2007 - 2020

The Myth of the Myth of the Myth of Barter and the Return of the Armchair Ethnologists

moneytalk2In a recent exercise in intramural pot stirring in the house of social science George Selgin of the Cato Institute launched yet another doomed advance into the noman’s land of the barter origins of money. Selgin, apparently fishing for a customised refutation from David Graeber (presumably such things are prized status symbols among certain peregrine tribes of the Econ), precedes to nitpick his way to a critique of Graeber’s earlier response to Robert Murphy. Graeber has wisely not responded himself and all the better for the Big Men of those Econ tribes since as any microeconomics textbook will tell you, the marginal utility of a good collapses as the quantity supplied explodes. Thus if his rebukes became abundant they would no doubt lose their sheen and this is of no utility to anyone.

It began with Selgin’s post on “The Myth of the Myth of Barter”.

It starts by accusing Graeber of ignorance” of economic theory (over a matter that’s clearly a difference of interpretation): in other words, he telegraphs from the start that he is not writing a polite disagreement between scholars, but intends to make matters as mean and nasty as he can. After a gripe about the plight of the economist besieged as he is on all sides by the forces of empiricism, Selgin then trots out largely the same old talking points that Murphy used earlier, with a brief comic interlude in which he intimates that there may in fact have been societies that perished because of their failure to invent money. If this indeed is a thing that has happened then we must immediately dispatch archaeologists to find the remains of a people with, for instance, an abundance of food and water but appear to have succumbed alternately to starvation and dehydration apparently due to their inability to negotiate a market equilibrium. It truly would have been a Sophoclean tragedy that befell such a society that their quixotic devotion to property rights and utility optimisation led them to choose eradication over Pareto inefficiency.

When Graeber refused to be baited, and instead linked to a response he gave to Robert Murphy’s article on the Von Mises Institute website several years earlier, Selgin decided to double down by posting to the Cato Institute website a piece entitled “Graeber, Once More”. Following a preamble grumbling about how the nasty anthropologist man had been mean to him on Twitter we are invited to consider two points which he claims were unanswered in Graeber’s previous article. The first is the bizarre claim that Graeber thought that Smith and Menger hadn’t heard of gift giving.

“Graeber had wrongly accused Smith and Menger of supposing that there was no alternative to either barter or monetary exchange — that is, of supposing that there were no such things as gift giving and other sorts of nonquidproquo goods transfers, or societies that relied upon such…”

This is an odd claim, considering, in fact, Graeber mentions Menger precisely once in his entire book and then only in passing. His real target is Smith, who he quotes extensively. But even so: this is simple hair splitting. Selgin goes on to quote passages of both where both Smith and Menger imagine that early societies gave gifts but that this process must inexorably have led them to quid pro quo exchange and then to money. This does nothing to advance his cause as it remains the case that Smith and Menger assumed that barter exchange and property rights once established would be so compelling as to replace the gift economy. The assumption here is still that people everywhere were bedevilled by the problem of the double coincidence of wants and that if only some infinitely saleable commodity could be discovered their economic woes would be resolved.

This is simply not the case. Beyond the institution of the gift which Graeber and many others have elaborated at length since Malin owski’s celebrated description of Kula exchange in the Trobriand Islands during WW1, anthropologists have discovered the general solution to this “problem”. Societies the world over have been observed to deal with this by embracing the fact that they deal with different types of “goods” that can’t be easily exchanged. They generally separate these different items into different spheres of exchange and in fact use such separation of spheres to structure their societies. For example some rural Mongolian gold miners will not use the money they earn from mining in the purchase of cattle or as dowries, these being seen as different types of materials and taking material from one sphere and putting it into another is thought to be a pollution of one sphere by another. A similar pattern was found with Polish peasant farmers when money was being introduced and land started to be exchanged for money. Such was the importance of land to the farmers that the money generated from such a sale was seen as only exchangeable for other land and must strictly be separated from the sphere of general consumption. The point here is that the problem that money is thought to solve is generally solved in a staggering variety of ways and that the nonsaleability of certain goods is
more often used as a feature not a bug.

The second accusation is even more farcical in its Mean Girlsesque insinuation: “Graeber lacked a proper grasp of some of the most elementary principles of economics, and of the modern theory of value in particular”.

Selgin accuses Graeber of not comprehending the majesty of the supply = demand equilibrium with the implication that he has yet to surrender himself to the righteousness of the holy cross of intersecting supply and demand curves in his earlier post. In that post Selgin pontificates: “I explained Martin’s mistake by observing that when a diner sells me bacon and eggs for $4.99, ‘that doesn’t mean that bacon and eggs are worth $4.99, “universally” or otherwise. It means that to the diner they are worth less, and to me more.’

