Money Read Free

conventional theory of money. It is entirely false.
STONE AGE ECONOMICS?
    John Maynard Keynes was right about Yap. William Henry Furness’ description of its curious stone currency may at first appear to be nothing more than a picturesque footnote to the history of money. But it poses some awkward questions of the conventional theory of money. Take, for example, the idea that money emerged out of barter. When Aristotle, Locke, and Smith were making this claim, they were doing so purely on the basis of deductive logic. None of them had ever actually seen an economy that operated entirely via barter exchange. But it seemed plausible that such an arrangement might once have existed; and if it had existed, then it also seemed plausible that it would have been so unsatisfactory that someone would have tried to invent a way to improve on it. In this context, the monetary system of Yap came as something of a surprise. Here was an economy so simple that it should theoretically have been operating by barter. Yet it was not: it had a fully developed system of money and currency. Perhaps Yap was an exception to the rule. But if an economy this rudimentary already had money, then where and when would a barter economy be found?
    This question continued to trouble researchers over the century after Furness’ account of Yap was published. As historical and ethnographic evidence accumulated, Yap came to look less and less ofan anomaly. Seek as they might, not a single researcher was able to find a society, historical or contemporary, that regularly conducted its trade by barter. By the 1980s, the leading anthropologists of money considered the verdict to be in. “Barter, in the strict sense of moneyless market exchange, has never been a quantitatively important or dominant mode of transaction in any past or present economic system about which we have hard information,” wrote the American scholar George Dalton in 1982. 15 “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there has never been such a thing,” concluded the Cambridge anthropologist Caroline Humphrey. 16 The news even began filtering through to the more intellectually adventurous fringes of the economics profession. The great American economic historian Charles Kindleberger, for example, wrote in the second edition of his
Financial History of Western Europe
, published in 1993, that “Economic historians have occasionally maintained that evolution in economic intercourse has proceeded from a natural or barter economy to a money economy and ultimately to a credit economy. This view was put forward, for example, in 1864 by Bruno Hildebrand of the German historical school of economics; it happens to be wrong.” 17 By the beginning of the twenty-first century, a rare academic consensus had been reached amongst those with an interest in empirical evidence that the conventional idea that money emerged from barter was false. As the anthropologist David Graeber explained bluntly in 2011: “[T]here’s no evidence that it ever happened, and an enormous amount of evidence suggesting that it did not.” 18
    The story of Yap does not just present a challenge to the conventional theory’s account of money’s origins, however. It also raises serious doubts about its conception of what money actually is. The conventional theory holds that money is a “thing”—a commodity chosen from amongst the universe of commodities to serve as a medium of exchange—and that the essence of monetary exchange is the swapping of goods and services for this commodity medium of exchange. But the stone money of Yap doesn’t fit this scheme. In the first place, it is difficult to believe that anyone could have chosen“large, solid, thick stone wheels ranging in diameter from a foot to twelve feet” as a medium of exchange—since in most cases, they would be a good deal harder to move than