andrewism-barter-myth

Back when I was in school, in my social studies class, I learned that prior to the invention
of money, people had to barter for everything they needed from anyone else.
In a barter system, value is determined by negotiation and mutual agreement, not market
price.
So people negotiate with each other to trade goods and services they can offer with goods
and services they desire.
So for example, let’s say I have baskets pon baskets of mangoes and I’m tryna get
rid of them because I prefer pineapples.
And let’s say one of my neighbours, we’ll call them Patsy, has a goat and my other neighbour,
Boyo, has a field of pineapples.
Boyo doh like mangoes, but he does want a goat for a goat race, and Patsy tired taking
care of this goat, so she ready to give away the goat in exchange for some mangoes.
Easy solution, I give Patsy my mangoes, I get Patsy’s goat, and I give Patsy’s goat
to Boyo in exchange for his pineapples.
That’s the ideal barter system scenario, but it gets messy the moment you introduce
more than one trade scenario into the equation.
What if Boyo didn’t want the goat, what if he wanted a cow?
What if Patsy was allergic to mangoes?
What if none of my neighbours had pineapples and my mangoes just rotted away cuz I couldn’t
trade them for anything I wanted?
That tricky scenario is known as the double coincidence of wants problem, which is when
two parties each have a good or service that the other party wants, but they are unable
to trade because they each desire something different from what the other has to offer.
It arises fairly frequently within barter systems because you can’t always find someone
who’s willing to trade what you have for what you want.
In my social studies textbook, the double coincidence of wants problem was used to explain
why people shifted from the barter system to the monetary system.
Money being the solution as it serves as a standardised medium of exchange.
But what if I told you that isn’t what happened?
Let’s dive right into the debate on the origins of money, the reality of pre-money
exchange, the actual uses of barter through history, and how all of this has affected
our imagination of the present and the future.
[TITLE CARD] In his highly influential 18th-century work
An Inquiry into the Nature and Causes of The Wealth of Nations, Scottish economist Adam
Smith first proposed the idea that as soon as a division of labour appeared in human
society, such as some specialising in hunting while others specialised in crafting, people
would naturally begin to barter with each other, leading to the double coincidence of
wants problem that would give birth to money.
Long prior to Adam Smith, Aristotle had also theorised in his book Politics in the 4th
century BCE that barter preceded the invention of money.
Carl Menger, Stanley Jevons, and other 19th-century economists all kept Smith’s framework of
barter preceding money.
These days, every introduction to economics seems to speculate that barter was the foundation
of “simple, early economies.”
One trending title on the history of money charts its history from barter to banknotes
to bitcoin.
Meanwhile, in the world of science, anthropologists were out in the field directly observing how
economies without money actually worked.
They noted a vast diversity in arrangements, from societies where people competed to give
the best gifts to societies that commonly held stockpiles of goods.
As British anthropologist Caroline Humphrey concluded, “No example of a barter economy,
pure and simple, has ever been described, let alone the emergence from it of money;
all available ethnography suggests that there never has been such a thing.”
Of course, barter has existed historically and contemporarily, but it has never been
the basis of a whole economy and it was not the origin of money.
Barter as a practice arises in three main circumstances: the first is in situations
where people are used to using money but don’t have it anymore, such as in economic crises.
In such cases, barter arises after the invention of money.
The second occurs on rare occasions between strangers who will never see each other again,
hardly the basis of a day-to-day economy.
The third is where there are ongoing trade relations between strangers in moneyless economies,
but no double coincidence of wants problem arises because they already know exactly what
they want to acquire from the other party.
If you’re going to cross a desert, a mountain, and an ocean risking death to trade your goods,
you’re doing so because you know they have what you want and you have what they want.
Even when money and markets did exist, they would still trade based on conventional rates
of exchange, or if money was used, it was used for specific commodities.
Being a merchant in ancient times was not easy, so you make it a bit easier by minimising
uncertainty.
While it’s possible for such a system to generate a means of accounting, there’s
no reason to assume that it would produce a concrete medium of exchange regularly used
in everyday transactions within a society.
Such a system would likely only be used by the tiny proportion of the population engaged
in long-distance trade.
As the late British anthropologist David Graeber argues, among the many flaws of this economic
theory on the origin of money via barter is the assumption of spot transactions as the
basis of early economies: if people don’t make the trade right away, there’s no deal.
But why would we limit ourselves to spot transactions in a day-to-day economy?
If you don’t have what I want right now, I can still give you what you want, and you’ll
eventually return the favour.
We are neighbours, after all.
The vast majority of all economic relations in human history have existed between people
that lived near each other and knew each other personally, not long-distance traders.
An institution as impersonal as money wouldn’t cut it in such contexts.
[Skit: The Myth of the Rational Human] Carlton: Hey Johnny, I’ve been looking all
over for someone to trade my spears with.
I’m really hungry and I need some bread.
Do you want to trade my spears for some bread?
Johnny: Nah bro I only have two apples and I don’t want spears.
Carlton: What about my two-disc Blu-Ray special edition of the Incredibles with commentary
from director Brad Bird?
Maybe then I could trade your apples for some bread.
Johnny: Nah, no thanks, Blu Ray is a social construct, and besides, I didn’t even like
the sequel.
What’s going on, you look really worn out?
