When I first read chapter 2 of David Graeber's book "Debt - the first five thousand years", I was blown away by the juxtaposition of anthropology and economics and the history of ideas. I still am. Now that I'm reading it a second time, I'm less convinced by his first main argument.
The chapter, "The Myth of Barter" takes Adam Smith and other early economists to task
for founding economics on the idea of the invention of money as an inevitable and necessary improvement to a pre-existing barter economy. The anthropological evidence, Graeber tells us, makes it likely that no such barter economy existed.
I'd like to criticise this argument. First, how serious is it really to the foundation of economics that the early economic authors were not anthropologically accurate? Second, I'd like to argue that we should consider barter in the forms that did exist in ancient cultures, as an end point in that very real and ever-present phenomenon of primitive economic life often referred to as gift exchange. Thirdly I'd like to point out that for everyday gift exchange to function in any culture, the participants must have been able to get a handle on one of the three great founding elements of money - its role as a unit of account. Gift exchange cultures, which are really just credit based cultures, didn't use a singular means of echange, nor did they have a singular store of value. Hence they didn't have money as understood by modern economists.
1.
Adam Smith wasn't just an economist. He was a humanities guy. His job required him to give courses on three main disciplines of the humanities - the political/economic perspective of human culture, the ethical perspective, and finally the religious perspective. Hi died before he could write a book on the religious dimension, but his two masterpieces clearly address the syllabus he worked to.
As such, he probably ought to have been more aware of anthropological thinking (though the academic subject of anthropology had not yet been created). I guess there's only so much one man can do. And no doubt he picked up on the barter story from book reading, or speaking to others who read books. Quite likely too, he operated in a time when the Western world's view of primitive cultures was quite superior. But we don't throw away the idea of democracy just because it was born in a culture which endorsed slavery. The ideas can transcend the context of their birth.
Anyway, how much of modern economics really does hinge on the existence of a barter culture? Wasn't economics for Smith really an analysis of those cultures where money had already made an appearance? Did Smith's argument need for there to pre-exist some barter cultures? No. At worst, then, Smith is an anthropologist of that subset of cultures where money as a concept had emerged. I guess we shouldn't be too unhappy with this already wide remit. The anthropologist of monetary cultures.
2.
Graeber's book gives you some wonderful examples of tibal cultural activity. He's widely read and exploits many of the founding anthropologists' ethnographies well for his argument. Graeber makes it clear that within small communities, they operated a credit based system of exchange, often wrapped in the terminology of gift exchange. These people kept mental accounts of who owed what to them, and to whom they owed. Graeber also points out that barter, where it did happen, happened in high octane meetings between rival tribes. Barter was part of the ritual of these exchanges. These exchanges were often political any symbolic exchanges, with a view to avoiding real life-threatening conflict. Not the kind of quotidian asset transfers we often think of when we think of barter. Indeed, he makes it clear that our notion of consumerism as a distinct cultural activity, separate from spiritual, political, sexual interaction, just wasn't a distinction primitive cultures made. Nevertheless, I think it is possible to characterise barter as the limit point of gift exchange in the presence of unquantifiably large credit risk. If you don't know much about these strangers, and if money hadn't been invented yet, then you'd quite possibly perform barters with them. That is to say, in modern financial/mathematical terminology, swaps with short duration and matching legs of approximately similar value. This minimises the effect of the uncertainty caused by you not being able to quantify the credit worthiness of the other. Credit makes more sense if transactions occur between you and the other regularly. You then get a handle on their credit worthiness.
3.
Graeber raises the question: how do you quantiy a favour? "One establishes a series of ranked categories of types of thing. Pigs and shoes may be considered objects of equivalent status; ... ; coral necklaces are quite another matter". These "spheres of exchange" are of course, primitive, heterogeneous units of account. In other words the unit of account is the singular limit of these spheres of exchange.
So I argue that you can rehabilitate Smith. He was the founding father of a particular kind of social science - the study of those cultures who'd unified their spheres of exchange into a singular unit; and who'd additionally beefed up the consequences of that peripheral state of gift exchange, namely gift exchange in the absence of a handle on credit. It should not be so surprising that a seemingly marginal and perhaps even questionable cultural activity can later become the centrepiece of another cultural form. Perhaps barter, that risky, sexually charged encounter with strangers, always on the verge of degeneration into violence, associated with dance rites, free love, nervous laughter, happening on the outskirts, physically and culturally, could have been the beginning of the anonymisation of exchange which heralded the modern age. If this is so, then most of the juice in Graeber's expose of the myth of barter in the foundations of economics gets diluted. Great book though - read it.
