much about how debt obligations were dealt with in ancient societies. This despite the fact the this phrase has now lost most of its original meaning — becoming instead a platitude.

        The origins of “Thank You” go back to the Sanskrit roots. In the European languages, the word “Thank” or “Danke” has no antecedent meaningful predecessor. The only meaningful phonetic predecessor seems to come from the Sanskrit branch, where the Sanskrit phrase “Dhanya Ho” meant “May you be enriched” This was a direct acknowledgement of a debt relationship, acknowledging the gift, and an implicit promise of fulfilling that debt at a future time. This is much more in line with your (David Graeber’s) understanding of the development of a monetary system.

        I did make these observations earlier on a thread in “Social Democracy for the 21st Century: A Post Keynesian Perspective ” blog

      3. tkwelge

        Did you read “Super Freak-o-nomics?” There was a chapter that described an experiment where chimps were taught to use money (using rewards and not violence), and interestingly, they took to money in a fashion similar to humans that have been using money for generations. This isn’t an argument by the way, I actually want to know your thoughts on the subject.

        One other thing; I remember watching the discovery channel as a kid, and I remember watching monkeys trade goods directly for sexual favors. And yes, it was a direct spot trade. It would be interesting to imagine that this could be the origin of all barter exchange.

        1. David Graeber

          The principle of exchange has always existed in human society, it is one (1) component in our sense of morality, and is always mixed together with and in complex interplay with other principles. The problem is that as soon as people see it’s there, they conclude it’s the only thing there, or the most important thing there, or proves that swapping of consumer goods between neighbors was the origin of money, or all sorts of other things that it’s mere presence doesn’t prove at all.

          So again, I’m not saying no one ever swapped anything, in any sense, until the rise of the market. Of course they did. I am saying why does the mere fact that sometimes people swap things become the explanation of all social phenomenon?

    2. JTFaraday

      “When one primate picks lice off of some other primate’s back, he is bartering one service for another – namely the other primate’s grooming service.”

      Yeah, that’s why I think. But according to our new fangled evolutionary psychologists, monkeys picking nits is
      1). evidence of the prehuman origins of ALTRUISM, and
      2). proof that humans didn’t need religion to develop morality, because
      3). they’re just naturally altruistic (or something).

  29. Anonymous Jones

    I really appreciate this contribution to the site. I must admit that I have read some of your writings on anarchy, and for a multitude of reasons, many of which are documented elsewhere, I have a profound disagreement with you on that front.

    That said, this is an impressive, substantive post filled with thought, logic and facts. I respect your ability to simply and persuasively set forth your argument, and I am ordering your book right after I finish this comment.

    [OK, OK, I have to say it. I think your writings on anarchy have the same fantasy, counterfactual intuition and religious fervor you attack so well here, but that is surely a matter of opinion (oh well, I guess you disagree with that, too...of course, that's why anarchy doesn't work; people don't agree and then they join together with others of like-minded persuasions in an attempt to use collective power (which seems not, as you have said elsewhere, to be made necessary by the effects of the pre-existing power itself or even if so, insoluble in the continuity of existence) to insist that their preference matrix take precedence over that of others)...blah, blah, blah...I know, too many parentheticals...]

    1. David Graeber

      Of course it can’t be proven whether a truly free society – as anarchists conceive it – would work. Neither can it be proven that it would not. I’m an optimist.

      If I were running around blowing people up in the name of a vision of society that might or might not be possible, one could certainly argue there’s a fundamental problem there. But it’s not been anarchists who’ve been blowing people up for roughly the last century or so, it’s… well, exponents of pretty much all the other political philosophies.

      1. Freude Bud

        (paraphrasing): “not anarchists who have been running around blowing people up for the last century or so.”

        Not in the vast numbers of other ideologies, but in the early 20th century anarchists, of various stripes, did in fact blow up a few people.

        On another note, I am halfway through Debt: The First 5,000 Years and it’s brilliant. So much so that even though I haven’t finished it I’m considering recommending it before doing so to all the serious readers I know.

        I’m not sure if it’s best to ignore the Austrians, but I think the advice given you earlier that they’re ideologues and thus conversation, as it were, is going to be difficult, if not outright impossible at times. You might have dodged a bullet seeing as they haven’t actually read your book–imagine how they’ll take the assertion that bullion is the money of war!

        1. David Graeber

          Fine, it you like, I will withdraw “century” (roughly 100 years) and limit my statement to a mere 85-90 years. Not sure why this makes that big a difference.

          1. Freude Bud

            Well, if you include the Spanish Civil War’s anarcho-syndicalists in Catalonia, 85-90 years would not be enough–given that by blowing people up we simply mean killing them for ideological purposes/reasons.

            Please recognize that I am only making the point for the sake of historical accuracy–I do not quibble with your overall point that anarchists are not responsible for much of the ideologically-driven murder of the 20th century–indeed they are nearly at the bottom on the scale of murder.

    2. Toby

      Hi AJ,

      might I offer a thought exercise by way of a middle road?

      There is only anarchy if we think of this formation as self-organization. Hierarchical and anarchical social modes arise out of a fundamentally anarchical life-ground (no one forces the sun to shine, the rain to fall, etc.) in response to environmental conditions. Human hunter gatherers were, I’ve read, exclusively anarchic/egalitarian, because that mode made most sense. It ‘worked’ too. With the advent of farming our coevolution with the rest of nature presented us with different challenges which led inexorably to hierarchical arrangements. This allowed alpha-male types to become useful to the group, where formerly they had been a threat to be dealt with. This meant ambition became prevalent and growth became, in time, endemic to the hierarchical form. Lots of history and war went by and we end up with nation states and corporations wired to grow, in the broad context of a money system which collapses when economies are not growing.

      To get off this suicidal addiction to Perpetual Growth we need new social arrangements. I don’t see a return to primitivism, but I do see a return to far looser and more flexible social organizations with more local autonomy. These things have to be learned, and we have to teach ourselves how to do it. Hierarchical set ups will always be with us, as will anarchical, but my sense is that the hierarchical are at their wisest and healthiest if they emerge and recede out of and back into a directly democratic social life-ground or base. For this to be possible we need a new money system and a new sense of what money is, such that we encourage ourselves, on purpose and by design, towards steady state or de-growth economics, a larger commons, far more political and geographic freedom, and far more explicitly self-organizing processes.

  30. Ron T

    I agree that economists will hate this tory because it shows that you cannot do economics without modeling credit/debt. Barter is simply not a good approximation.

    As for the Austrians, they cannot possibly accept this as it makes the whole religious system based on faith in the prophets (Mises, Menger etc) crumble: if Menger was wrong once, maybe he is not infallible? Maybe armchair pondering isn’t the best way to understand the world? What then?

  31. Siggy

    Interesting piece and a few cogent comments.

    But then; does it truly matter how ‘money’ came into existence?

    Does it mattter whether the money medium is redeemable for a fungible commodity or whether your money medium is a piece of paper that is not redeemable and which can be created predicated on some some artificially determined ratio?

    When the money medium is, in fact, a promise to repay, then you have the problem of can the debtor perform. That for example is where Greece and its compatriotes find themselves, they can’t perform.

    I think that anthropoligists have a great deal to offer to the economics dialogue in that it is, after all, a political economy wherein the actors are people with all of their frauds,foibles and failings in operation.

    Whether it be tulips, seashells, fictional soybean sheds or a foot of soybean oil floating a few thousand barrels of water, there is this busness of misrepresentation, if not fraud. The profligate extension of credit creates transactions and generally increasing prices, better spend, better speculate, better invest, you might miss the train. If you worried about missing the train, understand, it’s too late the train has left.

  32. twente

    This is a really interesting post. I am interested now in reading your book. More of this debunking of common economic myths please! But only if they are as well backed up by evidence and research like in this case…

  33. konst

    Just a quick note. haven’t read the entire article yet but Dr. Graeber when you wrote

    b. Similarly, the number of documented marketplaces where people regularly appear to swap goods directly without any reference to a money of account is also zero. If any sociological prediction has ever been empirically refuted, this is it.

    If you are referring to Menger’s view of how money emerged, then it isn’t a sociological prediction; it’s a conjecture.

      1. konst

        I meant Menger’s view of how money emerged is a conjecture.
        Unless I misunderstood your comment, “prediction is a statement about the way things will happen in the future.”
        There is no prediction of a future event in the emergence of money; all occurred in the past.

        In contrast “A conjecture is a proposition that is unproven but is thought to be true and has not been disproven.”
        (yes those definitions are from wikipedia)

        1. David Graeber

          I guess I didn’t make myself clear. I am aware of the technical difference between the two words (though one can speak of sociological laws being “predictive” in different ways, i.e., “if a society lacks money then it will operate by means of barter” is a predictive statement, and that was what everyone from Smith to Menger did assume would have to be the case, not just of one society long ago but of all societies that lack money, and it’s false.) What I was specifically asking is: “what difference does it make?” Unless you are once again arguing that the fact that these economists claimed that all moneyless societies would operate by barter is irrelevant, we can narrow down the argument to the fact that this included some moneyless societies of the distant past, which we can’t prove anything about for certain one way or the other, and are back to what I called the “little green men” hypothesis – saying “you can’t prove it didn’t happen!” without providing any reason to think it did.

  34. TimOfEngland

    Interesting – having read David’s last article posted here I was pretty sceptical about a “gift culture” but this week I realised this idea is viable – because I have just unwittingly taken part in it.

