Comment by godwinson__4-8
17 days ago
> A currency can arise from any fungible, tradable, generally-durable commodity that the bulk of society decides to accept as being worthwhile. In prisons cigarettes often fill that role; in pre-agrarian hunter gatherer groups it's often little baubles like shells. Government isn't necessary for this, but social contract is. You need to have enough faith that your neighbor will accept the currency to accept it yourself.
Are cigarettes really currency in this case? Aren't they more like one of many possible barter units? Can't you also price things in ramen packs in prison?
Similarly, I thought the sea shells thing had been sort of debunked. In that scale of society you don't need currency, you know the guy. David Graeber summarizes this rather intuitively. Why would you need to give a guy a sea shell in a "hunter gatherer group"? You're gonna see him every day of your life and everyone is gonna know/remember he owes you one. It would be like giving your sibling a sea shell because you did them a little favor or something. It doesn't actually happen that way because it would be a complete waste of time, just actually return the favor next time. I believe the sea shell thing is more like a gift, rather than a currency. Like you might give someone a flower to tell them you think they're swell. Presumably you think that because they helped you at some point. That doesn't make it currency. People just liked giving each other shells.
I think on most modern theories, currency really comes about from conquest. The idea is as you expand these informal IOUs are not enough. You don't want to have to lug around ramen packs or cigarettes. So at the point of a sword or w/e you say hey take this coin and give us food and then you honor the coin enough and people trust it, not because it's "fungible, tradable, generally-durable commodity that the bulk of society decides to accept as being worthwhile" but because if you don't accept it the government will kill you. And if you do accept it then not only will they not kill you but they'll give things back to you later, which you will end up being a positive incentive for everyone. Now instead of a presiding over a killing field you've created a market. But without the threat of the state, it is not coherent. That's what government is.
That's basically what it says on American money. "This note is legal tender for all debts, public and private". So sure a business can refuse you service, that's a separate issue. But if you have a debt in the United States and you try to give them US dollars and they refuse and say, no thanks actually we demand cigarettes - well now they are breaking the law, aka inviting the wrath of the state. So everyone uses dollars because the last thing anyone wants is to be in debt and think a pack of ramen is gonna work and they just get to say no thanks cigarettes for me please.
And of course, you also don't want to get impaled on a spike by a dude who looks suspiciously like that guy on the coin you probably should have taken.
Currency is used for trade between multiple distrusting groups, credit is used for trade within a social group. There was an article recently on HN about the highland tribes of Papua New Guinea [1] and it described how the natives would trade amongst tribes using shells.
You actually see this on a small scale today in the functioning of many small communities, eg. you don't actually exchange currency to pay the host of a party, but you are expected to reciprocate and host sometimes yourself if you want to keep getting invited. There's a surprisingly large amount of these unpaid micro-transactions that happen, eg. my wife has gotten free childcare, free advice, free (used) furniture, free baby clothes, etc, all in the heart of Silicon Valley, because she reciprocates and also gives away her old furniture, baby toys, baby clothes, advice, introductions, childcare, etc. But when we have to pay the contractor for work on our house, we need dollars. When we buy a computer, we need dollars. When we buy all those goods that we give away new, we need dollars. That again reinforces the "credit is for people you know, currency is for people you don't" distinction.
Barter is used when a previous currency system collapses. The currency is no longer guaranteed to be accepted, so people want hard goods that they know they can use. But barter is an unstable equilibrium: as you mentioned, currency is just barter where one particular good becomes so widely accepted that people will take it not because they want it, but because it can be traded for other things that they want. There are reports of the Bosnian War [2] that described how alcohol and ammo quickly became pseudo-currencies because they were universally accepted and could easily be traded for what you actually needed.
Graeber isn't wrong, but as an anthropologist he over-indexes on the within-group interactions. There are lots of documented examples of currency emerging spontaneously from trade between groups where the groups all mutually decided that one type of object had value.
[1] https://www.scribd.com/document/664716931/How-I-survived-a-y...
Hmm... do you not have a credit card? I often reflect on how paying with dollars seems so disadvantaged in today's economy. If you plan to pay back on time, why would you ever use dollars?
I'm not sure your in group/out group thing really holds up. I think of your credit/wife examples as not "credit" but something like basic reciprocity, closer to barter.
I think it's just a bit of blurring of terms. In my mind, bullets and ammo are just not currency in the same way a coin is. You can call it a "pseudo-currency" but the pseudo is kind of cheating.
