Menger's Barter Theory of the Origin of Money Is Still Standing
Summary
Investment Theme: The podcast discusses the enduring relevance of Menger's Barter Theory as an explanation for the origin of money, countering recent criticisms from anthropologists and economists.
Market Insights: The conversation highlights the importance of understanding historical economic systems, such as barter, to comprehend modern monetary systems and their implications for economic policy.
Theoretical Discussion: The podcast critiques the rejection of the barter story by some scholars, emphasizing that no definitive evidence has been presented to disprove the barter theory as a plausible origin of money.
Historical Analysis: The discussion points out that historical evidence often cited against the barter theory, such as the works of David Graeber, may not conclusively refute the theory and sometimes misinterpret historical texts.
Policy Implications: The debate over the origin of money has significant implications for modern economic theories, such as Modern Monetary Theory (MMT), which argues for the state's role in money creation.
Key Takeaways: The podcast underscores the necessity of a coherent explanation for the value of money, with the regression theorem being the only standing theory, reinforcing the barter story's relevance in economic discourse.
Transcript
[Music] This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy. Well, George, welcome to the Human Action Podcast. >> Well, hello, Bob, and thanks for having me. >> Sure thing. Glad that we could make this work out. So you have published a paper um defending the the use of the barter theory of money. So maybe just for the listeners just take a big step back here and can you explain the big picture like how you got interested in this topic? >> Uh yes uh I am uh generally a monetary economist. That's what I studied when I was in graduate school. My PhD is in Bulgarian monetary aggregates. uh and uh I've been interested in the institutional side of uh money for a long time because I just happened to be at Washington University in St. Louis during the time when Doug North was there and actually for a couple of years I was his research and teaching assistant. So I always tried to look on the institutional side of things uh and especially of money and then I started reading all these books. Oh, but basically they have the same pattern. Uh you thought you knew what money was, but it's not what you thought it was. I'm going to tell you what money is. Uh and then they start everybody going in their own directions. And then uh the last 25 years I started noticing that many people saying, "Oh, but that's not how money came to be." the usual story which we call the barter story of the economist that that was barter it's inconvenient uh and people came up with all kinds of uh ways to work around that one of them was the indirect exchange facilitated by money there are also other ways it's not the only one but that's the origin um and then some anthropologists especially but also some sociologist Um also some uh financeers even started saying no no no no money did not come about this way. There were other things. There was never barter there was never markets. The usual carpoanian story of never markets before the 19th century and so on. So I started to look more uh deeply into what their arguments were. Actually, I credit you personally uh because I followed your uh methodology related to your criticisms especially of Krugman uh in the contra krugum both the the podcast and the book uh where you were actually clicking the links to check if everything is all right. Right. So I started clicking links and all kinds of stuff started coming up which did not support uh the anti-barter story. Uh so I started piling up material on that issue and then some about 10 years ago I decided that I'm going to be working on and it's taking a lot of time but I'm still doing it on uh a larger project called theories of the origins of money. Uh and this is sort of a first paper coming out of that basically saying uh well um we cannot exclude the barter story because it actually in fact has not been rejected and the rejection is is a mirage in the eyes of those that thought they achieved it. Uh sadly one of the biggest uh proponents of the rejection of Barter uh David Greyber passed away like 5 years ago. Uh so he is not going to be able to defend his position um further. But I I think that in the paper I make it pretty clear that uh the argument that the barter story has been rejected is unsustainable at this point. >> Okay, great. Yeah. So, this is um thank you for the summary and we'll just unpack that as we go through this interview here. Let me just take a few moments because I want to make sure the listener who might not be hip deep in these controversies understands why I think this is so relevant to an Austrian audience. That for one thing uh Carl Manganger's theory of the origin of money is not just a a niche Austrian uh element but he actually like wrote for the encyclopedia of the social sciences I believe is what it was. He you know Carl Manger they assigned him that entry like in terms of like you know what the origin of money um so you know the way he explains that is uh you know one of the the leading examples of that story but it's not just an Austrian >> perspective like it's you see versions of this story in Adam Smith even right so and and again the the for folks at home like so what I think George and I will be referring to as the barter story >> is just the idea that originally you know, people had property and they had what was called direct exchange, which was great. You know, if you had mutually uh advantageous trades, then both parties walk away with higher subjectively valued items. But there's limitations to that. And then, you know, in Manganger's telling, he said, "Oh, if if you have a good that's relatively unmarketable or unsalable and you want to get something >> telescope, >> yes." Then you you know you find somebody else that's got something that's more remarkable even if that's not what you directly want. you might trade away your thing for that because you know I'm gonna much more likely to find somebody who wants you know the these things and then that process just snowballs and so he can kind of explain step by step even though nobody set out to quote invent money it's spontaneously emerges right so it's a very Austrian story and then as George says last thing I'll say here George that there has just been a wave of criticisms of that in recent years and maybe even decades such that like the fans of David Greyber just think that he demolished that theory with anthropological evidence and that oh you economists with your armchair logic you just refuse to look at empirical evidence whereas we've known for a long time now that this barter myth story like that doesn't that doesn't happen and there's a famous quote from Greyber this won't be the exact words but he says something like the standard economist story of uh barter money credit gets things exactly backwards historically we you know we know that it emerged the other way the first was credit and then money and then barter which all right so anyway that's kind of the the context sorry the last thing I'll say is in terms of this isn't just a theoretical curiosity or historical investigation but there are policy implications in the sense that like the MMT people for example it's very important to them to say no the state creates money >> because that just like gives it more power and like oh you know if it weren't for the state we wouldn't even have money so you know imagine that you people and so they want to it's important to them and I'm not just attacking astronomy like they go out of their way to say this repeatedly that it's not true yes that >> they think we're being ideological by saying oh no we you know the private voluntary sector can create money we don't need the state for that and so they think that we're the ideologue so anyway that's why this is such a hotly contested area >> yes and uh the the thing is uh that this is one of the cases where I believe uh that theory informs history >> rather than the vice versa. Especially the fact that MS in his theory of money and credit uh came up with the well by then it was the first misian theorem the regression theorem which is the only existing no other exists explanation of the value of money. uh nobody has offered any other theory of why money has value uh and explained how this value gets formed but the the Ms regression theorem and it has to have whatever happened to become money to be a marketable good in the beginning otherwise we do not we cannot explain money. So until somebody else comes with a different theory uh about the value of money uh this one has to stand. It's like the the Sherlock Holmes thing that uh the regardless of how incredible how impossible if it's the only one standing that's the explanation. Uh so mis the misesian regression theorem and his theory of money and credit actually in my mind proves that historically that there must have been some trading involved uh for for money to emerge. It was not simply these debt relations that Greyber favors or especially the state coming up all of a sudden uh much later because the latest the earliest possible emergence of the state as a player involves writing and money is probably older than writing. >> Mhm. So um um in that respect uh respecting the misian contribution for all it is it's the only standing theory of the value of money. No no no one can do anything about that. Nobody has done anything else. Uh it means that history must have uh evolved somehow so that this theorem holds. Um and the barter story as originally told actually the first person recorded who has told the barter story is Aristotle. He's not the most pro market guy on earth as we know very well, but he told the story very explicitly uh in over two pages in his politics. Um and then later the story was repeated and especially Adam Smith and then Carl Manganger's exposition is actually excellent the long one the encyclopedia entry which is in in the tens of pages long. uh it is really a story of how um an institution a specific setting of social relations emerges uh and if in one thing Carol Pollani may be a little bit correct is that it's as complex a phenomenon as language is it doesn't just come up somebody snaps their fingers and it appears >> um so that's the that's my impetus there and uh the more I looked into the arguments against the barter story, the weaker I found them. And actually this paper is look guys, there is a case um against the barter story. It doesn't hold uh a more a more detailed uh examination. >> Okay. And that's why you were making the the reference to like my for people who didn't understand the the sort of joke you did there. Yes. Folks, let me just explain it. George. So Tom Woods and I, as many of you probably remember, had a podcast called Contra Krugman where we would weekly, you know, take an op-ed or something that Krugman had done, a blog post he had done, and then we'd go through it. And so what became a running joke was a lot of times Krugman would assert something and have a hyperlink, you know, presumably backing up or justifying his claim. And I just got in the habit that I would click the link and many times it would say the exact opposite of what Krugman was claiming. And so that yeah became a running joke like oh yeah I clicked the links Tom and then you know Tom would so that's what George is saying here. Um how how should we proceed? Do do you mind if I just read this Carl Pani quote um and maybe just have you react because this is something that was not >> Yeah. This is one of the juicier stories. Yes. >> Okay. So again and then you know we can take this whatever direction you