Mint the Coin has drawn a whole lot of fevered discussion, but Joe Wiesenthal (@theStalwart) has perhaps the best take: the project opens the door to a real discussion of money, its origins and its purposes. The idea of just minting a coin with a huge designated value does sound strange to those of us whose economics came out of Paul Samuelson’s textbook. Here’s a possible explanation* for the discomfort. And if you think it sounds strange, just think how it sounds to the Ron Pauls of the world.

Australian Model for Trillion Dollar Coin

In my economics class all those years ago, I was taught that money originated in barter societies. This view came from Adam Smith in Wealth of Nations. David Graeber* says that in Smith’s world, which sounds like an American Indian tribe, money arises from barter. One guy makes bows and arrows, another tents. Some use the bows and arrows to hunt down game. In Smith’s world, the bow guy trades for meat and tents, the tent guy trades for meat and bows and arrows, and hunters trade for tents and bows and arrows. Obviously not everyone needs a tent on the same schedule as bows and arrows, so they create money. It’s a great way to solve the complex problems created by barter.

Graeber points out that this bizarre society assumes that women aren’t taking part in any of these transactions, which is absurd, because most likely the clothes and probably the tents are made by the women. Smith might not have known it, but at the time he was writing,

… Lewis Henry Morgan’s descriptions of the Six Nations of the Iroquois, among others, were widely published — and they made clear that the main economic institution among the Iroquois nations were longhouses where most goods were stockpiled and then allocated by women’s councils, and no one ever traded arrowheads for slabs of meat. Economists simply ignored this information. Stanley Jevons, for example, who in 1871 wrote what has come to be considered the classic book on the origins of money, took his examples straight from Smith, with Indians swapping venison for elk and beaver hides, and made no use of actual descriptions of Indian life that made it clear that Smith had simply made this up.

Debt, p. 29, footnote omitted. Smith’s view is that people are driven by a truck and barter mentality.

What, he begins, is the basis of economic life, properly speaking? It is “a certain propensity in human nature . . . the propensity to truck, barter, and exchange one thing for another. ” Animals don’t do this. “Nobody,” Smith observes, “ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. ” But humans, if left to their own devices, will inevitably begin swapping and comparing things. This is just what humans do. Even logic and conversation are really just forms of trading, and as in all things, humans will always try to seek their own best advantage, to seek the greatest profit they can from the exchange.

Debt, p. 25. If you stop to think about it, this is laughably simple-minded view of humans. Graeber points out that people engage in all kinds of transactions outside of simple truck and barter, ranging from acquiring wives to temple contributions. In fact, no one has ever seen or reported on a society based on truck and barter, and no one has ever seen a society in which money arose to simplify barter.

Graeber explains the relevance of these points. He says Adam Smith had an agenda. He wanted to set up economics as a separate area of study, amenable to scientific inquiry and theorizing:

Above all, he objected to the notion that money was a creation of government. In this, Smith was the intellectual heir of the Liberal tradition of philosophers like John Locke, who had argued that government begins in the need to protect private property and operated best when it tried to limit itself to that function. Smith expanded on the argument, insisting that property, money and markets not only existed before political institutions but were the very foundation of human society. It followed that insofar as government should play any role in monetary affairs, it should limit itself to guaranteeing the soundness of the currency. It was only by making such an argument that he could insist that economics is itself a field of human inquiry with its own principles and laws –that is, as distinct from, say ethics or politics.

Graeber didn’t set out to write a history of money, but rather a history of debt, trying to explain why people say that it’s immoral not to repay debt. Funny how that immorality runs to the benefit of the feral rich, the rentier class. Smith’s story, and the goals Graeber attributes to it do too. Maybe we should formulate a new foundation for Jonathan Haidt: things that benefit the feral rich are highly moral, and things that benefit the rest of us are immoral.
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* This discussion is largely based on David Graeber’s monumental anthropological exploration, Debt: The First 5000 Years. We were lucky enough to have L. Randall Wray and Bill Black on our Book Salon last Saturday, discussing Wray’s somewhat imposing book, Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems. Of course, we at FDL have been exposed to the issues for some time, thanks to Letsgetitdone and others.

Photo by z_fishies under Creative Commons license