“Money: The Technology of Ritual Exchange”
Michael E. Marotta
SOCL 440: Technology and Society
Fall 2009: Dr. Ronald Mark Westrum
Abstract:
Money is a medium of exchange, a store of value and a unit of account. Functionalism predicts that in any society the forms of money generally reflect the mid-range technologies of that society. A new monetary medium is only rarely a technical innovation. The exceptions to this generalization appear in times of social stress and crisis. Five “revolutions” hallmark the history of money: the creation of indirect barter in commodities; the invention of coinage; money of account; private money; and debt as an asset.
Moreover, whether and what extent such innovations are not merely incremental adaptations of known arts i.e., improvements in technique expected of a skilled worker, is also open to question. Once instantiated, a new form of money can be evidentiary support for theories of conflict (Marxist, feminist, etc.). However, money most often serves consensus and peace-making. Phenomenology and world theory bring into focus other aspects of both the forms and functions of money. Not all innovations in money are immediately successful. Some have been rejected temporarily. Others have been abandoned. Ultimately, symbolic interactionism provides the broadest range of explanation and prediction for the forms and uses of money.
Of all the artifacts of civilization, few draw the attention that is devoted to money. That the juxtaposing of “devotion” and “money” arrives as dissonance speaks volumes about who we are individually and what our society is collectively. Any challenge to that statement is easy to refute with an Internet search engine set to the Boolean of “love and money.” We tie them together and yet make a sin out of their marriage. Carnal knowledge is forbidden fruit; indeed, and the “pillow books” of economics – how to get rich – are denied to and by academic economists. The hegemonic discourse of Marxism allows us only to condemn money as a corrupting influence on every institution from law enforcement to university research, from religion to sports. We accept as axiomatic that commerce, trade, business and finance can be ruined by greed. A halo hangs over every not-for-profit corporation. Yet the empirical fact is that literacy evolved from numeracy: recorded debt and credit antedate the Gilgamesh by at least one thousand years. The empirical evidence is that money is the prime mover of civilization.
Intelligence is the fuel for that motor. Like the lever and the wheel, money multiplies and redirects our efforts. Almost any collection of humans will display intelligence: we have controlled fire for perhaps a million years. However, no civilization – literally, no city – has been possible without money because money as both literacy and numeracy is the mechanism whereby intelligence is stored, transmitted, directed, applied, and multiplied.
Money originated historically from ritual exchange and it still serves this purpose. That commodities serve as money in barter and indirect barter is true. Salt is a perfect example of commodity money. However, gold and silver have little utility. We use gold and silver for our electronics which did not exist for about 5,000 years all the while people nonetheless valued gold and silver as money. That these were jewelry only puts them in the same class as feathers, stones and mud with which people decorate their bodies. Therefore, commodity-as-money is just one foundation point for money. Money is at once deeper than and beyond commodity value.
Economists of all schools seem to agree that money serves three functions: a medium of exchange, a store of value, a unit of account. In fact, those three are not all universally necessary and sufficient. A multinational corporation might publish its books in dollars so that investors everywhere understand the values cited. But convenient as they are as a unit of account, dollars are a poor store of value. Gold is better. However, if Bill Gates wanted to liquidate his holdings in Microsoft, gold would be a poor choice as he would need a troupe of 1000 men carrying 100 lbs each -- and he'd have to feed them, etc., while they transported it wherever he went. For that, a single American Express card good for a couple billion dollars would be better. In fact, for you and me, if you want to buy something on the Internet across national borders, electronic transfers are best; and for that, the unit of account is mostly irrelevant: the credit card company will perform the foreign exchange transaction and you need not be concerned.
At root, gold and silver are more like wampum. Wampum was invented about 1500 by Hiawatha as a means of bringing tribes together[1]. It was devised as an alternative to warfare. Wampum was intended as and used for ritual exchange. Whether this can be projected back to the past is problematic, of course. We are on thin ice when we force-fit square peg modern "primitives" into the round holes of paleolithic times. Nonetheless, the invention of wampum is compelling and sheds light on the use of gold and silver, which are, after all, just pretty stones.
Following a different foundation point, literacy came from numeracy. Accounting is the basis for writing. Abstractions for material objects -- "metal" as apart from "copper" -- were tallied about 5000 BCE and led to the invention of "large" numbers beyond three or four. Five, six, seven, ... had to be invented, which is why the common Chinese scripts for 5 and 8 look so startling similar to the Indian ("Arabic") symbols for the same numbers: big numbers were only recently transmitted around the world. Thus, money, represents an intellectual abstraction far deeper and consequential than we usually consider.
The “Ultimatum Game” demonstrates our expectations of fairness. It is played by two people. One is given $100 and told to share it any way they want. The other person can accept or reject the offer. If the recipient rejects, neither gets any money. Usually, most people expect a 50-50 split. At about 30-70, many to most subjects decline the deal. In strictly economic terms, it is irrational to turn down free money. Even though getting $30 is better than getting nothing, most people value fairness.
The Ultimatum Game underscores the fact that money began as ritual gift exchange and still evidences vestigial traces of that origin. In getting money for our labor and giving it for the labor of others, we practice “fairness.” And that seems more important than objective gain.
Contrary to the claims of sociologist who advocate for a conflict theory of organization, money ends, reduces, ameliorates and prevents conflict. Capitalism offers peace between individuals and among groups because trade as gift exchange speaks to our sense of safety perhaps more than it promises material gain.
LET {A,B,C …} = {1,2,3,…}
According to University of Texas scholar, Denise Schmandt-Besserat[2], writing evolved from the use of clay tokens to keep track of livestock, grain, beer, and other farm goods. The tokens go back to between 7500 and 8000 BCE and were widely used by 5000 BCE. The farm goods were owed to the city temples in Uruk, Eanna, Habuba Kabira and over 100 other cites of Mesopotamia and the Levant. These tokens allowed the temples and supplicants to kept track of debts ahead of harvests. Eventually, the tokens were stored in clay containers, but being so enveloped, they were not visible. Therefore, their shapes were impressed on the outside of the containers into which the tokens were baked. Pictographs mimicked the tokens and cuneiform writing evolved from those pictographs. That claim rests on solid empirical evidence. It also was demanded by the fact that the oldest pictographs (and, of course, cuneiform) show a remarkable intellectual development of abstraction – such as “metal” – beyond concrete material objects.