want but again this is so folks he's got you know this long paper with all sorts of quotes and things. Obviously we're just going to try to give you a sampling of it. So uh Carl Pelani wrote in 1944 uh referring to the 19th century that previously to our time no economy ever existed that even in principle was controlled by markets though the institution of the market was fairly common since the later stone age its role was no more than incidental to economic life. And so I don't know if if if you have much you want to com but can you just explain like is that pervasive in this anti-barter story literature that they're saying to economist. >> Yeah. Go ahead. uh the larger context of anti-barter and go again we're going to get to Mises uh is the the fight against economics >> uh as the most highly developed social science explaining uh social phenomena that are very complex uh and for things like Marxism to be capable of having anything to do with the reality and the truth of human existence economics is in the way. So they have to get rid of it. Uh and that in in his human action business points of such attempts to get rid of economics because it's in the way of other ideologies. Uh and then um Greyber also uh eventually shortly before he died he actually started expressing the exact same sentiments. Economics should be done. Uh it should be buried. Nobody should ever hear about economics. It's a it's an exploitation tool of the ruling class and so on. Uh so economics is in the way of a lot of those leftist collectivist uh against the market sentiments that we know very well about sadly. Um and that's the bigger context and Carl Pollani is one of the big exponents. he was a a Marxist uh big exponents of that type of research agenda in the let's say 1940s and 50s especially uh and that's from his great transformation is the quote which basically said that somewhere in the 19th century all of a sudden some exploiting classes discovered markets as a tool of exploiting the working class and started applying them everywhere. Before that, humankind did not know markets at all. That's basically his uh his uh theory. It doesn't hold water. I mean, I can refer you, it's a different literature, but Dedra Makloski has excellent reputations of all those Polanian uh Polanian expositions. But on some points, for example, the the the the close relation between uh let's say uh the money phenomenon and the language phenomenon, he has some not bad points. Uh he was an extremely well- read and clever person actually as well as his brother, but he's less famous. Um so um that's the start and then the tradition continues with some of the students of Carol Pollani against the market especially uh George Dalton uh and uh later it it somehow turns into oh it's already been proven it somehow is taken for granted by all the anthropologist almost all not all of them there is this uh I think her name is Mary Anderson or something like that who is not really uh in that type of thinking Um many sociologists they think it has been proven that things are this capitalism thing is so very recent people never knew even though of course Carl Pollani cannot deny that people were exchanging things on markets but he's trying to claim it's extremely marginal well if you read Aristotle not true uh actually he's describing precisely market types of exchanges uh by peer years uh based on uh their excess production of different goods. Uh and it is so natural that money may have emerged from such things that Aristot actually describes as from a first person perspective. He actually lived those things. He is a witness um in in in the 4th century BC. Uh that it's it's difficult to imagine that the story has been refuted. So can I um and this is what it was fascinating. So, as you just said there, George, like part of what you do here is you sort of um you go through and and quote and kind of show how all these anthropologists seem to be just like talking in a circle like like all just agreeing with each other and then they had convinced themselves like, "Yeah, everybody knows that the barter story has been definitively rejected and then you just were sort of saying, well, show me like don't don't just say it." And and so one thing in particular that if uh let me just try to summarize and obviously you know tell me if I'm getting it wrong but is that David Greyber for example says the definitive study on you know the the barter origins or what whatnot is from this guy Humphrey and if we go and look at that we see that it's actually there was a there was a previously monetary economy and then these various things happened and they demonetized and and like regressed into a bar well regress is not the right turned into barter. And so that's where Greyber's getting this notion that actually historically it goes, you know, credit money then barter sometimes. But as you point out, like that's that's a weird logical argument to say there was never an original state of barter because this one particular case, >> this one particular tribe, yes, went through this in the 20th century. Actually, it's a lady, Caroline Humphrey, uh I think she was in in Oxford. Um but what uh what Greyber calls the definitive study of the definitive anthropological work uh on on barter uh well it involves one single population of a very smallish human tribe in the Himalayans somewhere in where today's Nepal uh which because the border between China and India became very hard during the cold for uh all kinds of traffic stopped going through uh this territory and uh the the whole monetary establishment was dependent on this traffic. And when the traffic stopped, they demonetized and started bartering and she basically says, well, you can have a previously monetized tribe that now has resorted to barter. That's all she says. Actually this is not uh in any shape, way or form a definitive study on the anthropology of barter. It studies only one population and I uh quote some books uh uh published in the late 40s 1940s. One has a second edition in the 1960s where it's in the in the hundreds uh of uh what they call primitive money. that Squigin and uh Einik uh societies with monetary arrangements that have been described. They call them primitive. Probably today this word would not be very well accepted. Um and uh there are hundreds. She has not studied the hundreds. >> She has studied one. So that cannot constitute a definitive work on the anthropology of barter under any uh definition of def definitive work. Uh and then her she herself bases her claim uh because she begins actually it's uh it's her starting uh assumption. It's not her final finding. Mhm. >> It's her starting assumption is if we reject the barter story, can we still find barter? >> Yeah. >> And she says yes, we found it in this one tribe in the Himalayas. Uh but she has not proven that there was no barter. uh and she has only one uh quotation um only one reference and it's to a work by uh Dutch uh sort of monetary but also anthropological author Thomas Krump uh who has a large book uh the phenomenon of money very interesting book uh and there he does not say there was never money there was never barter there was never barter exchange he just says it was not very common and it was not very likely for money to emerge uh from such arrangements uh by humans. Uh but it's not very likely within the the light of his very formal mathematical complex neocclassical type of model. Uh otherwise it's not quite so unlikely in the messy reality that we live in. Uh so actually Thomas Krump would disagree that there was never uh significantly large barter exchange so that it could generate the monetary phenomenon. He just says it's not very likely in history. We don't find many instances. He actually quotes three. In the literature I have found several more. One of them is actually Mesopotamia where we know probably the monetary phenomenon first came to be. Uh so uh when you click the links and you actually read through the reference it does not really say what Greyber implies it says. Mhm. C. Yeah. Can I So going along with that just you you had mentioned just to return to Humphre for a minute is because I I really liked what you you did there or in the paper is you let me just read this and maybe just explain for the listeners too because it again this it gets really subtle and nuanced and some people might think oh come on what's the difference? But it it it's critical like like you say in terms of explaining like wait a minute this this idea that they're all just kind of patting themselves on the back like yeah we reject the bar. So you're saying so folks this is a direct quote from his paper. Going further Humphrey does justify her assumption rather than conclusion that barter did not precede money with the following statement. Quote we know from the accumulated evidence of ethnography that barter was indeed very rare as a symptom dominating uh primitive economies. And then the references to a single source of crump and so on. Um and then and so what's funny though is you go on to say but yet on the first page of her study Humphre had stated no example of a barter economy pure and simple has ever been described. All available ethnography suggests there has never been such a thing. And so, so Georgie in his paper, you know, makes the important point that, well, wait a minute, there she's just flatly saying on page one, no example exists. It's never been described. And then later she actually says it was very rare. >> And so just I don't know if you're going to like this analogy, J, but imagine if you're, you know, talking to researchers about the origin of life and you say in general, if you just had, you know, a a pond out there with lifeless molecules, would you expect a cell to emerge? and they would say, "Oh, no, that would be incredibly unlikely." And so therefore, would you say, "So that proved that, you know, there was six, yeah, biblical Genesis, you know, not getting into a religious argue, but my point is people would say, no, all you would need is it happened once and then that could explain the origin." So likewise here, >> you know, the fact that we don't have a And okay, I have other points, too, but I just Is that a fair way of me assessing what you did there and showing how she went from saying it's rare to it doesn't exist, we have no evidence whatsoever? like that's different from saying it's rare >> and and your reference to the uh beginnings of life would sound familiar to lots of your listeners uh because you've discussed this topic uh at length. Uh yes, the fact that it's sort of very likely does not mean it did not happen exactly that way. So very many unlikely things have happened in the universe history, in the earth history, in human history. That one more would not be a surprise to anybody. Uh unlikely thing to have actually happened. Um so the argument it's unlikely is qualitatively different from the argument it never happened. And that's what Humphrey is doing on on page one. Uh she says never observed. Uh all the evidence pointed against that. And then on on the second page, she says when she actually has to refer to a source, she says rare and unlikely. But these are two extremely different propositions. whether it's uh impossible or possible but uh low probability uh because it it enters the conversation in a different mode. If we say yes it's not very likely but obviously if we have no other explanation other than uh the regression theorem for the value of money um that must be it. Yes, may have been unlikely, but that's we don't have other story. Nobody else has proposed another story. Of course, the MMTers would tell you it was the state, but uh their story would not hold up very and and you've done excellent job on it and and your recent conversations with Jonathan Newman were informative on that that actually