Empiricism Shatters the Barter Theory of Money

I came across an interesting writeup in The Atlantic: The Myth of the Barter Economy.

It lays out how historical and anthropological evidence contradicts the orthodox barter theory of money, the notion that money emerged in a competitive market process out of a barter economy. Research suggests that rather money has historically emerged out of debts and government imposed taxation:

But various anthropologists have pointed out that this barter economy has never been witnessed as researchers have traveled to undeveloped parts of the globe. “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money,” wrote the Cambridge anthropology professor Caroline Humphrey in a 1985 paper. “All available ethnography suggests that there never has been such a thing.”

When barter has appeared, it wasn’t as part of a purely barter economy, and money didn’t emerge from it—rather, it emerged from money. After Rome fell, for instance, Europeans used barter as a substitute for the Roman currency people had gotten used to. “In most of the cases we know about, [barter] takes place between people who are familiar with the use of money, but for one reason or another, don’t have a lot of it around,” explains David Graeber, an anthropology professor at the London School of Economics.

No academics I talked to were aware of any evidence that barter was actually the precursor to money, despite the story’s prevalence in economics textbooks and the public’s consciousness. Some argue that no one ever believed barter was real to begin with—the idea was a crude model used to simplify the context of modern economic systems, not a real theory about past ones.

“I don’t think anybody believes that was ever a historical situation, even the economists writing the textbook,” Michael Beggs, a lecturer in political economy at the University of Sydney, told me. “It’s more of a thought experiment.”

The complete article is well worth a read.


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