Thursday, June 14, 2012

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:

‘sm’ writes:

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  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.” 
For comments/reply to:

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.


Blogger SM said...

It appears the link to the book download is broken/doesn't work. But you can still get a free copy at

4:02 pm  
Blogger SM said...

Correct me if I'm wrong, but the illustration of Smith's description of the complications of barter seems to have taken on a myth of its own as people attribute to it that Smith is describing exchange only occuring through "spot barter" transactions.

2:29 am  
Blogger Unlearningecon said...

I think a major point to note about this 'barter between strangers' is that it did not at all reflect the kind of smooth transactions with which we are familiar, but instead revolved around sex, ceremony and was often done under constant threat of war breaking out.

It also doesn't seem to be true that it evolved into much more than this until certain state institutions were established (most notably of all, taxation). Whilst your criticisms are somewhat valid, I feel this is still at odds with the Mengerian perspective.

8:07 am  
Blogger Gavin Kennedy said...

Thank you for your comment.
I am not sure if you refer to my comments or to "sm's".
I have not yet tracked down Menger's work, due to the intrusion of other tasks (notably from grading a couple of hundred MBVA/MSc exams).
The long road of evolving towards a bargained exchange culture though gift exchanges, spoils of "war", reciprocity ('the quasi bargain'), customs and ceremonies, and elements of barter, were the most evident (in longevity) sets of human behaviours in pre-history. For most of the world, these behaviour sets in all their variations lasted multi-millennia.
Money, in its earlier from (marked sticks, etc.,) preceded state money to meet trade debts.
State money paid for armed forces in garrison deployments; unpaid armed troops are dangerous, hence paid by Emperor tokens in silver and gold) and for domestic and conquered taxation impositions.
State money as legal currency cleared any debts. As a student in a vacation job, I recall a branch office being told off for refusing to accept payment in pound notes instead of a cheque, because a refusal to accept payment of a debt in the 'Queen's currency', legally wiped out the debt which could not then be taken to a debtor's court to enforce payment.

10:44 am  
Blogger SM said...

Thanks Unlearningecon for the comment. If it refers to me than I’ll take “somewhat valid” as a contribution to the discussion (note, I appreciate the civility of the comments, I know all to well how out of hand comments can get).

I’m making a private, better thought-out/written paper on the book, ideas, etc. If you want me to send a copy when I complete it (I’m pretty busy at the moment so it may take a while to finish it) I’ll be more than happy to send it to you.

I’m also interested in how black/grey markets would fit into Graeber’s analysis.

12:39 am  

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