even that story does not hold when you check the evidence with Jonathan is doing right now. Uh I'm expecting this to be published soon. uh all the MMTiers and especially historical origin and the state origin of money. It does not hold because it requires um uh writing and also uh and I believe money is older than writing and also it requires silver and somehow uh the the wise government coming up with silver exactly at the same time when everybody else was coming up with silver does not sounds even less likely. Uh so um many other theories of the origins of money do not hold. There is also the temple theory, the palacio theories, the credit theory of of Greyber. He is not such a big fan of government origins. He's a little bit of anarchist, left uh leaning anarchist. uh but his death story. Uh and that's that's my bigger project trying to see how each of those holds up against first the theory and then against the historical evidence. It seems like the barter story uh looks the best so far. >> Great. Um maybe this is the appropriate time too that I again I I think what what's happening is there there's so much don't want it to be the case that they're not honestly saying >> you know suppose the barter story were true what would the historical or anthropological evidence look like because again suppose it were true >> and that it did you know there were these very you know long ago there was primitive societies and they were using barter and then if money emerged in one place it would wrap rapidly spread. >> Yes. >> Throughout. And so it's not necessarily the case that you would find, you know, evidence of 16 separate, you know, independent city states from thousands of years ago that all relied on barter. And I was making the point, you know, to Jonathan and others when we talk about this stuff is that in the Mungarian story especially, you know, because I think that's the the best, you know, theoretical example or exposition of the logic. It's if you started out in a in a state of pure we're saying barter but really be like direct exchange in terms of like a messian you know framework >> that you would it's not like you would expect that to persist for seven generations and then finally you know 300 years down the road somebody might say you know I had this relatively unsailable commodity maybe I should that no it's something that would happen like the next time someone tried to sell something you would expect you know what I mean so >> it's so rational and logical that probably the moment people started actually having surpluses to exchange with each other uh or not so much people but probably larger groups uh tribes and then households within tribes uh they would within one generation come up with the marketable goods flowing around >> right the only yeah the I was thinking like the only reason a priori you would expect that it wouldn't is if you just had like nomadic traders who never thought they were going to see each other again then maybe there would just be spot direct exchanges. But hey, for all I know, I'm never going to see this guy again. So maybe >> there have been these silent uh uh negotiations. There have been examples. Yes, very interesting sort of uh approaches to uh this trade by unknown um tribes. Uh but again uh nobody's saying barter was the only game in town. >> What money origin needs is just to have some barter. You may exchange in other modes. You may actually have debt uh also based exchanges that does not prevent in any way the barter story uh to be true. You just need to have some barter and then the most marketable good the most salailable as uh manure says uh would eventually win over and become uh become the money the single sort of generally accepted uh medium of exchange and which is the Megarian definition of and misian of of money. Um and then obviously the best forms of such generally accepted which turns out to be precious metals uh would eventually emerge in places where the supply and demand of these precious metals is sufficiently convenient. Obviously a lot of circumstances need to fall in place but they obviously did not the first time like you said with life so many things had to fall in place for life to emerge. It did. So let me just because you alluded to it there uh go off on a somewhat of a tangent here because that was the one element of Greyber's analysis the the you know intertemporal you know credit transactions or we would call them that I realized oh yes like when I would teach the origin of money to undergrad classes and I would walk through and just look at how airtight this is that I had completely overlooked the possibility of you know people giving up present goods right now in exchange for Hey, down the road you're going to give me something to reciprocate. And that is, you know, a complication certainly. And you would imagine, especially like in primitive societies where people are all kind of living in a tribe or something that that would clearly come, you know, somebody has a good harvest, they share it with their neighbors knowing that, oh, they're going to return the favor. And you can imagine that not even necessarily being like a market transaction, but sort of custom that is advantageous to the survival of the group. And so that's why Okay. I I'm like you I could do that but like you said the problem with Greyber's story where again he tries to say oh first there was credit then money and then occasionally barter >> is the and Gber admits it to his credit he said yeah like you know if if I help my neighbor by you know him fixing his his house >> and now he owes me that and then down the road you know I yeah I I'm hungry and he has extra pigs and so but but you need to know what's the exchange ratio between fixing a house and getting some pigs. And how would you if you had Yeah. If you had barter then you would know but >> you immedately have the market price. Yes. The exchange ratio is a very important aspect. Everybody seems to forget. Yes. Everybody says double coincidence of once people need to be in the same place to actually trade. It's a spot trade and so on. But actually they have to agree on the price. Everybody seems to be forgetting that if they don't agree on the price, no matter how monetary the economy is, we're not going to get a transaction. Uh and uh how do they agree in a price on a price? Well, it may be a one-time thing which obviously did exist and the gift exchanges of uh older times uh of Marcel Moss and so on obviously they happened probably in history but does that does not prevent the barter place of the origin of money in any way shape or form people were exchanging in all kinds of modes. Uh the partner story does not say they did not exchange using debt relations. They did not exchange using gift exchange. They did not exchange using actually there's very interesting history of blood money and bride money and so on. Uh yes all of them but the only place where you can get a price and somebody something becoming uh the most salailable thing is uh a more regular type of trade a market type of trade uh which is the barter story. >> Yep. Great. So, so again just to emphasize folks that you know the the earlier point is if if anthropologists were went out and they did discover some community that had been in a state of pure barter for you know eight generations as long as anyone could remember that would actually be a problem for the Mgarian story. You would say why did they persist in this state when the whole point of his story is to explain how natural and spontaneous it would be for a medium of exchange to emerge that outstripped all the other you know so ironically like again that's what what I meant when I was saying they're kind of unfairly holding up like say well if your theory were true we would see this and it's like no actually we would see the opposite you know and then um on this point too so I I liked your paper that you were nuanced and your point was not to say that yes there it must have been that in in the past everybody was just doing pure barter or nothing else. That yeah, these other things could have been going on and we certainly should look at the evidence and not just from our armchair >> just try to deduce what history must have been. But like you say, there's logical problems to try to go from just a debt based set of relationships to the emergence of money that how do you know what one thing trades for against another unless people are trading it against it? You know what I mean? That's what we mean by barter. >> Exactly. To be fair to Greyber, he does say that. Yeah, I owe you one but one what? At one point he he does admit that and also he admits that there were obviously barter exchanges. He insists however that for the origin of money something that they call the barter economy is necessary like everything is barter almost nothing gets traded in other ways. Everybody is using barter. Uh no the Barta story does not especially the original Barta story the if you if you try to do a neocclassical general equilibrium story Barta story then probably you would need that but not in the Aristotilian smithian story marian especially you don't need that you just need to some people to have been involved in barter >> yes >> alongside everything else >> right and and then also too the other thing I wanted to just pull out of what you said there is like the the silver shekels and stuff and kind of going with what Jonathan Newman was saying and this is when I first re like reviewed Greyber's book what was it debt the first 5,000 years I think the title of it is I went through it I just focused on you know this issue about him allegedly slam dunk destroying the barter origin of money is that the examples he was giving I don't remember if it was like ancient phoenicia or something to show like oh no it was like a temple tax or blah blah blah and what they were using was the the shekele of silver and that was their monetary. I was like that seems like a big coincidence that you guys are just saying no it was just from the powerful like religious or government officials by edict just declaring this thing is the money and they happen to pick the thing that on a Mungarian framework we can totally explain why that is what they would have chosen you know so anyway it just again like you're saying it >> it it it see the the historical evidence that they were pointing to is entirely consistent with the Mgarian story it's just they're so sure that's wrong that they just they can't see it >> also Another thing about the debt uh story is that requires especially if it's going to become at some point tradable debt. Um so that it may be serve as a beginning of money. Uh Greyber by the way never finishes the story of exactly how money emerged from uh old debt relations. Um uh it has to be recorded somehow. So you need writing >> and I continue saying that uh human exchanges and therefore the inconveniences of barter and therefore coming up with some solutions around barter one of which is indirect exchange serviced by the most salailable thing uh are much older than writing. Um and uh another point of my story is they say oh no archaeological evidence and my question is what do you need to see in archaeological evidence to say aha this was exchanged using barter because what you see in archaeology some bones from here which have been transferred there some obsidian from a farway source going traveling some thousand miles, but you don't know how it was exchanged. >> Mhm. >> Saying I have seen no evidence of barter. Uh puts the question, what evidence do you need to see? Um and uh >> and I cannot imagine what would archae archaeologists see in the record to say aha that was done by barter. You you have the the the the the hair uh bones here and you have the pheasant bones there. >> How do you know how they were