When the history of money is described, very often the claim is made that people invented money because barter was impractical: a quick Google Search lists many places where this claim is made, e.g. (1), (2), (3), etc.

It sounds plausible, but not everything that sounds plausible is actually true. Is there any credible evidence for this claim?

As an example for an alternative explanation, David Graeber poses that money was invented to keep track of debt.

  • 7
    @matt_black - Depends how you want to define debt, I could very easily sell/trade you three cows in exchange for two horses and until you provide me those two horses you are debt to me. – rjzii Nov 3 '12 at 17:48
  • 2
    Also, the impracticality of barter is only obvious once money is invented. Money makes trade dramatically easier especially for people who are not neighbours. And trade usually makes all parties better off. – matt_black Nov 4 '12 at 1:32
  • 1
    Both "invented" and "deemed" make it sound like there was some central authority that made a decision. Evidence on the ground is that money developed as an organic process later codified by Authority. – dmckee Nov 4 '12 at 14:13
  • 2
    I don't think the two stories are incompatible. No one is arguing that money did not start as promisory notes, ie. formalized dept. The mainstream is that this became a medium of exchange because it was more convenient than barter. This does not contradict Graeber, at least not the parts that wikipedia recounts. Graeber departs from mainstream by arguing that deferred payment, where one sides obligations are met at a later stage, where more common in early economies than barter. – Taemyr Jun 19 '14 at 9:29
  • 2
    Graeber claims that anthropological consensus is against there having ever been a "barter" stage before money existed, which is what would be required for money's raison d'etre to be to avoid barter. I suggest reading the first few chapters of Graeber's book and following up the references from there. I'm very sceptical of the idea that money was invented because barter is impractical and would want to see better evidence anyway. – Francis Davey Sep 15 '14 at 17:10

I think your linked sites, and numerous others, do provide significant evidence that what promissory notes, and then money gave us was a much easier way to carry the equivalent of a couple of cows, some gold and an acre of land.

The Library of Economics and Liberty has this to say on the Origins of Money (ellipses and bold indicating my edits):

I.1.4 Suppose that A and B exchange with each other a number of units of the commodities m and n. A acquires the commodity n because of the use-value that it has for him. He intends to consume it. The same is true of B, who acquires the commodity m for his immediate use. This is a case of direct exchange.

I.1.5 If there are more than two individuals and more than two kinds of commodity in the market, indirect exchange also is possible...

I.1.6 Let us take, for example, the simple case in which the commodity p is desired only by the holders of the commodity q, while the comodity q is not desired by the holders of the commodity p but by those, say, of a third commodity r, which in its turn is desired only by the possessors of p. No direct exchange between these persons can possibly take place. If exchanges occur at all, they must be indirect; as, for instance, if the possessors of the commodity p exchange it for the commodity q and then exchange this for the commodity r which is the one they desire for their own consumption. The case is not essentially different when supply and demand do not coincide quantitatively; for example, when one indivisible good has to be exchanged for various goods in the possession of several persons.

I.1.7 Indirect exchange becomes more necessary as division of labor increases ...

I.1.8 Thus along with the demand in a market for goods for direct consumption there is a demand for goods that the purchaser does not wish to consume but to dispose of by further exchange...

I.1.9 Now all goods are not equally marketable...

I.1.10 It was in this way that those goods that were originally the most marketable became common media of exchange...

I.1.11 Thus the requirements of the market have gradually led to the selection of certain commodities as common media of exchange...

I.1.12 This stage of development in the use of media of exchange...For hundreds, even thousands, of years the choice of mankind has wavered undecided between gold and silver. The chief cause of this remarkable phenomenon is to be found in the natural qualities of the two metals. Being physically and chemically very similar, they are almost equally serviceable for the satisfaction of human wants...

Have a read of the rest of that paper for much more in depth description!

  • The example is actually just bartering, but with gold/silver instead of directly. While coins were made their value was in the metal itself and it wasn't uncommon to break a coin into smaller pieces. – liftarn Jun 12 '14 at 11:20
  • But no reference to any actual historical period in which this is said to happen. I.e. it reads like armchair economics rather than actual history. – Francis Davey Sep 15 '14 at 17:11

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .