Murphy vs. Graeber on Money, Round 2
Some 5,000 years ago, anthropologist David Graeber and I battled over his scathing critique of the standard economist (and Mengerian) account of the origin of money. He insisted that I read his book before sputtering more nonsense, and so I got The American Conservative to get me a copy. My review is now online. The intro:
This book is just as audacious as its title suggests: Graeber, an anthropologist, walks the reader through the history of debt. How seriously does the author take his task? Consider: he devotes the 38 pages of Chapter 5 to constructing “A Brief Treatise on the Moral Grounds of Economic Relations.” Inasmuch as Graeber takes aim at the economist’s standard account of the origin of money, his book presents a formidable challenge. Yet on close examination, Graeber’s ambitious and scathing assault largely misses the mark.
And a choice paragraph from the body:
Graeber unwittingly makes even more concessions to the Mengerian account when he later writes: “In the marketplaces that cropped up in Mesopotamian cities, prices were also calculated in silver, and the prices of commodities that weren’t entirely controlled by the Temples and Palaces would tend to fluctuate according to supply and demand.” So what the historical record actually shows us is a Sumerian economy in which merchants used silver in actual spot transactions when trading in the outside marketplace and Temple authorities kept track of internal bookkeeping operations through the use of silver valuations. And Graeber thinks it so self-evident that the causality ran from the Temple bureaucrats to the merchants that he actually says of the Mengerian account, “rarely has an historical theory been so absolutely and systematically refuted”!
However, lest you think me a doctrinaire, I do concede this much:
Although Graeber’s critique therefore misses the mark in one obvious respect, nonetheless he does seriously challenge the standard Mengerian account, in a way I’m embarrassed to say that I had never even considered when teaching the fable to my own students. Specifically, Graeber points out that barter spot transactions would really only be necessary between strangers who might not see each other again. In contrast, neighbors could engage in credit transactions even before the use of money had developed. For example, if one farmer had eggs to sell, while his neighbor didn’t have anything he wanted at the time, then the first farmer could simply give them to his neighbor, saying, “You owe me.”
I never understood the rabble over debate on barter economics. The simple fact is that there were no widespread barter economies that existed where suddenly money emerged. If people use barter, the development of that economy is severely restricted-if not completely hindered. There is no way for a sophisticated structure of production to develop due to the lack of calculation. The fact that we have found no “pure” barter civilizations and instead discovered money side by side with their emergence is a good thing-it reveals another (equally important) Austrian insight-You need Monetary Calculation for an economy!
Barter has always existed between traders from _different_ tribes or communities. Europeans traded via barter with Indians along the Pacific coast 200 – 300 years ago. And there are many other examples.
Does Graeber deal with this?
Is there a competent book in the literature which extensively investigates the history and pre-history of trade and barter?
We know that extensive long distance trade goes way back nto pre-history, Has this research been surveyed Ina competent book, not written by a lefty hack?
Barter in Prehistoric Times
Franz Oppenheimer
http://mises.org/daily/5921/Barter-in-Prehistoric-Times
Yeah sure, link to a long book excerpt of speculation from before the time anthropology was even a thing.
But at least as a historical source, it’s interesting. It shows that already in 1908, people were starting to question the narrative of the invention of barter.
“…nonetheless he does seriously challenge the standard Mengerian account, in a way I’m embarrassed to say that I had never even considered when teaching the fable to my own students. ….For example, if one farmer had eggs to sell, while his neighbor didn’t have anything he wanted at the time, then the first farmer could simply give them to his neighbor, saying, “You owe me.”
Does Menger explicitly reject that such credit transactions could have occurred in a barter economy; that credit transactions had to come after the ‘origin’ of money? It’s been a while since I read Menger, but I don’t remember him making this a key component to his ‘story.’
Are you and DeLong in the same book club?
http://delong.typepad.com/sdj/2012/04/no-silicon-valley-did-not-and-does-not-partake-of-the-anarchist-utopian-nature-why-did-you-imagine-it-did.html
http://delong.typepad.com/sdj/2012/04/david-graeber-thinks-a-positive-review-very-impressive-ive-recommended-it-im-citing-it-but-take-a-trust-but.html
lol! Thanks, but you just sapped an hour of my life following that. I’ll be sure to share the line with my co-workers about Apple being started by a democratic committee of 20 ex-IBMers with their laptops in a garage. (At least he got the garage part right…)
Yeah the whole thing was mildly amusing until the twitter exchange, which was almost laugh-out-loud funny.
Graeber sounds like a REAL FUN GUY. It’s inexplicable how such a committed commie cannot find real work in Communist academia. What a mystery.
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.
http://en.wikipedia.org/wiki/David_Graeber
The thing that struck me upon my first reading of Graeber snippets from the Imperious “Lord Keynes” was that Graeber seemed to believe that the informal and subjective systems of exchange he claimed to have discovered disproved Austrian analysis:
As for the supposed refutation of my example of the village where people loan things to one another, no, the commentator does not get my argument right at all. First of all, we are not dealing with a situation where people borrow things from one another and expect an equivalent of exactly the same value. I suppose the certain Austrian school theories of human nature assume that’s what neighbors in a moneyless economy would do with one another, but again, this just shows a flaw in those theories of human nature, because when tested against the empirical evidence, this is not what one finds. What one finds are a variety of mechanisms of distribution, some open-ended sharing, some relatively centralized allocation (the actual Iroquoian societies that people like Jevons used as examples mainly had women’s councils allocate things and didn’t swap directly between households at all), and some direct exchange, particular[ly] with people in that vague middle ground between neighbors and strangers – but that exchange was based not on exact value equivalence – a concept that presumes the prior existence of money in the first place, and is therefore completely illogical to attribute to people unfamiliar with the use of money to buy and sell things – but a broad sense of owing someone a favor of a roughly equivalent sort. This need not be a material object at all, it could be help, or ritual sponsorship, or maybe your son is in love with your neighbor’s daughter, but let’s leave that aside for a moment. Insofar as it is goods, it would generate a system of vague ballpark equivalents.
http://socialdemocracy21stcentury.blogspot.com/2011/09/david-graebers-response-to-robert.html
These exchanges as described were voluntary and based upon subjective valuation by each side to the transaction. Earth to Graeber: There is no such thing as “exchange based on exact value equivalence” and Austrians certainly do not claim that there are.