exchanged? >> Right. Very good. Yes. That's actually it's funny. That's such a an obvious like that's a good application of the principle I was I've said twice now this episode, but you're right. Just you just saying it like that succinctly is just hit me, you know, like a 2x4 on the head that because you're right. It's it's clearcut once money does emerge and there's records like of financial transactions. It's clear how we can find those and say, "Oh, this merchants's keeping track of, you know, selling all the sheep or whatever." >> So, that makes sense. But you're right, if it were a a situation where there was no common unit of exchange and it was just people trading things, you know, in kind or whatever, >> nobody would hold anything. >> Yeah. What would you even write write down except like just a document that Why would you do that? There would So yeah, very very good that that the evidence they would have seen they might that might not even be perceived as a financial record. It it wouldn't be obvious what they were even saying. So >> so to me the the argument there's no archaeological evidence. There is a a well-known saying uh in in those type of circles that the absence of evidence is not evidence of absence. Mhm. >> So the fact that we do not have evidence of barter does not mean there was no barter because what evidence do you want to see? >> Yes. Um you did so if I could change gears here and you mentioned it a second ago. That's something I did want to ask you to elaborate on. So here's just a a quick quotation from you George. You say in this theoretical aspect the rejection of the barter story is based on a conflation of the original barter story with neocclassical economics. It is true that the barter story is very easy to incorporate in the framework built by neocclassical economics and it may be argued that it has indeed been so incorporated through the decades but that does not mean in any way that the barter story depends on the assumptions of neocclassical economics. So can you just explain their you know what what happened and then why you think >> they're attacking you know a more modern form that's actually weaker. >> Uh actually as a fan of Austrian economics uh I'm not a big fan of new classical economics. uh and uh neocclassical economics when I say use this term is the marriage of the marginal analysis with the higher math uh and especially uh the insistence on equilibria especially the general equilibrium uh and we can see how the BA story by being based on market exchanges uh very conveniently enters uh this type of narrative which is the new classical one uh even though neocclassical economics cannot explain money they have absolutely no story they have to force the money into the models and one of the things I studied in the '9s was exactly that how either you have to put them in the budget constraint like the well-known clower constraint or you have to put them in the utility function which is Miguel Sidroski uh or you have to force somehow money in the model for it to to be present it does not emerge from the new classical models. That's one of the reasons why neocclassicists need to uh to rethink everything they do. If you cannot explain money, your theory is not worth much. Uh and uh money as a as a social phenomena, societal relation, very complex. Um uh so but the barter story does not need general equilibrium does not need higher mile does not need homoeconomicus which graer annihilate graber annihilates and one would agree with graber on that one. >> Mhm. >> Yeah. Homoeconomicus is a is a is a useless uh ideal type or an imaginary construct. it does not help um uh actually may actually be detrimental uh for for our understanding of human societies. Uh so uh uh destroying homoeconomicus is not a bad thing in itself. Uh but the barter story does not require such a a being at all. Actually, Magar really describes living people like any other anthropologist would describe them with all of their problems and imperfections and vices and so on. Uh does not prevent the Va story from being true in any way, shape or form the way it was told by Aristotle, Smith and Mangar. >> Yeah, just a a quick anecdote on that. um when I was in grad school at NYU for the it was called a paper writing seminar we had to do like they it was like the point of the seminar was to teach you how to write a journal article and uh so you had to have a topic and I was searching around for something and it and I I thought oh you know what I'm going to write about the origin of money like you know in a Mgarian sense and model that be because I like you're saying it was it was obvious once you you know start studying those those formal neocclassical models that the money doesn't play. There's no reason to have money in those models that everybody it's just general equilibrium and wall raisian economy and everything and you know you just have your consumption set and whatever you know the price vector >> perfect and everything. >> So there's there's no there's there's no reason to have money but yet if it has to like if it's a model that has a central bank there's got to be money because the central bank has to do something and so yeah they just kind of force people to get utility from it like holding a Picasso. It's like yeah you just like holding money you know because or something. So anyway, I I thought okay surely in this literature nobody has ever gone and read manganger and modeled that and so I built up a like a formal model like whatever and I went through and I presented at this seminar and this oldest boy in Javanovich who is like an eclectic guy that he read other stuff and he went that's Kotoko and writes 91 exactly >> and I went so it was embarrassing that I didn't bother to do a thorough literature search because I just assumed oh yeah these crazy but actually and they actually cited Manger too. Anyway, it was they had you know paid homage to him and then did a formal search theoretical model blah blah blah. So, um that does exist in the literature but yet certainly the standard models that we learn. >> Oh yes, there are circular models of money but they have the problem of explaining the value of money. Uh the only person who has ever escaped the infinite circling loop is MS with the regression theorem. Nobody has done that. >> Yes, I >> nobody else. Yeah. >> Okay. Um, just as we're wrapping up here, is there any major point, you know, I I went through and I was kind of asking you to elaborate on the nuggets that I found particularly interesting. Am I missing anything big from your paper that you feel if we're summarizing it, we got to explain to the folks? Well, probably as a last uh sort of uh short uh anecdote is the thing that I discovered when I actually pulled up Aristotle in Greek and discovered that Caro Pollani was not really correctly uh quoting terms in Latin from Aristotle. And what Aristot was saying was precisely the barter story and he was using the correct word for barter and Pollani was sort of not very correct in his usage of what Aristotle said. Um so uh almost everywhere I clicked I found that the actual evidence supports at least adamantly does not reject the barter story. It is there all the time. It is quite possible, quite realistic and that's probably what happened because again we do not have any other coherent story. All other stories need to rely on some miracle all of a sudden money coming up with its value >> um uh and and started operating. No, the value had to come from somewhere. >> Yeah. Yeah. And just to make sure the folks are getting that and that's why you keep alluding to the regression theorem. So the idea folks is okay suppose there you know some ancient civilization that is they're just using debt relations and things and then some wise ruler perceives the benefits of using a commonly accepted medium of exchange. So, for one thing, as Mega points out, that would be a genius. Like, how would you like money's kind of weird like until you see it and think about it, it's not obvious why that even makes any sense. But, okay. And say they hold up like some shells and say, "This is going to be the money." Now, this is commonly accepted. Any if you want to sell horses, you you want to trade horses for chickens first. Trade your horses for these shells that you don't really want. But the person who is trading chickens will do it too. And then it says, "Okay, well, how much does one horse how many shells a horse trade for?" I don't know. And so that's that's part of the issue like to just denovo create money you you don't know how what it's its purchasing power is whereas you know >> me how did they know how many shekels daily wages to the workers which you find in the tablets all the time but how did they know how many shekels uh so the question of how much uh cannot be answered by anything but the regression theorem. >> Great. One last thing, can you just explain when you were saying Pelli was mistakenly attributing views to Aristotle, was it because the the translation from the Greek to the Latin was incorrect and Palani was just relying on a faulty translation? I think he was just reading a Latin translation and he was wishfully thinking that the word that he was coming up with which is methodosis um was used by Aristotle uh to uh to to name uh barter uh and methodosis really does not mean barter but actually the word that Aristot used for barter he meant something completely was by the word methodosis which is interchanges and that's actually uh the not not the best word but correct translation of the term he used another word four times in the same paragraph uh to designate barter and that was the word alagi and and pollani actually an alagi means exchange um so polani ignored that completely uh so whatever he had to say about Aristotle's story is incorrect, Aristotle told a different story. >> Okay, great. So, is it fair to say in conclusion that when certain critics say that the barter story of the origin of money has been utterly rejected, if you go through and follow the the citations to say, "Okay, show me why >> there's no smoking gun anywhere." And then we have all these other largely theoretical reasons to say >> the barter story seems to be necessary like to explain the value. And so you know all things considered that still contender. >> Yeah. >> No uh smoking gun has killed the bur story. Actually when you click all the links and read through the stuff they make it less likely than we probably thought but still there. And again, no other explanation of the value of money exists but the regression theorem which depends on exchanging exchanges taking place. >> Oh, one last thing that I like to bring up a lot is >> we do have sort of a laboratory experiment to see the barter story. Yeah. Radford's the economics of a P which folks even if you don't care about so much the anthrop I I would encourage you if you're listening to this podcast if you're that kind of person you probably should go read that article it's very accessible it's the again the guy's name is Radford the economics of a P camp yes >> he was a trained economist who I think was in the Royal Air Force and was shot down in >> yes he was a British I'm not sure whether he was in Europe or in in the Pacific in a camp the whole war and he describes the economic life of the camp >> and the emergence of money in the in the form of cigarettes, >> right? And what I love too, just last is he clarified and said now what we meant by that was the tobacco in a fullbodied cigarette because otherwise you people could just tap out some of the tobacco and pass it off as one cigarette. So anyway, it's just great in terms of that was their money, folks. And clearly, you know, it wasn't that someone >> smokers were uh were using it and accepting it and smokers literally burned their money. >> Yep. Okay. Well, folks, my guest has been George Genev with the paper is on. Let me see if I can scroll because I had gone down to the the bottom see your citation. Let me get the exact quote. Has the barter theory of the origins of money been rejected? And we'll put links of course to the the actual publication. So, George, thanks so much for your time. >> Thank you very much, Bob. And I wish you all the best. >> Same to you. And thanks everybody for tuning in. We'll see you next time. Check back next week for a new episode of the human action podcast. In the meantime, you can find more content like this on nieces.org. [Music] [Music] [Applause] [Music] [Applause]
