Monday, May 22, 2017

David Graeber: Debt: the Myth of Barter

Adam Smith got it wrong about primitive society where he said that people bartered, says David Graeber. What they had was a kind of mental debt system. You'd help someone one day, or give them something, but you expected the favour returned on another day if you needed it.


In the second chapter David Graeber explodes a foundational myth of economics. In textbooks all around the world the history of economics is summarized thusly: first came barter, then money, only later were credit and debt invented. The problem with this presentation is that “barter” economies pretty much never existed. We don’t find them either in anthropological study of any human cultures around the world, nor in historical records anywhere. In fact, the very first records of any kind are of credits and debits in Mesopotamian tablets. 
But the story of barter is so ingrained in us we probably find the fact that it didn’t really happen dumbfounding. I mean, of course people barter. Don’t they? If I have wheat and you have ham and I want ham but I don’t have any money I just trade you my wheat for your ham, right? 
Graeber shows how the idea of barter was created in exactly this way: as a thought experiment by economists trying to explain their discipline. But the myth of barter was never really compared against actual human societies. It was was simply assumed that barter must be what people do when they don’t have money and all sorts of imaginary scenarios were concocted, without reference to historical records, to explain the invention of money and gradually increasing complexity of this new thing they called “the economy”. 
Economists imagine that complications arising from barter are what gave the impetus for creating money. For example they describe something called the double coincidence of needs: you and I both have to need what the other has for a direct trade to work. But the truth is much simpler. Barter doesn’t work in a small village or tribal setting because it presumes antagonism between the people involved in the exchange. If we live in a village where we see each other on a daily basis though, we can’t afford this kind of antagonism. I can’t seek my own gain at your loss because we are in a long-term relationship. Instead we will come up with a way of accounting for debts. When you need wheat I will give it to you with the understanding that when I need ham you will return the favour. 
Here is what I think the take-away from this mistaken historiography should be: the foundational myth of economics establishes the entire system on the basis of antagonistic transactions of self-interest when in truth the story of debt is a story about human relationships. Debt was originally the answer to the question of how you and I can meet each others’ needs and remain friends.


The Myth of Barter

26 comments:

Ralph Musgrave said...

Graeber doesn't have much grip on reality. Much of the trade between East European countries prior to the collapse of the USSR was on a barter basis. E.g. E.Germany sent Russian vehicles and Russian sent E.Germany crude oil in return. No cash changed hands.

Barter is also all around us all the time: I do my next door neighbor various favors and he does me various favors in return. No cash changes hands.

Marriage is also barter writ large (and same goes for non-married couples). Man does various things for the woman, and the latter provides the man with various - er - "favors".

Kaivey said...

He was talking and primitive societies, which is how man evolved over thousands of years. Adam Smith made an assumption. Barter is not found in any primitive society, says Graeber. It makes sense. But this owing people favours can't work in larger societies.

Tom Hickey said...

It's well known that barter is used when there is economic breakdown or collapse. It's a substitute for monetary exchange rather than a cause or origin of it.

It's true that barter is ancient but it was used intergroup (trade) rather than intra-group. An economy, even a proto-economy, is intra-group.

From what we can tell, hunter-gathering societies were organized on social exchange rather than economic exchange. Economic exchange doesn't emerge until the beginning of agriculture and the advent of surpluses that were storable, that is, the first economies appear to have been grain-based economies where accounting records were in terms of grain.

Exactly how the concept of money was developed is unclear but grain is a candidate for a prototype since it was relatively stable, and it could be aggregated and divided easily. But it was a commodity and money is not a commodity, so grains were probably thought of as "money."

But the people of time understood credit and debit pretty much as we do now. The concept of money seems to have originated from the credit-debit relation.

Graeber points out that the credit-debit relation arises from earlier social factors involving mutuality, reciprocation, and obligation.

Kaivey said...

Graeber does say that tribes sometimes bartered with each other. Although we know that tribes often exchanged gifts, and it wound be a time of celebration where young people found partners. This was to keep the gene pool healthy, although they didn't think about that.

Noah Way said...

Exactly. Tribal societies were cooperative. Taking more than one needed or threatening the tribe's ability to survive was grounds for punishment, exile or death.

Sebastian Junger's excellent book Tribe explores this concept of socially supportive community as it relates to war.

Tom Hickey said...

But this owing people favours can't work in larger societies.

There is actually a lot more of this than most people think offhand. It is not necessarily directly economic but it has economic benefits for the parties indirectly. This is an important feature of networking. Society is a vast network of relationships of different types. There is also a certain amount of reputational transitivity in addition to reciprocity.

Kaivey said...

It's like Wikipedia is non profit. It could carry adverts and make the founders billions. Is it that people feel the need to be helpful even across the globe?

Joe said...

"Barter is also all around us all the time: I do my next door neighbor various favors and he does me various favors in return. No cash changes hands. "
Isn't that exactly what grabber meant by the mental credits and debits? There's a fuzzy balance sheet in you and your neighbors heads. It's not like you and you neighbor exchange favors at the same time explicitly as one in exchange for the other. It's not an exactly one-to-one exchange. It good for both of you to help each other out, but if you're constantly helping with nothing in return, it starts to be clear that the balance sheet has tipped in one direction.

jrbarch said...

