
The Myth of the Barter Economy (2016) - IA21
https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051/
======
wazoox
Ancient history is very interesting in these matters: back in the Bronze Age,
kings such as Pharaoh and the Hittite, Assyrian, Minoan kings actually did
international trade through "gifts".

For instance the Pharaoh was in need of cedar wood, so he would write to the
King of the Assyrians in Sumerian (the _lingua franca_ of the time) "Dear
cousin, I would like to send you some gifts but I'm out of boats. Cheers,
Ramses".

To which his "dear cousin" would reply "Dear cousin, I'm sending you these
cedar logs so that you can build these boats you need. Did I tell you that
drought has hit Niniveh and the corn is scarce? Yours, Sennahcherib". Then
Pharaoh would send back boats full of grain, and so on.

~~~
wl
The thrust of your comment is more or less correct, but you make several
significant errors in the details.

Akkadian, not Sumerian was the language of international diplomacy in the
period you speak of. Sennacherib came later in the Iron Age. And if the
Egyptians needed cedar, they'd write to Byblos (which during the New Kingdom,
was a tributary state more often than not), not Assyria.

~~~
aYsY4dDQ2NrcNzA
More, please.

~~~
lowdose
Would be awesome to get a good book referral for this indeed.

~~~
thaumasiotes
The original comment is almost certainly thinking of
[https://www.amazon.com/dp/0199858683/](https://www.amazon.com/dp/0199858683/)
(Brotherhood of Kings: How International Relations Shaped the Ancient Near
East).

It's a very good book.

A minor theme is indeed that Mesopotamian city-kings had a hard time trading
with Egypt. Mesopotamia seems to have produced mostly textiles, which Egypt
made domestically. What Egypt needed from international trade was copper and
wood.

All the Mesopotamian city-kings wanted gold, though, which came from Egypt.
They could get this one time, by marrying a daughter to the Pharaoh. We have
an example of Pharaonic correspondence with a king who repeatedly asked for
unworked gold, finally sent a daughter over, received a mountain of gold in
return, and concluded by complaining that the gold had been worked (into
statues).

I assume many of those statues got melted down.

There is some discussion in
[https://www.amazon.com/dp/0670022667/](https://www.amazon.com/dp/0670022667/)
(Carthage Must Be Destroyed: The Rise and Fall of an Ancient Civilization) of
how the Phoenician city-states of the bronze age (source of cedar wood to
Egypt) gradually succumbed over the centuries to Assyrian empire-building.
It's not the main focus of the book though.

~~~
lowdose
Thank you! Since I heard about the Antikythera mechanism more ancient times
have sparked an interest.

------
not_buying_it
David Graeber has a nice way of explaining money arising from IOU's in Debt:
the first 5,000 years. It makes a lot of sense and basically explains why the
barter myth is so impractical that it could never have been a reality in any
sizable community.

~~~
maliker
I liked his explanation of state-controlled currency evolving as a technology
of war. I.e. the king needs to pay his soldiers something portable, dense with
value, and hard to counterfeit, and precious metal coins fit those
requirements. And then to guarantee that the coins are accepted for payment
and hold their value, he imposes taxes that have to be paid by everyone using
those coins. Pretty elegant and a system that, even as as a taxpayer, I hadn't
thought carefully about.

~~~
hnick
Yes, the idea that taxes and debt existed before money to grant that money
value was very eye opening, and an obvious model in hindsight.

Another example of someone in power saying "Hey, see this problem we created?
Well, we also have the solution..."

~~~
thaumasiotes
Taxes certainly existed before state-issued currency, but the purpose was
obviously not to grant value to the currency. (It can't have been -- this was
_before the currency existed_.)

Ancient taxes were assessed in kind, most commonly in grain or labor. The
reason was that the government wanted the grain or labor. The main benefit of
taxing in metal is that grain is perishable and voluminous, not that it
creates demand for more metal.

Consider a stylized section of Chinese history:

State-issued currency: copper coins (low value, accepted most places); paper
notes (high value in the capital, hard to spend elsewhere)

Means of exchange: raw silver valued by weight

Form of taxation: silver

~~~
hnick
I was replying to the specific use case of creating a tax to grant value to a
freshly invented currency by giving it to occupying soldiers as payment while
requiring merchants to pay taxes using it. It was intended to speed up
adoption because the merchants needed to get the coin for taxes so had to
accept it as payment.

~~~
thaumasiotes
Do you know of such a tax? There are two types of freshly invented currencies:

1\. Currency invented where there were just raw materials before. ("Conceptual
invention")

2\. Currency invented to replace or exist alongside other already-known
currency.

In case 1, I believe the currency is generally an object that was already
valuable, and therefore doesn't need support. Coins were usually able to trade
a little _above_ their value as measured in raw material because of the
nominal standardization they provided.