    16-17 months ago I was having a spring throw-out and came across some of my Dad’s 25-30 year old sea fishing reels (like winches!). They were in pretty bad shape (Dads been gone 14 years). Instead of throwing them out with the other stuff, knowing they were the quality product of their time, I offered them for free to a Pub acquaintance – the only person I knew who would be interested in them.

    The reaction of everyone else was “hey you can ebay them!” etc. but I insisted he could just have them. I had my personal reasons like “good home”, “he’ll revive them”, “they’ll be enjoyed” etc.

    Thing is, next week I’m going to a family get together to the coast and somebody suggested booking a boat fishing trip… I still know the guy I gave the reels to as we still frequent the same pub, so I asked if he had suitable tackle for a day trip and could I borrow some? He has come up with the perfect set up for a short in-shore trip. No problem. I fact I’m probably the winner the reel is excellent the rod almost brand new.

    Conclusion – I had almost forgotten about the reels – until – I wanted to collect on that favour (“You owe me one”). I might never have collected had the circumstances not come up, but when they did – I collected. I knew that he would reciprocate because the same group of guys saying “ebay ‘em” were also present and it would of course have been socially unacceptable for him NOT to come up with the goods especially as they are only a loan.

  35. casino implosion

    I’m excited to read Debt. Seems like it might serve to beef up the first parts of “The Great Transformation” that Polanyi was weak on.

  36. Skippy

    I wonder how neolithic humans would feel, examples of technology sharing, chipping obsidian, amongst non family / tribal members…about credit. At what point did humans engage in centralized ideology, stuff it in a hut, expect everyone else to pay for it and for that privilege of servitude extended credit *by* the arm chair thinkers…eh.

    Skippy…there is always a hut, pyramid, moi, temple, big square rock, royal palace, digitized exchanges, which everyone is required to spin around with out question or suffer the greatest punishment known to our species…social exclusion. Me wonders why?

  37. konst

    Only got 5 hours sleep so forgive me if this lacks details, especially since I’m not an expert just an amateur. Of course I could be wrong on these points but I don’t think I am.

    To Dr. Graeber, you are mistaken if you think money is a mathematical means of account to measure two goods against each other. (Consult the Austrian school on why).
    —–
    In another comment you wrote
    September 13, 2011 at 10:54 am
    Thanks, I’ll get back to work on that!

    (I did win some of them over on the Von Mises Institute blog – which rather surprised me, to say the least.)

    So that’s evidence of prejudice before this whole debate with Austrians?
    —–

    And two questions:
    have you found that coercion is necessary to institute and maintain these systems of money set up by the temples?

    1. Paul Tioxon

      Coercion is what General Pinochet in Chile did with Hayek’s ideas of giving the government back to private capital, one disappeared person at time. But keep working on that high moral ground thing from Austria, the nation that did not know when to stop giving world historic figures. It should have stopped with the Vienna Circle and spared us Hitler and Hayek.

      1. David Graeber

        Well I guess it depends on how you define “coercion.” The Temples seem to have been weird entities, not governments, not claiming a monopoly of force, but clearly not exactly free-association communes either. For instance, the workers in the cloth workshops seem often to have originally been orphans, refugees, or disabled people – making them seem almost like charitable institutions. But in later periods there were also war captives, suggesting that if they were orphanages, it was of a rather Dickensian sort. Perhaps one analogy might be corporations, which are organized by a top-down bureaucratic command system within, claim not to make anyone do anything they don’t want to do outside, but owing to their domination or even monopolization of certain key resources, in fact wield enormous power.

        1. aet

          Claiming a monopoly of force is very far from having a monopoly of force.

          Since when did force listen to, or care about, mere “claims”, anyhow?

          1. David Graeber

            Some Temples probably did claim all sorts of monopolies of force, since they claimed to speak for all-powerful or at least very-powerful gods. None of them had anything like a monopoly of force, except, perhaps, within the Temple.

        2. konst

          Well what I meant is was there any type of force or threat of force to accept the money system set up by the temples?

          It might be analogous to legal tender laws of today or some other threat. They don’t have to exercise it everyone but just make examples of a few dissenters. Similar to the atmosphere of fear perpetuated “democratic” governments today.

      2. tkwelge

        Dude. Hayek had nothing to do with Pinochet making people disappear. This is such BS. Hayek was an economist who gave economic advice. He was not responsible for one atrocity. He did not help Pinochet come to power. Geopolitics is complicated, and advising those on the geopolitical stage is doubly complicated. The fact of the matter is that Pinochet is probably on the same level as George Washington and Che Guevara. There are no snow white individuals in political history. If you are arguing that Hayek is a bad person or caused people like Pinochet to exist, you are revealing the depth of your own insanity.

        1. Foppe

          Who cares that there are no ‘snow white people’. The relevant question is whether there are better people than Pinochet (or Hayek).

        2. Cahal

          ” My personal preference inclines to a liberal dictatorship and not to a democratic government where all liberalism is absent ”

          - Hayek

          1. tkwelge

            @cahal

            That is a rational statement from Hayek. I too would prefer a liberal dictatorship to a democracy that is completely lacking liberalism. I’m still not seeing an example of Hayek saying, “Killing lots of innocent people is a good idea!” or jumping out of an airplane with a knife in his teeth to oust Allende. All he did was give economic advice. Hayek has written against totalitarianism in many of his books, and accusing him of being pro pinochet rather than pro liberalism is utter nonsense.

          2. Foppe

            (And with the fact that he took rather a lot of democratic governments to be “hostile to liberal principles”. Anyway, it again is a stupid dichotomy, and if we look here, we see a Hayek who is saying “the fact that Pinochet was a ruthless dictator is unproblematic because a liberal government ultimately replaced him — which is pretty much analogous to arguing that Hitler wasn’t bad because he was ultimately defeated.)

          3. Cahal

            Firstly, Hayek’s definition of ‘liberal’ basically means ‘free market policy’.

            Secondly, if you too would prefer a dictatorship that adhered to your ideals over a democracy that didn’t, you too have revealed yourself not to be interested in true freedom but dogma or corporatism. That is the point I was making – it has little to do with Pinochet.

        3. David Graeber

          I don’t know, would you make the same argument for a Marxist who rushed off to advise Mao on collectivization approaches during the Cultural Revolution?

        4. Foppe

          And then there’s also this point, made by Naomi Klein, in The Shock Doctrine:

          The British prime minister was well acquainted with what she called “the remarkable success of the Chilean economy,” describing it as “a striking example of economic reform from which we can learn many lessons.” Yet despite her admiration for Pinochet, when Hayek first suggested that she emulate his shock therapy policies, Thatcher was far from convinced. In February 1982, the prime minister bluntly explained the problem in a private letter to her intellectual guru: “I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable. Our reform must be in line with our traditions and our Constitution. At times the process may seem painfully slow.”
          The bottom line was that Chicago-style shock therapy just wasn’t possible in a democracy like the U.K. Thatcher was three years into her first term, sinking in the polls and not about to guarantee a loss in the next election by
          doing anything as radical or unpopular as Hayek was suggesting. For Hayek and the movement he represented, it was a disappointing assessment. The Southern Cone’s experiment had generated such spectacular profits, albeit for a small number of players, that there was tremendous appetite from increasingly global multinationals for new frontiers—and not just in developing countries but in rich ones in the West too, where states controlled even more lucrative assets that could be run as for-profit interests: phones, airlines, television airwaves, power companies. If anyone could have championed this agenda in the wealthy world, it would surely have been either Thatcher in England or the American president at the time, Ronald Reagan.
          … The British military’s counterinvasion of the Falklands was code-named Operation Corporate, and though it was an odd name for a military campaign, it proved prescient. Thatcher used the enormous popularity afforded her by the victory to launch the very corporatist revolution she had told Hayek was impossible before the war. When the coal miners went on strike in 1984, Thatcher cast the standoff as a continuation of the war with Argentina, calling for similarly brutal resolve. She famously declared, “We had to fight the enemy without in the Falklands and now we have to fight the enemy within, which is much more difficult but just as dangerous to liberty.”27 With British workers now categorized as “the enemy within,” Thatcher unleashed the full force of the state on the strikers, including, in a single confrontation, eight thousand truncheon-wielding riot police, many on horseback, to storm a plant picket line, leading to roughly seven hundred injuries.

          1. David Graeber

            I just looked up Hayek’s letter to the Times in support of Pinochet’s dictatorship, written _while_ Pinochet was torturing and murdering thousands of activists. It contains lines like “I have not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende” – a rather remarkable line, since I don’t remember hearing about anyone being removed from their homes to be tortured to death under Allende, but it seemed to happen rather frequently under Pinochet. But I suppose if one asked only apparatchiks the same question in Stalin’s Moscow, or perhaps canvassed a few random people found walking down the street there and asked if they felt free under Stalin, you’d probably get more or less the same response.

            Other choice lines, “That a limited democracy is probably the best possible known form of government does not mean that we can have it everywhere, or even that it is itself a supreme value rather than the best means to secure peace…” Here speaking about Chile, a country that, before the military coup Hayek supported, had been a parliamentary democracy for 80 years. Hayek pretty much states outright that as far as he is concerned, the privatization of the pension system is much more important than whether people have the right to vote, and that the protection of property rights is far more crucial to human liberty than whether people have the right to express – well, for instance, the opinion that the pension system should not be privatized, without the fear of being taken away, have electric cattle prods applied to sensitive areas of their bodies, and eventually dropped out of helicopters into the ocean.