Menger's Barter Theory of the Origin of Money Is Still Standing
Summary
Transcript
[Music] This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy. Well, George, welcome to the Human Action Podcast. >> Well, hello, Bob, and thanks for having me. >> Sure thing. Glad that we could make this work out. So you have published a paper um defending the the use of the barter theory of money. So maybe just for the listeners just take a big step back here and can you explain the big picture like how you got interested in this topic? >> Uh yes uh I am uh generally a monetary economist. That's what I studied when I was in graduate school. My PhD is in Bulgarian monetary aggregates. uh and uh I've been interested in the institutional side of uh money for a long time because I just happened to be at Washington University in St. Louis during the time when Doug North was there and actually for a couple of years I was his research and teaching assistant. So I always tried to look on the institutional side of things uh and especially of money and then I started reading all these books. Oh, but basically they have the same pattern. Uh you thought you knew what money was, but it's not what you thought it was. I'm going to tell you what money is. Uh and then they start everybody going in their own directions. And then uh the last 25 years I started noticing that many people saying, "Oh, but that's not how money came to be." the usual story which we call the barter story of the economist that that was barter it's inconvenient uh and people came up with all kinds of uh ways to work around that one of them was the indirect exchange facilitated by money there are also other ways it's not the only one but that's the origin um and then some anthropologists especially but also some sociologist Um also some uh financeers even started saying no no no no money did not come about this way. There were other things. There was never barter there was never markets. The usual carpoanian story of never markets before the 19th century and so on. So I started to look more uh deeply into what their arguments were. Actually, I credit you personally uh because I followed your uh methodology related to your criticisms especially of Krugman uh in the contra krugum both the the podcast and the book uh where you were actually clicking the links to check if everything is all right. Right. So I started clicking links and all kinds of stuff started coming up which did not support uh the anti-barter story. Uh so I started piling up material on that issue and then some about 10 years ago I decided that I'm going to be working on and it's taking a lot of time but I'm still doing it on uh a larger project called theories of the origins of money. Uh and this is sort of a first paper coming out of that basically saying uh well um we cannot exclude the barter story because it actually in fact has not been rejected and the rejection is is a mirage in the eyes of those that thought they achieved it. Uh sadly one of the biggest uh proponents of the rejection of Barter uh David Greyber passed away like 5 years ago. Uh so he is not going to be able to defend his position um further. But I I think that in the paper I make it pretty clear that uh the argument that the barter story has been rejected is unsustainable at this point. >> Okay, great. Yeah. So, this is um thank you for the summary and we'll just unpack that as we go through this interview here. Let me just take a few moments because I want to make sure the listener who might not be hip deep in these controversies understands why I think this is so relevant to an Austrian audience. That for one thing uh Carl Manganger's theory of the origin of money is not just a a niche Austrian uh element but he actually like wrote for the encyclopedia of the social sciences I believe is what it was. He you know Carl Manger they assigned him that entry like in terms of like you know what the origin of money um so you know the way he explains that is uh you know one of the the leading examples of that story but it's not just an Austrian >> perspective like it's you see versions of this story in Adam Smith even right so and and again the the for folks at home like so what I think George and I will be referring to as the barter story >> is just the idea that originally you know, people had property and they had what was called direct exchange, which was great. You know, if you had mutually uh advantageous trades, then both parties walk away with higher subjectively valued items. But there's limitations to that. And then, you know, in Manganger's telling, he said, "Oh, if if you have a good that's relatively unmarketable or unsalable and you want to get something >> telescope, >> yes." Then you you know you find somebody else that's got something that's more remarkable even if that's not what you directly want. you might trade away your thing for that because you know I'm gonna much more likely to find somebody who wants you know the these things and then that process just snowballs and so he can kind of explain step by step even though nobody set out to quote invent money it's spontaneously emerges right so it's a very Austrian story and then as George says last thing I'll say here George that there has just been a wave of criticisms of that in recent years and maybe even decades such that like the fans of David Greyber just think that he demolished that theory with anthropological evidence and that oh you economists with your armchair logic you just refuse to look at empirical evidence whereas we've known for a long time now that this barter myth story like that doesn't that doesn't happen and there's a famous quote from Greyber this won't be the exact words but he says something like the standard economist story of uh barter money credit gets things exactly backwards historically we you know we know that it emerged the other way the first was credit and then money and then barter which all right so anyway that's kind of the the context sorry the last thing I'll say is in terms of this isn't just a theoretical curiosity or historical investigation but there are policy implications in the sense that like the MMT people for example it's very important to them to say no the state creates money >> because that just like gives it more power and like oh you know if it weren't for the state we wouldn't even have money so you know imagine that you people and so they want to it's important to them and I'm not just attacking astronomy like they go out of their way to say this repeatedly that it's not true yes that >> they think we're being ideological by saying oh no we you know the private voluntary sector can create money we don't need the state for that and so they think that we're the ideologue so anyway that's why this is such a hotly contested area >> yes and uh the the thing is uh that this is one of the cases where I believe uh that theory informs history >> rather than the vice versa. Especially the fact that MS in his theory of money and credit uh came up with the well by then it was the first misian theorem the regression theorem which is the only existing no other exists explanation of the value of money. uh nobody has offered any other theory of why money has value uh and explained how this value gets formed but the the Ms regression theorem and it has to have whatever happened to become money to be a marketable good in the beginning otherwise we do not we cannot explain money. So until somebody else comes with a different theory uh about the value of money uh this one has to stand. It's like the the Sherlock Holmes thing that uh the regardless of how incredible how impossible if it's the only one standing that's the explanation. Uh so mis the misesian regression theorem and his theory of money and credit actually in my mind proves that historically that there must have been some trading involved uh for for money to emerge. It was not simply these debt relations that Greyber favors or especially the state coming up all of a sudden uh much later because the latest the earliest possible emergence of the state as a player involves writing and money is probably older than writing. >> Mhm. So um um in that respect uh respecting the misian contribution for all it is it's the only standing theory of the value of money. No no no one can do anything about that. Nobody has done anything else. Uh it means that history must have uh evolved somehow so that this theorem holds. Um and the barter story as originally told actually the first person recorded who has told the barter story is Aristotle. He's not the most pro market guy on earth as we know very well, but he told the story very explicitly uh in over two pages in his politics. Um and then later the story was repeated and especially Adam Smith and then Carl Manganger's exposition is actually excellent the long one the encyclopedia entry which is in in the tens of pages long. uh it is really a story of how um an institution a specific setting of social relations emerges uh and if in one thing Carol Pollani may be a little bit correct is that it's as complex a phenomenon as language is it doesn't just come up somebody snaps their fingers and it appears >> um so that's the that's my impetus there and uh the more I looked into the arguments against the barter story, the weaker I found them. And actually this paper is look guys, there is a case um against the barter story. It doesn't hold uh a more a more detailed uh examination. >> Okay. And that's why you were making the the reference to like my for people who didn't understand the the sort of joke you did there. Yes. Folks, let me just explain it. George. So Tom Woods and I, as many of you probably remember, had a podcast called Contra Krugman where we would weekly, you know, take an op-ed or something that Krugman had done, a blog post he had done, and then we'd go through it. And so what became a running joke was a lot of times Krugman would assert something and have a hyperlink, you know, presumably backing up or justifying his claim. And I just got in the habit that I would click the link and many times it would say the exact opposite of what Krugman was claiming. And so that yeah became a running joke like oh yeah I clicked the links Tom and then you know Tom would so that's what George is saying here. Um how how should we proceed? Do do you mind if I just read this Carl Pani quote um and maybe just have you react because this is something that was not >> Yeah. This is one of the juicier stories. Yes. >> Okay. So again and then you know we can take this whatever direction you want but again this is so folks he's got you know this long paper with all sorts of quotes and things. Obviously we're just going to try to give you a sampling of it. So uh Carl Pelani wrote in 1944 uh referring to the 19th century that previously to our time no economy ever existed that even in principle was controlled by markets though the institution of the market was fairly common since the later stone age its role was no more than incidental to economic life. And so I don't know if if if you have much you want to com but can you just explain like is that pervasive in this anti-barter story literature that they're saying to