Every account of money begins with a story, and very nearly every one begins with the same story. Once, it runs, there was barter: the butcher who wanted bread had to seek out a baker who happened to want meat, and exchange stalled for want of a double coincidence of wants. Money was the cure — some single commodity, salt or cattle or silver, so widely desired that all would take it, chosen by no one and adopted by all, until it became the thing for which every other thing was traded. Adam Smith told the story in 1776, and Jevons and Menger gave it its modern polish; it is lucid, plausible, and almost universally believed. It has a single defect. The anthropologists and historians who went looking, for a century and more, for a society that actually lived by barter and then invented money to be quit of it, have never turned up even one.
It is worth telling the story properly before taking it apart, for it is a good story and has earned its long life. Begin, as Smith did, with the division of labor: once each man makes one thing and gets the rest by trade, exchange becomes the whole condition of life — and barter, the direct swap of good for good, is a clumsy instrument for it. The man with arrowheads who wants grain must find not merely someone with grain to spare but someone with grain to spare who happens just then to want arrowheads, and such meetings are rare. So the remedy invents itself. A prudent man, finding his arrowheads often refused, learns to accept in trade not only what he wants but whatever he judges others will surely take from him in turn — salt, hides, cattle — and once enough men reason so, their choices converge, by no one's plan, on a single good that all accept because all accept it. That good is money; and the metals win the office in the end for their plain virtues, since they neither rot nor divide badly and are easily known. So the story goes, and for elegance it is hard to fault.
The elegance is not innocent, and it repays a pause to see what the story quietly arranges while one admires it. For if money came into the world this way — thrown up by the market, by the unconcerted choices of traders seeking their own convenience — then money is the market's creature and no one else's. It owes nothing to the king, who merely stamped his face on a metal already money; nothing to the temple, the tribe, the web of obligation in which men actually live; nothing to law. Its worth is the worth of the stuff it is made of, and its quantity is a fact of nature — the silver in the hills — rather than a decision anyone took. Every one of these conclusions is built into the story before a fact is examined, and each serves a particular and powerful view: that money is a commodity, that its essence is to be a medium of exchange, and that it lies as a neutral veil over the real business of goods. The tale is not merely an account of money's birth; it is a charter for a theory of its nature.
Set against the story is a difficulty it has never overcome: there is no evidence that the barter age it describes ever existed. This is not for want of looking. For more than a century anthropologists have gone into societies without money expecting the textbook's world of higgling spot-trade — the arrowheads-for-grain economy waiting to discover silver — and have not found it, anywhere. What they find instead is at once richer and stranger. Where there is no money, goods move not chiefly by barter but by gift and counter-gift, by obligation freely entered and slowly discharged, by the keeping of long informal accounts of who has given what to whom. The neighbor who needs a tool is given it, and gives in his turn when the giver is in need; the relation is not closed by an even swap but kept open, on purpose, as the very stuff of a common life. Barter — the cold, complete, one-time exchange between parties who owe each other nothing before or after — turns out to be not the primal condition of mankind but a special and marginal thing: the way one deals with a stranger or an enemy, with someone one does not expect to meet again.
The defenders of the story have a reply, and it deserves a hearing. Barter does sometimes give birth to money before our eyes, they point out, and money so born looks very like the story's. In prison camps cigarettes have become a currency; when an official money collapses, people fall back on trading goods directly and then, soon enough, single out some good — vodka, cigarettes, foreign notes — to serve as a makeshift medium. Here, surely, is the myth enacted in miniature. But look again at who does the enacting. The prisoners, and the citizens of a broken currency, are not a people innocent of money discovering it afresh; they are people raised in monetary economies, carrying the idea of money in their heads, reaching for a substitute when the usual one fails. The cases show that where money is already understood a commodity can be pressed into its service — which no one denies. They show nothing of how the understanding first arose; and it is the origin, not the reenactment, that the story claims to explain.
