What is the barter system with example

About the invention of money

In the following I would like to provide some background to the current scientific discussion on the question of money, then explain my own position and finally show what an actual debate should look like.

1. Adam Smith presented in The prosperity of the nations the thesis that after the division of labor appeared in human society, which had some specialized in hunting and others in making arrowheads, people began to trade things with each other (about six arrowheads for a beaver's skin) . This habit, however, had to lead logically to a problem that economists have since called the problem of the “double chance of wishes”: In order for an exchange to be possible, both sides must have something that the other accepts as an exchange good. This, it was believed, would eventually lead to people hoarding things that they believed were likely to be generally desirable, which is precisely why these things were even more desirable and therefore ultimately monetized. The barter has thus created the money and the money ultimately created the credit.

2. Nineteenth-century economists such as Stanley Jevons and Carl Menger kept the basic direction of Smith's thesis but developed hypothetical models of how money could have emerged from this situation. They all assumed that in all communities without money economic life could only take the form of barter. Menger claimed of the members of such communities that they "carried their goods to market", assuming marketplaces where a wide variety of products were available but which were only exchanged directly for anything that people found useful.

3. Anthropologists slowly swarmed around the world and began to observe how economies in which money was not used (or at least not used for everyday transactions) actually worked. First and foremost, what they discovered was a bewildering variety of arrangements, from competitive gift giving to communal storage to places where economic relationships were centered on neighbors cherishing their dreams. What they didn't find was somewhere, somewhere, where the economic relationships between the members of a community took the form that economists had claimed: "I'll give you twenty chickens for this cow." That is why anthropology professor Caroline Humphrey pulls (Cambridge) in their key work on Barter and Economoic Disintegration (1985), concludes: “No example of a simple and simple exchange economy has ever been described, let alone the emergence of money from it; the entire accessible ethnography suggests that nothing like this never happened. "

a. Just to emphasize: So economists had claimed that all (100%) non-monetary societies were barter economies. Empirical research has shown that the actual number of observable cases in thousands of studies is 0%.

b. Similarly, the number of documented marketplaces where people regularly appear to exchange things directly and without any reference to money was also zero. If any sociological claim could ever be empirically refuted, it was this one.

4. Economists have for the most part accepted the anthropological research results when confronted directly with them, but they have not changed any of the assumptions that led them to their wrong theses. Meanwhile, all textbooks continue to repeat the same old sequence: in the beginning there was barter, then money, then credit - only instead of actually saying that tribal societies regularly bartered, they turn it into an imaginative exercise (“Imagine what you if you had no money. ”) or they vaguely suggest that everything actually done in tribal societies must have had something to do with bartering.

What I [in my book Debt. The first 5000 years] said it is anything but controversial. When economists are confronted with why they keep telling the same story over and over again, the answer is usually, “You're not offering a different story!” In a way, they hit the point. Because the problem is, there is no reason to believe that there is a single story for the origin of money. My thesis is the following:

1. If money is simply a mathematical system by which one compares proportional values, say, one of these is worth 17 of those, and that may or may not take the form of a circulating medium, then something in that order must be among a variety of things Circumstances and for various reasons in human history. Probably the money as we know it today was created in a long process in which various developments came together.

2. However, there is every reason to believe that barter and the related problem of the “double chance of desires” was not one of the circumstances in which money first appeared.

a. The major flaw of the economic model is that it assumes prompt business. I have arrowheads, you have beaver pelts, if you don't need the arrowheads right away, no problem. But even if we assume that neighbors in small communities somehow trade items with one another, why in the world should they limit themselves to prompt business? If your neighbor doesn't need the arrowheads right now, he probably will need them at some point in the future, and even if you don't, you are still his neighbor - you will no doubt have something he can use, or you will someday do him some favor can do. Without the assumption of prompt business there is no problem of the “double chance of desires” and therefore no need to invent money.

