
Conflict reigns over the history and origins of money - diodorus
https://www.sciencenews.org/article/money-ancient-origins-debate-mystery
======
winstonewert
My impression after reading Graeber's book was that he was probably right in
questioning the simple story of a barter economy transitioning into a money
economy. But he's way too simplistic in his own narrative. It is hard for me
to see how people could start denominating debt in terms of money without at
least some limited sense of using money to replace barter.

He also seems to think that this is the foundation of all economic thought and
thus he suggests that all of economics is wrong because they have assumed an
incorrect origin of money. (I exaggerate, but not by much).

~~~
petermcneeley
Graeber's point was that barter is not used in small societies. In debt-ed
social relations were the means of negotiated trade. Paying for things with
currency was how one dealt with strangers in a spot trade. In our world most
interactions are alienated transactions with strangers, thus money is used.
[https://www.youtube.com/watch?v=CZIINXhGDcs&feature=youtu.be...](https://www.youtube.com/watch?v=CZIINXhGDcs&feature=youtu.be&t=1500)

~~~
winstonewert
It has been a number of years since I read the book, but my recollection was
that he argued that money was invented to quantify debt and that any kind of
currency was a later invention.

~~~
qubex
Likewise.

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MrEfficiency
As I've gotten older, I've stopped caring about these black and white style
comparisons.

Instead of saying that money was used to facilitate trade OR used to pack back
debts, why not both?

Given how useful money is, I only imagine that it solved many problems that
many civilizations and villages ran into.

~~~
ratman

        Recent research from the Americas adds new questions to
        the debate. These investigations suggest that money
        independently appeared for different reasons and assumed
        different tangible forms in many parts of the world,
        starting thousands of years ago.

------
FranzFerdiNaN
This isn’t a debate. Historians and anthropologists actually have some idea of
how the past works. I guess if you want some weird 19th century idea of the
past you might want to talk to an economist.

~~~
JumpCrisscross
> _guess if you want some weird 19th century idea of the past you might want
> to talk to an economist_

The myth appears to be that economists believe in the barter hypothesis. It
was prompted by Adam Smith and subsequently disproven. Using the barter
hypothesis as an argument against economics is like using Haeckel's embryos as
an argument against evolution.

~~~
mpax
I believe the barter hypothesis is already in Aristotle, so it’s perhaps
several millenia old.

Anyway, the issue does run deeper, since the barter theory is implicit in for
instance theories of banking, inflation and the money supply. See “veil over
barter”. It’s pretty important economists get it right.

~~~
JumpCrisscross
> _the barter theory is implicit in for instance theories of banking,
> inflation and the money supply_

No it isn't. (There isn't a single theory for any of banking, inflation or
monetary theory.) If anything, modern economics starts with the fiction of a
perfectly liquid medium of exchange that can be infinitesimally divided,
borrowed and loaned. Low-liquidity economics ( _e.g._ bartering) is an edge
case to modern theories.

~~~
21
Another fiction in modern economics is the rational man that always maximizes
utility.

~~~
JumpCrisscross
> _Another fiction in modern economics is the rational man that always
> maximizes utility_

Nope, this is another fictional fiction. _Homo economicus_ is a pedagogical
tool and toy model. Utilitarian economics feature pretty much nowhere because
defining a single utility function for real people is impossible.

When modelling agents, it can be useful to start with a rationality assumption
and then add complications. Or not. Depends on what you’re studying. The
entire exercise of valuation, for example, asks “what would a rational person
pay for this asset” and then looks to see if someone will sell it to you for
less. The toy model is useful even if it doesn’t repreeent the present reality
in the same way models of thermodynamic systems at equilibrium are useful.

~~~
mpax
> Homo economicus is a pedagogical tool and toy model. Utilitarian economics
> feature pretty much nowhere because defining a single utility function for
> real people is impossible.

Then what is the point? I mean, seriously, what is the point of teaching it?
Why not simply use a different model that doesn't result in all kinds of
awkward edge cases?

~~~
JumpCrisscross
Same reason we start with frictionless surfaces in physics. It’s simple to
grasp and extends gracefully. I provided an example of valuation exercises as
a practical application. Nobody thinks price = value. But by asking “what
would a rational me pay for this bond” and then observing the price, we gain
useful insight.

If the word rational bothers you, replace it with equilibrium. As to why we
don’t use other models, these models predict realty better than purely
behavioural and other exotic models. They’re Newtonian mechanics to the
economics discipline.