            Just saying

          2. tkwelge

            @Graeber

            Yes, and there were a lot of marxist guerrillas operating at the time too. Even if you were to believe that every victim of Pinochet was pure as snow, and even if you include the number of people who were at least closely related to victims of pinochet, you only come to about 200,000 total affected. The population at the time was 10 million. That means that 98% of the population wasn’t even directly related to a victim of the regime. That isn’t to say that everything is okay. But on the broad spectrum of regimes that were implementing various ideologies, Pinochet does not rank as the most violent. And the statement from Hayek was a personal statement. How does that one statement brand him as a supporter of the concept of totalitarianism in its most ruthless form?

            And Naomi Klein reads more like a propagandist than an actual historian.

          3. tkwelge

            >Hayek pretty much states outright that as far as he is concerned, the privatization of the pension system is much more important than whether people have the right to vote,

            See, it’s statements like this that make me think that you have no interest in being intellectually honest. Allende’s chile was not paradise. Allende’s chile was knee deep in some of the worst economic conditions imaginable and things were only getting worse. You talk as if everything was occurring in a vacuum. Allende also loosely supported Marxist guerrillas, and he never even came close to winning a majority of the population’s support in any election.

  38. craazyman

    Saying money arose from barter is like saying music arose from noise.

    Those ecnomists. My Lord. Where even start.

    Noise is similar to music, but the notion of willfull and imaginative design of FORM makes it more dissimilar.

    Money is a form of imagination design that requires and incorporates so many foundational concepts totally absent from barter.

    You can’t jump from barter to money any more than you can walk across the Grand Canyon with one step. You need an airplane or at least a hang-glider, and that requires a considerable amount of imagination and purposeful design.

    1. craazyman

      by the way, I have no research or evidence for any of my theories, claims or ideas. They all comes from navel gazing and total slothful lazy channeling, often after red wine and xanax. But I always have confidence, anyway.

      1. Calgacus

        Your theories, claims or ideas sound interesting. Must I follow your strict regimen of xanax, wine, navel gazing and total slothful lazy channeling, to absorb them, or can I slack off once in a while? How can I subscribe to your newsletter?

        1. aet

          I dunno; the difference between ‘music’ and ‘noise’ often seems to be merely a matter of opinion.

          Is the drawing of that distinction truly sound?

  39. Frustrated Researcher

    You think trying to get hidebound economists to give up there unfounded idea of barter to money to credit shibboleth. Try to get these same mossbacks to give up the dogma of the Rational Expectations Theory and the Efficient Market Theory, even after you show them the empirical evidence. Economists seem to have one function, being lapdogs who bark on the commands given by the political and financial elite.

  40. Fonz

    I think I’m going to have to read this maybe a dozen more times to understand it all, but it was simply amazing. And that’s coming from someone who finds this sort of stuff boring. Thank you.

  41. RueTheDay

    Austrian economics is nothing more than an elaborate defense of the rentier masquerading as a defense of the entrepreneur and capitalist. One need only look at their generally positive view of deflation to see this.

      1. F. Beard

        Because price inflation is bad does not mean price deflation is good. That is the logical error the Austrians have fallen into.

        Our problem is that we have a single government/private sector money supply that does not serve either very well. The solution is to have separate government/private sector money supplies per Matthew 22:16-22.

        1. tkwelge

          I’ve never seen an austrian say that deflation is everywhere and always a good thing no matter what. The Austrian argument is that the value of money should be determined by a market. Not that money should always increase in value.

          1. F. Beard

            The Austrian argument is that the value of money should be determined by a market. tkwelge

            If only! Instead they are typically for a government enforced gold standard which would be price fixing of a metal.

            The Austrians pose as libertarians but their money “solution” is actually fascist:

            “The government does have the right to establish the form of money that citizens must use to pay their taxes. The government should limit itself to a statement regarding the weight and fineness of the tax coins. If private enterprise produces coins that meet these standards, the government must accept such coins as valid for the payment of taxes. The government lawfully controls the form of taxation; but it should not have any power to monopolize the production of coins. Governments have always asserted this authority, and they have always done so to the detriment of liberty.” Gary North from http://www.lewrockwell.com/north/north895.html

            In other words, North would allow private counterfeiting of government money so long as it was done with gold.

          2. tkwelge

            >If only! Instead they are typically for a government enforced gold standard which would be price fixing of a metal.

            There are austrians that believe that a gold standard would be superior to what we have now. At the end of the day, most, if not all, believe that money should be completely voluntary. No standards enforced.

            >In other words, North would allow private counterfeiting of government money so long as it was done with gold.

            Good for North. However, he doesn’t represent all of austrian econ. From that quote, it seems to me that North was saying that the government has a right to determine which money it will accept in the form of taxation. However, he believes that the government shouldn’t be the creator of that money, able to print it at will. There are actual mechanisms in private money and credit creation that slows down the expansion of medium, whereas the government control of money makes it possible for infinite expansion to occur at the whims of tyrants.

          3. F. Beard

            From that quote, it seems to me that North was saying that the government has a right to determine which money it will accept in the form of taxation. tkwelge

            That would violate “equal protection under the law” since whatever money form government chose would have a huge advantage over other money forms it did not choose. Thus government money MUST be inexpensive fiat.

            However, he believes that the government shouldn’t be the creator of that money, able to print it at will. tkwelge

            That is where he is precisely wrong. Who else should create government money but government? However, government money should ONLY be legal tender for government debts, not private ones.

            … whereas the government control of money makes it possible for infinite expansion to occur at the whims of tyrants. tkwelge

            That would not be a problem if genuine private currencies were allowed. Then only government and its payees would suffer if government overspent wrt taxation.

          4. tkwelge

            >That would violate “equal protection under the law” since whatever money form government chose would have a huge advantage over other money forms it did not choose. Thus government money MUST be inexpensive fiat.

            When people talk about “equal protection under the law,” they are usually talking about people and not money. I agree that such a policy is not the optimum, however, an organization is within its “rights” to accept whatever form of payment it chooses, governments included. The fact that people are forced to pay taxes it what destroys the voluntary element. Personally, I’d be in favor of a government that accepts any form of money that can be related to other forms of money by price. North’s point was that getting the government out of the money creation game was the most important step. I don’t know that much about North, but notice how I said “most, if not all” not “all” Austrians.

            >That is where he is precisely wrong. Who else should create government money but government?

            Is there a point to this statement? No money should be created by force, period. Nobody should be forced to accept money, nor should they be forced to use a specific money, nor should they be forced to pay taxes against their will.

            >That would not be a problem if genuine private currencies were allowed. Then only government and its payees would suffer if government overspent wrt taxation.

            True, but I prefer to get all force out of everything. If an entity similar to government can exist without force, than sure, let it print money to its heart’s content, as long as nobody is forced to accept it and nobody is forced to pay it.

          5. F. Beard

            No money should be created by force, period. Nobody should be forced to accept money, nor should they be forced to use a specific money, nor should they be forced to pay taxes against their will. tkwelge

            True but irrelevant. The point is that we do have government and that it should not serve private interests such as gold owners or miners. That would be fascism.

            More importantly, the money creation rate should not be tied to something so silly as the mining rate of gold. IF genuine private currencies were allowed then the private currencies would keep fiat honest and vice versa.

            Philosophically, the need for separate government and private money supplies is clear since government is force and the private sector is voluntary cooperation.

          6. tkwelge

            >Philosophically, the need for separate government and private money supplies is clear since government is force and the private sector is voluntary cooperation.

            Statements like this don’t really mean anything. Government is force and the private sector is voluntary cooperation, therefor we need separate monies? None of that made any sense. WHy not get rid of force all together? Why do we need force?

            >The point is that we do have government and that it should not serve private interests such as gold owners or miners. That would be fascism.

            No initiation of violence, no problem. No government, no problem. Rigorous property rights, no problem.

          7. F. Beard

            Statements like this don’t really mean anything. Government is force and the private sector is voluntary cooperation, therefor we need separate monies? None of that made any sense. tkwelge

            Government money is backed by force; taxes must be paid with it. In addition to being FORCED to pay taxes, should the population also be FORCED to buy gold to do so? See the problem? What should only be a private money form at most is now backed by government force!

          8. F. Beard

            No government, no problem. Rigorous property rights, no problem. tkwelge

            And who will protect those property rights if there is no government?

  42. Matt

    You have to admit, his climb-down is high comedy. Essentially:
    - I did not say that you are a doofus, merely that you struck me as a doofus.
    - If I actually had to read people’s books or understand their arguments, it would be really hard for me to fill my blog.
    - I am right because I cannot imagine a world in which I am wrong.

  43. Jeremy Sapienza

    This is really fascinating, something I never thought about before — I never would have encountered this much detail in such a relatively short form on the history of trade. What is odd about Austrians is that they are supposed to take a “whatever people want” view on markets, so it’s odd to see such line-defending from Murphy on such a marginal issue of history. There’s no good or bad way to come to a mutual agreement on how and in what quantity to exchange goods for other goods or compliments or stories or future approximate goods, and the field of economics should really only be concerned with it from the point of view of curiosity. I take the view that in modern times of high population and easy travel, money is the most useful. It obviously doesn’t preclude the rise of something else entirely that I couldn’t imagine, and it definitely shouldn’t inform anyone’s view of what came in the past if we have better subsequent evidence.

