On the History of Money
By Arnold Kling
Anthropology is full of examples of societies without markets or money, but with elaborate systems of penalties for various forms of injuries or slights. And it is when someone has killed your brother, or severed your finger, that one is most likely to stickle, and say, “The law says 27 heifers of the finest quality and if they’re not of the finest quality, this means war!” It’s also the situation where there is most likely to be a need to establish proportional values: if the culprit does not have heifers, but wishes to substitute silver plates, the victim is very likely to insist that the equivalent be exact. (There is a reason the word ‘pay’ comes from a root that means ‘to pacify’.)
In the standard economic view, money emerges as a solution to the problem of “double coincidence of wants.” In my alternative view, money emerges as a way for rulers to obtain services from soldiers. (“Here is some silver. Go fight. When you come back with booty, you can exchange this silver for your share.”)
In Graeber’s view, we are both wrong. Money emerges as a system for compensating people for suffering inflicted by others.
Read the whole post. Pointer from Jim Hamilton.