Grasp this little strand of truth. Pull on it. Keep pulling. And watch Martin’s critique unravel. Graeber’s critique, with its fatuous dichotomy of generous credit transactions on one hand and antagonistic monetary transactions on the other, rests on the same fallacy, and is no less gimcrack.”

This egregiously overstates the intellectual heft of this rather trivial notion and underscores precisely what it is Selgin doesn’t get about nonindustrial societies. Selgin, Smith and Menger make the classic mistake of anyone trying to trace the origins of a particular social structure or institution that is they presuppose the existence of that institution in the explanation of the origins of the institution. Why are people individualistic utility optimisers? Why, because of property rights and money of course! Why do people have property rights and money? Simple, because they are individualistic utility optimisers! One suspects that such economists attribute the existence of other social sciences to an ignorance of economic scripture.

The main anthropological objection here is that the society they are postulating is a nonstate society without a central government or institutional enforcement of the rule of law. Yet the people this society is thought to contain seemingly have the same attitudes to property and profit as Western economists since the Enlightenment. As Graeber points out:

“for there even to be a discipline called ‘economics,’ a discipline that concerns itself first and foremost with how individuals seek the most advantageous arrangement for the exchange of shoes for potatoes or cloth for spears, it must assume that the exchange of such goods need have nothing to do with war, passion, adventure, mystery, sex, or death. Economics assumes a division between different spheres of human behaviour tat… simply does not exist”

“for there even to be a discipline called ‘economics,’ a discipline that concerns itself first and foremost with how individuals seek the most advantageous arrangement for the exchange of shoes for potatoes or cloth for spears, it must assume that the exchange of such goods need have nothing to do with war, passion, adventure, mystery, sex, or death. Economics assumes a division between different spheres of human behaviour tat… simply does not exist”

Smith and Menger couldn’t imagine a gift economy persisting more successfully than a barter economy because they had no point of reference from which to imagine the longevity of such a society. They had no knowledge of Chinese Guanxi or the Kula Ring of the Trobriands. Just as economists like to point to World War II POWs using cigarettes as a store of value, Smith and Menger are really sending a group of people from their own society to some notional past and imagining what they would do.

This was not entirely unreasonable in the eighteenth and nineteenth centuries, when anthropologists had not yet scoured the world observing what actually happens in societies without money.

But modern day economists like Selgin have no such excuse.

One might even say that this is the point where economists have to make up their mind whether they are actually scientists, as they like to claim, or theologians. Scientists make hypotheses based on reasoned speculation, and then, as Popper famously observed, attempt to falsify them. If they fail to falsify a theory, that theory stands. If they succeed, they have to reformulate, to discover the flaw in their original hypothesis. Theologians in contrast start from some revealed Truth, as given by an established authority (God, Aristotle, Menger, Marx…), which therefore must be true, and then try to figure out how real world observations can be made consistent with it. It is Graeber, in this case, who is proceeding like a scientist. Having observed that the original prediction, that 100% of all moneyless economies would be based on spot trade swaps between neighbours, has been proven spectacularly false (in fact, 0% of such economies are), he reformulates, logically, to see why this should be, and how to thus produce a theory of the origins of money consistent with the empirical evidence (that in the overwhelming majority of cases, money emerges first from legal affairs and not from commercial transactions.) He concludes that legal crises would, indeed, create problems in the precise commutability of goods that ordinary informal credit arrangements or gift economies would not. Selgin, in contrast, takes the theological course, setting out to prove that Smith and Menger must, ultimately, still be right about the origins of money whatever the empirical evidence.

But by doing so Selgin only digs deeper into the hole of misunderstanding in which he has already secreted himself. He goes on to state that the barter origins of money are to be found in exchange among strangers. Graeber makes a point of saying that strangers barter but that it also seems very unlikely that a money regularly used among people in a community would emerge from strangers bartering. Again, Selgin’s solecism is to forget that the nature of social relations in modern industrial society is not representative of the nature of social relations around the world and across time. A world where people can travel frequently and constantly have to deal with strangers is historically highly idiosyncratic. People moved very little historically and the vast majority of all economic relations in human history have existed between people that lived near each other and knew each other personally. As such, economic transactions for most of human history also encoded other features of human life such as status, allegiance, amity, shame, prestige, or, for that matter, a sense of fun or personal spite. An impersonal utility accounting form of money is not of use in such contexts.