Case 2 is not at all rare, and there are even cases of states deciding to make
coins from a worthless material (iron) for ideological reasons. Everyone can
have iron.

This seems like an ideal case for propping up the (otherwise too low to bother
with) value of the ideological coins, but I'm not really up on the history of
this kind of thing. I know the iron-coin states were often economic failures
(e.g. Sparta). I know there were a lot of difficulties with paper money in
China, but I don't know the details.

~~~
hnick
"Fresh" from the perspective of a population might be more accurate to what
I'm saying - not invented from nothing (that was inaccurate wording). The book
we're discussing goes into a lot of detail on this, more than I could having
read it so long ago now.

The wikipedia article briefly mentions this:
[https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years](https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years)

"The author postulates the growth of a "military–coinage–slave complex" around
this time. These were enforced by mercenary armies that looted cities and cut
human beings from their social context to work as slaves in Greece, Rome, and
elsewhere. The extreme violence of the period marked by the rise of great
empires in China, India, and the Mediterranean was, in this way, connected
with the advent of large-scale slavery and the use of coins to pay soldiers.
This was combined with obligations to pay taxes in currency: The obligation to
pay taxes with money required people to engage in monetary transactions, often
with very disadvantageous terms of trade. This typically increased debt and
slavery."

It occurred mostly in subjugated nations as a way to bring in the new money
(from the perspective of the conquered, who saw no value in this foreign
coin). It accelerated adoption in populations who had no familiarity with the
system, and indeed may have been operating on non-monetary systems still (the
book credits Alexander as wiping away many of the last vestiges of such
economies).

Looking at the above passage, it has some resemblance to company scrip.

~~~
thaumasiotes
> "The author postulates the growth of a "military–coinage–slave complex"
> around this time.

I'm trying to get a sense of where to put this on a continuum between "I could
imagine things happening this way" and "here are contemporary records in which
the king specifically states that the new tax is needed in order to get people
to accept the new coins".

Postulation isn't really what I'm usually looking for in a historical work.

~~~
thaumasiotes
I should point out that historically, getting people to accept metal was not
an issue that usually came up. For example, Hammurabi's code details a
punishment for certain merchants who will accept metal as payment but refuse
to accept grain. That's the king complaining that what merchants want is to
accept metal _exclusively_ (though not coins; they are not known to have
existed at the time).

------
nk1tz
The more interesting way to analyze history, rather than trying to evaluate
the degree of barter, is to seek out the most saleable good which was in use
at a given place and time. Humans must solve the problem of "coincidence of
wants" (ie. You raise chickens and I'm a woodworker - do we always need each
other's goods?). Naturally, they begin to use the most saleable good available
to their community as "money" for trade. The most saleable good (the most
marketable and easy to sell) is usually the good available to them which
scores highest on the following five properties (imagine a radar chart):
Divisibility, Durability, Portability, Fungibility, Scarcity.

This way of thinking can provide a satisfying explanation of the emergence of
gold as a global store of value.

For more reading: [https://mises.org/library/origin-money-and-its-
value](https://mises.org/library/origin-money-and-its-value)

~~~
neilwilson
The coincidence of wants is likely a myth.

Humans operate by doing each other favours. You'll find you intuitively know
who you've done a favour for and who you owe a favour to. It's inherent to
being humans and three year olds can do it - as science has
discovered.([https://www.en.uni-
muenchen.de/news/newsarchiv/2016/paulus_s...](https://www.en.uni-
muenchen.de/news/newsarchiv/2016/paulus_socialcapital.html)) We all walk
around with a favour ledger in our heads.

Essentially "here's a chicken, you owe my a chicken's worth of something
sometime".

As groups get larger you end up taking tokens as an IOU aide-memoir. And to
nail those who try to cheat.

That then evolves into money. Token money. Tokens representing promises.

~~~
pdonis
_> The coincidence of wants is likely a myth.

Humans operate by doing each other favours._

But intuitive tracking of who owes you favors and who you owe favors to does
not scale. The double coincidence of wants problem is not a myth; it just
doesn't come into play until you start dealing economically with groups that
are too large for intuitive tracking of favors to work--roughly, groups larger
than the typical hunter-gatherer tribe.

~~~
kragen
As we see in the comments above, the gift economy scaled to include Bronze-Age
Mesopotamian international trade. It's true that a Hittite in Hatti wouldn't
know everyone in Nineveh, or indeed anyone, but he knew the Hittite king, who
knew the king in Nineveh.

------
leto_ii
This was a valuable read.

I think a similar misunderstanding takes place with Hobbes's idea that the man
in the state of nature lived in a war of all against all. There's simply no
evidence that this ever happened, even though it has been used by Hobbes and
others as a justification for the need of oppressive institutions.

I think that if we start investigating the conceptual underpinnings of things
quite a bit of economical and political thought will prove to be essentially
unfounded and unscientific.