Furthermore, according to Schmandt-Besserat, the highest expression of that intellectual process was the development of numbers, representing quantities in excess of three or four, which are the typical limits of “natural” human language. The oldest texts refer to seven and nine literally as “three two two” and “three three three.” Only with use and repetition over centuries did larger numbers evolve.
Schmandt-Besserat is clear that these token were not “money” per se, not a circulating media. Money as the media of indirect barter were the farm goods represented by the tokens, and of them, grains – barley and wheat – were the principle goods of commerce. Most trade was direct exchange, but even as early as 5000 to 3000 BCE, some commodities were accepted and transferred because of their general utility to anonymous third parties, rather than as consumables.
Sumeria was built on clay. Therefore, it is not surprising that their token accounting system and their cuneiform tablets were clay. They knew metals and had sophisticated metallurgy, but their baseline was clay. The cuneiform tablets give evidence of futures contracts and other sophisticated thinking. However, their economies were in and of the commodities themselves, not the contracts. As far as we know, no clay tablets show the purchase and sale of other clay tablets. It was possible to take on the debts of another person, but there existed no markets for debts. That would come much later.
COINS OF THE REALMS
While metals always were trade goods on par with livestock and grain, metals first appear as money in the late Bronze Age, circa 1500 BCE. Sir William Ridgeway identified the standard “talent” as the weight of a block of copper the size and shape of an ox hide.[3] The copper was valuable. The shape and size – mimicking an oxhide because cows were money[4] -- defined the weight, about 50 modern pounds. Based on their scarcities, the relative values of metals gave rise to the shekel of gold (about one-third of a modern ounce) and the mina of silver (about half of a modern pound) of silver, both equivalent to the talent of copper. Silver could also be measured in shekels, of course, and that became the more common unit of silver for commerce. The Old Testaments tells of rings, earrings and bracelets of silver and gold, weighed in shekels.[5] In the New Testament, Jesus offers a parable about servants entrusted by their master with talents of silver.[6] However, the basic equivalency was that a shekel of gold equals a mina of silver equals a talent of copper.
While we can see in these Late Bronze Age citations the roots of today’s common coins, the fact is that the invention of coinage was a singular event. For thousands of years, merchants from Mesopotamia had sophisticated contracts, promises for future delivery, agreements over great distances, all in clay, and none requiring coinage. Such silver as circulated was in the form of jewelry. Coinage was invented no earlier than 650 BCE and no later than 550 BCE. The oldest known hoard comes from the foundation of the Temple of Artemis at Ephesus, placed about 550 BCE. From that foundation, at four locations, have come 92 coins and coin-like objects that announce the invention of a new medium of commerce.
Aside from the Greek cultural context, two other locations are often suggested: India and China. However, epigraphic and archaeological evidence are not mutually supportive, whereas the facts are an integrated fabric for our understanding today of the Greeks of 550 BCE.
The 92 coins of the Artemision show a rapid development from mere nuggets,[7] apparently fished from the Pactolus River, to nicely struck examples, bearing the heads of animals and other symbols. Among the putatively “intermediate” objects are two that are striated on one side only and punch marked on the other. This has been suggested to be the result of placing a hot “flan” or “planchet” on an anvil that had been scored to prevent the object from slipping when struck with the dies. The dies are accepted to be mere nails, square in cross-section. The evolution from raw nuggets to finished coins probably took three generations or less. We know the Lydian tyrant Gyges from both Herodotus and the Bible as well as from the poetry of Archilochus.[8] One elegy of Archilocus says that he cares not for the “coins” of Gyges. Archilocus lived 680-645 BCE. Gyges’s dates are variously given, but 680-640 BCE is acceptable. The matter is relevant to our accepting Archilocus has having been at one time himself a mercenary.
That coins were invented to pay mercenaries is one theory. A variant is that they were invented as bonus payments, not wages per se. Other theories include the suggestion that coinage began in temples, as temples were repositories of offerings. The British numismatist Charles Seltman suggested that tradesmen (retailers) invented coinage to avoid having to reweigh bullion.[9] Compelling though that may be to our commercial sensibilities, it violates too many precepts of commerce, not the least of which is that once exchanged, the coin never comes home. Moreover, no hoards of coins are known from the archeological sites of Mesopotamia, the Levant or Egypt. The earliest coins are Greek and circulated narrowly close to their homes of origin. Not until about 450 BCE did the “owls” of Athens and the “ponies” of Aegina circulate around the eastern Mediterranean.
By that time, the production methods would be recognizable to us as heralding modern 18th century craftwork. The obverse (“heads”) of the coin was carved into an anvil. The planchet was created by pouring molten silver into cylindrical disk forms of exacting geometry. The cooled silver was reheated to soften it. One man placed it on the anvil. A second held the driving die (“reverse” side image) and a third struck the die with a sledgehammer. Although the actual work – especially at Athens – was done by slaves, the design and creation of dies was the work of a hired artist. Moreover, an elected official was responsible for the operation.
Each town sought to make its issues identifiable for several reasons. First of all, unlike previous times, coins did not need to be weighed. Foreign coins were weighed; outland coins were treated as bullion. The town’s own coins passed by “tale” or count. Thus, the “owls” of Athens, the “tuna fish” of Klazomenae, the “lions” of Miletus and all of the others were instantly recognizable. In fact, for almost 200 years, the towns of Mytilene on Lesbos and Phokaia on the mainland, alternated annually, to produce a stunning array of goddesses and other images, all of which fit nicely into an expected size, shape and design philosophy. When the town of Abdera hired die cutters from Miletus to produce coins for them, the lions of Abdera were as distinct from those of Miletus as to us are the flags of the United States and Malaysia.