I'm also not sure "There are lots of documented examples of currency emerging spontaneously from trade between groups where the groups all mutually decided that one type of object had value" disproves the point about violence/government. Can't I do the "pseudo" move back at you? What is the mechanism of the "mutual decision"? Would it be unlike the ones that lead to states? It sounds like everyone agrees something has value so we can have a dispute resolution mechanism. The implication being if you don't agree the other choice is violence? What if I say this "spontaneous collective of groups" is a "pseudo-government"?
Where would that leave us?
I'm talking about "credit" in the David Graeber sense, where people effectively just remember who has done good things for them and reciprocate, not in the modern sense of credit cards and bank accounts. They're connected, but the former is more general.
I do think that the development of currency is intimately connected with the development of government. The core problem government solves is dispute resolution, and I would bet that the majority of disputes come from transaction where one side does not hold up their end of the bargain. In small communities you just have the tribal elders adjudicate, but as you start doing more currency transactions between mutually-distrusting groups that can't agree on their authority figures, you need a system in place for dispute resolution. Cue states.
My point is simply that currency comes first. State formation is a consequence of extended trade networks transacting with currency, currency and trade is not a consequence of state formation. To my knowledge this is historically accurate, and there are a lot of examples of currency spontaneously arising without a state to back it.
Hell, cryptocurrency itself is a good example. We now have a viable transnational, trustless, instantaneous currency. We do not have a viable transnational trustless dispute resolution process. And we very much feel the lack, because crime and fraud is rampant in cryptocurrency transactions. Currency creates the problem that government solves. Creating a government that can go along with cryptocurrency is an unsolved exercise left to the reader.
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We should be careful to distinguish when credit-cards are used for credit purposes versus the common scenario where they're just the default/convenient payment method and a debit-card could substitute just fine.
Kind of like how the local church might traditionally manage birth/death/land records, but that doesn't mean the documents are sacred or a religious observance.
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I've heard many arguments that barter came before currency, if I'm not mistaken that was even one of Adam Smith's tropes in his writings that influenced currencies and economies we have today.
I don't necessarily buy the idea that someone with a chicken and needed bread wandered around looking for a baker in need of chicken, but their argument does fly in the face of the idea that barter follows failed currencies.
If nothing else you have a chicken and egg problem to unwind there, and barter does seem a bit more basic or simple than currency so I'd have guessed it came first.
There's a book Debt: The First 5000 Years (by the David Graeber that parent commenter references several times) that observes that there’s no documented case of a society that ran mainly on barter and then invented money to escape it. The "barter first, then money" story is mostly a thought experiment. I'm not in a position to confirm or refute this based on my own knowledge or to do the research to develop that knowledge, but I'm not aware of anyone seriously challenging Graeber on this point.
IIRC, Graeber suggests that debt comes first. Initially it is tracked by memory, then when that gets too complicated, some kind of item is chosen to represent debt, which then in some cases evolves into currency. I believe this process has been observed.
It's less "I have bread and want a chicken" and more "I'm mostly self-sufficient by necessity, and provide what I need, but I have extra bread this week and Bob over there has a chicken ..."
You can watch both barter and currency develop in groups of children almost spontaneously.
While your assumptions about barter societies are pretty much true, I think you're off on the origins of currency being tied to force. This is overly influenced by modern fiat currencies whose values are derived from government requirements rather than valuable assets. There was a long period of time where precious metals and other valuable items were used as stores of value without a central authority requiring their use. People used official coinage because its weight and purity was standardized and it made things easier, and the value changed alongside debasement, often in spite of official attempts to prevent this. People also used different currencies alongside each other based on their weights and purities. The only times in ancient societies where we have something similar to what you're describing where a specific currency must be used is in taxation, and even then, most taxes were settled in equivalent values of other goods and not specific currencies. The only example I can think of for what you're describing is the Jewish temple offering system in the second temple period, in which certain obligations to the Temple were ruled to have to be paid in Tyrian sheckles specificall
But what do you mean? We have multiple currencies today? Each one is still based on force within its jurisdiction. Yes people try to get around the law. That doesn't change the nature of force. People speed all the time. This is not evidence that the government does not have authority over the interstates, rooted in force.
Sure it's evolved, but I don't see anything in your comment that really disputes the tie to force. Of course, taxation is connected to force. Additionally, as I addressed in another comment, a lack of modern "central authority" does not mean a lack of connection to "force" or violence. People can come up with distributed or atomized versions, which nevertheless arise under a similar tradeoff with respect to the fear of violence.
Sea shells were traded across the North American continent. I don’t know if they were currency, but they were found 1000 miles from the shore.
The point is that they weren’t just used within a single group where everyone had access to more for the cost of only labor.
Does pricing things in euros mean dollars aren't a currency? Are dollars just one of many interchangable barter units?