b. What anthropologists actually observed instead where money was not in circulation was not a system of explicit borrowing and lending, but a broad system of unspecified credit and debts. In most such societies, if a neighbor wants something of your property, it is enough to praise it (“What a great pig!”); the reaction was that it was handed in immediately and at the same time insisted that it was a gift and that the giver would never have wanted anything in return. In fact, the recipient now owed him a favor. Now he could wait for the favor, since it is quite pleasant to know someone has an obligation to you, or he could ask for something explicitly non-material (“You know, my son is in love with your daughter ...”). He could ask for another pig or something he thought was worth about the same. But it is hard to imagine how all of this could lead to a system in which it is possible to weigh proportional values ​​against each other. Even if, as sometimes happens, the party owing the favor is harassing you with an undesirable gift and it is felt to be inappropriate - a couple of chicks, for example - it will be ridiculed as a curmudgeon, but it is unlikely that you will thinks it necessary to come up with a mathematical formula just to measure how stingy he is considered to be. As a result, as Chris Gregory pointed out, there is an extensive ranking of different types of goods in so-called 'gift economies' - canoes are worth about as much as inherited necklaces, both are worth more than pigs and whale teeth, which in turn are worth more than Chickens etc - but what you don't find is a system by which you could measure how many pigs a canoe is worth.

3. None of this means that barter never existed. It is documented at many times and in many places. But it typically shows up between strangers, between people who normally do not have a moral relationship with one another. There is a reason why the words "negotiate" and "barter trade" are originally associated with "cheat, lie, rip off" in almost all European languages. There is still no reason to believe that such a barter would lead to the creation of the money. That's because bartering occurs in three known forms:

a. Barter can take the form of singular interactions between people who are unlikely to ever meet again. The problem of the “double chance of wishes” may arise, but it does not lead to the creation of a monetary system, because rare and occasional events do not lead to the creation of generally applicable systems.

b. If there are permanent trade relationships between strangers in moneyless economies, it is because one side knows that the other has specific products that it wants to acquire - so there is no problem of the "double chance of desires". Instead of getting people to create a circulating medium of exchange (money) to facilitate their transactions, such trading led to the creation of a system of traditional equivalents that were relatively independent of the whims of supply and demand.

c. Sometimes barter becomes a widespread form of interaction, for example when people who are used to using money in everyday transactions suddenly find themselves without money. This happens when, for example, the supply of money decreases (as in Russia in the 1990s) or because people do not have access to it (inmates of prisons or prisoner of war camps). That cannot lead to the invention of money because money has already been invented. [...]

The longevity of the barter myth is strange. It originally goes back to Adam Smith. Other elements of Smith's thesis have long since been rejected by mainstream economists - labor theory is just the most prominent example. In this case, then, why are so many desperate attempts made to figure out times and places where something like this must have happened, despite the overwhelming evidence that it did not?

It seems to me that this goes back to the very concept of rationality to which Adam Smith also adhered: that people are rational, calculating bartenders, always looking for their material advantage; and that it was therefore possible to set up a scientific field that examines such behavior. The problem is, the real world seems to contradict this in every way. In actual villages we find people who, instead of just thinking about the best deal they can get in exchange for another thing with their neighbor, are more interested in who they fall in love with, who they hate, who they help out who they can embarrass and humiliate, etc. - quite apart from guilty of minor warfare.

Even when strangers met and barter broke out, people had a lot more on their minds than getting the greatest number of arrowheads possible for the smallest number of shells. I give a number of examples of this in my book. [...]

Finally, it is easier to understand why economists are so defensive about the challenges of the barter myth and why they keep telling the same old story even though they know it is not true. If what you are describing is not how we "normally" behave, but how we have been taught to behave by the market - who is it nowadays who actually does the teaching? First and foremost, economists. Not only does the question of barter go straight to the core of what economics is - most economists still insist that economics is essentially an enormous barter system with money as a mere tool (a position that seems even stranger than it is today the majority of the world's economic transactions consist of playing around with money in some form) - but it also leads directly to the status of economics itself: Is it a science that describes how people actually behave, or rather one that dictates how should they behave? (Note that science generates hypotheses about the world, the evidence of which is checked, and which can be changed or discarded if what it predicted is not empirically fulfilled.) Or is economics instead a technology within a world that leads to the great Was part created by economists themselves? Or is it, as it seems to many Austrian economists, a kind of belief, a truth embodied in the words of great prophets (such as Ludwig von Mises), who by definition must be right and their theories (up to invented stories in unknown historical epochs) have to be defended, regardless of what empirical realities oppose them?

* The present text is an excerpt from an answer given by the author to a criticism of his book by the economist Robert F. Murphy Debt. The first 5000 years formulated and published on the blog http://www.nakedcapitalism.com. Abridged and translated from English by Jens Kastner.

This text appears in pixels. IG Bildende Kunst magazine (Vienna), Summer 2012, “Talking about money”.