In The Tyrant’s Writ, historian Deborah Tarn Steiner explored the introduction of writing to the Greeks. We can accept easily that the true alphabet was a powerful tool for recording thoughts. Tarn identifies many more ramifications. Among them, consider that in Athens – as in most cities – outsiders, foreigners, even if they were “Greek” had fewer rights, often none. Thus, the metics of Athens, among them the refugees from Ionia running ahead of the Persians after the failure of the Ionian Revolt, could only write, as they were not allowed to speak at the Assembly.
Moreover, Deborah Tarn Steiner called her work The Tyrant’s Writ because tyranny was an innovation in government, replacing hereditary rule, and setting the stage within a few generations for oligarchy and democracy. Tyrants were often successful businessmen – self-made men on the rise – to whom was entrusted the financial management of the town’s affairs. Whereas the Mycenaean kings of the Iliad called on familial bonds to fill their ships with warriors, the tyrants of Lydia hired mercenaries. Those hired soldiers were citizens of Greek towns of Ionia – Miletos, Kolophon, Samos, and nine others. They voted at assembly to accept the offer of fighting for pay. They were paid in coins.
Finally, while Athens became “the school of Hellas,” philosophy did not begin there, but in Ionia. In Athens, it was called “the Milesian way” after the teachings of Aspasia of Miletos[10], consort of Pericles whose symposia drew young Socrates.
In this, we see all of the operating factors of Greek society. The mint master was democratically elected. The workers were slaves. The designs announced the town of origin as an entity in its own right, a polis of independent being. Coins were uniform and therefore countable. They were the product of established metallurgy and smith-work. They allowed the storage of concrete wealth in an abstract form. Silver (as well as gold and electrum) has few uses except as adornment. It cannot be eaten. Even as a metal, it is poor for tools, being soft and not holding and edge. So, metal money represents an abstraction that influenced Greek ideas of both the atomic and the infinite.[11]
That coinage could have originated in China or India does not change the picture. Chinese “cash” coins were cast, not struck. We have “trees” of coins on their sprues; and close inspection of coins shows their having been broken from such castings and then filed smooth. (Manpower was never in short supply in China.) Billions of these nearly identical coins were made from about 250 BCE to about 1850 BCE, when modern coinage in the European mode dominated. Furthermore, Chinese cash announced not an independent city but the emperor of the entire nation. From about 150 BCE forward, emperors took regnal names, sometimes several during a lifetime. These characters typically appear as a foursome, two top and bottom, two left and right. The first was Jian zhong jing guo (建中靖國), “happy medium; cleansing the country.” These might best be thought of as similar to the administrative slogans of our presidents: “New Deal” or “New Frontier” or “Great Society.” Artifact evidence leads us to see a direct line from stylized commodity money to coinage in China. The earliest trade artifacts are bronze “knives” and “spades.” It is easy to see in them functional tools. However, even the oldest lack any structural or operational utility. Most interesting are those that show the transition from artifact to coin. The knives had at one end a round hole, presumably for hanging on a peg or thong. The intermediate form is a very large round hole from which flows a vestigial knife blade.
The origins of coinage on the Indian subcontinent are even less certain. The oldest known are struck, not cast, and show a development typical of similar Greek (or Chinese) coins from at least two centuries later than the earliest known examples. Even so, like those others, the oldest coins of India reflect the metal-working technology of the time and place and also show an intellectual abstraction from useful metal to ornamental metal.
In China, coins were cast. In the West, they were struck. In China, standardized metal money might go back before 250 BCE. In the West, it starts at about 550 BCE. No significant change came until the European Middle Ages, circa 1200 CE.
The Romans improved the production of coinage only marginally. Their die cutter – called celators – were skilled at portraiture. Mass production changed little. The only significant improvement seems to be the creation of “clamshell” die pairs into which the planchets were placed. However, this was not (apparently) universal. Historians and numismatists debate among themselves the nuances of production techniques between Rome and the provincial mints, though in the main these were unsurprisingly similar.
We have no problem understanding the coinage of the Roman Empire. The silver denarii of the Caesars showed their images on the obverse and called upon graces of Abundance, Concordance, Justice and even Pudicity on the reverse. Also on the reverse could be news of the day, conquests of Dacia, Judea, Parthia, Germania, Britannia. At the same time, perhaps a hundred nominally independent Greek cities continued their own local coinages in bronze.
After the decline of the West, the Eastern Roman Empire[12] bought off the Visigoths and others with indemnity payments. So many gold coins were issued from the 400s to the 800s that today, these are not more expensive relative to their bullion content than are the gold coins of the 19th century United States, about 60% to 100% over their metal content. Demand is more important than supply and not many people collect the gold of Constantinople. Even so, the supply is objectively bountiful. That testifies to the extent to which the Empire paid tribute to barbarian tribes.
The Chinese found the same virtue in necessity. Various entities – the empire or independent states – paid tributes of silver, silk and tea to barbarians. Galling as such payments always are, clearly, they supersede the alternatives of continuous military defeats capped only by the inevitable ravaging of the peoples and their lands.
VIRTUAL MONEY
With the decline of the Roman empire in the West, precious metal coinage also fell off. As military commanders paid their troops in coins of decreasing fineness until they were unabashedly copper. Individual households turned their stocks of precious metals into “plate” for household objects. Those treasures were looted and re-looted for centuries, accumulating in the foundation pits of the castles of Dark Age warlords, to become the legendary “dragon’s lair” treasures of the time. With the slow rise of the Merovingian and Carologinian houses, the West saw more coinage… much more… so much more that keeping track of it all became a problem.
The plethora of coinages from the Middle Ages tells a common story across time and place. A new moment of local prosperity brought a new coinage, typically on a known international standard. Over time, the issuer (typically, a bishop or a count, but perhaps also a king who may have contracted with a private minter) was forced to debase the coinage. More copper was added and the coins became smaller. Some, such as the English sterling silver pennies were remarkably stable. Others such as the deniers of Hall in Austria[13] were accepted despite their slide. In addition, the natural depletion of mines also contributed to “bullion famines” which raised the value of silver and encouraged smaller, debased coins to meet the need of retail trade.