economist. >> Yeah. Go ahead. uh the larger context of anti-barter and go again we're going to get to Mises uh is the the fight against economics >> uh as the most highly developed social science explaining uh social phenomena that are very complex uh and for things like Marxism to be capable of having anything to do with the reality and the truth of human existence economics is in the way. So they have to get rid of it. Uh and that in in his human action business points of such attempts to get rid of economics because it's in the way of other ideologies. Uh and then um Greyber also uh eventually shortly before he died he actually started expressing the exact same sentiments. Economics should be done. Uh it should be buried. Nobody should ever hear about economics. It's a it's an exploitation tool of the ruling class and so on. Uh so economics is in the way of a lot of those leftist collectivist uh against the market sentiments that we know very well about sadly. Um and that's the bigger context and Carl Pollani is one of the big exponents. he was a a Marxist uh big exponents of that type of research agenda in the let's say 1940s and 50s especially uh and that's from his great transformation is the quote which basically said that somewhere in the 19th century all of a sudden some exploiting classes discovered markets as a tool of exploiting the working class and started applying them everywhere. Before that, humankind did not know markets at all. That's basically his uh his uh theory. It doesn't hold water. I mean, I can refer you, it's a different literature, but Dedra Makloski has excellent reputations of all those Polanian uh Polanian expositions. But on some points, for example, the the the the close relation between uh let's say uh the money phenomenon and the language phenomenon, he has some not bad points. Uh he was an extremely well- read and clever person actually as well as his brother, but he's less famous. Um so um that's the start and then the tradition continues with some of the students of Carol Pollani against the market especially uh George Dalton uh and uh later it it somehow turns into oh it's already been proven it somehow is taken for granted by all the anthropologist almost all not all of them there is this uh I think her name is Mary Anderson or something like that who is not really uh in that type of thinking Um many sociologists they think it has been proven that things are this capitalism thing is so very recent people never knew even though of course Carl Pollani cannot deny that people were exchanging things on markets but he's trying to claim it's extremely marginal well if you read Aristotle not true uh actually he's describing precisely market types of exchanges uh by peer years uh based on uh their excess production of different goods. Uh and it is so natural that money may have emerged from such things that Aristot actually describes as from a first person perspective. He actually lived those things. He is a witness um in in in the 4th century BC. Uh that it's it's difficult to imagine that the story has been refuted. So can I um and this is what it was fascinating. So, as you just said there, George, like part of what you do here is you sort of um you go through and and quote and kind of show how all these anthropologists seem to be just like talking in a circle like like all just agreeing with each other and then they had convinced themselves like, "Yeah, everybody knows that the barter story has been definitively rejected and then you just were sort of saying, well, show me like don't don't just say it." And and so one thing in particular that if uh let me just try to summarize and obviously you know tell me if I'm getting it wrong but is that David Greyber for example says the definitive study on you know the the barter origins or what whatnot is from this guy Humphrey and if we go and look at that we see that it's actually there was a there was a previously monetary economy and then these various things happened and they demonetized and and like regressed into a bar well regress is not the right turned into barter. And so that's where Greyber's getting this notion that actually historically it goes, you know, credit money then barter sometimes. But as you point out, like that's that's a weird logical argument to say there was never an original state of barter because this one particular case, >> this one particular tribe, yes, went through this in the 20th century. Actually, it's a lady, Caroline Humphrey, uh I think she was in in Oxford. Um but what uh what Greyber calls the definitive study of the definitive anthropological work uh on on barter uh well it involves one single population of a very smallish human tribe in the Himalayans somewhere in where today's Nepal uh which because the border between China and India became very hard during the cold for uh all kinds of traffic stopped going through uh this territory and uh the the whole monetary establishment was dependent on this traffic. And when the traffic stopped, they demonetized and started bartering and she basically says, well, you can have a previously monetized tribe that now has resorted to barter. That's all she says. Actually this is not uh in any shape, way or form a definitive study on the anthropology of barter. It studies only one population and I uh quote some books uh uh published in the late 40s 1940s. One has a second edition in the 1960s where it's in the in the hundreds uh of uh what they call primitive money. that Squigin and uh Einik uh societies with monetary arrangements that have been described. They call them primitive. Probably today this word would not be very well accepted. Um and uh there are hundreds. She has not studied the hundreds. >> She has studied one. So that cannot constitute a definitive work on the anthropology of barter under any uh definition of def definitive work. Uh and then her she herself bases her claim uh because she begins actually it's uh it's her starting uh assumption. It's not her final finding. Mhm. >> It's her starting assumption is if we reject the barter story, can we still find barter? >> Yeah. >> And she says yes, we found it in this one tribe in the Himalayas. Uh but she has not proven that there was no barter. uh and she has only one uh quotation um only one reference and it's to a work by uh Dutch uh sort of monetary but also anthropological author Thomas Krump uh who has a large book uh the phenomenon of money very interesting book uh and there he does not say there was never money there was never barter there was never barter exchange he just says it was not very common and it was not very likely for money to emerge uh from such arrangements uh by humans. Uh but it's not very likely within the the light of his very formal mathematical complex neocclassical type of model. Uh otherwise it's not quite so unlikely in the messy reality that we live in. Uh so actually Thomas Krump would disagree that there was never uh significantly large barter exchange so that it could generate the monetary phenomenon. He just says it's not very likely in history. We don't find many instances. He actually quotes three. In the literature I have found several more. One of them is actually Mesopotamia where we know probably the monetary phenomenon first came to be. Uh so uh when you click the links and you actually read through the reference it does not really say what Greyber implies it says. Mhm. C. Yeah. Can I So going along with that just you you had mentioned just to return to Humphre for a minute is because I I really liked what you you did there or in the paper is you let me just read this and maybe just explain for the listeners too because it again this it gets really subtle and nuanced and some people might think oh come on what's the difference? But it it it's critical like like you say in terms of explaining like wait a minute this this idea that they're all just kind of patting themselves on the back like yeah we reject the bar. So you're saying so folks this is a direct quote from his paper. Going further Humphrey does justify her assumption rather than conclusion that barter did not precede money with the following statement. Quote we know from the accumulated evidence of ethnography that barter was indeed very rare as a symptom dominating uh primitive economies. And then the references to a single source of crump and so on. Um and then and so what's funny though is you go on to say but yet on the first page of her study Humphre had stated no example of a barter economy pure and simple has ever been described. All available ethnography suggests there has never been such a thing. And so, so Georgie in his paper, you know, makes the important point that, well, wait a minute, there she's just flatly saying on page one, no example exists. It's never been described. And then later she actually says it was very rare. >> And so just I don't know if you're going to like this analogy, J, but imagine if you're, you know, talking to researchers about the origin of life and you say in general, if you just had, you know, a a pond out there with lifeless molecules, would you expect a cell to emerge? and they would say, "Oh, no, that would be incredibly unlikely." And so therefore, would you say, "So that proved that, you know, there was six, yeah, biblical Genesis, you know, not getting into a religious argue, but my point is people would say, no, all you would need is it happened once and then that could explain the origin." So likewise here, >> you know, the fact that we don't have a And okay, I have other points, too, but I just Is that a fair way of me assessing what you did there and showing how she went from saying it's rare to it doesn't exist, we have no evidence whatsoever? like that's different from saying it's rare >> and and your reference to the uh beginnings of life would sound familiar to lots of your listeners uh because you've discussed this topic uh at length. Uh yes, the fact that it's sort of very likely does not mean it did not happen exactly that way. So very many unlikely things have happened in the universe history, in the earth history, in human history. That one more would not be a surprise to anybody. Uh unlikely thing to have actually happened. Um so the argument it's unlikely is qualitatively different from the argument it never happened. And that's what Humphrey is doing on on page one. Uh she says never observed. Uh all the evidence pointed against that. And then on on the second page, she says when she actually has to refer to a source, she says rare and unlikely. But these are two extremely different propositions. whether it's uh impossible or possible but uh low probability uh because it it enters the conversation in a different mode. If we say yes it's not very likely but obviously if we have no other explanation other than uh the regression theorem for the value of money um that must be it. Yes, may have been unlikely, but that's we don't have other story. Nobody else has proposed another story. Of course, the MMTers would tell you it was the state, but uh their story would not hold up very and and you've done excellent job on it and and your recent conversations with Jonathan Newman were informative on that that actually even that story does not hold when you check the evidence with Jonathan is doing right now. Uh I'm expecting this to be published soon. uh all the MMTiers and especially historical origin and the state origin of money. It does not hold because it requires um uh writing and also uh and I believe money is older than writing and also it requires silver and somehow uh the the wise government coming up with silver exactly at the same time when everybody else was coming up with silver does not sounds even less likely. Uh so um many other theories of the origins of money do not hold. There is also the temple theory, the palacio theories, the