If the living record will not supply the barter age, neither will the buried one, and here the reversal is sharpest. The oldest economies of which we have detailed knowledge — the temple and palace bureaucracies of ancient Mesopotamia, reaching back some five thousand years — were not barter economies inching toward money. They were already, in the relevant sense, monetary, and elaborately so, without a coin among them. Scribes kept accounts in fixed weights of silver and standard measures of barley; wages, rents, the price of an ox, the interest on a loan, the fine for an injury, were all set down in these units and owed and paid and carried forward as debts on tablets of clay. The unit of account was in full operation; credit was everywhere; and the circulating coin — the lump of metal one hands over — would not be invented for another two thousand years, in Lydia, in the seventh century before Christ. The thing the story places at the end of the road, the abstract measure of value, stands plainly at its beginning; the thing it places at the beginning, the bartering of good for good, is nowhere to be found.
What rises in the story's place is a different account of money's birth, and a more credible one. If the measure and the debt come first, then money is at root not a commodity but a credit — a record of obligation, a promise to render value, made countable by being expressed in a common unit. The coin, when at last it comes, is on this view not the essence of money but its token: a portable acknowledgment that a debt exists and may be handed on. This is the credit theory, and it stands the textbook on its head. Barter does not give rise to money; rather money, understood as the unit in which obligations are reckoned, is among the oldest social technologies there is — older than the market it is supposed to have served. It is the conclusion the first plate reached by another road, that the numéraire, the measure, is the primary thing; and the clay tablets of Sumer are its most ancient witness.
The empirical case would be enough alone, but there is a flaw in the story's reasoning as well, and it is instructive. The whole tale turns on barter's being intolerably inconvenient — on the rarity of the double coincidence driving men to a better way. Yet for a trader to feel that inconvenience as the story requires, to weigh this swap against that and judge the want of a common medium a burden, he must already be reckoning the values of things in some shared terms. The double coincidence is a problem only in a world that already has prices, and prices already require the unit of account that money was supposed to introduce: the story presumes at its start the very thing it sets out to explain at its end. Nor does Menger's mechanism escape. A good is "saleable," he says, when others will readily take it — but that readiness is nothing but each person's expectation that the next will accept it too, and such a self-confirming expectation, shared across a community, is precisely a social convention, a form of collective trust. Pressed hard enough, the commodity theory dissolves into the very thing it was built to avoid: for what made the money-commodity money was never the metal, but the agreement.
Why, then, do the textbooks keep telling it, a century after the anthropologists filed their report? The most honest answer is that the story is useful as a deliberate simplification is useful: it isolates one function of money, the easing of exchange, and lets the theorist reason about that function free of the clutter of history and law and obligation — an as if, a fable, no more meant for literal truth than the frictionless plane of the physics lesson. There is something to this, and a science must be allowed its simplifications. But the barter fable is not inert as a frictionless plane is inert. It has lodged in the common mind a definite and consequential picture — of money as a natural commodity, sprung from the market, owing nothing to the state or to the bonds between people — and that picture does real work in real arguments: about what money is, who ought to govern it, and whether its management is a technical question or a political one. A simplification that quietly settles such matters, while seeming only to clear the ground, has ceased to be a convenience and become a doctrine in disguise.
For this is what the barter story finally is: a creation myth, and like other creation myths it tells less about the past than about how those who repeat it wish the present to be understood. It is the founding legend of the commodity theory of money — the theory that money is a thing, neutral and natural, made by the market for its own ease — and it does the office every origin myth does, lending to a contestable arrangement the authority of the way things have supposedly always been. The patient findings of history and anthropology point the other way: that money was a measure and a debt, a creature of obligation and reckoning and in the end of the community and the state, long before it was a coin one could weigh in the hand. Money looks like a commodity that won a long competition. It is in truth a relationship that learned, late and imperfectly, to wear the mask of a thing — and the tale of its barter birth is the first and most graceful place the mask was fitted on.
The age of barter is not money's memory but its alibi: a past invented to make a thing of what was always a promise.
None of this denies that money eases exchange, or that a single medium spares us the misery of the double coincidence; money does these things, and they matter. It denies only that easing exchange is what money first and essentially is, and refuses the quiet inference, smuggled in with the story, that a thing so useful to the market must be the market's own natural product and no one else's concern. A price is a verdict on a hidden contest, mistaken for a fact of nature — and money, the unit in which every price is spoken, comes trailing a creation myth that works the same trick on a grander scale, dressing a social and political institution in the borrowed clothes of a commodity the market just happened, all by itself, to find. The argument remains open.