  44. tkwelge

    You know, a lot of people on the von mises site were really trying to understand your argument and discuss with you on equal terms. You are responsible for a lot of the defensiveness, as many of your statements are designed to create a defensive response in others. That’s just my two cents.

    And no, Austrian economics does not hinge on Menger’s theories. The Austrian’s are simply arguing that money is a useful tool that naturally allows individuals to trade effectively. I never heard the argument that Austrian Economics DEPENDS on the idea that gold came before credit until you stated it.

    Personally, I don’t get how your argument is meaningful. The observations are definitely meaningful in every way, as are many of your insights, but the fact that credit and fixed prices came first does not mean that money or barter is any less meaningful. Necessity turned humanity into economizing creatures. Personally, my view of anthropology and economics is that humanity moved from less effective forms of exchange to more efficient forms of exchange, and those who didn’t make the move were out competed by those who did. That’s commensurate with your observations.

    Gift exchange doesn’t solve the coincidence of wants at all, and your description of events basically proves that a fixed medium of exchange did become necessary for large markets to operate. Whether or not it was imposed by force at the beginning makes little difference.

    I’m just not seeing the actual disagreement between what you are saying and what most Austrian’s believe. I’m sure some cling to the idea that pure barter societies once existed, but I believe that they are making the mistake that our ancestors understood exchange as we do and were just waiting for money to appear. The fact of the matter is that man had to learn how to economize, and yes, this probably came at the tail end of thousands of years of warfare and oppression before everything converged.

    1. David Graeber

      Actually, what happened was that Murphy wrote the piece making it sound like it was a rebuttal of the book, even though he hadn’t looked at the book, and then I was greeted with people appearing all over Amazon, the internet, etc, declaring that my work had been completely discredited.

      That’s what’s responsible for the defensiveness.

      When I appeared on the Mises site (and, especially, when Murphy did not) I was greeted by many very gracious and engaged interlocutors and noted that I was quite gratified by this.

      Actually, I never said that my work _can’t_ be reconciled with an Austrian position. But again, I wasn’t even writing specifically about Austrians until proponents of that school, specifically, took offense, and have continued to pound away at the issue incidentally, despite no other major group of economists getting all that worked up. So it seems a bit odd to say it’s all in my head.

      1. F. Beard

        Actually, I never said that my work _can’t_ be reconciled with an Austrian position. David Graeber

        Don’t bother unless you are a fan of usury. The Austrians are absolutely devoted to it. They justify usury by claiming it is the price paid for having money now as opposed to having it in the future. But that assumes that there are no other forms of finance but borrowing money which is false. Common stock, for example, is a means of finance that does not require any borrowing. It shares wealth and power rather than concentrates it. But the Austrians also believe a natural aristocracy should rule us so I expect they would be opposed to democratic forms of money.

          1. Jamie

            I’ve seen it remarked that it may well be no coincidence that many tended to present their names so as to suggest nobility – e.g. Ludwig von Mises, Frederich von Hayek, Eugen von Böhm-Bawerk, etc.

            Incidentally, my favorite example is Eugen von Philippovich von Philippsberg. It looks like he was borderline Russian/German and wanted to be sure he covered all his bases; hard to say which explicit semi-feudal aristocracy will be the Next Big Thing, after all.

            (You suppose America’s highest-profile Austrian School adherent will ever be known, perhaps posthumously, as ‘Ron von Paul’? It does have a certain ring to it…)

          2. tkwelge

            This is completely incorrect. And no, even if there are other means of lending, that doesn’t mean that lending at interest isn’t justified under time preference. The fact that you can lend to people under different terms does not alter this fact.

            Austrians are in no way anti egalitarian.

  45. smintheus

    An informative and interesting summary of your research.

    I think however that it minimizes the influence of the state as an actor in developing money and currency. The large temple complexes in Mesopotamia were considered extensions of the state, in that there was no secular/sacred divide between state authorities and temple authorities. The Mesopotamian rulers boasted of the care they showed in overseeing and regulating and securing the gods’ holdings (agricultural and industrial) as well as in maintaining proper religious observances. These rulers portrayed their role as the gods’ head servants in their cities/states, which in their entirety were regarded as the domains of particular gods. So it’s not quite right to describe temple-economies as a function of “non-state bureaucracies”. Instead, the temple bureaucracies constituted the largest segments of the state bureaucracies.

    The emergence of money in archaic Greece is fairly well documented, especially given that we also have the Homeric poems which describe the pre-monetary economies of Bronze Age and Dark Age Greece. The adoption of currencies by various Greek poleis may or may not have followed the appearance of bullion produced by aristocratic families (perhaps for their bands of followers or freebooters), and in the case of Corinth the early appearance of coinage may have been especially helpful in facilitating trade. But on the whole, it’s clear that the introduction of money in Greece generally went hand in hand with large projects being undertaken by the city-state in question (often large building projects, or military infrastructure or other projects that would be difficult to manage without currency). This is similar to the Mesopotamian temple-economy phenomenon, where a complex state institution found it easier to manage its affairs with the aid of currency. It seems that currency became a fixture in Greek city-state economies largely from the top down, introduced by state bureaucratic necessities and then trickling into more use in private commercial activities.

    One side note, which supports David Graeber’s argument that pre-monetized economies engage in a bewildering variety of exchanges that an outsider might not be able to predict: In Homeric society (however defined), it seems that some exchanges of valuable commodities (what in a modern economy we’d consider a lump payment) involved temporary rather than permanent payment. That is, some commodity could be handed over to the recipient for a specific period of time and then returned to the original owner. To us, that would seem like a loan, but in Homeric society everything about it except its temporary nature suggests something close to what we would understand as a payment.

    1. David Graeber

      Yes, you are right, the state is crucial in Greece, and I like the overall thrust of your analysis, but I’d add a quibble. In the earliest periods, which are presumably those we’re talking about, it’s not clear there actually was anything we’d recognize as a state. Later, yes, Temples were extensions of the states that centered on Palaces, but originally, Palaces seem to have been imitations of the original Temples, which did not claim any sort of monopoly over force, administration of justice, imposition of uniform revenue systems, military systems, etc. It’s actually very difficult to figure out exactly what’s going on because it befuddles our conventional categories.

  46. LAS

    Everyone else has moved on to more recent topics. However, the ethnographic study of debt/credit is quite fascinating and so I scribble on the blog wall this late hour after its original posting.

    David’s well-reasoned arguments suggest that creation of credit is not a big problem to society. It’s the effort to quantify the credit and impose that quantity as natural or constitutional law that is the big headache to us all.

    Look at all the “ceremonies” our “non-tribal” society performs in order to impose quantity. Examples are… (1) We moralize about debtors, saying they owe so much because they went into a contract fully knowing the debt they were assuming (not admitting that debtors were led to expect different, more optimistic circumstances for paying it back, etc.) and (2) The probability that financial fraud had a substantial role in creating “credits” and credits maybe should be rolled back.

    Our public posturing sure sounds like a ritual to me! One that I’m not finding much fun in, primarily because of the social destruction. Money was perhaps created to alienate a man from his labor and permit a bureauracracy to accumulate the value of his labor.

    Nice work, David! Keep it up.

  47. Geoffrey Allan Plauché

    Dr. Graeber,

    I think you be interested in another Austrian response to your position.

    It begins:

    David Graeber and Robert Murphy have been debating the validity of the monetary regression theory. They seem to be talking past one another. Graeber is assuming that Austrian theory agrees with neo-classical theory in areas where it does not, and Murphy is assuming that Graeber is substantially more familiar with Austrian ideas than he seems to be. To clear up the confusion, we need to take a step back and start at the beginning.

      1. Geoffrey Allan Plauché

        I don’t understand your objection. Clearly it is a response to David Graeber’s criticisms, and it attempts to clarify his misunderstanding of Austrian Economics and explain why he hasn’t refuted the Austrian money regression theorem.

        1. F. Beard

          … explain why he hasn’t refuted the Austrian money regression theorem. Geoffrey Allan Plauché

          Even if the market freely chose gold as money once that does not mean that the market would continue to freely choose gold forever. Thus the Austrian Money Regression Theorem is irrelevant.

          1. Geoffrey Allan Plauché

            F. Beard,

            Did you even read the post? He doesn’t even bring up gold once. The money regression theorem doesn’t specify that gold is necessarily the first and only money in any society. The author explains why the theorem is necessary — because it explains how money came into being. Without the theorem, we have an infinite regress and no way to get to a monetary economy from a non-monetary one.

          2. F. Beard

            No. I did not read the post. But my point remains, the Money Regression Theorem is irrelevant because the free market must AWAYS be able to change its mind about which moneys it shall use. That rules out government recognition of any money form but its own fiat.

          3. Geoffrey Allan Plauché

            F. Beard,

            “No. I did not read the post.”

            Okay, so you have no idea what he actually argues in the post. None whatsoever. Good to know.

            “But my point remains,”

            No, it doesn’t. You don’t know what you’re talking about with regard to the money regression theorem.

            “the Money Regression Theorem is irrelevant because the free market must AWAYS be able to change its mind about which moneys it shall use.”

            This doesn’t make any sense. The money regression theorem doesn’t hold that once a money has been selected by a free market or any society (first you thought it had to be gold but now I guess you’ve backed off of that ignorant claim) that it cannot switch to a different money. And it most certainly doesn’t prevent this switch! :D

            “That rules out government recognition of any money form but its own fiat.”