When long distance trade did take place, Graeber notes in his reply to Murphy, it tended to occur under conditions that made a double coincidence of wants problem extremely unlikely (basically, one doesn’t cross deserts and mountains “risking death in a thousand different ways” because one thinks someone in a faraway land might have something you want, and be interested in your products; you do so because you are relatively sure of it. For the same reason, ancient traders tended to rely on fixed rates of exchange rather than fluctuating, negotiated prices because the whole point was to minimize uncertainty). In Debt, Graeber notes that there are probably a few unusual cases where a trade currency might have emerged from such arrangements, but unless one is a theologian a few isolated cases are of no particular significance. After all, there are a few cases where forms of money emerged from gaming tokens, too, this hardly means we can then declare there is proof for some “gambling theory of the origins of money.”

This whole kerfuffle is all really about such economists trying to resurrect a battle that was lost a century ago, namely whether or not you can understand human thought and action without actually having to leave your armchair. Ever since Bronislaw Malinowski replaced James Frazer as the paradigmatic anthropologist, the emphasis of the discipline has been on the gathering of empirical data through participant observation. This is the heart of the discipline and anthropological theory is subservient to ethnographic evidence. Economics as it is practiced in the main is based on the idea that it knows what the underlying axioms of human nature are. If these are wrong, and anthropologists generally observe them to be wrong, then the implications which flow from these ideas are reduced to mere curiosities in the history of economic thought. This is a contest of the Platonist against the Empiricist and in the arena of real world evidence there can be only one victor. If Selgin wishes to lead the resurgence of armchair ethnology he is more than welcome, the anthropologists will however be out observing what real human beings actually do.

 

*** GO HERE TO DONATE TO OUR CROWD FUNDER APPEAL AND SUPPORT US ***

Comments (7)

Join the Discussion

Your email address will not be published. Required fields are marked *

  1. Alan says:

    As someone trained in social anthropology who has since read The Wealth of Nations as well as a good amount of the respectable secondary literature on Smith, I would have to say that much of what anthropologists have had to say about Smith, which is mostly not very much, is nonsense. Mostly I suspect this is because they don’t read Smith and take what economists write about Smith at face value. More fool them. The dirty little secret is that very few economists read Smith either but have been mass purveyors of horseshit about Smith for many decades now.

    I am somewhat skeptical of what I have seen of Graeber’s use of Smith. I suspect Graeber and others make much more out of Smith’s speculations about the origins of truck, barter, and exchange than is warranted and probably give meaning to Smith’s words that didn’t exist in the original context. As Smith writes in Wealth: “Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire.” That is to say, my speculations on the matter really aren’t all that important to the argument being made here.

    For an essay by an anthropologist who uses Smith as something other than a straw man, at least in his more recent writings, see Gregory’s On Money Debt and Morality.

    Smith is celebrated as the father of modern economics, but only a cursory familiarity with his work is needed to reveal the real kinship relation. For a start, the theory of economic value developed in his An Inquiry into the nature and causes of the wealth of nations (Smith 1776) is a labour theory of value not a marginal utility theory of the kind that was later developed by Bentham, Jevons and others. On this account, Smith is the father of Ricardian economics and the grandfather of Marxian economics. Secondly, the theory of moral value he developed in his other great work, The theory of moral sentiments (Smith 1759), is a theory of affective individualism, not the rational individualism of 20th-century homo economicus kind. As the title of his book suggests, he was concerned with moral sentiment rather than moral reason. He was one of the last great sentimental moral philosophers. There is a sense, too, in which economic anthropology is the bastard offspring of this unacknowledged father….Anthropologists have been very selective in their reading of Smith. Few get beyond the oft-quoted paragraph in WoN about the natural propensity of homo sapiens to truck, barter and exchange. However, the ToMS has many surprises in store for the economic anthropologist, for there we find that the morality of the affective individual varies with kinship distance and along with it the interest rate that should be charged on a money debt economy.

    That is to say Smith prefigures Malinowski, Mauss, Sahlins et al.

    Anthropologists mostly throw bricks at neoclassical economics. Aside from this essay, for more fun see for example Gregory and Sahlins. (Sahlins is particularly entertaining about the zombie discipline that won’t die.) However, there is no true engagement or debate. They are parallel universes. Aside from a few skirmishes, economists mostly ignore the writings of anthropologists. When you have well-compensated revolving door positions in academia, think tanks, government, and financial institutions legitimating the status quo with a veneer of dubious ‘science’ you can afford to thumb your nose at the weirdos across campus, at least while the gravy train stays on the tracks.