This being said, we can't entirely fault people like Hobbes and Smith who
didn't have access to the investigative tools that are now available. We can
however fault today's social scientists who continue to build on faulty
foundations instead of honestly reassessing their theories.

~~~
einpoklum
To over-simplify, Hobbes' "man in a state of war" is a noble or land-owner,
who needs to keep control of his property against the landless peasantry and
opposing nobles.

This is reminiscent of how, say, in Athenian democracy, a citizen was a male
property owner - and most of the population just didn't count; most people
were reduced to slavery (much due to debt actually!). Some of this conception
persisted all the way up to the original US constitution - women don't count,
slaves don't count but are property etc.

As for faulting Hobbes - you can fault him plenty. There was critical anti-
establishment practice and thought, always - in varying forms.

------
timwaagh
Not sure whether the expansion of this 'psychological debt model' is
desirable. Because it's impossible to quantify such debts without money, it
becomes more difficult to optimize allocation. Maybe the people in the woods
haven't found water during many days. Suppose I have some water. More than I'd
need for now, but not enough to last for years. I would not be inclined to
give any to them. Sure, the woods people might make me a meal or sing for me
which is nice, but my water supply is ultimately a guarantee for my long term
survival. But if they did have even the concept of money, they might offer a
high price, a price that allows me to say 'hey, with these resources i could
build a house/attract a partner/drive away in a lambo and that's more useful
to me than one month out of my seven months of water'. The antropologies make
a compelling case for a different precursor to money and these gift economies
are very similar to a money based economy. But money does offer the additional
benefit of value quantification and security of deposits.

~~~
NohatCoder
If the woods people have been without water for days, and you deny them water,
they are probably going to kill you and take your water. Remember, your first
priority when encountering other humans is to survive, sometimes the right
gift may save your life.

~~~
timwaagh
I wasn't very specific about the situation. You are right in the sense that
trade makes sense only among equals, the rest would just be forced to give up
their possesions. So we have to assume this isn't possible. We can assume I am
standing on a cliff they can't easily reach. Or perhaps I have a few muscular
non-thirsty buddies with me.

~~~
NohatCoder
Even if you are equal in strength, they may choose to fight you out of
desperation, giving up some water is probably still preferable to the risk of
a fight.

------
milesvp
There was a great blog post I saw some years ago on HN about someone
reminiscing about halloween candy trading as a kid. They remembered fondly
about just how organized the trading quickly became. it was all barter, but
there emerged quickly a candy franca. All the kids were willing to accept
three muskateers bars because they knew others would accept them, and worst
case they were at least tolerable to eat.

While I agree that the barter economy as a rhetorical construct is most
certainly made up, being very useful in freshman econ, I’m not convinced it
money could possibly happen without first having trade in general. I would
argue that money happens very quickly, which is why you’re not going to see a
lot of evidence of extensive barter. If one childhood is enough to establish a
candy currency, then you’d expect a similar currency to develop very quickly
in any society.

~~~
karatestomp
The argument from the apparent source of this (Graeber's _Debt_ ) is that the
progression of "barter, but that's inefficient so we create -> money, and then
later we create -> debt" is historically inaccurate—instead, debt comes first,
barter also but mostly for dealing with strangers, and then money is a later
invention that has to do with sophisticated (relative to what came before)
military logistics in large states/empires.

This is an oversimplification but gives you the gist of the book's argument.
So yes, it agrees that money is a relatively late development and trade
existed before it and was largely barter-based _but only when strangers or
rival groups traded_ , but the central argument is that debt (basically) came
_first_ rather than _last_ , and effectively precedes money, which is more a
tool of debt than debt is a tool of money, if you will.

~~~
Double_a_92
Was it "formal" debt though, or more like "I'll give you some of my extra
grain, because you seem kinda friendly, and you might repay me the favor if I
happen to be in trouble in the future"?

~~~
karatestomp
Things like tally sticks for tracking debt were used, absent and before
currency, it seems. Pretty widely. IIRC (it's been a while since I read _Debt_
) the book asserts that very small tribal or family economies likely worked
the way you describe, with informal, mental tallies of debts, and as
communities got just a bit larger physical tallies took over, persisting for
some time. A consequence of this is that debt isn't surely "less real" or less
essential/natural than money, nor even newer, but in fact _more_ real, _more_
essential or natural (so to speak), _and_ older.