LK, the MMTers and the other assorted totalitarians hysterically love the Graeber book because they think they have finally found the proof that money arose from the diktat of statist thugs and not from voluntary exchanges based upon subjective economic calculation. Obviously, they are wrong. Like all anti-Austrians, LK and Graeber haven’t the slightest familiarity with or understanding of basic Austrian concepts like human exchange or economic calculation. It’s like LK trying to explain the nature of the automobile while being meticulous about refusing to understand that they run on gasoline.
I admit I haven’t read David Graeber’s book, but based on your review I see a bunch of problems. Most obviously, since gold and silver were popular ornamentation in ancient Sumer, how can you reliably distinguish between precious metal as money and precious metal as merely a generally desirable good that people might exchange for any other good?
I get his point about the standard silver shekel as administered by whatever could be considered the government of the day, but bureaucrats love to take something that already works, and claim it as their own by standardising it. For example, a “bushel” of grain is these days a precise standard measure, but “bushel” also just means a bowl or basket for holding grain and historically it has had a whole bunch of sizes. So the bureaucrats see people exchanging silver for goods and they decide to create a universal unit for measuring silver (and grain as well), which is indeed a useful thing, but does it really turn “non-money” into “money”? I don’t accept that anything intrinsically has changed here, it’s just that having standard measures is a whole lot more convenient than ad-hoc units.
What’s more, going back to Sumer might not be going back far enough. The trade in flint goes right back into the stone age (probably 10000 years) and a whole bunch of easily traded items have been found all over Europe (e.g. copper, tin, bronze, amber, salt, etc), so people over a very wide region had some idea of which goods would be commonly accepted as “liquid”, and they didn’t need priests nor kings to explain it to them. More than that, they certainly traded across borders and between radically different jurisdictions. For example, a well-shaped flint knife that fits an average human hand has a reasonably reliable unit of value because in that day and age everyone used a knife at some stage during their daily lives (or knew a close family member who did). In the stone age, kingdoms were small, but the flint was well travelled.
Maybe the book covers it, but there’s no mention in the review of the little carvings that came from Sumer, representing cows, sheep, goats, etc. and although no one knows exactly what they were used for, it seems logical that they represented a general purpose mechanism for making a barter transaction in an abstract way (leave the sheep at home and exchange the token as representing the rights to a sheep). There’s explanation and pictures here:
http://rhetoricaldevice.com/articles/BriefHistoryOfMoney1.html
Are these trade tokens money or are they barter? Well, obviously enough they are a bit of each and that’s the whole point. There never has been a fully solid separation between money and barter. Even today, fiat paper money has a direct commodity analog where the commodity in question is state-sanctioned violence. You take your paper money, you pay your tax, you don’t get hurt. It has a real physical value in terms of protection (and ya need protection).
Finally, with the idea of credit: you can look up the biologists who have documented vampire bats (not to be confused with vampire squid, their close relative) and the bats exchange blood on a credit system. It’s a commodity economy, where the amount of blood that a bat holds directly determines how long the bat will live without another feed. There is only one commodity in this economy so absolutely no specialization of labour, but there is a random factor in as much as on a given night’s hunting some bats will randomly collect more than others (some will fail that night and return empty handed). Stockpiling blood is a rapidly diminishing return (it’s not efficient and it adds to the bat’s flying weight) so the blood is worth a lot more to a hungry bat than a full bat.
Biologists insist in calling this “reciprocal altruism” because they went in search of altruism and they are very determined that it was altruism they found. Anyone normal would call it “trade on credit” because that’s exactly what it is, but if progressive biologists ever admitted that they just rediscovered the idea of trade that the Capitalists had been telling them about since forever, then those biologists would be out of the clique quick smart.
By the way, no one knows exactly how the bats calculate their credit accounts, but since their lives depend on getting it right, and since they have been doing it a long time, I’d say their system must be working. That can only imply one logical conclusion — bitcoin.
Tel, reading your opening query I’m reminded of something. I’m not sure if it’s an answer to your question, but it surely makes me think that the answer is in here:
I wear a solid gold Italian lira that was made into a pendant on a chain around my neck. It was a gift from my great aunt a number of years ago.
How is that for a perfect match of money and a desirable consumer good?
That piece of gold is probably worth more to you than anyone else, so it’s not a good choice as a monetary unit.
However, personal sentiment aside, yes I appreciate the connection.
“how can you reliably distinguish between precious metal as money and precious metal as merely a generally desirable good that people might exchange for any other good?”
Why is there a need for this distinction? In Menger’s Origin of Money it is precisely because it already had a use value or demand on the market that allowed it to develop into money as it’s qualities of salability distinguished it from other commodities.
get his point about the standard silver shekel as administered by whatever could be considered the government of the day, but bureaucrats love to take something that already works, and claim it as their own by standardising it. So the bureaucrats see people exchanging silver for goods and they decide to create a universal unit for measuring silver (and grain as well), which is indeed a useful thing, but does it really turn “non-money” into “money”?”
This is not what happened.
There are so many errors and incorrect assumptions that I’m not sure where to begin.
As Sumer is lacking in silver deposits it must be attained by trade. The temples & palaces (government) were centres of manufacturing that organized the bulk production of goods for trade, receiving silver & other raw materials.
Once acquire, silver must be processed & refined..
The public sector,then supplied it to the community by spending it into the economy and by public institutions accepting it as payment, gave it value.
The value of silver was arbitrarily set equal to a bushel of barley
Prices were not determined by shifts in market supply and demand or in the supply of silver, or even of barley. Like our meter, bushel or kilogram, they were supposed to provide stability by being uniform and unchanging.
Excellent work Bob! A very careful investigation of the subtle concepts involved here.
You and Nick Rowe are a two-man Graeber hit squad.
Money demonstrably appeared independently several times. Which is more likely: there’s an inherent reason why it would (Menger) or multiple independent creations by fiat all of the same idea (Graeber)?
Did Mises and Menger really believe that in barter exchanges one party couldn’t say, “Hey dude, it’s okay if you don’t have the three eggs I want now, just pay me three eggs later” (or four or five eggs if they weren’t buddy-buddy)? I don’t think this is the case. I think when they talked about credit they talked about money substitute, or future repayment of money-based loans.
Yeah, I figured the same thing. Also, just from an evolutionary standpoint, it is clear that “credit” in the sense described above probably happened before human reason even evolved. I mean, it can be observed in social animals that they will share in expectation of being returned the favor later, so it isn’t exactly an intellectually noteworthy insight by Graeber.
