The Evolution of Money

by David Orrell

  Money has played a determining role in history from ancient Mesopotamia to the present day, and this latest transition will have lasting consequences. The High Middle Ages saw the building of cathedrals that still provide both spiritual inspiration and tourist dollars to their regions. So what will be our comparable long-term civilization-building projects—our gifts to future generations? Can we at least buy some time? And if money is a medium of communication like writing, what story will we leave? As Marshall McLuhan famously said, “the medium is the message,” and the answers to these questions will depend on the money systems that evolve.

  NOTES

  Introduction

  1. Catherine Eagleton and Jonathan Williams, Money: A History (Richmond Hill, Ont.: Firefly, 2007), 256.

  2. Lydia Saad, “Americans’ Money Worries Unchanged from 2014,” Gallup, April 20, 2015, www.gallup.com/poll/182768/americans-money-worries-unchanged-2014.aspx.

  3. Tim Adams, “Anxious, Atomised … and Not in It Together: The State of Britain in 2015,” Observer, April 19, 2015.

  4. Elizabeth W. Dunn, Lara B. Aknin, and Michael I. Norton, “Spending Money on Others Promotes Happiness,” Science 319, no. 5870 (2008): 1687–1688.

  5. As author George Cooper told World Finance: “We’ve got a very interesting debate going on that’s just started a few weeks ago with the Bank of England publishing a new paper saying that the old model of how money is made in the economy is wrong. … Now they’ve published this paper, and a lot of people are getting very excited about it. And really it should be radically changing monetary policy. But it’s actually having no impact at all” (interview in World Finance: The Voice of the Market, April 4, 2014, www.worldfinance.com/banking/economics-is-a-broken-science-dr-george-cooper-on-his-new-book-money-blood-and-revolution-video).

  1. Origins

  1. Philip Brickman, Dan Coates, and Ronnie Janoff-Bulman, “Lottery Winners and Accident Victims: Is Happiness Relative?” Journal of Personality and Social Psychology 36, no. 8 (1978): 917–927.

  2. Tim Kreider, “Slaves of the Internet, Unite!” New York Times, October 27, 2013.

  3. F. A. Harper, Why Wages Rise (Irvington, N.Y.: Foundation for Economic Education, 1957). David Hume earlier wrote that money “is none of the wheels of trade: It is the oil which renders the motion of the wheels more smooth and easy” (Essays, Moral, Political, and Literary, ed. Eugene F. Miller [Indianapolis: Liberty Fund, 1987], www.econlib.org/library/LFBooks/Hume/hmMPL26.html).

  4. Aristotle, Politics (Mineola, N.Y.: Dover, 2000), 42.

  5. Adi Setia, “Ja’far Ibn ‘Ali al-Dimashqi on Community, Money, and Prudent Management in Trading and Spending: Four Excerpts from His Kitab Al-Isharat Ila Mahasin Al-Tijarat,” Islam & Science 9, no. 1 (2011): 11–32.

  6. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London: Strahan & Cadell, 1776), I.4.2.

  7. William Stanley Jevons, Money and the Mechanism of Exchange (New York: Appleton, 1875), I.4.

  8. Karl Menger, “On the Origins of Money,” Economic Journal 2, no. 3 (1892): 239–255.

  9. Geoffrey Crowther, An Outline of Money (London: Nelson, 1941), 15.

  10. Paul A. Samuelson, Economics, 9th ed. (New York: McGraw-Hill, 1973), 274–276.

  11. John Smithin, “What Is Money? Introduction,” in What Is Money? ed. John Smithin (New York: Routledge, 2000), 4.

  12. Christopher T. S. Ragan and Richard G. Lipsey, Economics, 13th ed. (Toronto: Pearson Education Canada, 2011), 672–673.

  13. “Origin and Evolution of Money,” Banco Central do Brasil, www.bcb.gov.br/?ORIGINMONEY.

  14. Alfred Mitchell-Innes, “What Is Money?” Banking Law Journal, May 1913, 377–408. Another author to raise the question was Effingham Wilson, What Is Money? (London: Wilson, 1872).

  15. L. Randall Wray, ed., Credit and State Theories of Money: The Contributions of A. Mitchell–Innes (Cheltenham: Elgar, 2004).

  16. Quoted in David Graeber, Debt: The First 5000 Years (Brooklyn, N.Y.: Melville House, 2011), 29.

  17. Maria Eugenia Aubet, Commerce and Colonization in the Ancient Near East (Cambridge: Cambridge University Press, 2013), 147.

  18. James B. Pritchard, ed., The Ancient Near East: An Anthology of Texts and Pictures (Princeton, N.J.: Princeton University Press, 2010).