The solution was the invention of “money of account.” Bankers of the Middle Ages created virtual money with the names libri (pounds), marks (half-pounds), soldi (shillings) and denarii (pence). These represented standard measures of silver based on the decrees of Charlemagne that sought to re-establish Roman norms. Thus a “pound”of silver was 240 standard “pence” even if it took a thousand coins of various grades and weights to make that happen. The mark was (about) half a pound.[14] The shilling was (about) an ounce, at 20 to the pound.
The best thing was that as bankers kept their books in standard moneys of account, they could do business across great distances without regard for specific coinages. This meant that actually no coins needed to be transferred, and often were not. Bankers met at great fairs and compared and cleared their books with a minimum of hard cash changing hands.
During the European Middle Ages, the transmission of notarized papers removed the need to transport hard cash. The typical transaction was four-sided: Merchant A borrowed money from Banker B who sent a letter to Banker C requesting payment to Merchant D. A three-sided contract allowed the merchant to have the money waiting for him at his destination.[15]
Today, we call the state treasury of the United Kingdom the Exchequer. That name derives from the medieval practice of accounting. The squares of the checkerboard represented accounts, whether receivables or payables. On the squares were stacked coins owed for each account. By the mid-13th century, the actual coins were replaced by jetons (literally, “throws”), counters mimicking coins, but made of base metals. Nuremberg was the center for their production and some manufacturers achieved commercial visibility for their wares. The system continued through the 16th century (or later in some places) though largely replaced by Arabic numerals and double entry bookkeeping before the 1500s.[16]
The introduction of Arabic numerals into Europe is another narrative. Known to some perhaps from the ninth century, the Crusades brought them to Italy, though they were outlawed in Florence. Of course, their utility quickly overpowered traditionalist political inertia. By the late 1400s, the town of Treviso outside Venice became a center for the training of commercial clerks in the new methods of Arabic numerals, double entry bookkeeping, and algebra.[17]
Arabic numerals eventually impacted the arithmetic of money, by changing the preferred denominations from halves and thirds to tenths. It was a slow process.
As late as the 19th century, coins of German states gave their value in twelfths (or sixths or thirds or halves) of a thaler.[18] A common coin from Hanover 1846 reads “CLXVIII EINE FEINE MARK.” As the coin is 2.670 grams of 0.521 fine silver for an actual silver weight of 0.0447 troy ounces, the mark is 7.5096 troy ounces, very close to Charlemagne’s standard, over a thousand years earlier. We have been acculturated to think of tens as “natural,” but if you count off the three phalanges of your four fingers with your thumb as a pointer, you see the natural basis for twelves. The New York Stock Exchange did not decimalize until January 29, 2001, quoting traditionally in eighths, but using sixteenths as an interim measure 1997-2001.
Only in 1585 did one Simon Stevin of Holland publish a pamphlet, La Disme, explaining the wonders of base-10 arithmetic. It is from that book that our own tenth of a dollar was originally called a “disme” in official reports of the U.S. Treasury and its Mint up through 1837.[19] As late as that era, many merchants in the United States kept their books in pounds-shillings-pence. It was not so much that British coinage circulated here – it seldom did – but that commercial paper crossed the Atlantic. The standard mode was for merchants to send three copies of each letter to assure that one would arrive.
In addition to the British system, people of that time also followed the Spanish system of halves and quarters. That is why, despite the combined pleas of Jefferson and Hamilton, the U.S. Treasury created the quarter dollar (two bits; two reales), rather than a truly decimal 20-cent piece. Spanish dollars carried the number 8 (for eight reales), thus “pieces of eight.” Spanish money circulated widely into the middle of the 19th century and the promises of banks in Michigan, Illinois, Alabama and, of course in New York, Massachusetts, Maryland and Georgia, displayed Spanish (Mexican, Peruvian) coins on them.[20] The banks did not actually have the coins. Wildcat banking was a dicey affair, but the paper promises usually served local needs well enough as a tally for transactions.[21]
PRIVATE ENTERPRISE
Every silver lining is covered by a cloud, and the Industrial Revolution was a perfect storm of innovations. Among the troublesome blessings was a severe shortage of small denomination money. The first coins were invented by tyrants to pay mercenaries. Little challenged the state’s prerogatives for over 2000 years. Nominally private issues were known, but they were mostly payments by generals to troops in the field, often by generals seeking the purple. Truly private money was unknown.
Compounding the problem was the fact that the Crown struck coins for its own uses, large payments for estate-sized orders of wine, grain, meat, textiles and armor. Moreover, except for the cost of the metal itself, it is just as burdensome to strike a gold coin as a copper coin. Furthermore, if the mint as an operation – or mint master himself – is to make a profit rather than being a loss to the state, there is more margin in gold (and silver) than in copper. But copper was needed to buy a day’s beer and bread in 1750. (Even a clipping a farthing from a silver penny left an unused smidgen of value.) Copper coins had been tried, but no crown and no contractor seeking a patent could make a profit from a product that anyone actually wanted. In the early 18th century, underweight patent coins – pennies and halves celebrating “Hibernia” and “Rosa America” – circulated grudgingly and were abandoned.
Demanding those non-existent copper coins were new industrial enterprises in the United Kingdom, principally in Birmingham, Manchester, and London, each employing dozens to hundreds of men, women, and children. One solution was to pay a gang of workers with a silver coin and send them all into town together. Another was to for the local taverns to extend credit or take payment in advance for beer and bread over time. Either side of that wager was chancy, of course.
Finally, in 1787, the Parys Mine of Angelsey, Wales, hit on a solution: they had their own copper struck into penny and ha’penny coins that were themselves promises to pay silver, 240 pence to the pound, in London.
Within five years, hundreds of competing private coins served similar needs all across England, spreading to Scotland and Ireland. Factories, towns, taverns, merchants, and many others, issued their own pence and halves. While of some value as copper, their worth was supported by promises to pay in silver, typically at Birmingham and/or London. Many of them were struck on new steam engines operated by James Watt and Mathew Boulton of Birmingham. The workmanship surpassed the silver and gold of the crown and set new standards for circulating coinage.
