How do we define money?
I have just been reading ~Money~ an unauthorised biography by Felix Martin, according to this book apparently the Greeks invented Money circa 8th to 6th Century BC. Really, so the people of Mesopotamia and the Fertile Crescent, didn’t exchange a measure of grain, the Shekel, for other items? Likewise the transactions recorded on clay tablets, must all be fake? Oh they did, well surely that is money in use?
Here is a crucial philosophical point, define money.
The main problem with trying to define money is, it isn’t what most people think it is. To start with, money can be both abstract and tangible at one and the same time. For example let’s say you dear reader, myself and say an MP (if you are an MP choose another person earning a different salary?) walk into a Pound shop, we each buy an identical tube of toothpaste, and pay the cashier, with a £1 coin. We’ve each spent exactly the same amount, £1, we’ve each handed over, £1, a coin that is quite tangible. And yet it can be easily pointed out, that we have each spent a different amount. Oh yes we have, if you put the purchase alongside our earnings. Suddenly the concrete amount of £1, becomes an abstract amount of worth, of different value to each of the three of us.
here is the slippery-ness of money
Of course as we go about our daily lives the amount we spend relative to another person doesn’t cross our minds. As a side note, if it does give you cause for concern all the time, you will always be unhappy. There are always people wealthier in some way or poorer in other ways compared to oneself. Back to the story, here is the slippery-ness of money, it is both a tactile tool for everyday living on one hand, and a febrile none existent token of worth, on the other?
Many people come unstuck when talking about macroeconomics, two of the biggest myths surrounds Governments and money. Governments do not have any money, if you were led to believe otherwise, you were lied to. Governments cannot directly create money. Yes Governments can mint coins or print banknotes that represent a value, but that value is all relative, and is set against the amount of money in circulation, against what the Country produces, or its wealth in abilities. Yes Governments can introduce legislation that enables private citizens to get on and create wealth, but Governments cannot under any circumstances directly create wealth, or its money equivalent. People working for the Government are not creating wealth, they merely redistribute to a greater or lesser degree, the amount of value in the Country. The money comes from tax receipts, and is then used for either good or bad projects.
life just existed
So let’s have a little history tour to help us define money. Palaeolithic man (Old Stone Age) was a hunter gatherer society, they survived because of some weapons and tools useful for living and surviving. When the number of people exceeded the available food to be picked, they died, the population reduced, and the few remaining went on living again. There was no money and along with no increase in efficiency or as some would say, productivity, life just existed. Palaeolithic people, could no more define money, as fly to the stars.
Along comes Mesolithic people or Middle Stone Age, they have some increases in efficiency, firstly fire, it facilitated a greater release of energy from foods processed through heat, so a higher calorific value could be gained, especially from meat and cooked grain like wheat. The keeping of domesticated animals, goats, sheep etc. started around this time. These feed on different foodstuffs to humans, so there was an increase in the number of calories per person for a similar area, without having to go hunting for it, so more people survived. This also allowed a tribe, to have more leisure time, because along with cooking, they had to spend less time foraging or hunting. But there was still no essence of money, Mesolithic people could not define money.
Then came the Neolithic period and the big breakthrough, Farming. It is difficult to over emphasize the significance of the invention of Farming. It revolutionised the human race and its development. As any gardener will know, just tending a garden part time can be productive. Doing so full time gives high returns of food. This resulted in farmers being able to feed their whole family, and have surplus left over, it changed the world.
Then in an area known as the Fertile Crescent, in what is now Iraq, and Syria and south eastern Turkey, the first Cities were built. Ur being one of the Cities, has been extensively chronicled by Archaeologists. Their findings are stupendous, not least, the discovery of the first tax system, the first accounting system, the first written word, the first written mathematics.
the bestest axe head ever made
Now back to define money, and a time just before the Fertile Crescent, imagine our first farmer, Ogg. After a couple of years he has surplus grain. He decides he needs a new Axe head and he also decides he wants the bestest axe head ever made. So he goes to the axe head maker sublime, Ugg and says,
“Look Ugg, I will give you six months grain in exchange for your best axe.”
“Okay it’s a deal I’ll have it ready a week on Tuesday.”
There is no money involved and I will emphasize, there is no concept of what we call money, this is just an exchange?
Now I hear you cry that is just bartering. Hold on, I haven’t finished the story.
Ugg scampers off home and says to Mrs. Ugg,
“I’ve just done this great deal, two months of grain for you, me and little Uggy.” (Note six months divided by three equals two, I haven’t lost the plot)
Then Mrs. Ugg has an idea,
“Look Ugg, we won’t be able to eat all this food, because I’m still going out and foraging, plus it’s been a good season. Also I could do with a new Fur coat, Agg is good at getting quality leather and furs, let’s do a deal with him. We could split half of the grain we get from farmer Ogg, in exchange for some of his hides, and have some brand new clothes, and still eat better.
Here is the crucial bit, there is no word for money, in fact there is no concept of money. However it has just come into existence, you could say invented, but I think this would be overstating the case, it is merely a proto money. The grain will be short lived, that is of no matter it is being used as money.
There is a further point to make, the evidence is mounting that there was no bartering societies as first thought. I not only go along with this, I think it virtually 100%, there was no bartering, in the sense of nothing being used as money.
the rich always have things
Plus Money benefits the poor more than the rich, the rich always have things. In the Neolithic period, many people were valued in Cattle and other such large or expensive items, the poor were obviously dirt poor. Suddenly you have a proto money that can be held for a period of time. Okay grain can’t be held indefinitely, but it is needed by all, in the form of food, and can be exchanged in small quantities. Also this would release the value of other previous efficiencies.
Not least, that boats can transport goods more efficiently than going overland, Agg the person good at getting hides, could now pay for 100 hides to be transported from someone who has too many to use? Flint knapping, this little gem I heard about decades ago. Flint is a Neolithic tool and can be formed into arrow heads much more efficiently than other stones, is sharper and does the job better. Early flint napping sites in England have been found to have an estimate waste from 1,000,000 flint heads? The farmer coming along with this proto money, grain, suddenly makes the best flint knappers wealthy, because they can be paid? If they were being paid, they were receiving money, now define money?
Basically the surplus grain, releases the value of the efficiencies, which have been created in the Mesolithic and Neolithic ages. Efficiency pays wages.
By the time of the Mesopotamians and the City of Ur circa 3,500 bc, metal was being used as an exchange medium. No it wasn’t stamped, no there weren’t coins in the sense we know them, but the written clay tablets show exchanges and accounting not for bartering but buying and selling through a medium of metal by weight. Early on the concept of money was probably unknown. Wittgenstein comes into play here, “Whereof one cannot speak, thereof one must be silent”. Wittgenstein was meaning if we don’t have a concept in words, we cannot have a concept in ideas.
At some point the idea of grain, or more probably metal, being an intermediary ‘token’ which could be held and exchanged for any goods, took hold. At this point someone started using a term, for this token, in other words the concept of money was born. It was probably the measure of wheat, in Mesopotamia, namely the shekel.
But there was no coin worth a shekel.
Which brings us full circle?
Define what we mean by money.