  2. David Graeber says:

    That doesn’t make any sense. The legacy of Smith’s arguments in this regard have been overwhelming, and that’s what I’m addressing. Why does the fact that Smith says he doesn’t consider the basis of his ideas in some area particularly important change anything? The point isn’t to understand the relation of any particular one of Smith’s ideas to the overall context of the totality of his thought, but to understand the origin of ideas that have become common sense to everyone in our society, to understand why they have become common sense to everyone in our society, to understand the implications of the fact that they have done so, and, insofar as these ideas are wrong and their effects have been pernicious, to see what can be done to address this problem.

    1. Alan says:

      I just revisited this thread and noticed your reply.

      You are just asserting that the evidence is overwhelming. Where’s the evidence? Many historians and others who read Smith carefully would disagree with you. He’s quite clear he’s being speculative. The main point of that section of Wealth is the importance of specialisation and the division of labour. The correctness or otherwise of his speculations on the origins is irrelevant to his main argument.

      It takes my breath away that an anthropologist can write a line like: “The point isn’t to understand the relation of any particular one of Smith’s ideas to the overall context of the totality of his thought, but to understand the origin of ideas that have become common sense to everyone in our society, to understand why they have become common sense to everyone in our society”. Of course the context matters if you want to understand the origin of today’s “common sense”. What has become “common sense” among neoclassical economists and neoliberals, and, as a result, part of the broader common understanding, is based on ripping bits and pieces of Smith out of context and making them, in many cases, mean the complete opposite. Their Smith is an origin myth, as Gregory points out, that is now used to legitimate many of the very practices Smith was explicitly attacking in Wealth. That matters.

  3. Paul Krugman is a Cockroach in Human Skin says:

    “Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire.” That is to say, my speculations on the matter really aren’t all that important to the argument being made here.

    You obviously don’t know how to read Alan if you think that’s what it means. If Smith says he doesn’t know what part of the human animals constitution serves as the explanatory principle for the propensity(to truck barter etc) that doesn’t mean he doesn’t still assert the propensity exists.

    The question of what it is about humans we can pin this behaviour on is not the same question as do human societies engage in barter, so when he dismisses the former as irrelevant he doesn’t dismiss the latter. This is like the school yard gotcha ‘does your mother know you’re gay?’

    Anyway, those who follow Smith assert that barter societies have existed and through some common sense mechanism yielded currency – which is the principle in question being looked at and contended. The importance of the barter myth is the difference between CMC and MCM’, one model of the economy that does not politicise money and one that does. Further it actually matters whether barter is considered legitimate because the myth influences peoples beliefs and common sense about how we should treat money – what sort of monetary and fiscal policy we have. The fact that governments can get away with the idea that austerity is prudence is because the relationship between money and production has been mystified.

    This misreading is interesting to me because the general attitude of inquiry that would accept that effects could precede causes is the problem with the whole barter myth. It’s the sort of philistine attitude that believes an institution comes to be due to the functions it serves in contemporary society or even worse why we appreciate them. Not to be blamed though, it’s very difficult to overcome this sort of thinking. You might benefit from meditating on some Nietzsche:

    “Rationality ex post facto. – Whatever lives long is gradually so saturated with reason that its irrational origins become improbable. Does not almost every accurate history of the origin of something sound paradoxical and sacrilegious to our feelings? Doesn’t the good historian constantly contradict?”

    Also David, I recently watched your haircut video… when are you going to come out as a Nietzschean?

  4. barakabe says:

    The origins of money is indeed an interesting subject, but understanding somethings origins, and separating it from its contemporary function, may only be a fruitless intellectual indulgence: even if the origins of money were truly Satanic what difference would that make to its use as a virtual concept in a globalized market of digitalized currency exchange? Even if we could prove empirical certainty that money causes all the dysfunctionality in the world nothing would change- capital as a concept of dominance is so bound up within structures of power that any resistance to eliminate it from human society would be opposed with absolute ferocity from those who benefit most from its existence. And this is the crux of the problem.
    Humans have a propensity to abstract. They probably did this for hunting purposes- with that sacrifice of unity with nature we cursed ourselves with a ‘alienation’ effect- that objectified nature & animals in order to evoke an efficient mode of exploitation; humans then extended this objectification from hunting animals to hunting other humans in war. This alienated mode of exploitation produces such significant short-term advantages that we can see nothing outside the value of this utilitarian exploitation that efficiently maximizes advantage- indeed in terms of the modern perspective: the narrow definition of use is whatever maximizes or generates monetary gain & there is nothing worse than being useless.