credit theory of of Greyber. He is not such a big fan of government origins. He's a little bit of anarchist, left uh leaning anarchist. uh but his death story. Uh and that's that's my bigger project trying to see how each of those holds up against first the theory and then against the historical evidence. It seems like the barter story uh looks the best so far. >> Great. Um maybe this is the appropriate time too that I again I I think what what's happening is there there's so much don't want it to be the case that they're not honestly saying >> you know suppose the barter story were true what would the historical or anthropological evidence look like because again suppose it were true >> and that it did you know there were these very you know long ago there was primitive societies and they were using barter and then if money emerged in one place it would wrap rapidly spread. >> Yes. >> Throughout. And so it's not necessarily the case that you would find, you know, evidence of 16 separate, you know, independent city states from thousands of years ago that all relied on barter. And I was making the point, you know, to Jonathan and others when we talk about this stuff is that in the Mungarian story especially, you know, because I think that's the the best, you know, theoretical example or exposition of the logic. It's if you started out in a in a state of pure we're saying barter but really be like direct exchange in terms of like a messian you know framework >> that you would it's not like you would expect that to persist for seven generations and then finally you know 300 years down the road somebody might say you know I had this relatively unsailable commodity maybe I should that no it's something that would happen like the next time someone tried to sell something you would expect you know what I mean so >> it's so rational and logical that probably the moment people started actually having surpluses to exchange with each other uh or not so much people but probably larger groups uh tribes and then households within tribes uh they would within one generation come up with the marketable goods flowing around >> right the only yeah the I was thinking like the only reason a priori you would expect that it wouldn't is if you just had like nomadic traders who never thought they were going to see each other again then maybe there would just be spot direct exchanges. But hey, for all I know, I'm never going to see this guy again. So maybe >> there have been these silent uh uh negotiations. There have been examples. Yes, very interesting sort of uh approaches to uh this trade by unknown um tribes. Uh but again uh nobody's saying barter was the only game in town. >> What money origin needs is just to have some barter. You may exchange in other modes. You may actually have debt uh also based exchanges that does not prevent in any way the barter story uh to be true. You just need to have some barter and then the most marketable good the most salailable as uh manure says uh would eventually win over and become uh become the money the single sort of generally accepted uh medium of exchange and which is the Megarian definition of and misian of of money. Um and then obviously the best forms of such generally accepted which turns out to be precious metals uh would eventually emerge in places where the supply and demand of these precious metals is sufficiently convenient. Obviously a lot of circumstances need to fall in place but they obviously did not the first time like you said with life so many things had to fall in place for life to emerge. It did. So let me just because you alluded to it there uh go off on a somewhat of a tangent here because that was the one element of Greyber's analysis the the you know intertemporal you know credit transactions or we would call them that I realized oh yes like when I would teach the origin of money to undergrad classes and I would walk through and just look at how airtight this is that I had completely overlooked the possibility of you know people giving up present goods right now in exchange for Hey, down the road you're going to give me something to reciprocate. And that is, you know, a complication certainly. And you would imagine, especially like in primitive societies where people are all kind of living in a tribe or something that that would clearly come, you know, somebody has a good harvest, they share it with their neighbors knowing that, oh, they're going to return the favor. And you can imagine that not even necessarily being like a market transaction, but sort of custom that is advantageous to the survival of the group. And so that's why Okay. I I'm like you I could do that but like you said the problem with Greyber's story where again he tries to say oh first there was credit then money and then occasionally barter >> is the and Gber admits it to his credit he said yeah like you know if if I help my neighbor by you know him fixing his his house >> and now he owes me that and then down the road you know I yeah I I'm hungry and he has extra pigs and so but but you need to know what's the exchange ratio between fixing a house and getting some pigs. And how would you if you had Yeah. If you had barter then you would know but >> you immedately have the market price. Yes. The exchange ratio is a very important aspect. Everybody seems to forget. Yes. Everybody says double coincidence of once people need to be in the same place to actually trade. It's a spot trade and so on. But actually they have to agree on the price. Everybody seems to be forgetting that if they don't agree on the price, no matter how monetary the economy is, we're not going to get a transaction. Uh and uh how do they agree in a price on a price? Well, it may be a one-time thing which obviously did exist and the gift exchanges of uh older times uh of Marcel Moss and so on obviously they happened probably in history but does that does not prevent the barter place of the origin of money in any way shape or form people were exchanging in all kinds of modes. Uh the partner story does not say they did not exchange using debt relations. They did not exchange using gift exchange. They did not exchange using actually there's very interesting history of blood money and bride money and so on. Uh yes all of them but the only place where you can get a price and somebody something becoming uh the most salailable thing is uh a more regular type of trade a market type of trade uh which is the barter story. >> Yep. Great. So, so again just to emphasize folks that you know the the earlier point is if if anthropologists were went out and they did discover some community that had been in a state of pure barter for you know eight generations as long as anyone could remember that would actually be a problem for the Mgarian story. You would say why did they persist in this state when the whole point of his story is to explain how natural and spontaneous it would be for a medium of exchange to emerge that outstripped all the other you know so ironically like again that's what what I meant when I was saying they're kind of unfairly holding up like say well if your theory were true we would see this and it's like no actually we would see the opposite you know and then um on this point too so I I liked your paper that you were nuanced and your point was not to say that yes there it must have been that in in the past everybody was just doing pure barter or nothing else. That yeah, these other things could have been going on and we certainly should look at the evidence and not just from our armchair >> just try to deduce what history must have been. But like you say, there's logical problems to try to go from just a debt based set of relationships to the emergence of money that how do you know what one thing trades for against another unless people are trading it against it? You know what I mean? That's what we mean by barter. >> Exactly. To be fair to Greyber, he does say that. Yeah, I owe you one but one what? At one point he he does admit that and also he admits that there were obviously barter exchanges. He insists however that for the origin of money something that they call the barter economy is necessary like everything is barter almost nothing gets traded in other ways. Everybody is using barter. Uh no the Barta story does not especially the original Barta story the if you if you try to do a neocclassical general equilibrium story Barta story then probably you would need that but not in the Aristotilian smithian story marian especially you don't need that you just need to some people to have been involved in barter >> yes >> alongside everything else >> right and and then also too the other thing I wanted to just pull out of what you said there is like the the silver shekels and stuff and kind of going with what Jonathan Newman was saying and this is when I first re like reviewed Greyber's book what was it debt the first 5,000 years I think the title of it is I went through it I just focused on you know this issue about him allegedly slam dunk destroying the barter origin of money is that the examples he was giving I don't remember if it was like ancient phoenicia or something to show like oh no it was like a temple tax or blah blah blah and what they were using was the the shekele of silver and that was their monetary. I was like that seems like a big coincidence that you guys are just saying no it was just from the powerful like religious or government officials by edict just declaring this thing is the money and they happen to pick the thing that on a Mungarian framework we can totally explain why that is what they would have chosen you know so anyway it just again like you're saying it >> it it it see the the historical evidence that they were pointing to is entirely consistent with the Mgarian story it's just they're so sure that's wrong that they just they can't see it >> also Another thing about the debt uh story is that requires especially if it's going to become at some point tradable debt. Um so that it may be serve as a beginning of money. Uh Greyber by the way never finishes the story of exactly how money emerged from uh old debt relations. Um uh it has to be recorded somehow. So you need writing >> and I continue saying that uh human exchanges and therefore the inconveniences of barter and therefore coming up with some solutions around barter one of which is indirect exchange serviced by the most salailable thing uh are much older than writing. Um and uh another point of my story is they say oh no archaeological evidence and my question is what do you need to see in archaeological evidence to say aha this was exchanged using barter because what you see in archaeology some bones from here which have been transferred there some obsidian from a farway source going traveling some thousand miles, but you don't know how it was exchanged. >> Mhm. >> Saying I have seen no evidence of barter. Uh puts the question, what evidence do you need to see? Um and uh >> and I cannot imagine what would archae archaeologists see in the record to say aha that was done by barter. You you have the the the the the hair uh bones here and you have the pheasant bones there. >> How do you know how they were exchanged? >> Right. Very good. Yes. That's actually it's funny. That's such a an obvious like that's a good application of the principle I was I've said twice now this episode, but you're right. Just you just saying it like that succinctly is just hit me, you know, like a 2x4 on the head that because you're right. It's it's clearcut once money does emerge and there's records like of financial transactions. It's clear how we can find those and say, "Oh, this merchants's keeping track of, you know, selling all the sheep or whatever." >> So, that makes sense. But you're right, if it were a a situation where there was no common unit of exchange and