  19. Indeed, prices fluctuated significantly during this period. See: Howard Farber, “A Price and Wage Study for Northern Babylonia During the Old Babylonian Period,” Journal of the Economic and Social History of the Orient 21, no. 1 (1978): 1–51.

  20. Éric Tymoigne and L. Randall Wray, “Money: An Alternative Story,” in A Handbook of Alternative Monetary Economics, ed. Philip Arestis and Malcolm C. Sawyer (Northampton, Mass.: Elgar, 2007), 1–16.

  21. Together the Federal Reserve and the Bank of England vaults contain about one-third of the gold supply.

  22. Federal Reserve Bank of New York, “Gold Vault,” www.newyorkfed.org/aboutthefed/goldvault.html.

  23. Not everyone is convinced. See Vernon Silver, “Where Is Germany’s Gold?” February 5, 2015, Bloomberg Business, www.bloomberg.com/news/features/2015–02–05/germany-s-gold-repatriation-activist-peter-boehringer-gets-results.

  24. According to Morris Silver, “That in the earlier second millennium Mesopotamia knew negotiable loans of a two-party promissory-note type is suggested by numbers of surviving loan documents specifying repayment not to the lender but to the ‘bearer of this tablet’ ” (“Karl Polanyi and Markets in the Ancient Near East: The Challenge of the Evidence,” Journal of Economic History 43, no. 4 [1983]: 804).

  25. This interest rate was mentioned in both the Eshnunna code and the Hammurabi code from about two centuries later. See Catherine Eagleton and Jonathan Williams, Money: A History. (Richmond Hill, Ont.: Firefly Books, 2007), 18. See also Michael Hudson, “How Interest Rates Were Set, 2500 BC–1000 AD,” Journal of the Economic and Social History of the Orient 43, no. 2 (2000): 132–161.

  26. As cited in the book of Leviticus, 25:8. See Michael Hudson, The Lost Tradition of Biblical Debt Cancellations (New York: Schalkenbach, 1993).

  27. Glyn Davies, A History of Money: From Ancient Times to the Present Day, 3rd ed. (Cardiff: University of Wales Press, 2002), 52.

  28. According to Jack Weatherford, “The Egyptians buried more gold and other precious commodities in the earth than any other known civilization in history” (The History of Money [New York: Three Rivers, 1997], 10).

  29. François de Callatay, “White Gold: An Enigmatic Start to Greek Coinage,” American Numismatic Society Magazine 12, no. 2 (2013): 6–17.

  30. Weatherford, History of Money, 32.

  31. Michael H. Crawford, “Money and Exchange in the Roman World,” Journal of Roman Studies 60 (1970): 40–48.

  32. David Schaps, “The Invention of Coinage in Lydia, in India, and in China” (paper presented at the XIV International Economic History Congress, August 21–25, 2006, Helsinki).

  33. Manuela Saragosa, “Libyan Gold Valued at $6.5bn,” March 23, 2011,, www.bbc.com/news/business-12833866.

  34. Karl Jaspers, The Way to Wisdom: An Introduction to Philosophy (New Haven, Conn.: Yale University Press, 2003), 98.

  35. According to Alan Pense, “If you consider the whole army of legionnaires and auxiliaries at the time of Augustus, 250,000 men, the total annual requirement of the army for silver denarii (or equivalent copper coins) was at least 75,000,000 per year!” (“The Decline and Fall of the Roman Denarius,” Materials Characterization 29, no. 2 [1992]: 213–222).

  36. Ibid.

  37. Marcus Tullius Cicero, On Duties, trans. Walter Miller (Cambridge, Mass.: Harvard University Press, 1913).

  38. Pliny the Younger, The Letters of the Younger Pliny: With an Introductory Essay, trans. John B. Firth (London: Scott, 1909), 3.19.

  39. Eagleton and Williams, Money, 49.

  40. Ovid, Ovid’s Art of Love (in Three Books), the Remedy of Love, the Art of Beauty, the Court of Love, the History of Love, and Amours, e
d. Anne Mahoney (New York: Blanchard, 1855), book I.

  41. Eagleton and Williams, Money, 51.

  42. Weatherford, History of Money, 52. For comparison, the modern Italian army employs about 180,000.

  43. W. V. Harris, The Monetary Systems of the Greeks and Romans (Oxford: Oxford University Press, 2008), 205.

  44. According to Matthew 20:2, the wages for a day’s labor were one denarius. Wages for a Roman legionary soldier went from 225 denarii under Caesar (ca. 46 B.C.E.) to 1,800 denarii under Maximinus (235–238 C.E.). See Eagleton and Williams, Money, 54.

  45. Pense, “Decline and Fall of the Roman Denarius.”

  46. Things got worse from there, as a pound of gold was worth 2.12 billion denarii in the middle of the fourth century in Egypt. See Davies, History of Money, 108.

