Friday, August 19, 2016

Re: Graeber: "What Is Money?" by Alfred Mitchell Innes

It's actually surprising how much of the first few chapters of Graeber's Debt is actually just a quotation of this article by Alfred Mitchell Innes from 100 years ago:

Alfred Mitchell Innes - what is money? Copyright must have run out by now, so here's a lot of quotation after a breakline:

The fundamental theories on which the modern science of political economy is based are these:

That under primitive conditions men lived and live by barter;

That as life becomes more complex barter no longer suffices as a method of exchanging commodities, and by common consent one particular commodity is fixed on which is generally acceptable and which therefore, everyone will take in exchange for the things he produces or the services he renders and which each in turn can equally pass on to others in exchange for whatever he may want; That this commodity thus becomes a "medium of exchange and measure of value."

That a sale is the exchange of a commodity for this intermediate commodity which is called "money;"

That many different commodities have at various times and places served as this medium of exchange—cattle, iron, salt, shells, dried cod, tobacco, sugar, nails, etc.;

That gradually the metals, gold, silver, copper, and more especially the first two, came to be regarded as being by their inherent qualities more suitable for this purpose than any other commodities and these metals early became by common consent the only medium of exchange;

That a certain fixed weight of one of these metals of a known fineness became a standard of value, and to guarantee this weight and quality it became incumbent on governments to issue pieces of metal stamped with their peculiar sign, the forging of which was punishable with severe penalties;

That Emperors, Kings, Princes and their advisers vied with each other in the middle ages in swindling the people by debasing their coins, so that those who thought that they were obtaining a certain weight of gold or silver for their produce were, in reality, getting less, and that this situation produced serious evils among which were a depreciation of the value of money and a consequent rise of prices in proportion as the coinage became more and more debased in quality or light in weight; That to economize the use of the metals and to prevent their constant transport a machinery called "credit" has grown up in modern days, by means of which, instead of handing over a certain weight of metal at each transaction, a promise to do so is given, which under favorable circumstances has the same value as the metal itself. Credit is called a substitute for gold.

So universal is the belief in these theories among economists that they have grown to be considered almost as axioms which hardly require proof, and nothing is more noticeable in economic works than the scant historical evidence on which they rest, and the absence of critical examination of their worth. Broadly speaking these doctrines may be said to rest on the word of Adam Smith, backed up by a few passages from Homer and Aristotle and the writings of travelers in primitive lands. But modern research in the domain of commercial history and numismatics, and especially recent discoveries in Babylonia, have brought to light a mass of evidence which was not available to the earlier economists, and in the light of which it may be positively stated that none of these theories rest on a solid basis of historical proof—that in fact they are false.

As Innes notes, there was no such thing as a coin made out of a fixed amount of a commodity until about the 19th century: there was never even a standard size of a particular coin. So the first bolded passage, above, is utterly false.

It's also false because at no time in history was a person able to exchange goods directly for the commodity represented by the coin. In fact, most coins had an inherent value that wasn't even remotely similar to their "inherent" value.

Later, Mitchell Innes addresses the second bolded passage. There was never any such thing as cod or tobacco being used as exchange: they were rather traded in lieu of the currency, which was still used as the unit of exchange.

The third bolded passage, as already noted above, is utterly false throughout history until about the 19th century. "Certain fixed weight" and "known fineness" are utter falsehoods that can easily be tested (and have been tested) by looking at actual samples of coins from history.

It's left up to Graeber, an anthropologist, to disprove the fourth bolded passage (which is Mitchell Innes'); in chapter 2, Graeber notes that in actuality there has not been one "traveler in primitive lands" who has ever found anything like a barter society.

This article by Mitchell-Innes is a very good read, and definitely a piece of scholarly work - by that I mean, if you want to take issue with any of his assertions, all you have to do is go out and do the empirical work yourself.

I just find it interesting that this article is so good a summary of ch. 2 of Debt.

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