Carlton: Man, I’ve been stressed out whole day tryna barter.
First I tried old man Geoffrey, then I tried Shanice the shaman, even hit up Maurice from
across the river.
Just, no one.
Johnny: I see what you mean, you seem down badder than a lone antelope on an empty plain.
This whole system feels rigged frfr.
Carlton: Facts, I wish we didn’t have to do things this way.
Like, we all living together in a community.
Why does everything have to be this rational, calculating exchange to seek material advantage?
Why can’t we just share our stuff?
Johnny: Yeah but this is just the way it is, the way it’s always been.
Not like it’s ever gonna change.
This is the only possible system.
Carlton: I hate being the projection of dead economists used to justify the universal and
masturbatory nature of capitalism Johnny: Same here.
Good luck getting your bread though.
What anthropologists have observed is a system of non-enumerated credits and debts.
That means that people owe and are owed to, but such obligations are not quantified or
measured exactly, and while valuables are given, there is no explicit agreement for
immediate or future returns.
Such gift economies rely on mutual and alternating debts as the foundation upon which social
relationships are maintained.
There is still a sense of some gifts being better than others, of course.
Canoes take a lot of time and effort to make, so you’re gonna get called cheap if the
gift you return is just a chicken, but nobody’s gonna assign a numerical value to exactly
how cheap you are for that social faux pas.
Across the world, we can find many examples of gift economy principles practised in day-to-day
life.
In the Trobriand Islands of Papua New Guinea, the people exchange shell necklaces and armbands
(known as soulava) in a vast and complex network of relationships that spans the islands.
The soulava are considered valuable not for their inherent worth, but for the relationships
they help to create and maintain.
In traditional Chinese society, gift-giving was viewed as a way to build and maintain
guanxi, the social connections and networks that facilitate cooperation and trust among
people.
Among the Indigenous peoples of the Pacific Northwest Coast of North America, the practice
of potlatch served to create and reinforce social relationships through gift-giving at
large ceremonial feasts, to mark important life events such as weddings, funerals, and
the passing of leadership roles, and to demonstrate one's wealth, generosity, and social status.
Non-monetary societies typically separate the things and services they share into various
spheres of exchange.
There might be a sphere of general consumption, a sphere for land, a sphere for marriages,
and a sphere for diplomacy.
For example, some rural Mongolian gold miners wouldn’t use the gold they mined to purchase
cattle or pay dowries, because taking material from one sphere and putting it into another
is considered a pollution.
Consolidating everything into one sphere of exchange through money is not the only way
of organising economic life.
And anyway, there’s no reason why there should be just one story for the origin of
money.
If money is just a mathematical system that allows for the comparison of proportional
values which may or may not take the form of a circulating medium of exchange, then
that could develop independently all over the place.
Current evidence demonstrates that widespread pricing systems emerged in the Fertile Crescent
as a side-effect of non-state bureaucracies.
In ancient Mesopotamia, temple administrations employed thousands of people which all needed
to be fed and provisioned.
This led to a system of fixed equivalences between silver and grain, as silver was already
being used to make images of gods and grain was stockpiled within the temples as well.
A single silver shekel was made equivalent to the rationed number of bushels of barley
that could provide two meals a day for a temple worker over the course of a month.
This fixed equivalence was then extended to compare the values of other everyday items.
Even then, however, this system of pricing only created a means of keeping track of credit-based
transactions, not the actual use of silver currency.
But temple bureaucracies are not that common.
Another origin of money can be found in legal bureaucracies.
People who have been wronged tend to want exact compensation.
An eye for an eye, a tooth for a tooth.
You kill my brother and you have to pay my family x amount of cows or that amount of
cows’ equivalent in silver.
Societies that wanted to prevent minor grievances from turning into major wars would develop
elaborate systems of penalties for various forms of injuries or slights, which required
a means of precise compensation that wouldn’t otherwise be necessary for ordinary informal
credit arrangements or gift economies.
Hence, money.
The myth of the barter economy has had disastrous results on our collective understanding of
economic history.
In societies without money throughout history, gift-giving and credit systems formed the
basis of social ties and economic relations of mutual obligation, not atomised, individualistic,
and self-interested spot transactions between strangers.
In such societies, where exchanges of goods and services occurred, people were far more
interested in who they loved, hated, wanted to embarrass, wanted to bail out of troubles,
and wanted to avoid fueds with than just trying to get the best deal.
The idea embedded within the barter myth is that we can only operate with a sort of quid
pro quo mentality a la Homo Economicus and that money is simply an improved form of our
existing baseline prehistoric relations.
From there, it may be easy to assign value not just to objects, but to people.
The institution of money has enabled institutions like chattel slavery and imperialism, and
led to the development of capitalism, which forces the majority of people to sell their
time and labour for a wage in order to meet their basic subsistence needs.
The barter myth is a projection of a mindset created under specific conditions to all of
human nature, creating a narrow vision of our range of economic and social possibilities.
Our imaginations need not be so limited by these common-sense economic mythologies.
For much of human history, we have shared our time, energy, and resources within our
communities for the benefit of all.
Some societies forged cross-community goodwill through the sharing of gifts.
I’ve already spoken about how we can reinvigorate such relations in modern times through the
development of library economies, but I intend to explore the concept even further in the
future.
For now, all power to all the people.
Peace.