Didn’t you guys know that they entire edifice of Menger’s writings and thus the entirety of Austrian thought depends upon historical proof of there being nothing but barter spot transactions? The admission of the existence of “I’ll pay you back with three eggs next week” transactions dooms the entire Austrian School. “Lord Keynes” long ago announced that David Graeber had destroyed the Austrian School based upon the lack of barter spot transactions in the historical record!
The obsession with barter spot transactions seen in Menger ignores another fundamental relation: the existence of debt/credit transactions (which might even be construed as reciprocal gift giving). As David Graeber argues,
“[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.
http://socialdemocracy21stcentury.blogspot.com/search?q=%22spot+transactions%22
Personally, I smell desperation.
I agree. It’s perfectly plausible to assume that even with these “credit extensions,” overtime individuals preferred to use money as it became available. Sure, without money they were willing to wait, but with the advent of indirect exchange it made uncertain “credit” transactions less necessary.
Sure, sometime (perhaps quite often) waiting on another party to give you a gift or credit didn’t get the job done. What if there were more than one in line for this gift and both had significant need? Surely a situation as simple as an offer and acceptance can be imagined by Graeber.
“Didn’t you guys know that they entire edifice of Menger’s writings and thus the entirety of Austrian thought depends upon historical proof of there being nothing but barter spot transactions?”
““Lord Keynes” long ago announced that David Graeber had destroyed the Austrian School based upon the lack of barter spot transactions in the historical record!”
These are nothing but stupid caricatures.
Nowhere do I say that the “entire edifice of Menger’s writings and thus the entirety of Austrian thought depends upon historical proof of there being nothing but barter spot transactions”. You’re either a (1) liar or (2) higher-order ignoramus.
I pick
(3) Entertaining while demolishing morons.
He is obviously both.
Does anyone else sense that Murphy likes David Graeber less than most?
Although Graeber’s critique therefore misses the mark in one obvious respect, nonetheless he does seriously challenge the standard Mengerian account, in a way I’m embarrassed to say that I had never even considered when teaching the fable to my own students. Specifically, Graeber points out that barter spot transactions would really only be necessary between strangers who might not see each other again. In contrast, neighbors could engage in credit transactions even before the use of money had developed. For example, if one farmer had eggs to sell, while his neighbor didn’t have anything he wanted at the time, then the first farmer could simply give them to his neighbor, saying, “You owe me.”
It’s still barter, though.
Seriously, am I the only one who can see that quibbling over the time periods in which transactions are completed, is actually irrelevant?
I mean, what difference does it make that a transaction process “last” only a few seconds (which most would call “spot”), as opposed to just a few seconds more, or a few minutes more, or a few hours more, or a few days or weeks more? Even in a spot transaction, there is an element of credit involved, even if for only a second or two. Like if I buy groceries with cash, then really, do I and the cashier physically move the goods and money at the exact same time, where my left hand and her right hand are holding the cash, and my right hand and her left hand is holding the grocery bag? Who trades like this? Nobody. There is almost always a delay involved, and even if it lasts only a second or two, there is an element of credit, where the buyer thinks “I trust that when I give you this money, that you will give me the groceries soon after”, or where the grocery clerk thinks “I trust that when I give you these groceries, that you will give me your money soon after.”
Go on, try it out in the grocery store yourselves and see that spot transactions don’t even exist. When you get to the checkout, and your groceries are in bags, in the cart, and the grocery clerk waits for you to pay (that’s a credit transaction boys and girls!), strike up a short conversation with her. Fiddle a little more with your cash. Be like those old ladies whose credit is so trusted, that the cashier will allow the grocery store shipper to put the bags into the old lady’s car, while the cashier counts the pennies. That’s a credit transaction, because the old lady’s credit is being tested. Does she really have $15.67 in pennies? We’ll trust her for now.
What I am saying is that all transactions, except transactions that see the goods and money flow from buyer to seller, instantaneously and at exactly the same time. Now here’s something to clean your clocks: Even the world’s most powerful computers, that trade foreign exchange down to the millisecond, those are not spot either, because if I were a quantum bit, I would be waiting AGES for the slow poke seller to send the currency to the buyer after the buyer sent the buy money. I would think “Wow, the buyer really does trust the seller’s credit.”
Meanwhile, slow poke economists will think spot transactions are taking place.
Here’s the final nail in the coffin: Since there is nothing “special” about a transaction process that lasts 1 second, that logically distinguishes it from a transaction process that lasts longer, and since there is nothing in economic science that says something like “Trades that take longer than 1 day must be considered credit transactions, and all others must be considered spot transactions”, it follows that there are no such things as spot transactions
The crucial aspect of the standard Menger account is that money arises out of barter. Barter can encompass trades that are finalized over a picosecond, to over 10 years, to infinity.
Menger just called the quicker trades “spot” whereas he called the longer trades “credit”, because he too necessarily introduced his own subjective standard of time that separates “spot” from “credit” transactions.
In other words, the fact that time is always moving forward means that all transactions are temporal and hence credit-like in nature, no matter how fast the transactions are finalized.
We can even go deeper. Is a trade finalized when both parties in an exchange think they own the respective properties being exchanged?
At what point in time exactly do you consider yourself being the owner of the groceries, and at what point in time exactly does the cashier think she (on behalf of the store) is the owner of the money?
If there is even an infinitesimally small, yet positive, period of time, that’s makes the trade a credit trade. Or does it? Maybe because economics is based on subjectivity, there has to be “enough” time that elapses that would enable the individual parties to consciously understand that they are in a position of trusting the other party to make good on their end of the exchange. If a trade lasts only a picosecond, then I dare say no individual can consciously have enough time to think the other party’s credit has to be trusted.
So maybe, we should say that a trade is spot if it is so quick that the individual parties have not enough time to think that the other party’s credit has to be trusted, and a trade is credit if the individual parties do have enough time to think that the other parties credit has to be trusted.
So the question becomes, what is that time period? I will say it varies from individual to individual. Imagine a quick thinker trading with a slow poke. It is possible that the slow poke doesn’t even think of the credit worthiness of the other party, while the quick thinker is well aware that individual credit worthiness is at stake.
Ever deal with deadbeats who you believe borrowed money from you, while they believe it wasn’t a loan, but simply a spot transaction that he believes is lasting weeks at a time? That’s funny.
Even if one chooses to call medium or long term credit transactions “barter,” this is just a semantic red herring.
