A Reader Posts on Dr David Graeber's book on Debt: the first 5,000 Years
I wrote a number of critical posts of David Graeber’s Book last year on Lost Legacy (December 5, 6, 9, 9, 11,14, 16, 22, 2011 and February 22, 2012). These attracted some correspondence both on Lost Legacy and by private mail (including one from David Graeber on another website).
However, one such post was from “sm”, which focused on the issues arrived last week, and was posted in the December series, followed by another one, which I somehow “lost”. [Partly, this problem arises when posting on Lost Legacy in posts of a few months back, or even years back, as I have difficulty tracking the post once I mark “publish”.]
I suggested to “sm” that I would be willing to publish a post on the current Lost Legacy, as usual uncensored or edited, and what follows arrived yesterday. Here it is:
A Discussion on David Graeber’s, “Debt: the First 5000 Years”
Instead of elaborating Menger’s theory of money, I feel it’s always best to go to the original source to avoid error. Due to limited space/time see Principles of Economics by Carl Menger (p.257-285 and Appendix 3 p.315-320). It can be downloaded as a free pdf at http://library.mises.org/books/Carl%20Menger/Principles%20of%20Economics.pdf. Note: keep in mind the evolutionary aspects of a transition between a small and large society and the division of labor within society. Also, I believe Menger is in line with Smith when discussing the inconvenience of barter and the need for money.
In Part 3 of your review you state “looking for signs of general bartering in surviving examples of small village life or among hunter-gathers may be the wrong focus.” In reality it isn’t, just look at Graeber’s argument on page 29 as he discusses barter. He states that barter didn’t exist “between fellow villagers,” but “ordinarily takes place between strangers, even enemies (then continues with an example). He (anthropologists) separates the former as being part of society, while the latter is excluded (trade w/strangers). In reality both exchange w/villagers and strangers need to be included as being a part of society. It appears they have overlooked a key part of the evidence for barter in early societies as exchange between different groups. (Note that we actually have examples of barter coinciding with reciprocity exchanges.) Now look at the beginning argument in chapter 4 when Graeber states “Clearly, money was not invented to overcome the inconveniences of barter between neighbors since neighbors would have no reason to engage in barter in the first place. Still, a system of pure credit money would have serious inconveniences as well. Credit money is based on trust… trust itself becomes a scarce commodity. This is particularly true of dealings between strangers” (p.73). Now consider Menger’s origins of money in an evolving society from small to large, i.e. the introduction of strangers within society, something Graeber doesn’t consider when dealing with money.
Now Graeber’s analysis jumps from small to large while missing the evolutionary period in between. If barter existed between strangers (by Graeber’s own admission) an interesting question arises. How would exchange take place in this transition period especially with the introduction of uncertainty in trading with strangers? (Note that reciprocity still exists as it does today as you indicate, but how about commodity money). Wouldn’t commodity money facilitate trade between strangers and avoid the trust issue (apply Menger’s theory). Also, the existence of “non-monetary tokens (not sanctioned by the state) like cows, nails, etc.” suggest an evolutionary aspect of money like the one Menger describes (and the state improves upon later, also note Menger’s example of Mexico). Just look at the case of Mesopotamia and silver as money. Why silver? Also note when Graeber indicated that silver rarely circulated it really is an example of Gresham’s law (bad money drives out good) because wine, barley, etc. were still accepted as payment.
Now note the significance of this understanding. I believe its exchange that leads to cultural norms i.e. language, etc. as well as to the creation money, debt/credit, reciprocity, etc. Notice the difference between the existence of money and debt/credit. The latter is formed through trust (reciprocity, etc.) While the former is related to distrust (commodity money) as exchange between strangers. When exchanging commodity money for goods you can’t get “ripped off” (like with debt/credit) because through evolution/exchange the commodity money retains “value.”
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I would appreciate a copy of any responses sent direct to “sm”.
After I have re-read the relevant Dr. Graeber’s chapters and the Menger’s reference, I shall post a response on Lost Legacy.