~~~
mpax
> If the word rational bothers you, replace it with equilibrium.

The world is a complex adaptive system, how does micro or macro equilibrium
fit that any better than homo economicus? If anything it sounds even worse to
me...

> They’re Newtonian mechanics to the economics discipline.

To me this is really the crux of the issue... how is it desirable to model the
world in terms of static mechanics, when it is clearly a dynamic system?

For example, I find this on the Wikipedia page about Market Clearing:

 _In economics, market clearing is the process by which, in an economic
market, the supply of whatever is traded is equated to the demand, so that
there is no leftover supply or demand. The new classical economics assumes
that, in any given market, assuming that all buyers and sellers have access to
information and that there is not "friction" impeding price changes, prices
always adjust up or down to ensure market clearing._

And then at the bottom there's this nugget:

 _Most economists see the assumption of continuous market clearing as not very
realistic. However, many see the assumption of flexible prices as useful in
long-run analysis, since prices are not stuck forever: market-clearing models
describe the equilibrium towards which the economy gravitates. Therefore, many
macroeconomists feel that price flexibility is a good assumption for studying
long-run issues, such as growth in real GDP. Other economists argue that price
adjustment may take so much time that the process of equilibration may change
the underlying conditions that determine long-run equilibrium. That is, there
may be path dependence, as when a long depression changes the nature of the
"full employment" period that follows._

I mean, I have never seen an econ 101 lecture mention things like path
dependence, which seems to be _a very big deal_ indeed. That to me makes it
seem this emphasis on being the equivalent of Newtonian mechanics is a bug and
not a feature. I mean, I don't want to single anyone out here, but it seems to
me this talk about "simplifying assumptions" and "toy models" is just some
elaborate ex-post justification for keeping outdated (and hugely invested-in)
models around.

~~~
chimeracoder
> The world is a complex adaptive system, how does micro or macro equilibrium
> fit that any better than homo economicus? If anything it sounds even worse
> to me...

Chemistry is a field of complex and dynamic systems, yet we are still able to
talk about equilibria there. Equilibrium doesn't mean nothing is changing -
and in fact, it doesn't mean that the equilibrium corresponds to any actual
observable state of the world. Due to aforementioned dynamism, observation
effects, and other complications, it may not be possible to observe the true
equilibrium state at all, but it's still a useful construct in our
understanding of the chemical world.

> I mean, I have never seen an econ 101 lecture mention things like path
> dependence

I'm sorry to hear that you've never experienced a good introductory economics
course. However, that experience (or lack thereof, as the case may be) doesn't
serve as testimony against the field.

~~~
mpax
I'm starting to notice a trend whenever I engage with economics on these
matters. In fact this pattern shows up _every time_ , it's like they are
trained to do this.

It starts with an acknowledgement that the theory is stylized beyond any
practical purpose, or that it is merely a pedagogical "tool". They then point
out that any fault I see with economic theory and/or methodology must be my
own failure to understand the material. Like, sure, go read Varian or Mas-
Colell's tomes before you try to bring up _anything_ wrong with elementary
supply-demand analysis. It's worth noting that they never go out of their way
to explain what the supposedly superior methods are. To me it's just moving
the goalposts.

In fact, I just stumbled on this paper, the conclusion reads as something
straight out of Monty Python's Flying Circus:

 _Complexity and Economics: computational constraints may not matter By F.
Echeneque, D. Golovin and A. Wierman