~~~
nybble41
Even in small groups you still need a currency (unit of account) before you
can keep a tally, though—unless you're going to keep separate tallies for each
kind of good, which quickly becomes impractical since even similar kinds of
goods may not have equal value. Also, you need some standard good with broad
marketability as a means of settling debts which can't be paid in kind (i.e.
legal tender or equivalent).

~~~
bildung
They certainly had a unit of account (bushels of grain, for example) to
quantify debt, but they didn't have a currency, which has additional necessary
criteria besides unit of account.

What these cultures had, according to Graeber, were essentially ledgers for
keeping track of debt.

------
m4nu3l
At some point the article states that money "might just be a choice", but I
think the article itself is pointing to the evidence it is not.

The git economy in a village and the one in a community of friends have
something in common. Another hint is yet in the article when it states "it's
hard to imagine a gift economy working to build skyscrapers and iPhones".

It seems pretty clear to me that the problem of a gift economy is that it
doesn't scale.

As long as every person in a group knows each other it is fairly easy to keep
track of gifts given and received. This becomes impossible as the group grows
and the number of people each person has to keep track of grows with O(n).

Of course you can divide a big number of people into groups and have those
groups use a gift economy between them by having leaders keeping track of
gifts given and received between groups.

And of course can also have multiple levels of subdivision. But the problem
becomes clear. The system is quite centralized and there is no direct way for
someone in one of those groups to exchange goods and services directly with
someone of another one without the good or service going up the command chain
and down to the other side.

~~~
pmoriarty
It sounds like you're criticising barter rather than a gift economy.

Unlike in barter, in a gift economy no one keeps track of who owes what to
whom, they just all give each other what they need.

To give an example, I've long participated in the open source community, where
I give away software that I've written and help others on IRC, in various
forums, and on stackexchange. I don't ask for or expect anything in return,
but I know I'm helping the community and I seek and accept aid from the
community when I need it, by asking my own questions and using software freely
given away by others.

This example is of a well functioning gift economy which has scaled incredibly
well.

~~~
jacobr1
> Unlike in barter, in a gift economy no one keeps track of who owes what to
> whom

My reading of gift economies is that there often is some element reciprocity.
In any given context, there might not be a direct exchange of gifts, but those
not participating in the process over time get excluded from future gifting.
And there are all sorts of "social status" and signaling effects that make
this much more than just altruism.

------
trhway
in 199x in Russia the B2B economy was working basically on barter. The
accounting/business software support for 5-10 segment length chains of "mutual
credit" ("vzaimozachet") involving multiple business partners between your
product and finally money (or something almost as liquid as money) was a feat
of business software engineering separating leaders from the chaff - while the
world line of a given barter chain may have been crossing spacelike/timelike
boundary several times it still had to look correctly in all accounting frames
of reference :)

One of the things which emerged to be almost as good as money back then was
"energy credits" with large power plants and networks serving as a kind of
banks/clearing houses.

~~~
kiwidrew
This sounds absolutely fascinating.

Do you have any links that go into more detail about the Russian B2B bartering
and accounting?

~~~
trhway
not really, i'm 22 years out of that game. While most related info on web is
in Russian, googling something like "russia multilateral mutual offset barter
1996" (any 199x year works to filter out links talking about modern situation)
seems to bring links describing various facets of how it was back then.

------
rusabd
Is this article just rehashing a chapter from "The Debt, first 5000 years"?

~~~
rubidium
More or less. Graeber is cited.

------
dnprock
The relationship between monies and goods has been murky. But it's kinda cool
to cut a clear line to say that bartering economy exists before money. But I
think they always co-exist. This relationship is more like chicken and egg.

I did some research on how gold became money. Archeologists found evidence of
gold usage dated 40,000 BC. When gold shows up in written history around
10,000 BC, it's already money. We did not really know if gold was good first
or money first. I conclude that it's a little bit of both when humans first
found it. I wrote about the topic in this article:

[https://bitflate.org/post/2019/11/29/how-gold-became-
money.h...](https://bitflate.org/post/2019/11/29/how-gold-became-money.html)

Going back further, I think we can say sex was the first kind of currency.
Organisms exchange sex to reproduce.

Today, we have Bitcoin. It's also unclear how we should define it: asset or
money. The answer is it's a little bit of both. I hope the IRS will lower the
tax rate on Bitcoin when they understand this.

------
pharke
Money is just a representation of the debt incurred in a "gift" economy (a
"debt" economy would be a better term for it) and allows the extension of
those practices to strangers or people you don't trust or can't have some
influence over. Gift economies still exist today in Western countries, often
in rural areas among neighbors where you will do a favor, help out, or lend an
item in exchange for likewise help at a later date. This works well in small
groups that know each other well but breaks down when it becomes hard to track
who did what for whom. Hence the invention of a tally system like money.