Eventually, the crown was able to get ahead of the curve, in part by Parliament’s outlawing of private coins. However, the problem -- and its solution – only spread. The British East India Company and the Dutch India Company both struck coins. In America, the Panic of 1837 dried up what little Federal money there was, and merchants took to creating their own cents. Some of the issues lampooned President Andrew Jackson with the image of a jackass with a law degree. Others insulted or promoted Martin Van Buren, Henry Clay and Daniel Webster.
Gold strikes in North Carolina, California and Oregon impelled the creation of private money in precious metals.
At the same time, banking matured. Paper is easier to transport than metal, of course. More to the point, the Bank of England could borrow millions of pounds sterling as gold coins from private citizens, and then hand that wealth over to the crown which needed to pay for its wars. The Bank accepted promissory bonds from the crown in return for the bullion, and then – miraculously – used those large-denomination interest-paying bonds as collateral against its own retail paper notes for £5 and more.
It is expected and true that the technology of printing allowed the private notes of the banks, and the stock certificates of the corporations, to surpass the workmanship of the royal chancelleries. Security was one motive. The printing and paper had to be difficult to copy. Advertising was another reason. To be perceived as stable and prosperous ahead of the facts is important to any new enterprise.
The creation of new wealth from new debt was the fifth revolution in money. Of course, there was risk.[22] Enterprises could fail, and often did. But the promise of profit brought investors. Railroads were one obvious creation; and thousands of industrial ventures blossomed. Also, under the new laws cities, local school boards, and state universities also tapped into the streams of commerce.[23]
PRAXEOLOGY VERSUS SOCIOLOGY
In The Politics, Part IX, Aristotle explains how coinage evolved from barter. People exchange their surpluses. Artifacts such as shoes are admittedly useful but nonetheless limited in their usefulness. Thus, people sought some medium which surpassed mere utility, but which was at once useless and yet highly desired. Moreover, coinage could be counted by units, by “tale” and need not be inspected and weighed individually. Furthermore, there was seemingly no limit to the wealth that could be represented by coins.
From Aristotle to Marx and our own millennium, little has been added to the story. The medieval master of arts, Nicole Oresme (1323-1382), warned his king against debasing the coinage. Sir Thomas Gresham (1519 - 1579) warned his queen.
According to Karl Marx:
But a particular commodity cannot become the universal equivalent except by a social act. The social action therefore of all other commodities, sets apart the particular commodity in which they all represent their values. Thereby the bodily form of this commodity becomes the form of the socially recognised universal equivalent. To be the universal equivalent, becomes, by this social process, the specific function of the commodity thus excluded by the rest. Thus it becomes – money.
Capital Volume One; Chapter Two: Exchange.
Throughout this work, I assume, for the sake of simplicity, gold as the money-commodity. The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money.
Capital Volume One Chapter Three: Money, or the Circulation of Commodities.
The Austrian School of economics takes great pride in thoroughly demolishing socialism on rationalist grounds. (The empirical evidence that socialism is inefficient is painfully undeniable.) Carl Menger (1840-1921), Eugen von Böhm-Bawerk (1851-1914), Ludwig von Mises (1881-1973) and Murry N. Rothbard (1926-1995) developed a philosophical tradition that among other attributes was consciously contrary to sociology. They called it praxeology. It begins with the individual. Moreover, no collective can be reified apart from the individuals who act within it. There is no such thing as “society.” At best, the word is a short-cut, a convenient label. There is no such thing as “the market” or “the economy” but only individuals who exchange. Of course, we speak of “market societies” as opposed to “command economies.” Just as the solar system may or may not include the Oort Cloud, and just as Pluto may or may not be a true planet, when speaking of “society” or “the economy” we need to exercise the same care that astronomers give to their vocabularies, ever mindful of the difference between lexical convenience and empirical fact.
Therefore, it is curious that the Austrians share the Marxist ontology of money. According to Ludwig von Mises:
A medium of exchange is a good which people acquire neither for their own consumption nor for employment in their own production activities, but with the intention of exchanging it at a later date against those goods which they want to use either for consumption or for production.
Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange. Money is the thing which serves as the generally accepted and commonly used medium of exchange. This is its only function. All the other functions which people ascribe to money are merely particular aspects of its primary and sole function, that of a medium of exchange.
Media of exchange are economic goods. They are scarce; there is a demand for them. There are on the market people who desire to acquire them and are ready to exchange goods and services against them. Media of exchange have value in exchange. People make sacrifices for their acquisition; they pay “prices” for them. The peculiarity of these prices lies merely in the fact that they cannot be expressed in terms of money. In reference to the vendible goods and services we speak of prices or of money prices. In reference to money we speak of its purchasing power with regard to various vendible goods.
(Human Action, Chapter XVII “Indirect Exchange”
The problem is actually two-fold. Marx sought the historical origin of money. The Austrians have no interest in that. They live in the here-and-now and consider only the present nature of money. In fact, this immediacy is axiomatic to Austrian economics: past prices are irrelevant. To the Austrians, the “chartists” and “technical traders” of the stock markets are the astrologers of economics. Therefore, we have to separate the investigation into its historic evolution (synthetic truth or evidentiary nature) and its pure meaning (analytic truth or rational justification).
It is apparently true that the price of coffee yesterday has no causal connection to the price of coffee tomorrow. Nonetheless, the past is prologue to the future. As Jane Jacobs pointed out in The Economy of Cities, contrary to the claim of Joseph Schumpeter that capitalism brings “creative destruction,” old social forms, old goods and services, seldom disappear entirely, but only are integrated into new expressions. As an example, Jacobs traced the manufacture of brass fittings for equestrian tack through centuries of change including brass fittings for clothing and small parts for complex machineries.
According to the rational-empirical method (Scientific Method), reliable claim to truth can be made when empirical evidence and rational theory are in agreement. If we have historical fact with no apparent explanation, all we have is a curiosity. Alternately, a rationalist theory about the actions of abstract entities is a science fiction novel. The objective unites the synthetic and analytic.
ONTOLOGY OF COMMERCE
Projecting the folkways of modern “primitive” or “first peoples” cultures on our presumably common Paleolithic origins can be problematic. We must proceed with caution. Nonetheless, we know that ritual exchange, especially of food is common and apparently old. While food is useful, transfers of abundance at times of surplus is deeply meaningful. Gifts of any kind are generally ameliorative. While no one wants a white elephant, neither do we look a gift horse in the mouth, even as we are wary of Greeks bearing gifts, or of gifts bearing Greeks.