Conclusion: "We show that the notion that economic agents have limited
computational resources adds no empirical content to the theory of utility
maximization. A data set of observed consumption at different budgets is
either in contradiction with the hypothesis of utility maximization, or it can
be explained using a utility function that is easy to maximize. Our paper is
not a critique of the literature on complexity and economics in general;
rather, we take issue with the idea that worst-case hardness of a model
implies that the model is flawed. We emphasize that the existing results on
complexity are useful for understanding how economics can be applied in a
normative and algorithmic way — for example, to engineer economic systems with
desirable properties. We posit that while computer scientists tend to think
‘algorithmically’ about economic models, economists tend to think
‘empirically’ about the models. There is a need for considerations of
computational complexity in both views. In particular, an algorithmic view of
economic models assumes that the model is fixed and literally true, and then
proceeds to ask about the computational demands placed on the agents by the
model. That is, it assumes that the agent is simply an implementation of the
model and asks whether the agent can efficiently compute its decisions. In
contrast, an empirical view takes the model as a tool for thinking about
reality. One does not presume agents literally follow the model, only that the
model provides a way to explain the observed behavior. In this view, a model
still loses credibility if the agents must solve computationally hard
problems; however, worst-case complexity is no longer the relevant concept.
Instead, the question is whether data from an observed phenomenon can always
be explained by the theory with the additional constraint that agents are not
required to solve computationally hard problems. This is the case with the
theory of the consumer. On the other hand, we expect complexity to matter
empirically for other economic models. When that is the case, one would want
to characterize the added empirical consequences of assuming that economic
agents do not solve hard problems."_ Source pdf:
[http://users.cms.caltech.edu/%7Eadamw/papers/letter_sigexc.p...](http://users.cms.caltech.edu/%7Eadamw/papers/letter_sigexc.pdf)

TL:DR; Yes the critique is completely valid, except in highly restricted
environments that never occur in the real world. But look, that's not what we
are actually trying to do, oh and by the way, those critics just don't
understand economics. In any other field you'd be laughed out of the room,
economists parade this stuff with a straight face, and if you object "you just
don't understand economics".

> > The world is a complex adaptive system, how does micro or macro
> equilibrium fit that any better than homo economicus? If anything it sounds
> even worse to me...

> Chemistry is a field of complex and dynamic systems, yet we are still able
> to talk about equilibria there. Equilibrium doesn't mean nothing is changing
> - and in fact, it doesn't mean that the equilibrium corresponds to any
> actual observable state of the world. Due to aforementioned dynamism,
> observation effects, and other complications, it may not be possible to
> observe the true equilibrium state at all, but it's still a useful construct
> in our understanding of the chemical world.

I might have worded that awkwardly. Yes equilibrium is a thing, I don't see
how modeling markets as tending towards equilibrium is helpful in any
meaningful sense. In fact, I think it actively obscures the dynamic nature of
real world economics.

> > I mean, I have never seen an econ 101 lecture mention things like path
> dependence

> I'm sorry to hear that you've never experienced a good introductory
> economics course. However, that experience (or lack thereof, as the case may
> be) doesn't serve as testimony against the field.

No comment :)

~~~
chimeracoder
> I'm starting to notice a trend whenever I engage with economics on these
> matters. In fact this pattern shows up every time, it's like they are
> trained to do this.

I could say the same, in that I notice a pattern too. It's like HN commenters
are trained to engage in extremely facile criticisms of fields that they have
little knowledge of, understanding of, or respect for, and then reject any
substantive critiques to the contrary due to their lack of understanding.

> It starts with an acknowledgement that the theory is stylized beyond any
> practical purpose, or that it is merely a pedagogical "tool"

Nobody has said either of those things. They've said that it's a model. As Box
famously said, "All models are wrong, but some models are useful". The key to
using a model, though, is understanding its scope and limitations - where it
does not apply, but also where it _does_ , and in which _ways_.

> They then point out that any fault I see with economic theory and/or
> methodology must be my own failure to understand the material. Like, sure,
> go read Varian or Mas-Colell's tomes before you try to bring up anything
> wrong with elementary supply-demand analysis. It's worth noting that they
> never go out of their way to explain what the supposedly superior methods
> are. To me it's just moving the goalposts

Nobody's saying that you have to do doctoral research in order to discuss the
limitations of elementary supply-demand analysis. It's just that the critiques
you're bringing up (in this thread, but with this pattern more broadly) are
somewhere between "not very interesting, because they have no relevance or are
mitigated elsewhere", and "based on complete misunderstandings of the
fundamental concepts at play".

Ultimately, it ends up something like the physicist from XKCD #793.

------
leptoniscool
[https://en.m.wikipedia.org/wiki/History_of_money](https://en.m.wikipedia.org/wiki/History_of_money)