            What?

          4. Geoffrey Allan Plauché

            F. Beard,

            In case you didn’t catch it before, the money regression theorem only explains how money can arise in the first place. It is your objections that are irrelevant because they misunderstand what the money regression theorem is about.

          5. F. Beard

            (first you thought it had to be gold but now I guess you’ve backed off of that ignorant claim) Geoffrey Allan Plauché

            The Austrian idea of money is scarce and/or precious metals but gold is their favorite. I guess they have stockpiled the most of it hoping it will be remonetized to their great profit.

            that it cannot switch to a different money. And it most certainly doesn’t prevent this switch! :D Geoffrey Allan Plauché

            The Austrians I have talked to are in favor of requiring that government recognize gold as money. But that would have the effect of granting gold a huge competitive advantage over other private money forms.

            “That rules out government recognition of any money form but its own fiat.”

            What? Geoffrey Allan Plauché

            To avoid granting any advantage to what should be purely private money forms, the government should only recognize its own fiat as money per Matthew 22:16-22 (“Render to Caesar …”).

          6. F. Beard

            It is your objections that are irrelevant because they misunderstand what the money regression theorem is about. Geoffrey Allan Plauché

            The Austrians I have read use the MRT to justify government recognition of gold as money.

          7. skippy

            @Beard, But it is private monies, see how they work. Imagine all those De Beers competing to keep monies honest, see De Beers history. Debt, Usury et al yeah, its silly, people die, get sick, nature happens, hope that can be worked out.

            Skippy…unstable, well it is a human trait, whats a body to do? Maybe with folks like Dr Graeber assisting, we can have an honest discussion, resolution pending.

        2. Geoffrey Allan Plauché

          F. Beard,

          “The Austrian idea of money is scarce and/or precious metals but gold is their favorite.”

          Not because of the money regression theorem. Please familiarize yourself with Austro-Libertarian arguments before replying again.

          “I guess they have stockpiled the most of it hoping it will be remonetized to their great profit.”

          LOL

          “The Austrians I have talked to are in favor of requiring that government recognize gold as money.”

          Well, it’d be better than government fiat money. But I’m an Austro-Libertarian and I want government to abolish its fiat money and allow private competition in supplying money — in other words, to get out of money altogether and not interfere with the market.

          “But that would have the effect of granting gold a huge competitive advantage over other private money forms.”

          Such as?

          “To avoid granting any advantage to what should be purely private money forms, the government should only recognize its own fiat as money per Matthew 22:16-22 (“Render to Caesar …”).”

          So you prefer to have government fiat money crowd out purely private money forms? How is that any better?

          “The Austrians I have read use the MRT to justify government recognition of gold as money.”

          The MRT does not by itself necessitate gold or any other commodity be money, nor does it necessitate that once a particular commodity is settled upon that you’re stuck with it. My preference is for government to not mandate anything as money, for it to get out of money altogether, and to allow the market to provide money. Many Austrians just think that the market will return to gold.

          1. F. Beard

            Not because of the money regression theorem. Please familiarize yourself with Austro-Libertarian arguments before replying again. Geoffrey Allan Plauché

            The Austrians wish to abolish the “stealth inflation tax” by making money expensive to create. But that is stupid. Like any other product, money should be made as cheaply as possible. The solution to the “stealth inflation tax” is not to limit the amount of money government can create but to allow the private sector to escape that tax by using genuine private money alternatives for private debts.

            “The Austrians I have talked to are in favor of requiring that government recognize gold as money.”

            Well, it’d be better than government fiat money. Geoffrey Allan Plauché

            Fiat is the ONLY ethical government money form. Furthermore, to limit the money creation rate to the mining rate of a metal is absurd.

            But I’m an Austro-Libertarian and I want government to abolish its fiat money and allow private competition in supplying money — in other words, to get out of money altogether and not interfere with the market. Geoffrey Allan Plauché

            Government should get out of the private money creation business. And to do that, it must recognize only its own fiat as money or recognize EVERY private money form equally. Since the latter is impossible, it follows that government must ONLY recognize its own fiat as money.

            “But that would have the effect of granting gold a huge competitive advantage over other private money forms.”

            Such as? Geoffrey Allan Plauché

            Such as being able to pay taxes with gold.

            “To avoid granting any advantage to what should be purely private money forms, the government should only recognize its own fiat as money per Matthew 22:16-22 (“Render to Caesar …”).”

            So you prefer to have government fiat money crowd out purely private money forms? How is that any better? Geoffrey Allan Plauché

            Genuine alternative private currencies would keep fiat honest and vice versa.

            “The Austrians I have read use the MRT to justify government recognition of gold as money.”

            Many Austrians just think that the market will return to gold. Geoffrey Allan Plauché

            Then gold needs no help from government. There should be no obstacles to using gold or anything else for private debts. However, debts to Caesar must be paid ONLY in Caesar’s money.

          2. Skippy

            Please do not mistake my remarks as flippant but, Austrian – insert blank anything, is just backwards-ization. Now I did not live then, although, from my studies its not a place I would send anyone too, regardless of transgression.

            Skippy…fortresses of worship…cough /…banks or how many more De Beers can humanity suffer…eh. Secular fiat or repeat!

            PS. BTW look at those 1CT+, Belgium cut, IF, D to I common rocks zoom. Gold bah! There’s your real private monies at work guys, do you like it, is it socially beneficial[?], should we just have a big free for all?

          3. F. Beard

            should we just have a big free for all? skippy

            “Free for all” means paradoxically “free for none”.

            It is competition that keeps people honest. That “power corrupts” thingy. Ya know?

          4. Skippy

            @Beard, you never addressed my main example of private monies, diamonds.

            Skippy…competition, yeah I know that one, leaves lots of dead people laying around.

          5. F. Beard

            you never addressed my main example of private monies, diamonds. Skippy

            Diamonds, being a commodity, are a silly money form because a commodity money, if used as a commodity, ceases to be money and if used as money ceases to be a commodity. And an unstable money supply is not a good thing.

        3. Foppe

          To be somewhat blunt, basically everything up to the assertion ‘Economically, “barter” applies to all interpersonal exchanges that do not involve money; exactly what form the barter transactions take is an empirical question and beyond the reach of economic theory’ strikes me as little more than filler material, while the assertion itself seems to me to suggest that the author is basically missing the point (or unwilling to even consider what) Graeber is trying to point out. I am not sure if you’ve read the previous interview on this site; that might clarify things a bit. If not, I really do recommend you read the book (or watch one of the interviews on yt) ;)

          1. David Graeber

            So if a Sumerian Temple stockpiles grain and then doles it out to Temple workers, that’s barter?
            If 17th century Seneca suffering from fever declares “I’ve had a dream” and then all his neighbors arrive to present him with material goods until one gives him something that was in the dream, in an attempt to cure him, that’s barter?
            If a Kwakiutl chief who has been humiliated by being caught arguing with his wife then declares to everyone in earshot, “oh, I was just entertaining you – now everyone please come into my house and take anything you like?” – that’s barter?
            if a Celtic nobleman, on receiving a gift from an enemy so magnificent he cannot possibly return something equivalent, commits suicide in an act of defiance after which the treasure is distributed to his followers – is that barter?
            should I go on?

          2. Foppe

            I suspect the answer the Austrians would give is that all of those examples are “uninteresting from an economical perspective”.

        4. David Graeber

          Which is vaguely hilarious because I never even mention the Austrian regression theorem in either the interview or the book. Some people are so self-involved!

      1. F. Beard

        Hang in there, please. The Austrians would be no improvement over what we have, bad as it is.

        Plus it is fun watching them being taken down from a different angle. :)

          1. Geoffrey Allan Plauché

            David Graeber,

            “So you think I should respond?”

            Yes. Why not engage in fruitful dialogue? The author wrote a civil, thoughtful, and informed response to your position. He is well-versed in comparative law, finance, and Austrian economics. I think he succeeds in defending the Austrian account of money. Not that I think Robert Murphy failed, mind you, but this piece seeks to resolve the problem of you two “talking past each other.”

            Besides, he and I and Murphy and many Austrians are all fellow anarchists (though not of the same stripe as you, I hear). Are we not at least partial allies against the state?

          1. F. Beard

            Actually I do. I used to be an Austrian. I have read Rothbard, Hayek, North, some Mises and quite a few other Austrians and I used to spend a lot of time reading Lew Rockwell.com and mises.org. I debated the folks at mises.org till I proved to my own satisfaction that they are not libertarian but fascists.

            Also the Austrians are devoted to usury (they call it “time preference”), depressions to “purge the malinvestments” and a government enforced gold standard.

            OTOH, to their credit, the Austrians oppose fractional reserve banking and the Fed. However, they fail to notice that FRB cheats borrowers too.

          2. David Graeber

            Yes I must admit that for my own part, I can’t see how lending money at interest would really operate outside the state, or alternately, some mafia-type coercive enforcement mechanism that would eventually turn into another state. I always bear in mind what happened in the part of rural Madagascar I was in when the police basically disappeared in the ’80s. Economic life still went on much as before, except it became impossible to amass large quantities of land and turn your neighbors into wage laborers, because they wouldn’t stand for it and would make your life impossible in various ways, and you couldn’t lend money at interest, because without the cops, there was really no way to come and shake people down and repossess their stuff. The only exception was this horrible woman named Nordine who lived in the town of Arivonimamo who used to lend money to old people who still remembered the colonial period, and she had a cousin with an old police uniform who’d show up at their door once they fell into arrears and start carrying off their silverware and whatnot.