Given those caveats, the invention of wampum may be reflective of earlier social modes. The historical Hiawatha was a disciple of Dekanawida, the inventor of wampum. When the French explorer, Jacques Cartier met the Hurons in 1535, Dekanawida perceived the threat. Dekanawida took it upon himself to warn the Iroquois to the south, traditional enemies of the Hurons. There, he met Hiawatha, a reformed cannibal. Their plan was to unite the warring tribes into a single “nation” and wampum was the means, as a form of compensation to replace incessant retaliation. They were successful, at least for 200 years. The Iroquois Confederation is often cited as a known model for our own republic. Wampum became synonymous with “money.” Many kinds were made, including cheap European knock-offs.
In our generation, some self-styled economic patriots created “barter clubs” in an attempt to avoid federal income tax. Uncle Sam is not so easily fooled. However, there is an example of non-commercial barter echoic of those exchanges that reinforced social bonds. In 19th century Sydney, Australia, gardening enthusiasts swapped plants.
The creators of Sydney's botanic garden were a varied group of people with diverse agendas and interests, only some of whom saw themselves as men of science. While several were trying to advance botany, others were more concerned with self-advancement or financial gain. Yet they collaborated, almost unintentionally, to found Australia's first scientific institution. Exchanges of plants were crucial to forming and maintaining the relationships between these different figures. … This study also takes issue with the notion that British colonial botanic gardens were established as part of a botanical empire, with Kew Gardens at its centre. It also seeks to extend Susan Leigh Star and James R. Griesemer’s idea of ‘boundary objects’, by suggesting that relationships based on barter, gift-exchange or patronage rather than cash played a key role in mediating between the participants in colonial scientific institutions.
Jim Endersby, “A Garden Enclosed: Botanical Barter in Sydney, 1818-39,” The British Journal for the History of Science, Vol. 33, No. 3 (Sep., 2000), pp. 313-334.
Compelling as this story is, this ritual gift exchange for social status is all around us. The story comes from an academic journal which (we can assume) did not pay the author for his work, though they do charge subscribers to read it. Academic researchers also deliver papers at conferences. Their travel and other expenses may be paid for incidentally, but that is not necessarily part of the process. Open sharing of information is expected as a sign of engaged status.
Modern advocates for “hard” money (also called “gold bugs”) point to the obvious truth that our Federal Reserve Notes are backed by nothing but faith – and in the face of mounting federal debt, faith can be lacking. The price of gold continues to “rise” because the value of the dollar continues to fall. However, mismanagement by the issuing authority is always the major risk with unsecured money. Nevertheless, many such issues prosper.
“Community currencies” have origins in the emergency scrip of the previous Great Depression of the 1930s. Today’s issues find their common ancestor in the “Time Dollars” of Ithaca, New York. Also backed by nothing but common trust, these local issues tend to serve their primary purpose which is to extend credit to productive people and then to amortize those debts with direct labor. LETS (Local Economy Transfer Systems) are a kind of community currency without physical media. In Latin America, Asia and Africa, people without computers keep tallies by hand. Here, we use the available technologies. The idea is the same as a community currency, but the “tote board” removes the expense of creating a circulating medium. The loss of anonymity is one hidden cost to a LETS, but communities are based on shared personal knowledge, i.e., gossip.[24]
RIGHT BRAIN RIGHT IDEA
In the Ultimatum Game the strictly rational second player might be willing to accept as little as one cent, a mere hundredth of a percent, a 0.01 to 99.99 split. After all, it is better to have some money than none. Certainly, getting $30 free is nice. So, why do people begin to balk at anything less than 50-50 with full revolt building at 30-70? Clearly, fairness (to self) is a deeper concern than gain (to self).
That, of course, depends on having a self.
It may be that writing led to the invention of “self.” Julian Jaynes[25] suggested that not long ago, humans had truly symmetrical brains, similar to those of other large mammals. We were ambidextrous. Our oldest tools – the spear, hammer, chisel, scraper, saw, awl, adze, hoe, even the first scissors – all can be used with either hand equally well. However, writing changed the “bicameral mind” giving us preferences for “right brain” and “left brain” thinking. The corpus callosum and the frontal lobe may be physical consequences, changes in the anatomy of the brain, caused by the invention of writing.
A sense of fairness may not be unique to humans and may run very deep within our animal brains. (See, “The absence of reward induces inequity aversion in dogs,” by
Friederike Range, Lisa Horna, et al. Proceedings of the National Academy of Sciences,
January 6, 2009, vol. 106 no. 1.) Also, famous “mirror tests” indicate that most large primates, elephants, magpies, and pigs recognize themselves in a mirror, though human babies do not until 18 months of age.
Whether the sense of equity through mutual exchange is deeply engrained or recently learned, it clearly exists within humans. We use gifts socially. Money transfers, indirect bartering, buying and selling, are all echoic of that earlier and deeper expression.
ILLUSTRATIONS
Fired clay tokens, stored in round clay “envelopes,” were the first visual means of keeping track of goods. When people began impressing the tokens onto the outside of the envelope, they invented writing.
http://www.utexas.edu/features/archive/2003/...
A small collection from the 8,000 or so trade tokens that have been found in Iraq, Iran and Syria. Photo: Mindy McAdams.
http://www/rhetoricaldevice.com/images/ClayTokens.jpg
CLAY TOKENS BECAME PICTOGRAPHS WHICH BECAME CUNEIFORM
University of Texas, Classical Archaeology
http://www.utexas.edu/courses/classicalarch/images1/tokentocuneiform.jpg
Ancient Weight Standards
We have coins by the ton which numismatists weigh to the hundredths of a gram. We also have weights for scales and balances. Different people in different times and places used the same words for different measure, just as we have dry, liquid, imperial, and English gallons and liquid and dry ounces, dry being either troy or avoirdupois. Weight standards could be the same or different in neighboring cities or in cities widely separated seeking to establish common grounds for commerce. Generally speaking, for the “ballpark” figures, these are among the many reliable citations.