The point is that the debt/credit exchanges over a period of time longer rather than seconds/minutes/hours diminishes the significance of the double coincidence of wants problem, as Murphy already noted here:
“This is an excellent point, and Graeber is right: In the standard exposition of a barter economy, economists typically think in terms of spot transactions. But in principle, there’s no reason to restrict ourselves in this way. If we can imagine a farmer trading a pig for an axe, we can also imagine a farmer trading a pig for a promise to deliver an axe in two weeks.
Graeber is also right that the possibility of credit transactions expands the scope of a moneyless economy, and mitigates the problem of finding a double coincidence of wants.”
Robert Murphy, “Murphy Replies to David Graeber on Menger and Money,” Mises.org, September 8, 2011.
http://blog.mises.org/18371/murphy-replies-to-david-graeber-on-menger-and-money/
Even if one chooses to call medium or long term credit transactions “barter,” this is just a semantic red herring.
No it isn’t. It is not a semantic red herring ad hominem non sequitur straw man garbage rubbish nonsense.
It is crucial to whether or not the theory that money arises out of barter, or some other mechanism, which is crucial to the Mengerian account that Graeber’s followers are claiming refutes Menger.
Graeber, precisely because he is quibbling over whether or not barter exchanges are spot instead of credit, or credit instead of spot, is the semantic red herring ad hominem non sequitur straw man garbage rubbish nonsense.
Whether or not barter transactions are labelled as spot or credit, is irrelevant to the Mengerian account of money arising out of barter qua barter.
Graeber is the one introducing the alleged importance of spot versus credit.
The point is that the debt/credit exchanges over a period of time longer rather than seconds/minutes/hours diminishes the significance of the double coincidence of wants problem.
Sure, but the point is that the problem still remains. It is not completely eradicated by virtue of time. Introducing money ELIMINATES the double coincidence of wants problem.
That’s the story of the Mengerian account.
“It is not a semantic red herring ad hominem non sequitur straw man garbage rubbish nonsense.”
lol. Lord Keynes is definitely a caricature.
Indeed. Why else name himself after a someone who was a caricature of middle age mercantilist fallacies?
I’ll side with you on this one but say you’re widely off the mark in your conclusion. The fact that time solves (actually, may solve) the double coincidence of wants dilemma, is, while important, not the whole story. The thing Graber is getting at – note also, his book is called Debt, not Credit – is that the standard interpretation of the barter to money fable suggests no role for debt at all. In the barter / spot trade / metallist story, debt is somehow logically separable from money and lives a shadow-life of its own, quite independent of the virtuous world of money. Money itself becomes the good that is bartered. But through the credit analysis, and quite independent from any attempt deliver a definitive genesis of money, the derivation of money things, no matter whether ficticious, metallic or as corn bushels, from non-barter, i.e. as an indicator of that which hasn’t been paid, as opposed to being the payment itself, turns the standard economic view of money as a commodity on its head. My money is always someone or something else’s debt. And, conversely, paying down debt is synonymous with destroying money. That is the significance of the credit view of money. And it is also fully compatible with double entry book keeping – as opposed to the metallist story.
Oliver:
The fact that time solves (actually, may solve) the double coincidence of wants dilemma, is, while important, not the whole story.
It doesn’t solve it though. Time can only ever diminish the problem. It can’t eradicate it, because no matter what, in each exchange in the chain, buyers have to find sellers who want the specific good the buyer wants. There will always be cost limitations of time/travel/research/etc, that will prevent certain exchanges from taking place, that money exchanges can overcome.
The thing Graber is getting at – note also, his book is called Debt, not Credit – is that the standard interpretation of the barter to money fable suggests no role for debt at all.
That’s false. The barter to money story accommodates spot and credit exchanges.
In the barter / spot trade / metallist story, debt is somehow logically separable from money and lives a shadow-life of its own, quite independent of the virtuous world of money.
No, debt is quite integrated into the domain of exchanges even in barter. The “I owe you” barter transactions are debt based transactions.
Money itself becomes the good that is bartered.
Oxymoron.
But through the credit analysis, and quite independent from any attempt deliver a definitive genesis of money, the derivation of money things, no matter whether ficticious, metallic or as corn bushels, from non-barter, i.e. as an indicator of that which hasn’t been paid, as opposed to being the payment itself, turns the standard economic view of money as a commodity on its head.
No it doesn’t. The value of credit exchanges are derived from the value attached to the bartered goods. If the credit promises take on an exchange life of their own, that’s barter transforming into money via the credit route. It doesn’t have to go through the spot route.
My money is always someone or something else’s debt.
No it isn’t. Money is a final means of payment. Whoever earns money in an exchange, extinguishes past debts that required payment in money.
And, conversely, paying down debt is synonymous with destroying money. That is the significance of the credit view of money.
It’s only synonymous with credit EXPANSION, not credit backed by prior saving. Credit backed by prior saving, when paid back, does not destroy money, because no new money was created in the creation of the credit contract.
If I own $100, and I lend it to you, then a debt of $100 is created, but no new money is created. If you fail to pay it back, or if you do pay it back, then the same $100 just gets transferred from one owner to another. Money is not destroyed here.
Contrast that with credit EXPANSION, where a loan created ex nihilo from a bank creates a fiduciary media that is treated as money, then when the debt contract is extinguished, money can be destroyed.
Credit per se isn’t creating or destroying money. It’s credit expansion that is doing it.
And it is also fully compatible with double entry book keeping – as opposed to the metallist story.
Sure, but the money asset is created out of nothing.
agreed
My money is always someone or something else’s debt.
No it isn’t. Money is a final means of payment. Whoever earns money in an exchange, extinguishes past debts that required payment in money.
If I own $100, and I lend it to you, then a debt of $100 is created, but no new money is created. If you fail to pay it back, or if you do pay it back, then the same $100 just gets transferred from one owner to another. Money is not destroyed here.
The creation of money is via credit expansion, thus all money in circulation has debt attached to it because it was created via credit of some sort. The liability (debt) that is created simultaneously with the money is only extinguished when the money is paid back. In a second circuit, whether via consumption, investment or loan sharking, as in your 2nd example, money is neither created nor destroyed . Loan sharking does create new asset / liability pairs too, though.
You first have an asset of 100.-. After lending it to me, you have a receivable of 100.-. I then have an asset of 100.- and a liability (debt) of 100.-. This btw., is not a good way to model what banks do, unless you believe that your deposits are gone once they’re in the bank. With FDIC insurance and lender of last resort, your deposits are safe… That’s the difference between 20/21st century banking and 19th century banking.
Oliver:
Looks like you didn’t “agree” after all, haha.