------
einpoklum
I read about this anthropological/historical fact in David Graeber's excellent
"Debt: The First 5000 Years", mentioned in the article. More about that book:

[https://en.wikipedia.org/wiki/Debt%3A_The_First_5000_Years](https://en.wikipedia.org/wiki/Debt%3A_The_First_5000_Years)

or you can just download it. How's that fir a gift economy? :-)

[https://libcom.org/files/__Debt__The_First_5_000_Years.pdf](https://libcom.org/files/__Debt__The_First_5_000_Years.pdf)

------
samatman
I find Nick Szabo's argument that money-like collectibles were in fact the key
technological advantage Homo Sapiens had over Homo Neanderthalensis an
intriguing one:

[http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CD...](http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/shell.html)

It's safe to say that something-like-money is substantially older than
agriculture.

~~~
jmcmichael
This article makes the same mistakes that the OP's article does - assumes the
truth of the myth of barter. It even uses the odd term 'time-offset barter',
which I have never seen outside of libertarian/ancap analyses. Barter is a
spot transfer, 'time offset barter' isn't barter but something else.

~~~
samatman
I'm quite sure you didn't read the article, which does no such thing.

~~~
jmcmichael
From the article:

 _Barter requires a coincidence of interests. Alice grows some pecans and
wants some apples; Bob grows apples and want some pecans. They just happen to
have their orchards near each other, and Alice just happens to trust Bob
enough to wait between pecan harvest time and apple harvest time. Assuming all
these conditions are met, barter works pretty well. But if Alice was growing
oranges, even if Bob wanted oranges as well as pecans, they 'd be out of luck
-- oranges and apples don 't both grow well in the same climate. If Alice and
Bob didn't trust each other, and couldn't find a third party to be a middleman
[L94] or enforce a contract, they'd also be out of luck._

This is the canonical Myth of Barter, where some society is assumed to have
existed that was so inconvenienced by the double coincidence of
interests/wants/needs that it invented money. This never happened as there
exists no evidence that a society existed that used barter as its main method
of exchange; barter was used on the edges of society, spot transfers made
between people who did not have the trust necessary to support debts.

Here's the passage where he refers to 'time-lagged barter':

 _Local but extremely valuable trade was, this essay argues, made possible
among many cultures by the advent of collectibles, by the time of the Upper
Paleolithic. Collectibles substituted for otherwise necessary but non-existent
trusting long term relationships. If there had existed a high degree of
sustained interaction and trust between tribes, or individuals of different
tribes, so that they gave each other unsecured credit, this would have
stimulated time-lagged barter trade._

I did read the article. In fact, I read this article years ago shortly after
it was published as back then I was an anarcho-capitalist, very interested in
non-state solutions to money.

~~~
samatman
That's just a straightforward description of what barter is. Barter exists, it
has the indicated limitations.

Szabo's argument is that collectibles predate history by tens of thousands of
years, that rather than replacing some mythical bartering system, that a
system of exchanged collectibles co-evolved with the entire concept of trade.

 _substituted for otherwise necessary but non-existent trusting long term
relationships_ , as in, allowed them to exist in the first place, not
replacing some barter-only system. Nick isn't crediting the Austrian origin
mythos here, he's providing a cogent alternative to it.

What I'm seeing no evidence for, and don't expect to, is the claim that _debt_
precedes collectible money. This is quite unlikely, as it seems to be a
feature of sedentary agrarian cultures; it's difficult to picture it arising
in a milieu of traveling bands of hunter-gatherers, who are mutually
suspicious, often rivalrous, and may not speak the same language.

------
jelliclesfarm
All marriages in ancient kingdoms were barters.

It still exists today as ‘giving away’ of the bride. The female’s dna and
germline gets the best it can buy with dowries and the bride’s attributes.

------
taneq
In games, even when the game is explicitly designed not to have currency,
players will invent one in order to facilitate trade. It'd be strange if
humans didn't do this in real life too.

~~~
mc32
Sure. But we are aware of the concept.

It would be interesting to see this emerge in a population unaware or
unexposed to the concept of money.

~~~
nerdponx
I imagine this has been studied to some extent in various uncontacted tribes.
Does anyone have any information on that?

~~~
317070
The first chapter in "Debt: the first 5000 years" deals with the issue.

------
mgraczyk
Interesting that they mentioned The Rainbow Gathering as an example gift
economy, rather than Burning man which is 7x larger and I would guess more
widely known.

~~~
pmoriarty
Is Burning Man really a gift economy when it costs many hundreds of dollars to
get in?