    It seems to me that our hyper-rational culture’s ideological fixation of utilitarian standardization is constantly being projected onto other cultures & societies- those that do not adopt our universal standards are ‘primitive’ or ‘irrational’. In a word it is ‘Imperialist’ thinking. The subsumption of all subjects & objects into a material system of capital commodification, including nature, animals & life itself, has robbed us of human dignity & moral freedom. Morality has nothing to do with property rights, law or money, unless you believe the origins of morality are rooted in some socially imposed form of equivalence, ie ‘a tooth for a tooth. Yet our efficiency drive as a mode of being pollutes all our experience with the same poisonous yet profitable panacea. Such are the myths we have founded our civilization upon. We are unquestionably caught inside a utilitarian prison of optimal efficiency that I don’t believe we can escape- nature in all probability will have to explode us out of this self-alienating prison of utilitarian efficiency where everything is reduced to objectified units of profit.

  5. Paul Krugman is a Cockroach in Human Skin says:

    “The origins of money is indeed an interesting subject, but understanding somethings origins, and separating it from its contemporary function, may only be a fruitless intellectual indulgence”
    This is correct, Graeber isn’t doing this, in fact he’s revealing the errors in those that do. This is the content of his attack on the barter myth, that is the idea that you can separate somethings origins from its contemporary function.

    “even if the origins of money were truly Satanic what difference would that make to its use as a virtual concept in a globalized market of digitalized currency exchange?”
    So we should then separate the origins of an institution from the contemporary situation even though that institution persists? Didn’t you just say this was a fruitless intellectual indulgence? Or do you think the fact that money is primarily credit in the form of a digital account means that it is any less political? A thoroughly confused position.

    “Even if we could prove empirical certainty that money causes all the dysfunctionality in the world nothing would change- capital as a concept of dominance is so bound up within structures of power that any resistance to eliminate it from human society would be opposed with absolute ferocity from those who benefit most from its existence.”
    So here you admit that you /do/ think money is political, going further all forms of capital are, good to know your position isn’t even coherent.
    “And this is the crux of the problem.”
    If this is actually a problem to you then you should look for solutions instead of twaddling cynicism at perfectly reasonable attempts to address it. For instance, you assume that the populace is so stupid that educating them on the political nature of money and economic theory wouldn’t help because for some reason the ferocity of the powers at be can’t be reckoned with. Later you lament the prevailing ideology without realising a project like Graeber’s is the attack on prevailing ideology. If you rather think that we ought to have violent structural change, do you seriously think it’s a good idea to keep people in the dark about the reality of the world to help them come to that position? You realise ideology isn’t just a buzzword right, what we believe about our oppression affects whether we recreate the very structures that dominate us, obviously why Marx spent the end of his life developing an understanding of capitalism a theoretical framework you obviously have no qualms about butchering instead of shying away from historical and institutional analysis. “Why does it even matter how the masses were proletarianized man, we just gotta like you know blame our oppressors. Theorising capitalism? What’s the fun in that!” What do you even want other than to be able to soapbox?

    “Morality has nothing to do with property rights.”
    I don’t want to address this but ideas of ruling class ruling ideas etc. >inb4 non-historicist “morality is just like what i feel man”

  6. barakabe says:

    I just give up. I thought it was fairly obvious I was in agreement with Graeber. Firstly you need help with the hostility. Its embarrassing, even if it is mildly amusing in its transparency. You cherry pick all the bits of my comments & then proceed to take them out of context, misinterpret them AND project a whole chain of subjective associations onto them that tells me more about you than about anything else. How is it possible for someone to lack so much self-awareness? I was actually hoping someone might enter some sort of theoretical (ala Marx, Engels, Benjamin, Adorno, Gramsci all practiced) speculation on the subject just for its own purpose. Of course Marx, Benjamin etc all theorized within a materialist historical context yet leaps of imagination in the service of speculation is sometimes an interesting intellectual exercise in itself. I know you will probably respond by saying something like: “yes you have abandoned intellectual debate and have now reduced dialogue to personal attack”- even though your response is nothing more than the toxic reflex of derogatory vomit. Of course you wont see that. I would fashion a retort but really what is the point?- its futile to enter discourse with someone in your state of mind.

Help keep our journalism independent

We don’t take any advertising, we don’t hide behind a pay wall and we don’t keep harassing you for crowd-funding. We’re entirely dependent on our readers to support us.

Subscribe to regular bella in your inbox

Don’t miss a single article. Enter your email address on our subscribe page by clicking the button below. It is completely free and you can easily unsubscribe at any time.