Not all money is credit. A lot of money is credit, but not all of it.
Imagine a shoe maker who wants bread.
He can give shoes to a smith on credit, and with enough time that elapses, he may be able to get bread from that smith by the smith trading for bread and then trading with the shoe maker. While the double coincidence of wants problem has been diminished, the problem still remains, because now the smith has to find a bread maker who wants shoes.
The introduction of money ELIMINATES this problem. That’s the point of Menger’s barter to money theory.
It has nothing to do with spot versus barter, it has nothing to do with double coincidence of wants being more pronounced or less pronounced in degree. It’s about double coincidence of wants existing, and money serving to eliminate any last vestiges of it, even if it has been “diminished” via credit exchanges.
Except that it doesn’t eliminate it. Money is a measure of the net debt that remains unpaid! If I issue an IOU in form of a coin, paper bill or number in an account for some real serve you provided, that IOU can become money for further trade. You can pass it on to John, who can pass it on to Mary, and so on, but what always remains is my initial debt.
No, money is a commodity. It is not a “measure”. It is the commodity that becomes the most universally accepted.
If those IOUs become marketable, if they become universally accepted, then they are derived from the commodities being bartered.
That is what you would like people to believe and it is the assumption upon which most of classic monetary musings rest. Hence the vehemence with which it is defended by the orthodoxy despite lack of evidence in favour and tons of evidence against it. It’s a deductive argument that is needed to support a specific ideological construct called economics. It certainly ain’t science.
Wrong, as Graeber has shown.
A commodity can be money, but money is not a commodity, as our current world has shown.
No Mammy, Graeber did not show that money is not a commodity.
IOUs, tax obligation claims, etc, these are traded. They are commodities.
If those IOUs become marketable, if they become universally accepted, then they are derived from the commodities being bartered.
But they are still IOUs and thus not the thing itself. Further, the relation of the IOUs to the things they represent may change and / or be renegotiated with time. But most importantly, they are still IOUs – i.e. I still owe something – i.e. they still represent someone’s DEBT.
@Oliver: All money represents debt. That’s why I can redeem it for Big Macs.
It’s not about what “I would like to believe”, it’s about what is praxeologically necessary.
The shoe is on the other foot. Any seeming empirical refutation of economically necessary principles that go against what YOU like to believe, is jumped upon as conclusive proof of what you want to believe.
This is why your only response to those who come from the logically necessary camp, is to project your own emotional bias on them, as if they suffer from the same affliction.
Oliver:
But they are still IOUs and thus not the thing itself.
But IOUs ARE things in themselves. IOUs can and do circulate as means of payment. This is how our monetary system works in part actually.
No, they are not commodities just because they are traded.
Of course you can use your own definitions and turn the whole discussion into a waste of time, as usual.
No, they are not commodities just because they are traded.
They are tangible, scarce and they are traded. They are commodities.
You can’t deny that they are commodities just because it inevitably leads to a conclusion you don’t like.
They are tangible, scarce and they are traded. They are commodities.
That is your own definition of commodities, which turns the whole discussion into a waste of time, as usual.
Not to mention they are not necessarily tangible or scarce.
What a waste of time…
the fundamental flaw in Graeber is as a Marxist he follows the Smith/ Ricardo Objective labor theory of value only to dismiss it as exploitative, while conflating Smith value theory with Austrian subjective-value theory via the barter fable. Graeber never bothered to read Menger’s the origin of money, otherwise he would know Menger refuted Adam Smith and Ricardo.
I think his main premise, being entirely theoretical and based off Marxian class exploitation theory, is money was a scam since only the rich exploiters valued silver.
What i don’t get, if money started as circulating debt tablets, wouldn’t it be the lower classes that demanded hard money the most to cancel out their debt? It seems more likely people started demanding payment, the acceptance of a new medium of exchange. “i’ll trade you two chickens today for a bucket of dates next week [no idea what sumerians farm].” Next week: “you got my dates?” “sorry, drought… barely surviving.”
Money was invented to solve the scarcity problem.
You’re making good points about the overemphasis on time lags, Major_Freedom, but I think the other crucial difference from “regular barter” is that the transaction is indefinite. While all the transactions you list involve a time lag and some kind of credit, they are at least clear about what the transaction is: these specific goods for that specific money.
Graeber et al’s point is that these ancient transactions had one side’s part not only lagged, but also vague: he’ll “owe you”, but owe you what? How much does he have to do give you to balance out the cow you gave him? And what’s the penalty? That all involves a level of judgment, value estimation, and social norms that go outside (or at least stretch) Menger’s framework of how interpersonal transactions happened.
The vagueness also seems to provide a spur for something to use as an intermediate, or measure of the indebtedness. That would bolster an organic development theory.
Silas:
I would agree that this is an interesting and perhaps new finding by Graeber. However, the significance of it to me is that human relationships are even more complicated and subjective than we previously imagined. It says nothing about the origins of money as arising from voluntary subjective exchanges vs. being invented and imposed by statist thugs. Graeber is a commie of sorts and he and the various strains of Keynesians have a vested emotional interest in the latter explanation and in their belief that the Austrian School has been vanquished by these findings.
I can imagine vague exchanges persisting for quite a while in a close knit group, especially one kin-based. Actually even hard-boild detectives keep informal exchange balances, who owes who how big a favor. 🙂 As the group grew, or external trades happened more frequently, that would increase the need for more precision. So a mechanism of tallying might develop. Why though would the mechanism need to be imposed?
So a mechanism of tallying might develop. Why though would the mechanism need to be imposed?
I don’t think the point is that tallying systems have to be imposed, I think the point is that if tallying systems develop, whatever is serving as the tallying commodity, must have been previously valued and exchanged before it became a tallying commodity. In other words, the commodity serving as a tally, or unit of account, or medium of exchange, originated as a barter good.
Sure, I can accept that.
Yet at the same time, these sorts of indefinite exchanges are still barter exchanges, and would still suffer to some degree the double coincidence of wants problem. Introducing money can turn indefinite, barter transactions that suffer from the double coincidence of wants, to indefinite, monetary transactions that do not suffer from the double coincidence of wants problem.
Whatever gains can be made through indefinite barter transactions of “I owe you”, can be made even greater through introducing a universal medium of exchange into those indefinite transactions of “I owe you.”
Someone can give another a cow, and then the other can say “I owe you” without stating exactly what they owe or when they owe it, but the payback being settled in money rather than another good, still eliminates the double coincidence of wants problem.
