Weekly update - An Inquiry in the Nature of Debt
It has been 3 weeks since I started the work on the subject. Let’s see what I’ve been up to.
- Went through the second chapter of the book.
- Observed my day-to-day interactions with people to understand barter.
This is going to be a post of its own. In very simple terms, to give an overview, the barter system that we (or at least I) have been told is wrong. Double coincidence of wants - nope, not needed to exchange things. Author explains this by giving examples of how economists have been telling imaginary stories about how an economy would be without money.
How does a barter system work ? Suppose you want croissants, eggs and orange juice for breakfast. Instead of going to the grocer’s and buying these things with money, you would have to find someone who has these items and is willing to trade them. You would also have to have something the baker, the orange juice purveyor and the egg vendor want. Having pencils to trade will do you no good if the baker and the orange juice and egg sellers do not want pencils.
Let’s forget the counter argument author gives and take our day-to-day example. I wanted beer. I went to a friend’s place in my apartment and asked “Hey! Do you have some beer lying around?”. Of course, the guy said “Sure! Let’s have together!”. And that’s all. It is now understood that “I owe him one”. When he feels the need (if he may ever) he will come and ask for something. But the beer was considered a “gift” because we know each other and are on friendly terms.
This shows that the barter system is far more intricate than the simple concept of “double coincidence of wants”.
Once upon a time there was barter. It was difficult. So people invented money.
This is not true. History shows that “virtual money” as we call it today, was in use much before coins came in. Barter was a byproduct of circumstances when two parties did not have any way to exchange money.
In small communities, credits and debts were kept in various forms such as accounts on a tablet. It was quite common for workers to show a tablet saying their employer will be paying them some nails (yes, exchanging nails was a thing) later when harvest comes.
Later when temples and palaces dominated the economy, they introduced coins - mainly silver in Sumerian economy. Even during that time, people did not have to pay using silver, they would exchange things worth equal amount of silver. Temples and palaces were always short on silver - so much that it was not even sufficient for the needs of royal households and estates. They had developed a standard form of accountancy to exchange money between departments and to keep track of credit/debts with people.
Most of the silver just sat around in Template and Palace treasuries, guarded in the same place for thousands of years. Standardization never happened even though technology existed because no one saw any particular need to do so.
The history saying we first used virtual money, coins came much later and their use spread unevenly, barter a byproduct of coinage was never written. Some economists such as Mitchell-Innes were just ignored. And we are still being told the reverse of the story anthropologists have found.
I have not been able to work as much as the first week on the subject due to various reasons, but feel free to discuss the matter over usual mediums. A proper post on barter is upcoming - not sure when.
Till then, have fun!