It's more like an expensive theme park.

~~~
Uhhrrr
Inside, it is mostly a gift economy. Selling and barter are prohibited, except
for ice and coffee sold by BMorg at Center Camp. There is some covert selling
of drugs, but those are also largely gifted. It generally works because most
people bring too much stuff anyway.

------
carapace
No mention of _potlatch_.

> A potlatch is a gift-giving feast practiced by indigenous peoples of the
> Pacific Northwest Coast of Canada and the United States,[1] among whom it is
> traditionally the primary governmental institution, legislative body, and
> economic system.

[https://en.wikipedia.org/wiki/Potlatch](https://en.wikipedia.org/wiki/Potlatch)

\- - - -

I have a crude "theory" that economic forms follow density:

Small groups, families and small clans, operate more-or-less communally (not
political Communism; I mean communal living. Sharing resources, etc.)

Larger groups, tribes and neighborhoods, operate more-or-less on barter or
favor-balancing.

Beyond that, you get money evolving out of long-distance trade, and modern
mercantile and financial (as contrasted with "just" economic) systems.

------
jkhdigital
It was a good article until the gift economy crap at the end. Game theory
explains all of this quite well.

Money is desirable because it makes transactions and economic calculation so
much easier. As a pure abstraction, money is simply a ledger
([https://www.minneapolisfed.org/research/sr/sr218.pdf](https://www.minneapolisfed.org/research/sr/sr218.pdf)).
When humans live in small groups related by blood, they just keep the ledger
in their heads (if at all) because the penalty of cheating is so great that no
one will defect (exile from the tribe and a lonely death).

When humans need to transact with people and there is uncertainty about (a)
whether they will be able to punish cheating, and (b) whether they will ever
meet this trading partner again, then they will use a more explicit and
trustworthy form of money to reduce the risks. For most of human history the
only real option here was some kind of physical token, which had to
approximate the ledger abstraction: uniform in quality, easily divisible, easy
to authenticate, with as inelastic a supply as possible.

The modern sovereign state allows for fiat money, since the state can simply
declare that its official currency is the ledger that everyone will use. It's
quite efficient, since you can do things like maintain a banking system that
exists primarily as numbers in a spreadsheet rather than vaults full of dusty
gold bars. Our fractional reserve system also mingle debt and money, and for
most of us the two are equivalent.

This makes perfect sense when you consider that money is a claim on the future
output of everyone who agrees to use the money. It's an EOU: everyone owes
you. Thus, if you issue fiat currency against public debt, it's effectively an
EOU as well since everyone in the economy is indirectly responsible for the
eventual repayment of that debt. Of course, sovereign currencies have borders,
so looking at the ledger used by governments to keep score amongst themselves
is quite telling.

However, when there is no socially accepted authority to dictate consensus,
how do mutually disinterested individuals agree on a form of money? This was a
pure thought experiment until the invention of Bitcoin, because the options
were exceptionally limited: precious metals were so much better than anything
else that had been tried, for reasons I won't go into here, that there really
wasn't a choice. But with Bitcoin, you have a protocol for digital cash that
can be used to create an infinite number of ledgers with the same desirable
properties. How do we choose which one to use?

The answer, of course, is proof-of-work.

~~~
simiones
Given Bitcoin has failed miserably as a currency, being almost universally
abandoned for this purpose for various reasons, I don't see how you can
present it as the future of money.

Also, game theory is a very limited model of human behavior. That you choose
to invoke it, and you choose to believe that humans are simple rational game-
theoretic "players" is not in any way proof that they actually are any of
these. There is a lot of observable human behavior which contradicts rational
and game-theoretic models - just look at some observations from behavioral
economics.

~~~
nk1tz
We learned this lesson in 2016 during the Bitcoin scaling wars. The path to
global unit of account does not begin with "medium of exchange" it begins with
"store of value".

The primary purpose of Bitcoin is to be a store of value (the definition of
money), without this achievement it cannot evolve to a medium of exchange
(definition of currency).

~~~
rmah
"Store of value" is not how economists (and most normal people) define money.
Pretty much any non-degrading asset can be a store of value. That doesn't make
them money.

To be money, something must fulfill three criteria: 1) be a medium of
exchange, 2) be a store of value and 3) act as a unit of account. It helps if
the something is also fungible, easily divisible, etc.

~~~
jotakami
Missing the forest for the trees. Those three functions of money are the
“cliff notes” description of money, but there is a deeper abstraction that all
of those properties can be derived from: money is a ledger. In the case of
cash or bitcoin, the ledger has a constraint that negative balances are not
allowed.

------
JackFr
Author seems ignorant of
[http://icm.clsbe.lisboa.ucp.pt/docentes/url/jcn/ie2/0POWCamp...](http://icm.clsbe.lisboa.ucp.pt/docentes/url/jcn/ie2/0POWCamp.pdf)

~~~
stephen_g
That is largely in line with what Graeber’s book says, in that most of the use
we see of barter being out of necessity by _people who already know how, and
were familiar with using money_ (say, after their money-using civilisation
collapsed), not as much before monetary systems existed (except for some
trading between tribes).

And then later you have one of their institutions basically becoming a central
bank and issuing a currency!

------
bluetomcat
A similar kind of a "delayed barter" economy did exist until recently in
communist Bulgaria. Without any intervention from the government, people were
exchanging items and doing mutual personal favours (sometimes against the
law), all based on one's "social network".