Most importantly, whatever commodity is used to settle these sorts of indefinite transactions, be it goods or money, if money is going to be used, that money commodity must already be valued through barter exchanges.
For example, suppose in a village there are ONLY indefinite “I owe you” type barter exchanges. It would be impossible for a conquesting King to come in and then dictate that all outstanding transactions will be settled in a good that never had any previous barter value in exchanges prior. If the conquering King imposes a settlement currency of silver, or gold, or coconuts, whatever is decided, must have already been valued as a bater good by the King himself, to even let the King know this is a commodity he wants, and believes would “work” for others too.
For example, I cannot impose a currency consisting of a commodity that never before existed and was not exchanged prior to my imposing it as a currency. It would be logically impossible. All commodities must be first produced. All commodities, if they are going to be used as a currency, must already exist and must have already been exchanged via barter, to let people know it has value, including the person trying to impose it as a currency.
This is the core of Menger’s, actually more accurately Mises’, theory of money.
For example, I cannot impose a currency consisting of a commodity that never before existed and was not exchanged prior to my imposing it as a currency. It would be logically impossible. All commodities must be first produced. All commodities, if they are going to be used as a currency, must already exist and must have already been exchanged via barter, to let people know it has value, including the person trying to impose it as a currency.
That would seem to imply you can’t impose a currency through a “hut tax” arrangement, in which you force everyone to pay you a certain amounts of the new currency.
That would seem to imply you can’t impose a currency through a “hut tax” arrangement, in which you force everyone to pay you a certain amounts of the new currency.
Actually, it would only imply that one cannot impose a tax in a commodity that was never before produced, valued, and exchanged prior to it being imposed as a currency.
Try to imagine conquering a village, then mandating that everyone pay you in a commodity that was never before produced, valued and exchanged prior to your imposition.
I can’t think of any way it can be done.
It doesn’t seem necessary in the hut tax case for the currency to have been in prior use: the only complication that its newness introduces is that there will be a period during which people have to value it (under the constraint of having to meet their tax burden), and is price will bounce around a lot before it settles.
And it’s not particularly uncommon anyway for newly introduced currencies to be very volatile.
If the thing being taxed wasn’t previously in use, then wouldn’t it be impossible for the individuals being taxed to even be owners of it?
In other words, if a King started to tax people, then wouldn’t they need to be owners of what it is the King is taxing from them?
Assuming you agree that they would have to own what it is being taxed, then I think you’re obligated into having to accept that ownership of any commodity presupposes its usefulness, that it is being used.
I would argue even Euros were previously being used before their introduction, namely, the materials that go into the physical Euro currency, the computers that store the digital Euros, etc.
Ignoring the difference between synchronous and asynchronous transactions is at the core of most of the nonsense around economics
I am definitely with you. I also don’t get the confusion about barter being stretched over time.. It only adds the element of credit, that is you need to have sufficient trust in the guy you give an advance payment. And you still only will do this if you are sure that he will give you something that is worth more to you than the thing you gave. You still have the problem of double coincidence of wants in play here..
While I would argue though that there are things like spot transactions. There is no trust/credit needed. You get your return service on spot.
That’s directed to MF
🙂
While I would argue though that there are things like spot transactions. There is no trust/credit needed. You get your return service on spot.
Can you give an example?
In spot transactions you mostly are at least sure that your trading partner has the good available what he wants to exchange for your good. And you know it because he shows it to you.
In a credit transaction you only know that he, at the moment you give him your good, is currently not in the possession of the good that he promised to give you someday in the future (or at least is at the moment not willing/able to give it to you but only later). So you need the trust in him that he will be able to acquire what he wants to give you. You don’t need that in spot transactions, because usually he shows you what he wants to give you and tells you that he wants to do it at the moment you both agree to transact…
Like exchanging a chewing gum for a hot dog on spot…
I am well aware that technically you could play the game that one is mostly paying in advance, even if it is only a fraction of a second, but that doesn’t mean that the distinction between spot and credit isn’t a useful one. There is of course no sharp line between them.. You can definitely argue about when something is spot and when something starts to be a credit transaction…
BTW: In typical movies gangsters try mostly to transact as spot as possible. That is because they lack any credit in each other 😉
In spot transactions you mostly are at least sure that your trading partner has the good available what he wants to exchange for your good. And you know it because he shows it to you.
Notwithstanding the fuzzy “mostly” caveat, I would argue that showing the goods isn’t always true for spot transactions.
For example, a restaurant putting food on your table, before they see that you have cash to pay for it.
In a credit transaction you only know that he, at the moment you give him your good, is currently not in the possession of the good that he promised to give you someday in the future (or at least is at the moment not willing/able to give it to you but only later). So you need the trust in him that he will be able to acquire what he wants to give you. You don’t need that in spot transactions, because usually he shows you what he wants to give you and tells you that he wants to do it at the moment you both agree to transact
Notwithstanding the fuzzy term “mostly”, I think that just like spot transactions, I would argue that credit transactions don’t always entail the lack of possessing the good. Yes, you then said “or at least they possess the good but are unwilling or unable at the moment to give it“, but then this pretty much denies the possession criteria as being necessary. Plus the idea of “at the moment” really has no firm definition, and it is precisely because of this that I say “at the moment” is almost always “over time”, such that credit worthiness enters the picture.
I am well aware that technically you could play the game that one is mostly paying in advance, even if it is only a fraction of a second, but that doesn’t mean that the distinction between spot and credit isn’t a useful one. There is of course no sharp line between them.. You can definitely argue about when something is spot and when something starts to be a credit transaction…
But when though? That’s what I am trying to make clear. When exactly does a (seemingly credit) transaction go from “spot” to “credit”?
If we can’t identify and ground the distinction on something clear, something logical, then isn’t that just our reason telling us that maybe we’re going down the wrong path in trying to separate transactions into spot and credit?
Since it seems every other economic principle has a firm foundation in individual action, then maybe we should ground the distinction on that as well.
Maybe we should say a spot transaction occurs when neither party purposefully intends to give away their goods to the other in exchange for an explicit promise, but rather in exchange for the goods only. A credit transaction occurs when either party purposefully intends to give away their goods to the other in exchange for an explicit promise.
Maybe what I said about time was all a waste of it.
“But when though? That’s what I am trying to make clear. When exactly does a (seemingly credit) transaction go from “spot” to “credit”?”
I’d argue that it goes from “spot” to “credit” exactly at the same time it goes from “now” to “later”.
