A History of Money

A History of Money


[MUSIC PLAYING] LILY STEPONAITIS: So we’re
going to, in this clip, talk about, what is money, and
where our money comes from. So in order to do
that, we’re going to start by looking
at the story that’s most often told in
economics textbooks and in economics classrooms. And that is sort of
a hypothetical story that goes something like this. So imagine that you live
in a time in a community before money
existed, and you need to trade one thing for another. And so maybe I need
a new pair of shoes. And so Phil has a pair
of shoes that I want. In order to get those shoes,
I need to find something that he wants. So maybe he wants a
jacket that I have, and we’re able to make an
exchange– shoes for a jacket. So this is barter. The issue with barter
is that it essentially requires what’s called a
“double coincidence of wants.” So Phil has to have
something that I want, and I have to have something
that Phil wants, and in the right numbers. So it’s possible
to negotiate this, but it also can be
really inefficient when you try to scale this up. So it might work in a small
community, or amongst friends, or a family, but once
you try to scale this up to a bigger system,
it becomes very hard to navigate all of that
and almost impossible to manage. And so this is where money comes
into play, the story goes– that essentially, money came
in as a more efficient way to do these types of exchanges. And in this story, money comes
first, and then eventually comes banking and credit. So within this school of
thought, the history of money is usually a history of
coinage, and money starts as a commodity. So it’s essentially
gold, or it’s salt, or something that has
a value in and of itself. The issue with this story– and David Graeber points
this out in his book, Debt– The First 5,000 Years–
the issue with this story is that anthropologists have
found almost no evidence that these imaginary barter
communities ever actually existed. And so what does that mean? That essentially means
that this story that’s told doesn’t really come from
any anthropological evidence about barter. So barter did happen and
does happen at times, but it was always sort of more
of a thing between strangers or between tribes that were
meeting rather than something that was the main mode
of economic activity. And we also find that actually,
elaborate credit systems were established long
before coinage was invented. So we see elaborate credit
systems in the Indus Valley, in Mesopotamia,
in ancient China. So that really changes
the story about banking, and credit, and money. So rather than money coming
first and then banking and credit, actually,
credit came first, and then money was introduced. So if these elaborate
systems of credit pre-date the invention
of money and coinage, can we really think of
money as just a commodity? And the credit theorists and
the credit theory of money say no, money isn’t
necessarily a commodity, but it’s really
an accounting tool for measuring debts, the
debt we owe to other people. So money is essentially
a symbol that’s passed around that’s a
promise to pay back a debt. And the value of
this symbol comes from our trust in other people,
our trust in our society, and the people that
we’re living and working with that this money
will be paid back. And that’s also partly
a trust in the state, that the state is
good on this value, and that the state will be able
to enforce these relationships. And so we see both. We see that money has, in
the past, been a commodity, but this credit theory
of money also, is true. And so is it a commodity? Is money credit? And the answer is
really that it’s both. It sits on this really
fine line between being a thing with a precise and
measurable value with a value in and of itself and
being something that’s built around our
relationships to other people and our relationships
to the state. So the important
thing, I think, this leads to is actually,
a bigger conversation about not only our
money, but what that means for our economy. So both money and
our economy are not things that are separate
and independent, but they are deeply
embedded in our social and our political relationships
and shouldn’t necessarily be distinguished from those. [MUSIC PLAYING]

Leave a Reply

Your email address will not be published. Required fields are marked *