it was just people trading things, you know, in kind or whatever, >> nobody would hold anything. >> Yeah. What would you even write write down except like just a document that Why would you do that? There would So yeah, very very good that that the evidence they would have seen they might that might not even be perceived as a financial record. It it wouldn't be obvious what they were even saying. So >> so to me the the argument there's no archaeological evidence. There is a a well-known saying uh in in those type of circles that the absence of evidence is not evidence of absence. Mhm. >> So the fact that we do not have evidence of barter does not mean there was no barter because what evidence do you want to see? >> Yes. Um you did so if I could change gears here and you mentioned it a second ago. That's something I did want to ask you to elaborate on. So here's just a a quick quotation from you George. You say in this theoretical aspect the rejection of the barter story is based on a conflation of the original barter story with neocclassical economics. It is true that the barter story is very easy to incorporate in the framework built by neocclassical economics and it may be argued that it has indeed been so incorporated through the decades but that does not mean in any way that the barter story depends on the assumptions of neocclassical economics. So can you just explain their you know what what happened and then why you think >> they're attacking you know a more modern form that's actually weaker. >> Uh actually as a fan of Austrian economics uh I'm not a big fan of new classical economics. uh and uh neocclassical economics when I say use this term is the marriage of the marginal analysis with the higher math uh and especially uh the insistence on equilibria especially the general equilibrium uh and we can see how the BA story by being based on market exchanges uh very conveniently enters uh this type of narrative which is the new classical one uh even though neocclassical economics cannot explain money they have absolutely no story they have to force the money into the models and one of the things I studied in the '9s was exactly that how either you have to put them in the budget constraint like the well-known clower constraint or you have to put them in the utility function which is Miguel Sidroski uh or you have to force somehow money in the model for it to to be present it does not emerge from the new classical models. That's one of the reasons why neocclassicists need to uh to rethink everything they do. If you cannot explain money, your theory is not worth much. Uh and uh money as a as a social phenomena, societal relation, very complex. Um uh so but the barter story does not need general equilibrium does not need higher mile does not need homoeconomicus which graer annihilate graber annihilates and one would agree with graber on that one. >> Mhm. >> Yeah. Homoeconomicus is a is a is a useless uh ideal type or an imaginary construct. it does not help um uh actually may actually be detrimental uh for for our understanding of human societies. Uh so uh uh destroying homoeconomicus is not a bad thing in itself. Uh but the barter story does not require such a a being at all. Actually, Magar really describes living people like any other anthropologist would describe them with all of their problems and imperfections and vices and so on. Uh does not prevent the Va story from being true in any way, shape or form the way it was told by Aristotle, Smith and Mangar. >> Yeah, just a a quick anecdote on that. um when I was in grad school at NYU for the it was called a paper writing seminar we had to do like they it was like the point of the seminar was to teach you how to write a journal article and uh so you had to have a topic and I was searching around for something and it and I I thought oh you know what I'm going to write about the origin of money like you know in a Mgarian sense and model that be because I like you're saying it was it was obvious once you you know start studying those those formal neocclassical models that the money doesn't play. There's no reason to have money in those models that everybody it's just general equilibrium and wall raisian economy and everything and you know you just have your consumption set and whatever you know the price vector >> perfect and everything. >> So there's there's no there's there's no reason to have money but yet if it has to like if it's a model that has a central bank there's got to be money because the central bank has to do something and so yeah they just kind of force people to get utility from it like holding a Picasso. It's like yeah you just like holding money you know because or something. So anyway, I I thought okay surely in this literature nobody has ever gone and read manganger and modeled that and so I built up a like a formal model like whatever and I went through and I presented at this seminar and this oldest boy in Javanovich who is like an eclectic guy that he read other stuff and he went that's Kotoko and writes 91 exactly >> and I went so it was embarrassing that I didn't bother to do a thorough literature search because I just assumed oh yeah these crazy but actually and they actually cited Manger too. Anyway, it was they had you know paid homage to him and then did a formal search theoretical model blah blah blah. So, um that does exist in the literature but yet certainly the standard models that we learn. >> Oh yes, there are circular models of money but they have the problem of explaining the value of money. Uh the only person who has ever escaped the infinite circling loop is MS with the regression theorem. Nobody has done that. >> Yes, I >> nobody else. Yeah. >> Okay. Um, just as we're wrapping up here, is there any major point, you know, I I went through and I was kind of asking you to elaborate on the nuggets that I found particularly interesting. Am I missing anything big from your paper that you feel if we're summarizing it, we got to explain to the folks? Well, probably as a last uh sort of uh short uh anecdote is the thing that I discovered when I actually pulled up Aristotle in Greek and discovered that Caro Pollani was not really correctly uh quoting terms in Latin from Aristotle. And what Aristot was saying was precisely the barter story and he was using the correct word for barter and Pollani was sort of not very correct in his usage of what Aristotle said. Um so uh almost everywhere I clicked I found that the actual evidence supports at least adamantly does not reject the barter story. It is there all the time. It is quite possible, quite realistic and that's probably what happened because again we do not have any other coherent story. All other stories need to rely on some miracle all of a sudden money coming up with its value >> um uh and and started operating. No, the value had to come from somewhere. >> Yeah. Yeah. And just to make sure the folks are getting that and that's why you keep alluding to the regression theorem. So the idea folks is okay suppose there you know some ancient civilization that is they're just using debt relations and things and then some wise ruler perceives the benefits of using a commonly accepted medium of exchange. So, for one thing, as Mega points out, that would be a genius. Like, how would you like money's kind of weird like until you see it and think about it, it's not obvious why that even makes any sense. But, okay. And say they hold up like some shells and say, "This is going to be the money." Now, this is commonly accepted. Any if you want to sell horses, you you want to trade horses for chickens first. Trade your horses for these shells that you don't really want. But the person who is trading chickens will do it too. And then it says, "Okay, well, how much does one horse how many shells a horse trade for?" I don't know. And so that's that's part of the issue like to just denovo create money you you don't know how what it's its purchasing power is whereas you know >> me how did they know how many shekels daily wages to the workers which you find in the tablets all the time but how did they know how many shekels uh so the question of how much uh cannot be answered by anything but the regression theorem. >> Great. One last thing, can you just explain when you were saying Pelli was mistakenly attributing views to Aristotle, was it because the the translation from the Greek to the Latin was incorrect and Palani was just relying on a faulty translation? I think he was just reading a Latin translation and he was wishfully thinking that the word that he was coming up with which is methodosis um was used by Aristotle uh to uh to to name uh barter uh and methodosis really does not mean barter but actually the word that Aristot used for barter he meant something completely was by the word methodosis which is interchanges and that's actually uh the not not the best word but correct translation of the term he used another word four times in the same paragraph uh to designate barter and that was the word alagi and and pollani actually an alagi means exchange um so polani ignored that completely uh so whatever he had to say about Aristotle's story is incorrect, Aristotle told a different story. >> Okay, great. So, is it fair to say in conclusion that when certain critics say that the barter story of the origin of money has been utterly rejected, if you go through and follow the the citations to say, "Okay, show me why >> there's no smoking gun anywhere." And then we have all these other largely theoretical reasons to say >> the barter story seems to be necessary like to explain the value. And so you know all things considered that still contender. >> Yeah. >> No uh smoking gun has killed the bur story. Actually when you click all the links and read through the stuff they make it less likely than we probably thought but still there. And again, no other explanation of the value of money exists but the regression theorem which depends on exchanging exchanges taking place. >> Oh, one last thing that I like to bring up a lot is >> we do have sort of a laboratory experiment to see the barter story. Yeah. Radford's the economics of a P which folks even if you don't care about so much the anthrop I I would encourage you if you're listening to this podcast if you're that kind of person you probably should go read that article it's very accessible it's the again the guy's name is Radford the economics of a P camp yes >> he was a trained economist who I think was in the Royal Air Force and was shot down in >> yes he was a British I'm not sure whether he was in Europe or in in the Pacific in a camp the whole war and he describes the economic life of the camp >> and the emergence of money in the in the form of cigarettes, >> right? And what I love too, just last is he clarified and said now what we meant by that was the tobacco in a fullbodied cigarette because otherwise you people could just tap out some of the tobacco and pass it off as one cigarette. So anyway, it's just great in terms of that was their money, folks. And clearly, you know, it wasn't that someone >> smokers were uh were using it and accepting it and smokers literally burned their money. >> Yep. Okay. Well, folks, my guest has been George Genev with the paper is on. Let me see if I can scroll because I had gone down to the the bottom see your citation. Let me get the exact quote. Has the barter theory of the origins of money been rejected? And we'll put links of course to the the actual publication. So, George, thanks so much for your time. >> Thank you very much, Bob. And I wish you all the best. >> Same to you. And thanks everybody for tuning in. We'll see you next time. Check back next week for a new episode of the human action podcast. In the meantime, you can find more content like this on nieces.org. [Music] [Music] [Applause] [Music] [Applause]