“Maybe we should say a spot transaction occurs when neither party purposefully intends to give away their goods to the other in exchange for an explicit promise, but rather in exchange for the goods only. A credit transaction occurs when either party purposefully intends to give away their goods to the other in exchange for an explicit promise
Maybe what I said about time was all a waste of it..”
I know where you are getting at with this one, but isn’t it always an explicit promise? The difference is really the amount of time going by until the transaction is complete. Yet it cannot be an exact amount of time since it is derived from the human perception of time as he perceives the “Now” versus the “Later”. I agree it is fuzzy, but not a waste of time.
MF:
Even the world’s most powerful computers, that trade foreign exchange down to the millisecond, those are not spot either, because if I were a quantum bit, I would be waiting AGES for the slow poke seller to send the currency to the buyer after the buyer sent the buy money. I would think “Wow, the buyer really does trust the seller’s credit.”
It’s worse than that, because in those electronic markets you can trade quickly but actual clearance of those trades may happen a day later. You can’t just pull your money out of the system at electronic speed.
Excellent point. In this sense, you’re relying on the credit worthiness of the clearing house.
This is a good observation M_F but I think if you see ‘spot’ as informal for ‘a transaction that ends when the traders separate’ …
Sure, but then we’re just moving the time arbitrariness one step back, the physical locations of the parties.
What defines separation? More than 2 yards apart?
I’m glad you brought spatial dimensions up, because space, along with time, is of the same sort of category of thinking as time. Where are you if you are in the vicinity of someone? Even space is as subjective as time.
The participant’s understanding that the transaction is or is not complete. If it is complete then no-one owes anything. Two sides of the same coin really: Does our agreement to exchange include any future asymmetric obligation?
OK, but the key question I am raising is that within the set of completed transactions, which of them were spot based and which of them were credit based, and why?
Does our agreement to exchange include any future asymmetric obligation?
Yes – credit based. No – not credit based.
So when Wimpy promises to give me a chicken Tuesday for a hamburger today and I agree, credit is involved. He has an asymmetric obligation and I have decided to chance it. If instead he hands me cowrie shells or a chicken and I agree there is no further obligation — no credit.
Does our agreement to exchange include any future asymmetric obligation?
Yes – credit based. No – not credit based.
OK, but then I will just ask DID a previous transaction contain an asymmetric obligation?
I submit that all exchanges satisfy this criteria, because all exchanges contain a positive time period where the exchange is asymmetric, where one party is always in a state of trusting the other to make good on their side of the exchange, even if the exchange lasts only a few moments.
So when Wimpy promises to give me a chicken Tuesday for a hamburger today and I agree, credit is involved. He has an asymmetric obligation and I have decided to chance it. If instead he hands me cowrie shells or a chicken and I agree there is no further obligation — no credit.
But when does Wimpy hand you the cowrie shells or the chicken in the second scenario? If it’s any time after you gave him the hamburger, or vice versa, i.e. if there is any time that elapses between you giving him the cowrie shells or chicken, and him handing you the hamburger, then isn’t that a credit transaction as well?
This might be a little off-topic, but i still think it’s related…
Does anyone here know about any Austrian book or paper on the “black market,”– drug or armament exchange– in regards to marginal-utility, subjective value, supply and demand; also possibly dealing with credit/ debt and the whole barter debate? I realize the stigma that comes with such works, “oh, you’re just a pothead/ ex-smoker” or “you’re just attempting to pander to the stoner culture,” so i wouldn’t expect any major work on the subject, but the underground market is still a part of society, and as such it requires thorough examination. Analogous to a free currency, weed is silver while pills are gold. Of course, the price of drugs like the value of any currency or goods are subjective to varying factors.
I don’t mean for this post to bring down any “cause” or to associate drug culture with libertarianism. I know 1st hand how addictions can bring a family to ruin, but it stands to reason there are variables to why abuse occurs in the first place. Addiction just as easily comes from injuries– as it grows dependency– as it does from “recreational experimentation.” The alcoholic replaces one addiction with another, using chronic pain as an excuse with truth. While weed is a “gateway” drug, that oversimplifies the matter. If weed isn’t detrimental, and the weed culture accepts that to be the case, could the tendency for getting high be the same tendency for getting drunk? Does the illegal exchange of adderall on college campuses improve the college success rate, especially with the over-stimulation of the 21st century? How many people often surf the internet, visiting blogs, either listening to their IPODs or having their TV on to a random program for background noise, and wind up moving toward some sort of “focus” drug as they find it too difficult to buckle down? While some questions are impossible to answer, the right questions are the first step on the quest for truth.
The point of the above paragraph is to explain, I am in noway taking a stance one way or another, glorifying or attacking drug usage, as anything that alters the mind can be good or bad depending on the circumstance. I am more interested in the market process that occurs beneath the government’s radar that confirms to Austrian theory, so any published work will be a nice read.
I would like to see pain killers and anti-anxiety medication that don’t black out the user, or make him or her do crazy things like squeezing syrup into a bucket of butter spread/ margarine before placing it back into the fridge missing its lid. Perhaps somebody can invent a drug with a high that peaks, giving the tendency toward abuse the high without turning his mind to that of a mentally retarded child (the cost of cross-abusing vicodin with xanax). Is that possible?
I like to party too.
How much is it worth to you?
More than the money I give up and the risk incurred 😀
I do understand lower supply with higher demand raises the price, while a higher supply than the demand lowers the price. All the available literature does more or less explain the black market, at least in reading through the lines, but there isn’t any work showing how shrinking supply opens up demand in more harmful cheaper markets?
http://mises.org/document/999/The-Underground-Economy
I note that there’s a bit of argument around the finer and finer hair splitting about whether a transaction is instantaneous or whether the old lady at the supermarket fumbles around looking for enough goats to pay for her groceries.
Let’s suppose every market transaction takes 5 minutes to settle, and everyone does this once per week. There are 10080 minutes in a week so we can say that 0.05% of the value in the system as a whole is credit. Suppose those settlements blew right out to 15 minutes, then 0.15% of the value in the system would be credit (thus the system as a whole has inflated by 0.1%).
What effect would such inflation have on prices? Well bugger all actually, because so long as the credit component of the system is small compared to the value in the system itself, random change in credit levels can only have a tiny effect on overall supply and demand.
Compare with the modern world economy and we are looking at probably 95% of the value of the system is credit (maybe I exaggerate, but it’s big). Fluctuations in credit can have a very significant effect on prices, and on overall operations. There is no clear cut turning point where you can say the economy takes a transition from one type of economy to another, but there is a continuous change as credit moves from being a minor part of the economy to the major part.