          3. tkwelge

            Are you serious Dr. Graeber?

            How about a system of credit references? I would lend to somebody if they were willing to pay interest and they had good credit references. Even if I couldn’t go break their legs.

  48. tdraicer

    >Of course it can’t be proven whether a truly free society – as anarchists conceive it – would work. Neither can it be proven that it would not. I’m an optimist.

    There is where you lose me-but then I’m not an optimist. So I’ll settle for FDR’s Four Freedoms (which we are a long way from achieving) and leave it at that.

    1. David Graeber

      All a matter of taste. Also depends on how you define “work.” Does our society “work”? If I’m not mistaken, about half of Americans go through at least some period of clinical mental illness in their lives (mostly, clinical depression.) One might make a case that any society that drives half its members crazy at some point in their lives doesn’t work either.

      1. F. Beard

        One might make a case that any society that drives half its members crazy at some point in their lives doesn’t work either. David Graeber

        Excellent point. The usury and counterfeiting cartel is the source of the “rat-race” and other social ills.

  49. Ro

    I think a major motive behind the push of the myth of money as a necessary medium of economic exchange is to prevent any serious debate on alternative systems of exchange and rationing of resources. A serious inquiry into the origins and history of economic behavior may help to undermine this myth of money. If people realize that there are other ways to conduct business besides the one we have taken for granted, over time the system may experience a collapse or a major contraction through simple non-participation. I remember being told in my course on Indigenous American response to colonialism that the average Southern California native prior to European arrival worked 6 weeks per year to provide for themselves. The rest of the year, they devoted their time to other pursuits. That is a far far cry from the 40 hour work weeks those of us who are lucky enough to work get nowadays with the two week vacation we might get. Is this really necessary? Maybe money is here just to make us work. Just maintaining possession of property requires an input of money, making it impossible to settle any place and divorce oneself from the system, even if able to meet all other needs alternatively. A lack of labor is enough to stop the wheels of capital from turning. And people work their entire adult lives to have a few years at the end to not work.

    I am starting to believe that maybe the most effective way to undermine capitalism would not be through any kind of world revolution or forceful change of any kind. It would be simply the mass abandonment of the system we have and take for granted, in exchange for a more self sufficient alternative. A reversion to the system of the tribe. Maybe instead of finding a way to get more money for myself and the poor, I should help myself and others learn to live well without it. Maybe it’s not about taking money away from the wealthy but finding a way to stop the flow of capital into their hands from our own.

    If the system of money is not such a monolithic law of human relations then this might be a reasonable goal. I don’t know. I don’t know anything except that I need to learn a lot more. Thanks for this brilliant article, I feel like I learned something important today.

    1. David Graeber

      “Maybe money is here just to make us work”

      and interest-bearing debt even more so, I warrant.

      yes, think you hit the nail right on the head there.

      1. Foppe

        David Harvey makes a similar observation in his book The Enigma of Capital. E.g.:

        Debt relates to the future value of goods and services. This always involves a guess, which is then set by the interest rate, discounting into the future. The growth of debt since the 1970s relates to a key underlying problem which I call ‘the capital surplus absorption problem’. Capitalists are always producing surpluses in the form of profit. They are then forced by competition to recapitalise and reinvest a part of that surplus in expansion. This requires that new profitable outlets be found. (p. 26)

        And the thing encouraging the financiers to set the interest rates higher, in turn, can be stoked by inflation fears (or wealth taxes).
        (One of the annoying things about money is that, unlike goods, it doesn’t rot (except through inflation) so that it creates an expectation of value stability over time.)

  50. Darren Allen

    Dear David Graeber,

    I read your last posting here, got “Debt” am half way through and its opening up all kinds of new routes in the old suede. I must thank you – your book has made me look harder at the use of thanks, but I suppose it can also just mean “you do good and good in me responds” or something like that.

    Anyrate, I wonder if you could clear something up for me. I don’t quite understand the mechanism by which the social economy passes to the debt economy. I understand the foundations now – it needs violence – violence to rip slaves out of context, violence to rip conception of self out of context (?) and violence to hoard up a load of excess grain etc (?), but how does this lead to everyone in debt? If I”m a farmer and the local big fella’s got a load of slaves, is defining his own self as master-slave and is hoarding up the grain, why must I necessarily borrow from him? How does it happen that everyone ends up borrowing from him, everywhere?

    Or a foreign king moves in and takes my land, then demands 100 bushels (or whatever) of barley every year. How does this end up as debt – is it that this demand is immediately framed as a written account, that I spend the year up to harvest owing him that 100 bushels?

    Maybe you make this clearer towards the end of the book, or maybe I’m just daft.

    I also have another question. What are your favourite books on pre-history and archeology? That’s no doubt a huge question – could you pick out some readable-by-layman masterpieces from friendly authors?

    And one final question – possibly a bit much though. My own position on history is rather nuts, but very possibly novel and I’d really like a comment on my basic point. It is that the sense of self, the time-space creating divider and classifier is a tool which at some point in the past (pre-ag – about twelve thousand years ago) started to “take over” consciousness. I’m basically applying Ivan Illich’s conception of systems which pass tipping points to consciousness and early consciousness. I go into a little more detail here…

    http://www.gentleapocalypse.com/2010/06/history-of-world-from-pre-history-to.html

    This account deliberately moves into fantasy towards the end, but the basic point is in the first few paragraphs, upon which I’d appreciate any comment if you have time and inclination.

    All the best,

    Darren Allen

    1. David Graeber

      Well, the mechanisms are probably multiple, and happened over a long time. If the question is how do you end up with a class system where the rich become creditors to the poor, it has everything to do with the state. In Mesopotamia the state developed irregularly, there were no direct taxes on non-conquered people, but merchants and temple officials started lending grain to farmers in years of bad harvests and getting people in debt traps. In other places, traditional patron-client relations turn into debt relations when impersonal markets rise – as seems to have happened in Greece, sparking social crises. In others, states manipulate taxes to ensure subjects fall into debt to be able to pay them…

      If you’re interested in this specific sort of thing, the best author on pre-history is definitely Michael Hudson.

      As for consciousness – it strikes me that the idea of the fully conscious individual is a philosophical fantasy. Consciousness is at best uneven and sporadic and, throughout human history, always has been.

      1. Darren Allen

        I see. Thank you. Its all pretty tidy in my brain now – which, as you said, probably means there’s all kind of things I still don’t get, but it at least it makes sense.

        I’ll check the author.

        As for consciousness – I agree. My point was rather that the thinking and dividing and intellectual “ripping out of context” you describe is, it seems to me, part of a mechanism which is ordinarily and misleadingly called “self”. The problems you write about started when this mechanism got out of control and took over conscious experience.

        I appreciate your time on this.

        Darren

        1. David Graeber

          No problem. The last point is quite interesting. I have an idea to someday write something about consciousness, how it’s basically a dialogic phenomenon, it exists between people, in conversation (even an indirect one such as we are doing now), since the window of consciousness when you’re alone is usually 3-7 seconds wide, but when you’re talking to someone, it can be much much longer. This raises interesting questions about what “thinking” really is.

  51. SH

    I have no time to read either side’s arguments but judging by the amount of posts, this looks like a big winner.

    First, Austrians are sticks in the mud. It’s hard to push an argument on them.

    Second, Mises.org had a strategy before anyone else did. If the cost of information is free, the demand will be unlimited so they took that to heart, and to their credit, they have the assets now to push arguments.

    Three, the other sides are finally catching up, but don’t forget that cost of information argument. It took a concerted effort to “catch up”.

    Four, admit when you’re down. This argument schools the opposing argument. Reason wins.

    Five, money is not the argument, value of services is the Austrian argument. Despite Mises theory of credit, the crux is whether or not value is innate to the individual or to some other force. Menger created the school by more imaginary arguments as to how if you have a group of buyers and seller, high bid wins. No matter what the unit of account, or maybe even if you have that experiment where if the next guy’s option is to bid a dollar or lose a hundred, no matter what, high bid wins. That was how he defeated the labor school of value.

    Sixth, there are some Austrian stalwarts out there that scoff at this argument. The question is not where money came from, it’s who has the right to control money. Let’s get to that argument for once. Key phrase (politics of envy).

    Seventh, for the Mendelbrot fans out there, this changes nothging. Value and exchange is so undefineable that anyone arguing over that is a moron.

    It’s good to see a nasty put down every now and then, and when it comes down to it, Austrians are low on the fun scale, but that does not count them out on their analytical abilities. In my opinion the argument has always been why did we not try and stop the problem before it happened? Why are we always mopping shit up?

    Good Stuff.

  52. Paul

    Dear Mr. Graeber, I was not familiar with your book until reading this fascinating post, and I plan to get the book ASAP. I do have a question (which may well be answered in the book). I remember reading something a while back (can’t remember the source, sorry) suggesting that some of the early-to-mid 20th century anthropological work on gift economies has since been discredited, or heavily revised. I think maybe the specific reference was to Malinowski’s work in the Trobriands, with an implication that there’s a broader problem with the concept.

    Is there anything to this? Has credible anthropology cast
    doubt on the gift economy concept recently?