  47. Before Diocletian, who was Roman emperor from 284 to 305 and who drew up the first budget. See Davies, History of Money, 103.

  48. Orlando Patterson, Slavery and Social Death: A Comparative Study (Cambridge, Mass.: Harvard University Press, 1982), 31.

  49. Jerry Toner, The Roman Guide to Slave Management: A Treatise by Nobleman Marcus Sidonius Falx (New York: Overlook, 2014), quoted in Manuela Hoelterhoff, “ ‘The Roman Guide to Slave Management’ Is Brilliant,” Bloomberg Business, October 15, 2014, http://www.bloomberg.com/news/articles/2014-10-15/-the-roman-guide-to-slave-management-is-brilliant-hoelterhoff.

  50. David Noble, “11% of UK Businesses Say Slavery in Their Supply Chains Is ‘Likely,’ ” Guardian, August 18, 2014. For more information, see https://agenda.weforum.org/2015/12/are-you-benefitting-from-slave-labour.

  51. C. F. Kolbert, The Digest of Roman Law: Theft, Rapine, Damage, and Insult (New York: Penguin, 1979), 7.

  52. Edward Gibbon, The History of the Decline and Fall of the Roman Empire (New York: Harper, 1845), Volume 3, 176.

  53. Edward Castronova stresses that anything can be used as money: “In the end, ‘money’ is an abstract quality that can be applied to almost anything” (Wildcat Currency: How the Virtual Money Revolution Is Transforming the Economy [New Haven, Conn.: Yale University Press, 2014], 44). But in the games he cites, the money is usually designed by programmers.

  54. As Graeber puts it: “[F]or there even to be a discipline called ‘economics,’ a discipline that concerns itself first and foremost with how individuals seek the most advantageous arrangement for the exchange of shoes for potatoes, or clothes for spears, it must assume that the exchange of such goods need have nothing to do with war, passion, adventure, mystery, sex, or death” (Debt, 32–33).

  55. Geoffrey Ingham, “ ‘Babylonian Madness’: On the Historical and Sociological Origins of Money,” in What Is Money? ed. John Smithin (New York: Routledge, 2000), 17.

  56. Todd Hirsch, “The Future of Money,” TEDxEdmonton, 2013, YouTube, www.youtube.com/watch?v=K0n3BGId9nU.

  57. Narayana R. Kocherlakota, “Money Is Memory,” Staff Report 218 (Federal Reserve Bank of Minneapolis, 1996).

  58. Stephanie Kelton, “Money Is No Object: Accounting for Deficits, Taxes, and Trust in the 21st Century” (presentation at the Financial Planning Association Annual Retreat Conference, May 5–8, 2012).

  59. Felix Martin, Money: The Unauthorized Biography (New York: Knopf, 2013), 224.

  2. The Money Magnet

  1. Aristotle, Nicomachean Ethics, Book V, trans. W. D. Ross (Kitchener, Ont.: Batoche, 1999), 80.

  2. Felix Martin, Money: The Unauthorized Biography (New York: Knopf, 2013), 79.

  3. Russell, Bertrand. A History of Western Philosophy, and Its Connection with Political and Social Circumstances from the Earliest Times to the Present Day (New York: Simon and Schuster, 1945), 3.

  4. Iamblichus, The Life of Pythagoras, trans. T. Taylor (Kila, Mont.: Kessinger, 1918).

  5. W. K. C. Guthrie, A History of Greek Philosophy, vol. 1, The Earlier Presocratics and the Pythagoreans (Cambridge: Cambridge University Press, 1962), 221–22.

  6. Benoit Mandelbrot, The Fractal Geometry of Nature (New York: Freeman, 1982), 1.

  7. Aristotle, Generation of Animals, trans. A. L. Peck (Cambridge, Mass.: Harvard University Press, 1943), 184.

  8. This compares with K. Hart, who wrote: “One side [heads] reminds us that states underwrite currencies and the money is originally a relation between persons in society, a token perhaps. The other [tails] reveals the coin as a thing, capable of entering into definite relations with other things.” (“Heads or Tails: Two Sides of the Coin,” Man 21, no. 3 [1986]: 638). Rather than persons versus things, our version is numbers versus value. The key difference is again our emphasis on the importance of number.

  9. “U.S. Nickel Melt Value Calculator,” CoinApps.com, http://coinapps.com/nickel/us/calculator.

  10. In 2014, the Financial Conduct Authority fined Barclays £26 million for charges including manipulation of the gold price on June 28, 2012. See Financial Conduct Authority, “Barclays Fined £26m for Failings Surrounding the London Gold Fixing and Former Barclays Trader Banned and Fined for Inappropriate Conduct,” press release, May 23, 2014.

  11. Edward Castronova, Wildcat Currency: How the Virtual Money Revolution Is Transforming the Economy (New Haven, Conn.: Yale University Press, 2014), 6.