By the hair of the dog, I can say that if one individual’s actions have no effect, then neither does two individual’s actions, and three, and four, and then the entire population.
But that can’t be right, which means an individual’s actions are having some effect, it’s just too small to notice.
Of course, but small effects in prices happen for random reasons all the time, and that’s just background noise for any economy. If many individuals act at random, the Central Limit Theorem applies, and the more individuals you add to the pool, the more sure you can be that the overall effect is zero.
The problem is when you start to see large and correlated effects (individuals not acting at random), then you get noticeable booms and recessions. Exactly what the difference between “large” and “small” might be is a matter of judgement, but anyhow some level of boom and bust can be a good thing because new ideas get tried out during the boom times and failed ideas get culled down during the bust.
Only when credit becomes such a massively dominant factor that it drowns out the reality of scarcity and good judgment does it start to become a real problem. I think we have gone well past that stage by the way…
Individuals are not exactly “background”. They are the very subject matter of economics.
Every single solitary “noise” induced change is the result of definite individuals making definite choices and definite actions.
Reading you say “individuals act at random” made by brain hurt.
I think you are missing the point a bit. Let’s suppose two individuals agree on a deal, so the buyer could pay the seller in advance and say, “You deliver the goods tomorrow.”
On the other hand the seller could say to the buyer, “Here’s the goods now, you can pay me tomorrow.”
In a barter transaction there’s no clear distinction of buyer and seller anyhow, but let’s just consider that whoever is paying in the “most liquid” units must be the buyer. Then both ways around credit is extended, but one way it stretches the available amount of that high liquidity good (that might be called money) but in the other case it has the opposite effect and compresses availability. Thus, from a global perspective the price might be influenced by a small positive or a small negative.
However, is there any particular economic reason for either buyer or seller to be willing to be the guy who sits out of pocket for a day? Well it could depend on many things, but over a very large pool of people it should split equally either way (and hence result in a nett zero). Should some external force drive it in one particular direction, and it falls into a pattern where the buyer always pays late, then we don’t get a nett zero, we get a nett positive, creating inflation.
Totally off topic, but Major_Freedom you get the Rothbard Prize of the blog post. After listening to the discussion about “Man, Economy, and State” from the 2012 ASC, reading your points about needing a solid definition of what constitutes a “spot” transaction versus a “credit” transaction makes me think that what you’re saying might have been an argument Murray would have made (the Bobs, Murphy and Roddis, check me on this).
For those that didn’t see the roundtable on MES, one of the big points brought up was Rothbard’s insistence that words, terms, and concepts have clearly defined meanings and criteria of definition. His point was that if you were going to do economic science, this must be the case otherwise what you were doing would have no real, solid meaning.
“At what point, in what time-frame, does a transaction go from a “spot” to a “credit” transaction. After a second, minute, hour, day?” Awesome.
I totally followed Murphy on a possible solution being grounded on individual purposeful behavior, i.e. subjective preference, since he’s probably the only Austrian that brings it up often enough to keep it fresh in my mind.
“At what point, in what time-frame, does a transaction go from a “spot” to a “credit” transaction. After a second, minute, hour, day?” Awesome.
It’s even more awesome to ask the same question in reverse:
“At what point, within what time-frame, does a transaction go from a “credit” to a “spot” transaction. Within a year, week, day, hour, minute, second?”
I think asking this question makes it easier to see that the solution of when to say “it’s now different!” isn’t actually based directly on time at all, but rather on whether or not the individual purposefully and practically trades for a promise to get the good at some future date, and when the individual purposefully and practically trades for the actual good and to get it as soon as it is praxeologically possible.
Another complication:
Suppose two people did intentionally trade on spot, but then for some unforeseen circumstance there is a delay in the settlement of the transaction, for example after a sale, the seller realizes that he doesn’t actually have the good in the warehouse out back and tells the customer “It will be here soon.”
As the Smiths asked: “How soon is now?”
When does THIS transaction go from spot to credit? Again, I will say time is irrelevant. It is grounded in the purposeful intentions of the parties. As soon as practically possible? Like, the warehouse manager calls up the wholesaler and says “I need this good asap”. Then the wholesaler consents.
Is this still a spot? The parties are delivering the good as soon as practically possible. The buyer may believe the transaction is credit, because he’s trusting the credit worthiness of the seller, but the seller might think it’s still spot…or maybe he’ll change his mind because he noticed the buyer feeling a little worried, and so the seller might then consider the sale a credit transaction.
If nobody covered this, money originated in Sumer with shells, not silver coins. Graeber’s book is more on the Origins of Banking, than the Origins of Money. I laughed when I read Graeber’s quote, “It’s easy to see that ‘money’ in this sense is in no way the product of commercial transactions. It was actually created by bureaucrats in order to keep track of resources and move things back and forth between departments.” That is one form of money, and not even the original currency. I also figure shell-money started as an adornment, like gold in Egypt, before transitioning into money.
RPM, I’m guessing silver was used by the Sumerians because of their worship of the moon, gold by the Egyptians because of their worship of the sun. i think there was a reason they were valued to begin with, but economies progressed and they kept their value.
i concede, but only partly… The Sumerian word for silver is a compound kug-babbar; Kug means “pure,” which also happens to be the Sumerian name for the temples of Inanna (Ishtar, Ashtarte, the morning star); babbar means “white” and is what the Sumerian’s called the sun (Utu is the sun god, in Babyonian his name is “Shamash;” I don’t understand Babylonian, but seeing how it’s Semitic Shamash probably means “fire of the sky”). Kug-babbar is more a reference to the radiance of silver than to Inanna. Her temples would more than likely have been named Kug after silver was already highly valued by the Sumerians.
I’ll need to read Graeber’s book just for the hell of it, but I bet even money a thorough examination of ancient Sumerian codices/tablets and the Sumerian language will disprove most of what Graeber “theorizes” in the guise of “empiricism.”
Your review mentions cigarettes as a form of currency in POW camps. I knew of that example. You know where I first learned of it? In Graeber’s book.
He mentions it as an example that people in cultures used to currency quickly develop currency substitutes if for some reason their preferred trade token becomes inaccessible. But still I’d guess that if POWs has access to reliable means of record keeping and could put faith in each other’s long term obligations (which you can’t if you don’t know whether you will be taken out and shot tomorrow), I’m also sure they’d prefer a ledger over an actual physical exchange of cigarettes.