Knowing the shopkeeper in the butchery meant that he could reserve the fresh
meat for you once it gets delivered, while you, for example, as a car repair
guy in a state enterprise would provide him with some parts for his Lada from
any leftover quantities. It was a hidden parallel economy that was "boosting"
the planned economy. No kind of accounting was taking place between the
exchanging parties, people were doing it for their own interest in the long
run.

These types of relations between people were (and still are) leading to many
corrupt practices. A police officer or any kind of state representative would
treat you differently if you were a part of their social circles. It's a toxic
environment where you start putting greater value on connections rather than
on actual work and self-development.

~~~
jmcmichael
Barter is a spot transfer. 'time offset barter' or 'delayed barter' isn't
barter, and I've only seen this weird term used in libertarian/ancap/Austrian
economists attempting to come to grips with the rather strong evidence against
the myth of barter from which they derive their theories of money.

------
codingmess
"On paper, this sounds a bit like delayed barter, but it bears some
significant differences."

Yeah sorry, but it is a barter economy. They only frame it differently to get
their papers published.

Yes, it may work not exactly like described in the economics textbooks (and
gift economies have some interesting specific properties). But I am really
tired of people claiming everything in economics textbooks is to be taken
absolutely literal, and if the real world is not like that, then classical
economics has been refuted.

Of course they use idealized models in the textbooks, including the rational
actor. The economists are well aware that they are using simplified models.

~~~
nabnob
That's not the same thing as bartering at all.

When you do a favor for a friend (like giving a referral for a job), do you
see it as a transaction where you expect them to pay you back at some point?

~~~
Zyst
>When you do a favor for a friend (like giving a referral for a job), do you
see it as a transaction where you expect them to pay you back at some point?

To some limited degree.

If you were later in your life in need of a job, and your friend could refer
you to their new company, but they refuse to because of arbitrary reasons.

Would you not think they are being a poor friend? Even more so because you did
a very similar favor for them in the past?

~~~
tsimionescu
Possibly, but some expectation of reciprocity does not equal debt and an
'internal ledger'. That some aspects of some human interactions can be
modelled by a transaction model doesn't mean that they are inherently
transactional. We may well find that there are important differences and that
the actual internal human model is different.

Even your example only really works because you have constructed it in a
specific way. Of course if your friend could do you a small favor that helps
you greatly, and that you have performed for them in the past, you would
expect that they owe it to you, as if you had a mental ledger. However, if the
situation is slightly different, say, their father is ill and they are caring
for them in hospital, would you still expect them to call their office to
recommend you? If they were out of a job at the moment as well, but happened
to have some extra money, would you expect them to provide you a loan so you
could fund a start-up instead of getting a job?

I don't believe human relationships and gift economies reduce to a kind of
barter. There are barter-like aspects to it, but I think they stem from
different internal impulses. I may well be wrong, but I don't think we can
assume they are not simply because some mutual exchange is taking place.

~~~
codingmess
Again, economic theories don't need to be taken literal, they are simplified
models. Just because somebody helps somebody else in need without immediately
expecting a carrot in return, doesn't mean bartering is refuted.

Even in our today's world with money, people help other people in need. I
don't think it defies economic reason, either. It is "pay it forward" or a
kind of social insurance, as people can expect the same being done for them.
Also perhaps it is simply a different kind of interaction, who says EVERYTHING
has to be modeled as a trade? Or maybe it is the price for belonging to
society, or to a certain circle of people, who would shun you if you would
display antisocial behavior. Not every exchange good has to be a carrot.

Maybe the insurance model explains it quite well, now that I think about it.

Rational actors also work out in the long run, because by evolution the more
rational strategy prevails. So people may not be aware why they help others
(they don't do a calculation in their head every time), but it can still be
the rational thing to do.

------
baud147258
The historical informations on the non-existence of barter economies was
interesting, but then the article went into a nosedive with an anarcho-
anticapitalist rant on the evils of money.

~~~
tobbe2064
> nosedive with an anarcho-anticapitalist rant on the evils of money

This seems like a disproportional emotional response, considering that the
article was roughly 30 paragraphs, out of which 1 was dedicated to "the evils
of money" and 1 to the current existing anarchistic communities.