The bit that confounds me is why it takes an academic to point out what every kid in the schoolyard knows (not to mention the chimpanzees): - ' who owes who what; who is zoomin who'.

jrbarch said...

.... and where does that leave the ones who got it wrong in the first place?

MRW said...

Michael Hudson and his team of fellow experts that convened first at the Peabody Museum 20 years ago, then Harvard, have written a series of books on the economies and practices of the ancient world. The latest (5th) book in the series, Labor in the Ancient World [published 2015] begins in 10,000 BC. with massive public sites built in Turkey.

These experts Hudson is working with are “leading Assyriologists and Egyptologists and Mycenaean Greek specialists as well as archaeologists on how early societies mobilised the labour force, especially for large public building projects such as temples, city walls and other infrastructure,” says Hudson.

Hudson says in this extraordinary interview: “…ten years ago we had our fifth colloquium on “Labor in the Ancient World.” There have been so many revolutions in archaeology and Assyriology and even Egyptology in the last ten years that we’re only publishing this volume now, to be completely up-to-date.” For instance, they have the “actual bills and accounting statements for what’s paid to labour to build the pyramids.

To put it politely, the comments above about tribes and how societies worked are not borne out by the evidence. They’re extrapolated myth coined from the same bad education most of us got. You’ll be surprised to know the truth.

I suggest you listen to this wonderful interview if interested. Transcript also available at the same site.
http://michael-hudson.com/2015/04/sovereignty-in-the-ancient-near-east/

Kaivey said...

Because the right wing economists at the great universities going back to Adam Smith have been trying to con everyone into believing that capitalist business dealing had always been the way.

Kaivey said...

Hudson is still talking about advanced societies.

MRW said...

Hudson is still talking about advanced societies.

No, he's not. Did you listen to it? He’s talking about how societies EVOLVED. And Graeber wasn’t just talking about African tribes in sub-Saharan Africa. (The upper half of Africa was part of the great Golden Age of Islam and universities like the oldest in Egypt, and the three at Timbuktu where one had 22,000 students…that part of Sahara was verdant then.)

MRW said...

Because the right wing economists at the great universities going back to Adam Smith have been trying to con everyone into believing that capitalist business dealing had always been the way.

That’s way too simplistic, Kaivey. Universities weren’t divided into right- and left-wing in Adam Smith’s time, and economists were only called that after the discipline was established in the first third of the 20th C. [Accountancy, on the other hand, was established in the 12th C by Ibn Khaldun (sp?), who also established historiography, or the study of history.]

Kaivey said...

Okay, but mainstream economists have been pushing Adam Smith and his assumptions on barter for a long time. This is why David Graeber addressed it in his book.

Kaivey said...

'In textbooks all around the world the history of economics is summarized thusly: first came barter, then money, only later were credit and debt invented. The problem with this presentation is that “barter” economies pretty much never existed.'

David Greamer. Anthropologist.

MRW said...

Agreed. Used to know the name of the guy who dreamt up the barter story in the 1890s, but I've forgotten. But so what? Anyone with half a brain who ever visited a good museum would know about the Sumerian/Mesopotamian tablets. They were in my grade nine history book, fercrissake.

MRW said...

Kaivey, did you ever watch this? This is the calibre of American education until after WWII. http://www.veoh.com/watch/v16706342cB97DkDJ. Just need to watch the "101" version. It's a hoot.

Kaivey said...

I will watch it soon.

Matt Franko said...

"Get even...."

Bob said...

Zoomin?

Tom Hickey said...

Hudson is still talking about advanced societies.

No, he's not. Did you listen to it? He’s talking about how societies EVOLVED. And Graeber wasn’t just talking about African tribes in sub-Saharan Africa.


We know how stone age people lived and interacted in small tribes in prehistory owing to the primitive tribes that are still be found contemporaneously, for example, in the Amazon rain forest.

Tom Hickey said...

The barter issue is significant because the story told by conventional economics is that barter exchange led to money exchange to address the need for "double coincidence of wants" in barter exchange.

The conclusion was that what is really happening in economic exchange is barter of goods, and money only serves as convenient that constitutes a neutral veil over the barter process.

This implies that a monetary production economy is essentially the same as a barter exchange economy and money plays no role in the run so consideration of money can be dispensed with.

This is a reason that conventional economics ignores the role of finance and money and banking other than the interest rate as the price of money.

The just -so story of barter being the origin of money is part of the conventional narrative that underlies the framework of conventional economics.

MRW said...

Just out of interest, Tom, what dates do you consider "prehistory?" This question is no reflection on, or reference to, what you said. Just curious. (Everyone seems to have different dates to categorize "neolithic," "neanderthal," "ancient," "prehistoric," "bronze age," etcetera, etcetera.)

Tom Hickey said...

History is generally taken to be the period after events began being recored and prehistory the period before writing systems were in use or at least where there are extant records.

I would extend that definition a bit to include evidence than writing that historians are not just guessing about.

So I would say that history begins in an area where sufficient substantiation exists to say that certain events took place in an approximate time frame.

History is a story that is substantiated. Prehistory is a narrative constructed on the basis of evidence that doesn't force a narrative.

In other words, there has to be some criterion(a) for distinguishing truth and falsity, or estimating probability, in order to distinguish history from guessing and just-so stories.

There is also the question here of distinguishing history from myth and legend.

So the line of demarcation between history and prehistory is blurred by the "mists of time."