    Thanks for your post, and I look forward to reading your
    book. -Paul

    1. David Graeber

      Well there’s lots of problems with the notion of “gift economy” and literature about it. One problem is it’s a residual category, any transaction that isn’t a commodity exchange can be called a gift, but then, if so, gifts have no necessary common qualities. Another debate was over whether these are really “gifts” in the sense of non-self-interested, which was a false debate, since Mauss and Malinowski never really argued that they were – just that our distinction between totally self-interested market transactions, and totally altruistic charity, didn’t exist n such societies, because neither market nor charitable institutions existed. Another debate centered on whether Mauss was right to insist that there was a triple obligation to give, receive, and repay, which is wildly overstated. Another is whether it’s right to classify “types” of economies, and say one is all about gifts, the other all about commodities, when in fact you have a mix of different sorts of motives and economic relations in any society. You get my drift. The one thing there definitely wasn’t was anyone, anywhere in anthropology, seriously arguing that barter economies existed.

      I myself rather avoid the term “gift economy” because it’s basically a residual category but I do make use of it sometimes to make it clear that we’re not talking about a place where there’s anything like a market.

  53. konst

    To Dr. Graeber and other,

    It seems clear that many of you are not really familiar with the concepts of Austrian econimics (AE) as evidenced by your use of terms of neo-classical economics as though they are applicable directly to AE.

    A good intro is a series of short youtube videos made by an intelligent girl who goes by the name of praxgirl.

    So far there are 10 videos posted.

    http://www.youtube.com/user/praxgirl

    Watch them in order to get the full meaning.

    1. David Graeber

      Sure I’ll put it on my list. But the succession of events here is a bit silly. I wrote something directed at the founding assumptions of Neoclassical economists, never mentioning the Austrians. Murphy replied saying (a) my arguments are wrong, and (b) they don’t rebut Menger. Then after my reply he withdrew (a) but kept (b). Now you’re saying my problem is I conflate Neoclassical and Austrian. I’m afraid it wasn’t me. I actually criticized Neoclassical assumptions. If defenders of the Austrians replied, it’s because _they_ assumed they were the same, not me.

      1. konst

        Well ok but it seems to me that each group, i.e. Austrians and those who side with you on this matter, seem to use some of the same terms to mean different things. Both groups might even have more in common than each thinks but don’t have a common framework or terminology to communicate their positions. So I think some misunderstandings have occurred in this debate.

  54. konst

    Dr. Graeber in a comment above you wrote:

    September 15, 2011 at 8:51 pm

    I guess I didn’t make myself clear. I am aware of the technical difference between the two words (though one can speak of sociological laws being “predictive” in different ways, i.e., “if a society lacks money then it will operate by means of barter” is a predictive statement, and that was what everyone from Smith to Menger did assume would have to be the case, not just of one society long ago but of all societies that lack money, and it’s false.) What I was specifically asking is: “what difference does it make?” Unless you are once again arguing that the fact that these economists claimed that all moneyless societies would operate by barter is irrelevant, we can narrow down the argument to the fact that this included some moneyless societies of the distant past, which we can’t prove anything about for certain one way or the other, and are back to what I called the “little green men” hypothesis – saying “you can’t prove it didn’t happen!” without providing any reason to think it did.

    I’m not an expert on these matters. I looked for such a quote or passage in Menger’s “Principle of Economics” and couldn’t find any. Do you have a reference to any of Menger’s works where he says that?

    1. David Graeber

      Well in Menger’s cited essay on money he describes people in a moneyless economy “taking their goods to market.” I suppose you could argue that the entire exercise is purely hypothetical and he is not suggesting that this is how moneyless economies actually operate, but given the history of economic thought on the origins of money he is clearly drawing on, this seems unlikely.

  55. konst

    One more thing you may not be aware of Dr. Graeber,

    Something similar, on the origin of money, has been vigorously debated before between Austrians and MMT people and is an ongoing debate. That may explain the heated discussions on the matter.

  56. Jeff

    Murphy replied here:

    http://blog.mises.org/18371/murphy-replies-to-david-graeber-on-menger-and-money/

    “So we see that the existence of communities—whether in the distant past or even in our times, in isolated regions of the planet—where the members don’t use money or barter, is hardly a problem for the economist. What I do have a problem with, is Graeber telling me that money could have emerged from such a non-market framework. This was my fairly modest point. “

    1. Foppe

      Neat, normative way to use “emergence”. Anyway, fairly unpleasant (that is, self-congratulatory) discussion thread below it.

    2. David Graeber

      Well, I suppose I could next challenge Prof. Murphy on how, if he can’t imagine how money could emerge from an economy where barter is not practiced, many such economies actually have produced forms of money – only, what I call “social currencies” – that is, money that was primarily used to rearrange social relations rather than to buy and sell things. Man, that guy really would have done well to have read the book!!

  57. Foppe

    Apropos of nothing, in Ch.6n8 (p. 129) you say that the tenth commandment refers to the desire to possess someone as a debt peon. But although I find the interpretation appealing, you do realize that this is not a conventional reading of that passage at all, right? Because e.g. Matthew 5:21-22 gives an entirely different reading of that passage (And I cannot find Hudson’s article anywhere — making it about 12 years overdue, given that Wray’s paper is from 1999).

    1. Foppe

      (Which is to say that aside from the fact that just about nobody nowadays understands the passage this way, one might wonder whether your/Hudson’s reading of that passage had become lost already by the time Matthew was written. The wiki suggests Hoffman disagrees with the standard translation, and prefers “to take” over “to covet,” but a cursory search of his book on amazon does not list any instances of the word debt in his book either.)

      1. David Graeber

        It’s funny how that’s the commandment that’s always heavily censored when right-wing types want to put the 10 Commandments on their courthouses or whatever – they don’t use the one from the Bible, they use the one from the movie.

        “You shall not covet your neighbor’s house. You shall not covet your neighbor’s wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor.”

        If this really were a passage about lust in one’s heart (presumably, for the wife, and not for the servants, or the ox or donkey) then why does the house come first, and the donkey come last, and the wife somewhere in the middle? And why would this one statement in what is after all a legal text, unlike the other 9, have examples that are just there to serve as metaphors – “don’t dream about sleeping with your neighbor’s wife just as you wouldn’t want to dream about about acquiring his donkey” and not allude to something you’re actually not supposed to do? Or, finally, is the text really alluding to totally different things, so that dreaming of acquiring your neighbor’s house refers to, I don’t know, some sort of financial operation, a loan, dreaming of your neighbor’s wife refers to seduction, dreaming of your neighbor’s ox refers to theft, etc etc… All of this seems quite implausible to me. Wray’s suggestion that it refers to debt peonage would at least be consistent, since houses, wives, servants, and domestic animals were all things that could be repossessed.

        1. Foppe

          Well, that reading does have an illustrious history — the belief/argument that everyone who has ever thought a sinful thought is equally in need of salvation is, as far as I understand Christianity, quite powerfully felt to be true.

          1. David Graeber

            Definitely has. Was it already present in this stage of Biblical law? It seems a bit inconsistent with the other texts, but everything has to start somewhere. But even so, that still doesn’t mean that the passage didn’t refer to debt peonage, just that they are saying “don’t scheme to remove your neighbor’s stuff through financial manipulation because having designs on your neighbor’s stuff is itself a sin.” Since after all, otherwise, why not manipulate your neighbor into giving up his donkeys and wives?

          2. Skippy

            I wounder what the results of a neurological – psychological study, looking at the effects of an artificially 24/7 induced feelings of guilt, would reflect in both individuals, groups and society at large, in expanding time frames.

            Skippy…franchise fast-food McyD’s[?] of the soul – altruism.

  58. bob

    My favorite part of the Misses crowd is the pictures.

    They assume the identities of wigged aristocracy who, in their time, would have had any of these “bloggers” drawn, quartered and chopped up to serve to the swine.

    1. skippy

      300th post…bob, and you point out, that if their shingle don’t put a huzz down your spine…you ain’t read your history.

      Sippy…Romanticism has a lot to answer for…eh!

  59. Felix

    I just want to tell you that I am so ordering your book tonight because everything I’ve read from you in the last few weeks has completely blown me away with it’s smartness. Not the most articulate comment, but at least an enthusiastic one! Thank you!

  60. Foppe

    But if one’s honor is ultimately founded on one’s ability to extract the honor of others, it makes perfect sense. The value of a slave is that of the honor that has been extracted from them. (175)

    But this can only work, presumably, when slaves are drawn from one’s own society, since otherwise their previous status would go unrecognized or could not be recognized. (And perhaps one could also argue that honor societies do not scale well, and get into trouble once inter-community trade starts to play a major role, given that status recognition depends intricately upon people roughly knowing everyone involved, so that they can calculate how honorable someone is under that logic.)

    1. Foppe

      (Honor societies of the Irish variety anyway, seeing how the Greek response differed quite a bit.)
      Having said that, I’ll stop dumping my sloppy non sequiturs here, now — or at least until I’ve read how feudalism connects to this.

  61. SK

    I can’t comment on your take on Murphy, having read very little of either yourself or Murphy. But if things are as you say, the “real reason” behind the money from barter theory seems clear to me. Talking about how bad and chaotic and impossible things used to be before money (“You could only make one thing! You could only trade it for one other thing!”) is a threat. By explaining the origins of money in this way, they let us know that without money there will be utter chaos, and we will be unable to get any of the things we need. No need to get into psychology when the ideological purpose of the theory is quite clear.