Babylonian / Syrian Greek
1 shekel = 1/4 oz. 1 drachma = 1/8 oz.
1 mina = 50 shekels
1 talent = 60 mina 1 talent = 6000 drachma
Kerk Phillips, associate professor of economics, Brigham Young University
http://econ.byu.edu/Faculty/phillips/Assets/Econ459/459curr.pdf
Babylonian mina = 6 karšâ = 60 shekel = 499.80 gr
1 karšâ = 10 shekel = 83.33 gr
1 shekel = 8.33 gr
talent-weight = 60 mnai = 6000 drachm-weights = 27.47 kg
1 mna = 100 drachm-weights = 457.8 gr
1 drachm-weight (holkê) = 4.578 gr
1 talent-weight = 60 mnai = 6300 coin-drachms = 27.47 kg
1 mna = 105 coin-drachms = 457.8 gr
1 coin drachm = 4.36 gr
Livius is a website on ancient history
written and maintained since 1996 by the Dutch historian Jona Lendering
http://www.livius.org/w/weights/weights.html
Artifacts become coins in ancient China
Ancient Chinese knife money and spade money from the Shang and Zhou Dynasties.
German Wikipedia, original upload 2. Mär 2005 by Zhou Yi. Aus „China und Japan“ von Ernst v. Hesse-Wartegg (Verlagsbuchhandlung von J. J. Weber in Leipzig. 1900) von Zhou Yi eingescannt.
http://en.wikipedia.org/wiki/Cash_(Chinese_coin)
Archaic and Classical Greek Coins
Miletos c. 550 BCE Electrum One-Sixth Stater 2.67 grams
Miletos c. 550 BCE Silver One-Twelfth Stater 1.12 grams
Aigina, c. 480 BCE “Turtle” Tetradrachma from CoinArchives.com
Athens c. 440 BCE “Owl” Tetradrachma 17 grams
Corinth c 440 BCE “Pony” Stater from CoinArchives.com
Spanish Coins on American Money
From Utica, Michigan, 1842, a bearer check drawn on the account of the Utica-Railroad, shows a Spanish 2-Reales coin as its pledge for 50 cents.
“Provincial” tokens struck privately for commerce in the 1790s.
Merchant tokens circa 1793. Top, an Anglesey “Druid”
Bottom, John Wilkinson, Iron Master. The reverse shows a drop hammer forge.
http://www.thecoppercorner.com/history/bw_photos4.htm
Merchant token with Abolitionist message c. 1793
“Am I not a Man and a Brother?”
Private Banking Impelled Paper Technology
Bank of Washtenaw, Ann Arbor, Michigan circa 1840.
Private banks in the “wildcat” era pushed the limits of printing technology to create vignettes and papers that were hard to duplicate. The Central Mine of Eagle Harbor, Michigan, issued its own notes for over 30 years.
Bibliography
Baxter, W. T. “Early accounting: the tally and checkerboard,” Accounting Historians Journal, 1989, Vol 16. No 2. PP 43-84.
Blomquist, Thomas W., “Commercial Association in Thirteenth-Century Lucca,” The Business History Review, Vol. 45, No. 2, (Summer, 1971), pp. 157-178
Cook, R. M. “Speculations on the Origins of Coinage,” Historia. Wiesbaden, 1958.
Epstein, S. R., “Regional Fairs, Institutional Innovation, and Economic Growth in Late Medieval Europe,” The Economic History Review, New Series, Vol. 47, No. 3, (Aug., 1994), pp. 459-482.
Face, R. D., “Techniques of Business in the Trade between the Fairs of Champagne and the South of Europe in the Twelfth and Thirteenth Centuries,” The Economic History Review, New Series, Vol. 10, No. 3, (1958), pp. 427-438
Face, R. D., “The Vectuarii in the Overland Commerce between Champagne and Southern Europe,” The Economic History Review, New Series, Vol. 12, No. 2, (1959), pp. 239-246.
Grierson, Philip. The Origins of Money, London: Athlone Press, 1977.
Leonard, Robert. “Wampum,” ANA Money Talks, Transcript No. 1745. Colorado Springs: American Numismatic Association, June 11, 1999
Marotta, Michael E., “Electrum Sixths and the Treaty of Mytilene,” Classical Numismatic Review, Vol. 20 no. 2, Summer 1995, p. 7-8.
Marotta, Michael E., “A New Look at the Origins of Coinage,” The Numismatist, Colorado Springs, August 1995.
Marotta, Michael E., “A Penny Earned: What Money Bought,” The Numismatist, Colorado Springs, November 1996
Marotta, Michael E., “Champagne: The Athens Of The Middle Ages,” The Celator, Lancaster, Pennsylvania, November 2009.
Marotta, Michael E., “Electrum,” The Celator, Lanscaster, Pennsylvania, August 2003.
Marotta, Michael E., “Local Money: Plan for Homegrown Currency has a Rich Past,” Northern Express, Traverse City, Michigan. 11/13/2003
Marotta, Michael E., “Passing the Bay Bucks: Local Currency could Hit the Streets this Summer,” Northern Express, Traverse City, Michigan. 6/10/2004.
Marotta, Michael E., “The Origins of Coinage: Evolution of a Theory”, The Celator, Lancaster, Pennsylvania, October 1997.
Nightengale, Pamela, “The Evolution of Weight-Standards and the Creation of New Monetary and Commercial Links in Northern Europe from the Tenth Century to the Twelfth Century,” The Economic History Review, New Series, Vol. 38, No. 2, (May, 1985), pp. 192-209.
Price, Martin J., “Thoughts on the beginning of coinage,” J. Price. Brooke, C. N. L, et al., eds. Studies in Numismatic Method Presented to Philip Grierson. Cambridge: Cambridge University Press, 1986.
Ridgeway, William.The origin of metallic currency and weight standards. Cambridge : University Press, 1892.
Sargent, Thomas J. and Françoise R. Velde, The Big Problem of Small Change, Princeton: Princeton University Press, 2002.
Schmandt-Besserat, Before Writing: From Counting to Cuneiform, Austin: University of Texas Press, 1992.
