№ XVI
The twelve plates
Of all the objects in economic life, money is the one we treat as the most natural and the least in need of explanation — the neutral rod against which every other value is read. It is in fact the strangest of them, and the most thoroughly social: not, on the closest inspection, a thing at all, but a standing relationship of credit and trust, underwritten by the state, by which a society agrees what shall count as final payment of a debt. This volume asks what money is, why a paper promise should hold its worth, and what the answer reveals about the measuring rod the whole table is named for.
is money a commodity we trade, or a promise we trust?
Of all the objects in economic life, money is the one we are least inclined to examine, for the reason that it seems to need no examining. The wage is a puzzle, the rent a provocation, the rate of interest a thing one argues about; but money is simply there, the plain medium in which the puzzles are posed and the arguments settled — the neutral rod against which every other value is read off, itself apparently requiring no account at all. This is the first and most durable of the illusions money trades in. For the measuring rod is the strangest object in the whole science, and very nearly the only one that is not, on close inspection, a thing.
The textbooks, tellingly, define money not by what it is but by what it does. It is a medium of exchange — the thing one accepts not to keep but to pass on. It is a store of value — the thing held across time, a way of carrying purchasing power out of this year and into the next. And it is a unit of account — the numéraire, the common measure in which all prices are quoted and all debts reckoned, the rod this whole table has taken for its name. A definition by function is an evasion dressed as an answer: it lists the offices money fills without once saying what manner of thing fills them. And the moment one asks the plainer question — what is this stuff, that a slip of paper, or a line in a ledger, should command a day of a person's labor? — the ground begins to move.
There is an old and satisfying story that steadies it, and nearly everyone has heard some version. In the beginning, the story runs, there was barter, and barter was a torment: the man with grain who wanted a coat had first to find a tailor who wanted grain, and trade waited upon this double coincidence of wants. Then some one commodity — cattle, salt, cowrie shells, in time the precious metals, durable and divisible and easily known — proving more widely acceptable than the rest, came by degrees to be taken by everyone, not for its own sake but because it could always be passed on again; and so, chosen by no one and adopted by all, the most saleable of goods quietly became money. Aristotle had half-told it; Adam Smith told it whole in 1776; Jevons and Carl Menger gave it the polish it still wears. Its charm is that it makes money natural — a spontaneous convenience thrown up by the market to ease its own workings, owing nothing to the state, the law, or anyone's design. Money, on this telling, is simply a commodity that won a popularity contest, and the sovereign who later stamped his face upon it was a latecomer to a thing the market had made without him.
The story has one difficulty, which is that it appears not to be true. The anthropologists and historians who went looking, for more than a century, for the barter economy it presupposes — a society that traded good for good and then hit upon money to escape the bother — have never described a single one. What they find instead, wherever the records run deep enough, is credit: in the temples and palaces of Mesopotamia, debts denominated in measures of silver and barley, tallied and carried and cancelled on clay, thousands of years before the first coin was ever struck. This is the other theory of money, older than it sounds and lately revived — that money is not a commodity at all but a record of debt, an obligation made measurable and transferable, a promise to pay. Alfred Mitchell-Innes set it down plainly in 1913: the coin is not the money but a token of it, and the money is the credit the token acknowledges. For the better part of seven centuries the English Crown kept its accounts on tally sticks — notched lengths of hazel, split down the middle so that each party held half a record of what was owed — and these wooden debts passed from hand to hand as money, worth nothing whatever in themselves and everything as promises the Exchequer would honor. And standing behind the credit, more often than the market cares to admit, is the state — for as Georg Friedrich Knapp had argued, what reliably makes a currency wanted is, in the last resort, that a government will take that currency, and no other, in payment of the taxes it compels. The sovereign's demand, and not the metal's lustre, is what gives the token its grip; money may be, as the older word for it confessed, a creature of nomos, of law and custom, and not of nature at all.
These are not merely two histories competing for one past; they are two ontologies, two answers to what money fundamentally is — a thing, or a relation — and a great deal follows from the choice. If money is a commodity, it is natural and apolitical, and its quantity is a fact, like the quantity of gold in the ground; if it is credit and command, it is an institution, made and governed and contestable, and its quantity is a decision, taken by someone, in someone's interest. Even the hardest money tells against the commodity view in the end: a gold coin is money not by virtue of the gold but by virtue of the shared and standing expectation that the next person will take it too — its moneyness is the trust and not the metal, which is exactly why a prince could always coin the same gold into a different worth. To this the commodity theorists answer that none of it matters much, because money is in any case a veil: double its quantity, David Hume reasoned in 1752, and you double every price while leaving every real thing — every house, every hour of labor, every loaf — precisely as it was. Irving Fisher gave the thought an equation and Milton Friedman made it nearly a creed, and within its limits it holds. But the limits are the whole of the interesting country. For when prices are slow to move and confidence begins to wobble, money ceases to be a veil and becomes a force: a shortage of it can leave real men idle and real machines still, as every slump attests and as Keynes raised a revolution to explain. A thing that mattered nothing could not do that.
So the rod against which all values are measured turns out to be no fixed and natural bedrock but a thing of our own making — a standing relationship of credit and trust, underwritten by the sovereign, by which a society agrees, until further notice, what shall count as the final settlement of a debt. Its entire value rests upon a single expectation, that others will take it tomorrow because they took it today; and that expectation is social all the way down, sustained by law and habit and confidence, and capable, when confidence fails, of draining away in an afternoon. This is the deepest instance of the suspicion that runs the length of the table. A price, we have said, is a verdict on a hidden contest, mistaken for a fact of nature — and money is the very unit in which every such verdict is pronounced, itself the most thoroughly social and political of all economic objects, and the most stubbornly mistaken for the plainest of facts. And the mistake exacts a price of its own, for to take money for a fact of nature is to make its quantity — and the idleness that a want of it can impose — look like weather rather than decision, and so to hide the hand upon the rod and the responsibility that travels with it. The twelve plates that follow trace it from the idea of a measuring rod and the disputed story of its birth, through its hard material forms and the sovereign's hand upon it, its quantity and its supposed neutrality, the reasons we hold it and the banks that conjure it, on to inflation, the monetary constitutions men have tried to bind it with, and the bare trust at the bottom of all of it. Where money looks most like a thing, the volume finds a relationship; where it looks most neutral, a politics. The argument remains open.