  62. Hal O'Brien

    “In fact, the recipient now owes him a favor. Now, he might well just sit on the favor, since it’s nice to have others beholden to you, or he might demand something of an explicitly non-material kind…”

    This reminds me very much of Eric Frank Russell’s short story, “And Then There Were None.” It can be found on the web with a search.

    “(N)on-state bureaucracies are a phenomenon that no economic model would even have anticipated existing. It’s off the map of economic theory. But look at the historical record and there they are.”

    One doesn’t even need to do that. Every year Fortune magazine conveniently publishes a list of 500 large ones.

  63. MRos

    Civil communities never needed money to exist. Money came into the world with tributes and taxes, and will disappear together with sovereignty, “returning” to basic “tribe communities” with nothing else but “solidarism”.

    The first “financial” credit was needed to establish power. The result was tax and tribute, and a more debt… This debt had become “money” by ordinance. There is no such thing as “invention of money in private societies”.

    Your researches on the field of money are brilliant, Mr. Graeber. And they add so many details to the global picture. And there is still so much to tell that I only can hope you keep on going and sharing your ideas and results with the “civil community” so they might be able to understand what the nature of “thing” is that they are so crazy for.

    So few is known until know. When did solidarity societies become “greedy”? What made that those structures of ruling power could arise? The number of members in those “tribes” that passed a certain limit (Dunbar’s number?)?

    Money is debt. And the history of money is the history of power, of people ruling over other people. If people understand that money never has been a “social convention” and that it is not there to “lubricate” barter business (as there isn’t such thing as barter business), and that we do business and work only for the sake of money, then many things would change.

    It seems that financial capitalism has been the most effective way to expand power to its maximum, to generate the greatest surpluses in history, the greatest wars, the greatest debts, the greatest inventions, the greatest wealth, the greatest poverty…it had the power to drive the mankind to its limits…can we still find the red stop button? Understanding the nature of money and debt its origin might be a first step.

    1. David Graeber

      let’s hope
      and of course, we have no idea what a truly free society would ultimately look like. I just want to find out!

  64. John Thomas

    I admit you make some good points and I’d like to read your book. But you make things too either/or. We can certainly say during the Middle Ages most people lived via non-monetary means, the feudal system was an exchange obligations, etc. But then again, cities had money.

    Monetization ebbs and flows, and if you take the broad definition of economy here, we’re still not fully exchange-based. People who volunteer often do so because they feel their organization does good work, and I imagine quite a few when they say that think, it’ll do good work for me if I’m down on my luck. The age-old custom of exchange-of-obligation lives on in this simple form of insurance.

    1. David Graeber

      All true. Why do you think I am denying any of this? I’m talking about the origins of money in this particular essay, since that’s what got the Austrians worked up, not what happens once money exists, which is, as you say, complex, multifaceted, and the main topic of the actual book.

  65. kb

    “a monomaniacal sociopath who can wander through an orgy thinking only about marginal rates of return”

    While it’s true that classical economists defined value in terms of material goods, you’re ignoring the fact that modern economic thought accepts a more abstract concept of value. People don’t behave to obtain the most monetary value; rather, they make decisions in order to gain the most “something” with the least cost to themselves. That “something” could be satisfaction, social standing, goodwill–or the most cloth for spears.

    It may not make *financial* sense for me to give all of my money to charity, but the feeling of satisfaction and self-worth would have greater value to me than the potential spending power of cash.(Theoretically speaking.) I’m still gaining something.

    1. David Graeber

      Quite right. I’m ignoring it. Intentionally (I’ve dealt with it at great length elsewhere.) I don’t take such claims seriously (a) because they’re always an afterthought, or a rationalization throw in at the last minute if someone brings up some obvious flaw in economists’ arguments – I mean, no economist as far as I know _starts_ their analysis from such observations, and they try their best not to appeal to “non-economic” motives if they possible can – and (b) because the argument is pointless and circular, because if all economists are saying is that people act with some purpose in mind and that purpose, whatever it might be, can be represented as a “good” they’re trying to acquire – they’re admitting they are not a science and have no predictive power because they have no real models for why and when and in what proportion, a person will wish to get the goods, or get the good feeling that comes out of knowing he was nice to someone, or get the status points, or get the sense of fun that he gets out of engaging in some kind of transaction, or whatever else it may be. So really I find this objection rather pointless.

  66. An International Studies Student

    A truly eye-opening post. As a novice in the field of economics, I’ve always been unsettled by the discrepancy between human behavior as predicted by economists and their textbooks and human behavior as it springs forth from our natural impulses. As you said, the barter myth is a strikes at the heart of this and is without a doubt why economists are loath to admit its grave shortcomings. Thanks for the edifying read.

  67. Matthew Mitchell

    While the points you make are interesting and show various ways money can come about (Though I haven’t read your works so I haven’t got the full understanding of your conclusions, premises and evidence), you cannot attack the whole school of Austrian economics because there are those which hold views inherited from classical economics. Austrian economics is very relevant for today’s world but I’m sure many economists will be open to advances in the knowledge of history and would be open minded.

    There is disagreement in the Austrian school of economics, I agree with a lot of the stuff that, for instance, Carl Menger brought to the table, though I have my own views and I don’t always agree.

    My point is that while your points are interesting, your attitude towards the end is harsh and inappropriate.

    1. David Graeber

      You are turning things backwards.

      I wrote a critique of Adam Smith’s assumptions, taking his actual statements line by line, and then pointed out mainstream economists have not abandoned these false historical assumptions – in fact remained strangely attached to them – despite overwhelming evidence. I barely mentioned Austrians. Some Austrians took it upon themselves to attack me, so as to defend Menger. It’s not that I am unfairly singling out Austrians and frankly, I am really tired of being lectured on that account. The Austrians chose to attack me because THEY thought my argument undermined their assumptions in some critical way. It wasn’t the other way around. You want to go lecture someone on being crude and unfair, go lecture Murphy and the others that followed in his wake. Not me.

  68. Jane

    The word “money” comes from the Latin word “moneta,” coin, money. Coins were so called because they were minted in the temple of Juno Moneta, Juno the Reminder. (The same root gave us “admonish.”) This may support your thesis of credit & debt as the origin of money, since credits and debts have to be remembered. There’s also a parallel with the Sumerian temple bureaucracies.

    1. David Graeber

      Yes, Keith Hart’s book “the Memory Bank” starts with an interesting exposition of this.

      1. Jane

        And the etymology of “sell”:

        ORIGIN Old English sellan (verb), of Germanic origin; related to Old Norse selja ‘give up, sell.’ Early use included the sense ‘give, hand (something) over voluntarily in response to a request.’

  69. A cynic

    It is entirely possible that the societies that the anthropologists got to observe were stuck where they were precisely because they did not invent money and credit. In other words, the anthropologists’ samples are overwhelmingly populated by losers.

  70. anon

    What Graeber seems to be missing is that gift economies are a special case of berter economy. When I praise the neighbor’s pig and he gives it to me as a “gift”, what has in fact occurred is an exchange of my equity for the neighbor’s pig. In other words, I have issued an uncertain promise to my neighbor. which may or may not be redeemed at some future date. In a “high trust” society, this is clearly more efficient than a simple spot exchange, and may involve lower transaction costs. But the exchange is still bilateral and still suffers from the double coincidence of wants: if I can only offer chickens (and my neighbor knows this) but my neighbor would prefer copper tools, the deal will fail.

    Money-based markets allow for multi-lateral exchanges. As a side effect, they extend the network of exchanges beyond high-trust neighbors, which results in equity deals declining in frequency, being mostly replaced by spot transactions.

    1. David Graeber

      I’m not missing anything of the sort. What I described is that one peculiar sort of gift transaction that most resembles a barter exchange (as I stated explicitly as far back as my value book in 2001) – so as to demonstrate that even in this case, the “double coincidence of wants” problem would not occur – and your reason why it would is absurd, having to presume a neighbor who could only want one thing from you for the rest of your life. In any normal gift economy, one does not have to wait for the previous donor to ask for something, one can simply offer something, and it is basically impossible for that person to refuse. Finally, to say that gift economies are a special case of a barter economy is manifestly absurd because BARTER ECONOMIES DON’T EXIST. What part of this don’t you understand? You can’t say that all economies that actually exist – whether gift or commodity – are variants on some imaginary system that exists only in your head.

  71. steve

    I like much of what Austrian economics has to say about credit bubbles. The Keynesian argument that the solution to one bubble popping is to create another one seems wrong. (i.e. the solution to debt problems is more debt.)

    Having said that no field of study or school of thought is without error. David Graeber seems to have thoroughly discredited the Austrians standard story about the origins of money. Good for him.

    Did the Austrians respond in knee jerk denials. Yes they did. Einsteins response to new theories about quantum mechanics was knee jerk as well. He famously said “God does not play dice.”

    Another witticism with some truth to it is science advances one funeral at a time. In time, I expect a new crop of Austrians to adopt a new origin of money story, just like the old crop of physicists who discounted quantum mechanics as an effective mathematical model but not representative of reality was replaced by a younger crowd who really did believe the implications of the math that electrons exist in multiple locations at once.

  72. sv shepherd

    I’ve been pondering this, and it seems to have a clear testable prediction: If money was first invented for accounting, and if writing first was invented for accounting, then the presence of one should inhibit the other. No?

  73. Florence Farr

    Whenever a social science graduate starts nattering about money, I want to club a baby seal.

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