  12. William Thomson, Popular Lectures and Addresses (London: Macmillan, 1889), 73.

  13. Alfred Marshall, Principles of Economics (New York: Cosimo, 2006), 14.

  14. An “emergent definition of value” is provided by K. R. Srinivasiengar, who wrote that “value may be defined as the variable status of an object emerging out of contemplation of it by a subject attached to a given universe of desire realizable by that object” (“Outline of an Emergent Theory of Value,” International Journal of Ethics 45, no. 4 [1935]: 416). The theory we provide here is better described as an “emergent theory of price.”

  15. Roger Wolcott Sperry, “Left-Brain, Right-Brain,” Saturday Review, August 9, 1975, 30–33.

  16. Iain McGilchrist, The Master and His Emissary: The Divided Brain and the Making of the Western World (New Haven, Conn.: Yale University Press, 2009), 209.

  17. Ibid., 279.

  18. Quoted in Adam Levy, “Mapping the Trader’s Brain,” Bloomberg Markets, February 1, 2006, 34–45.

  19. Christopher T. S. Ragan and Richard G. Lipsey, Economics, 13th ed. (Toronto: Pearson Education Canada, 2011), 609.

  20. Paul A. Samuelson and William D. Nordhaus, Economics, 17th ed. (Boston: McGraw-Hill, 2001), 511.

  21. Effingham Wilson, What Is Money? (London: Wilson, 1872).

  22. The following discussion of the quantum properties of money is based on David Orrell, “A Quantum Theory of Money and Value,” June 28, 2015, Social Science Research Network, http://ssrn.com/abstract=2624371. It is also partly based on Orrell’s 2015 Marshall McLuhan Lecture “Money Is the Message,” hosted by Transmediale and the Canadian Embassy in Berlin (www.youtube.com/playlist?list=PL9olnMFdRIwshkq3nfaF2nBzbFAQRvLmy).

  23. Georg Friedrich Knapp, The State Theory of Money, 4th ed. (London: Macmillan, 1924), 32.

  24. Ibid., 38–39.

  25. Alfred Mitchell-Innes, “The Credit Theory of Money,” Banking Law Journal, December–January 1914, 151–168.

  26. Martin, Money, 29.

  27. According to David Graeber, “What we call ‘money’ isn’t a ‘thing’ at all, it’s a way of comparing things mathematically, as proportions: of saying one of X is equivalent to six of Y. As such it is probably as old as human thought” (Debt: The First 5000 Years [Brooklyn, N.Y.: Melville House, 2011], 52).

  28. Bernard Lietaer, The Future of Money: Creating New Wealth, Work and a Wiser World (London: Century, 2001), 39.

  29. According to Knapp, “The metallist defines the unit of value as a given quantity of metal. … The chartalist defines the unit of value historically. It therefore becomes a notion which derives its meaning from a particular pay-community in which it finds itself” (State Theory of Money, 302).

  30. Marshall McLuhan and W. Terrence Gordon, Understand
ing Media: The Extensions of Man, critical ed. (Corte Madera, Calif.: Gingko, 2003), 179–195.

  31. This special property of money objects is illustrated graphically for gold in figure 7.1.

  32. Glyn Davies, A History of Money: From Ancient Times to the Present Day, 3d ed. (Cardiff: University of Wales Press, 2002), 44.

  33. Part of the problem is the “shut up and calculate” Copenhagen interpretation of quantum physics, which, like money, attempts to reduce the quantum world to hard number. See David Orrell, Truth or Beauty: Science and the Quest for Order (New Haven, Conn.: Yale University Press, 2012), 109–111.

  34. “Hold Funds Policy,” TD Canada Trust, www.tdcanadatrust.com/document/PDF/520866.pdf.

  35. Lietaer, Future of Money, 34.

  36. Herodotus, The Landmark Herodotus: The Histories, ed. Robert B. Strassler, trans. Andrea L. Purvis (New York: Anchor, 2009), 55.

  37. Including in the area of finance, as we found after doing a search. As far as we are aware, the theory we develop here is a novel one, but we are certainly not the first to make comparisons between money and quantum physics. The book that seemed to come closest to our approach is Charles Eisenstein, Sacred Economics: Money, Gift, and Society in the Age of Transition (Berkeley, Calif.: Evolver Editions, 2011). In an appendix called “Quantum Money and the Reserve Question,” Eisenstein notes “the similarity between fractional-reserve money and the superposition of states of a quantum particle,” in the sense that money can seem to exist in more than one place at the same time (454–455). He uses this as an argument in favor of fractional-reserve banking. He does not explicitly link this to the dualistic nature of money (e.g., as debt and credit) but notes that money eludes simple definitions and calls for a “multi-jective” approach to understanding it.