Note: In chapter 2 and 3, I have used the original pagination of Innes, and excluded the new pagination of Wray
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THE ORIGINS OF MONEY OF ACCOUNTInnes acknowledges that his essays do not offer an explanation for the origins of the abstract money of account.7 However, without an alternative, commodity theory's conjecture that the origins of the money of account lie in the division of the valuable commodity into units that could be weighed and then given a numerical value cannot be dismissed so easily. Money of account is taken for granted in the commodity theory, 181 which assumes that the primeval market produces a transactions cost-efficient medium of exchange that becomes the standard of value and money of account. It is argued that coins evolved from the weighing of pieces of precious metal that were cut from bars and only later, after standardisation, counted. For example, the Babylonian shekel was originally not only an element in the unit of account, but also a bar of silver. However, as we shall see, there are both a priori and empirical grounds for reversing the causal direction. Money of account is logically anterior and historically prior to the market. Indeed, it must be said that Innes does appear to see the seriousness of the problem for his claim that a metallic standard was never the basis for money. Rather, he passes over the question of the standard of value's referent with the analogy that 'we divide, as it were, infinite credit and debt into arbitrary parts called a dollar or a pound, and long habit makes us think of these as something fixed and accurate ...' (Innes 1914: p. 155). His reference to measures of physical phenomena only serves to emphasise the lacuna. To be sure, ounces and feet are abstractions, but Innes doesn't pursue the question of whether 'infinite credit' is of the same order as, say, 'infinite weight' or 'infinite distance'. Merely to say that the unit of account is an abstraction does not in itself refute the notion that the unit originates in the 'natural' commodity, as Ricardo averred. As they stand, Innes's arguments do not constitute a robust challenge to the classical commodity theory of money. Keynes realised that if the Babylonian material, which represented the earliest known evidence of writing, could not provide an answer to the question of the 'historical' origins of money of account, then, it was unlikely to be decisively resolved.8 However, a stronger a priori case for the primacy of money of account - that is to say, of its 'logical' origins -can be made than the one put forward by Innes (Ingham 2000, 2002; see also Hicks, 1989; Hoover 1996; Aglietta and Orlean 1998). Furthermore, reasonably coherent historical and sociological arguments can be adduced in empirical support (Grierson 1977). In the first place, without making a number of implausible assumptions, it is difficult to envisage that an agreed money of account could emerge from myriad bilateral barter exchange ratios based upon subjective preferences, as the Mengerian commodity theory implies. One hundred goods, it should be noted, could yield 4,950 exchange rates (Davies 1994: 15). How could discrete barter exchange ratios of, say, 3 chickens to 1 duck, or 6 ducks to 1 chicken, and so on, produce a universally recognised unit of account? The conventional economic answer that a 'duck standard' would emerge 'spontaneously' involves a circular argument. A single 'duck standard' cannot be the equilibrium
price of ducks established by supply and demand because, in the absence of a money of account, ducks would continue to have a range of unstable exchange ratios. As opposed to discrete truck and barter, which produces myriad bilateral exchange ratios, a true market, which produces a single price for ducks, requires first and foremost a stable unit of account.9 As opposed to the commodity duck, the monetary duck in any duck standard, would be an abstract duck. Walras, the founder of modern economics' general equilibrium analysis, identified the theoretical problem over a century ago and introduced the 'auctioneer' and a 'numeraire' to get the trading started in his mathematical model of the market. Market exchange requires only a money of account. As the third-century BC Babylonians, eighteenth-century AD Bostonians, and countless others knew, money is essentially money accounting, which can be accompanied by payment in kind and/or myriad media of exchange and payment. (On eighteenth-century Boston's cashless monetary system, see Baxter 1945.) If it is implausible that market exchange, in itself, could produce the abstraction of a money of account, what is its origin? The nineteenth-century German historical school argued that the 'idea' of money is to be found in the scale of tariffs for the measurement of debts to be paid in compensation for injuries and damages laid down in institutions such as wergild ('worth-payment') (see Einzig 1966). The evidence from Germanic tribal societies post-dates Babylonian money of account and early coinage, but it may be argued that wergild-type institutions were basic to elementary tribal society. The numismatist Grierson has provided the most thorough analytical reworking of this conjecture (Grierson 1977). First, and unlike an orthodox Mengerian economic approach, he makes a sharp distinction between barter and money exchange. 'The parties in barter-exchange are comparing their individual and immediate needs, not values in the abstract' (Grierson 1977: p. 19, emphasis added). Second, Grierson implies a distinction between money in general and its specific forms. 'Behind the phenomenon of coin there is the phenomenon of money, the origins of which are not to be sought in the market but in a much earlier stage of communal development, when worth and wergild were interchangeable terms' (Grierson 1977: p. 33). He concedes that there is no direct evidence that wergild institutions predated the appearance of markets, but argues that the concept of moneysworth could not have been produced by the market. The conditions under which these laws were put together would appear to satisfy much better than the market mechanism, the prerequisites for the establishment of a monetary system. The tariffs for damages were established 183 in public assemblies, and ... Since what is laid down consists of evaluations of injuries, not evaluations of commodities, the conceptual difficulty of devising a common measure for appraising unrelated objects is avoided (Grierson 1977:20-21). I have suggested elsewhere that Grierson's hypothesis may be interpreted in a Durkheimian sociological framework in which money of account is a 'collective representation' for which the analogue is society itself (Ingham 1996a: 519-21).10 Wergild expressed two fundamental elements of social structure: the utilitarian and the moral evaluation of social roles and positions. The indemnity schemes of the wergild aimed to compensate for functional impairment, but also expressed society's normative order. The scale of fines and tariffs were related to both injuries and insults.l1 In other words, the analogue for value is not to be found in the costs of producing a 'natural' substance such as gold, as the early nineteenth-century positivist economists assumed, but failed to demonstrate. Nor can a scale of value, which is necessary for a money of account, be deduced from the subjective preferences that form the assumptions of modern neoclassical economic analysis. Money has its origins in debt, as Innes maintained. And primordial debt is a debt to society, where we must assume money, in the sense of abstract value, originated.12 Directory: books books -> The English Arrive in America books -> Active Vocabulary books -> Books we finished XIV books -> The theology of the balaam oracles: a pagan diviner and the word of god books -> The rhetoric of the father books -> Sra: Imagine It!, Themes, Taking a Stand, Ancient Civilizations Ecology, Great Expectations, Earth in Action, Art and Impact, Level 6 books -> You Can If You Try Unit 7 Nonfiction books -> How to Get the Most Out of books -> The tregenza family Download 1.48 Mb. Share with your friends:
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