Selgin, George. Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775-1821, Ann Arbor: University of Michigan Press, 2008.
Spufford, Peter, Handbook of Medieval Exchange, London: Offices of the Royal Historical Society, 1986.
Spufford, Peter, Money and its Use in Medieval Europe, Cambridge: Cambridge University Press, 1988.
Swetz, Frank J. Capitalism & Arithmetic: The New Math of the 15th Century (Including the Full Text of the Treviso Arithmetic translated by David Eugene Smith), LaSalle, Illinois: Open Court: 1987.
Ure, P. N. The Origins of Tyranny, New York, Russell and Russell, 1962
[1] Leonard, Robert. “Wampum,” ANA Money Talks, Transcript No. 1745. Colorado Springs: American Numismatic Association, June 11, 1999
[2] Before Writing: From Counting to Cuneiform. Austin: University of Texas Press, 1992 and very many other monographs.
[3] Origin of Metallic Currency and Weight Standards, Cambridge: University Press, 1892.
[4] Latin pecu* “cow” as the basis for “pecuniary.” German das Vieh=”cow” as the cognate for the English “fee.” But see, also, “Geld” (money) and “Gold” as variants of “Gelb” (yellow) and as the etymological kin of “Yield” i.e.,the harvest of (yellow) grain.
[5] Among many, Genesis 23: Abraham weighs out 400 shekels of silver to buy a burial site for Sarah. Genesis 24: Abraham's servant gives to Rebekha “a golden earring of half a shekel weight, and two bracelets for her hands of ten shekels weight of gold.” 1 Samuel 9: “Behold, I have here at hand the fourth part of a shekel of silver that will I give to the man of God, to tell us our way.”
[6] Parable of the Talents. Matthew 25:14-30; Luke 19:12-28.
[7] Nuggets of electrum, a naturally occurring alloy of gold and silver. Precious metals often come from the same ores, admixed with copper, etc. In fact, when copper ore is refined, the byproducts include silver and gold.
[8] Often alluded to in ancient sources but actually rediscovered in Alexandria only a hundred years ago.
[9] Greek Coins, London: Methuen & Co. Ltd., 1933 and 1955. Seltman wrote the article on “Money” for the Encyclopedia Britannica which stood from the 11th through 14th Editions.
[10] It is an interesting speculation that the spark of Thales of Miletos (624-546 BCE) lit the fires of Gautama Siddartha (563-483 BCE) and Kong Futze (551-479 BCE).
[11] Seaford, Richard, Money and the Early Greek Mind: Homer, Philosophy, Tragedy, Cambridge University Press, 2004
[12] Mistakenly called “Byzantines” – a politically-charged epithet invented by French diplomatists of the 17th century – they called themselves that they always were: Romans. When the emperor John Palaiologus came to Italy in 1438 to plead for help, the artist Antonio di Puccio da Cereto called “Pisanello” created the first honorific medal. The inscription reads: PALAIOLOGOS HWNNHS BACILEUS AUTOKRATWR ROMAIWN: John Paleologus King and Emperor of the Romans. See, “What, if Anything, is a Byzantine?” by Clifton R. Fox, professor of history at Tomball College, Texas, http://www.romanity.org/
[13] The coins were called “häller” or “heller” a denomination still used in the 20th century.
[14] The “mark” was a Northern unit, likely derived from the silver value of a Danish “ore” or gold “ounce.”
[15] Cash still had a place in commerce, of course. As late as the 13th century, silver bars weighing one mark were a medium for large transactions.
[16] The counters themselves found other uses. English marketplaces found them convenient as small change, there being nothing less than the silver penny, though they themselves often were cut along their crosses into farthings (“fourthings”). Jetons also become gambling counters.
[17] Smith, David Eugene, “The First Printed Arithmetic (Treviso, 1478),” Isis, Vol. 6, No. 3 (1924), pp. 311-331 Accessed: 06/09/2009 13:58. See also Swetz, Capitalism & Arithmetic, cited in the bibliography here.
[18] It is true that the ancient Roman denarius was a silver coin worth ten asses (singular as later called aes by British classicists). Some even carried an X for ten. However, the as was a pound of bronze divided into twelfths, down to the uncia and semunica (ounce and half-ounce). Michael H. Crawford is the author of many books and monographs about Roman monetary history.
[19] Walter Breen’s Complete Encyclopedia of U.S. and Colonial Coins, New York: Doubleday 1988. Breen graduated Johns Hopkins in 1952 with a BA in mathematics (Phi Beta Kappa) after only one year of study.
[20] See Bob Schreiner’s website “Spanish Coins on American Notes” http://scoan.oldnote.org/ for an authoritative presentation of facts and images.
[21] Few good histories of the wildcat banking era (1811-1860) exist. A History of American Currency with Chapters on English Bank Restrictions and American Paper Money, by William Graham Sumner, New York: Henry Holt and Company, 1874, still stands unexcelled. Even Murray N. Rothbard cribbed most of his research about the wildcat era for A History of Money and Banking in the United States from a single report, Suffolk Bank and Its Redemption System, first published in 1881 by the bank. Other details can be harvested (or gleaned) from working papers of the Federal Reserve and arcana such as History of the Chemical Bank 1823-1913 published by the bank.
[22] Economist Peter L. Bernstein (Against the Gods: The Remarkable Story of Risk, New York: John Wiley & Sons, 1996) asserts that every society has merchants, but that capitalism became possible only when Pascal and Fermat created the mathematics of probability which made risk predictable.
[23] Different states have different laws, but basically, bondholders get interest and their loans are secured by the physical assets of the corporation. Preferred stock has no voting rights, but is paid interest, though with no other security. Common stock might benefit from a declared dividend, but usually brings only voting rights.
[24] Dierdre McCloskey has been working on the idea of Bourgeois Virtues for almost 20 years. She is the author of two books and several monographs by that title. Contrary to the classical economists who tout an anonymous market of equally shared information McCloskey stresses reputational exchange (gossip) as a key feature of commercial society.
[25] The Origin Of Consciousness in the Breakdown of the Bicameral Mind Boston : Houghton Mifflin, 1990.