I dont really care, but you might gain from understanding your own bias in
this regard

~~~
baud147258
What I wrote might have used too strong words, but I feel like all the
discussion around not-barter economy was just used to support the point the
writer was doing on the evils of debts and money.

------
TopHand
While this is a thought provoking article, it makes assumptions that are not
necessarily true. If a person thinks in terms of resources and not in terms of
products you can begin to see the fallacies. It is easy for a group with
common interests to share resources. The problems begin to arise when the
group doesn't have a resource that it needs. As an example, if the Iroquois
lived in a region where there was no obsidian which they would want for making
tools and hunting instruments, they would need to approach a neighboring
community that has access to the material If that community didn't want the
Iroquois to have that material because it would upset the balance of power in
that this material could also be used for making weapons of war. If the other
community already had all the resources it needed to comfortably survive, how
would the Iroquois over come their reluctance to give them obsidian? For the
Iroquois this is becoming a matter of survival of their people. It they don't
have this resource they won't have the tools they need to farm or to hunt.
This is just a simple example, with more complex societies the more complex
the problems. In my life time, I have seen people try to sustain "gift
economies". I remember the communes of the sixties. On paper they sounded
quite reasonable. Most of them didn't survive or evolved into capitalistic
economies. One last point. Slavery was not an out come of the invention of
money. It was the out come of the invention of war. What do you do with enemy
combatants that surrender? Do you just kill them? Not if your humane. You make
them slaves.

~~~
Retric
Commune’s are unstable, but can work fine when separate from income streams. I
am aware of one that lasted 30+ years slowly dissolving as no effort was made
to add new members and people slowly left or died over time.

Monastery’s demonstrates what it takes for such communities to last over
hundreds of years. Effectively they must recruit, be economically viable, and
avoid any single point of failure like having a specific leader.

~~~
TopHand
Monastery's receive resources from the Church.

~~~
Retric
Donations from the public or formal religious institutions are just one
revenue source. Often they where effectively self sufficient gathering revenue
from farming, winemaking, baking etc. My point was outlays need to be less
than revenue for the institutions to survive long term.

The downfall of the self sufficient commune movement is it frequently resulted
in poverty. The example I am referring to had well paid professionals
including doctors etc who saved money by joining. Low rent including
utilities, food, appliances, and household supplies allowed members to travel
and party more. In effect a collage fraternity without the collage rather than
a monastery without a religion.

~~~
TopHand
My point was is that they participated in a larger economy.

------
sebsito
As Smith described, people didn't invent money straight away. First, resources
like salt and metals; then stuff you can melt (easily divisible). Then
official coins of equal weight to fight counterfeiting and inaccuracy of
weight.

I'm afraid this is one of the "history doesn't fit my ideology" pieces.

~~~
emptyfile
What? Smith? As in Adam Smith the guy who died in the year 1790?

I'm not a historian but I'm pretty sure his ideas about history aren't
relevant to us in the year 2020.

~~~
eesmith
Might want to read the article first.

The first two words after the title are "Adam Smith". Later text confirms that
it's the same person, with "The man who arguably founded modern economic
theory, the 18th-century Scottish philosopher Adam Smith, popularized the idea
that barter was a precursor to money."

------
mantrid84
If barter never existed, then how did Christopher Columbus and his many
successors through out ages trade with natives in America or Indonesia? They
definitely weren't using IOUs.

there's already very good rebuttal to David Graeber claims by Robert P. Murphy
[1]: "Finally, we have actual case studies of communities developing money
prices from scratch: namely, prisoners who end up using cigarettes as the
common medium of exchange. The classic work here is Radford's 1945 article,
"The Economic Organization of a P.O.W. Camp." There is nothing in Radford's
account that conflicts with the standard economists' story about the origin of
money. The prisoners certainly weren't giving each other things from their Red
Cross kits as gifts or as loans. No, they first were trading (in a state of
direct exchange) and cigarettes quickly became the money in their community
for all of the reasons that economists typically cite.

And to reinforce the point we made earlier, Radford explains that the prices
(quoted in cigarettes) of various items were posted on a board. If Graeber and
his colleagues stumbled upon the ruins of this P.O.W. camp, they would
presumably conclude that there was never a preexisting state of barter,
because they only found boards listing prices quoted in terms of cigarettes.
There were no boards listing the thousands of pairwise permutations of direct-
exchange ratios, and so clearly the Mengerian story must have been wrong — so
would go the erroneous reasoning of Graeber."

[1] [https://mises.org/library/have-anthropologists-overturned-
me...](https://mises.org/library/have-anthropologists-overturned-menger)

~~~
rtkwe
> Trade did occur in non-monetary societies, but not among fellow villagers.
> Instead, it was used almost exclusively with strangers, or even enemies,
> where it was often accompanied by complex rituals involving trade, dance,
> feasting, mock fighting, or sex—and sometimes all of them intertwined.

They talk about that and say barter generally did exist as trade between
groups outside the local community. Which makes sense as an alternative to the
gift economy.

Also POW camps aren't really great examples because they're a) already coming
from money based societies b) not producing their own goods, ie all incoming
things are basically gifts especially in the POW camp and everyone has a
similar set of goods initially and c) they're in confinement which distorts
any group's dynamics.

That last part of b is really because people all share 90% of the same set of
resources and the main difference is the relative weights each person assigns
to each item.

~~~
yxhuvud
Also, not to forget, prisoners tend to not trust each other all that much.
Most people are not in prison because they are trustworthy..

