The Origin of Money – 5: Money and the Classical World

Depiction of ritual sacrifice from the Parthenon

The First Global Economy

During the Bronze Age trade expanded across the eastern Mediterranean to such an extent that that some historians refer to this as “The first age of globalization.” The ancient palace civilizations achieved maturity—Egyptians, Babylonians, Assyrians, Hittites, Mycenaeans, Persians, Canaanites, and many others developed vast and complex trade and exchange networks with neighboring cultures large and small. Cargo ships plied the seas, rivers and canals, transporting goods from as far afield as India and the British isles. Yet this was still accomplished not through monetary exchange networks or banks, but rather through gift exchange carried out primarily by ruling elites. Rulers attempted to cultivate artificial family ties with other rulers, or sometimes literal ones through intermarriage (the exception being Egypt, which never intermarried), as Eric Cline explains in 1177BC: The Year Civilization Collapsed:

[The Amarna letters]…provide us with insights into trading and international connections in the time of Amenhotep III and Akhenaten during the mid fourteenth century B.C. It is apparent that much of the contract involved “gift giving” conducted at the very highest levels–from one king to another.…Another royal letter, from Akhenaten to Burna-Buriash II, the Kassite king of Babylon, includes a detailed list of the gifts that he has sent…Similar detailed letters with comparable long lists of objects, sometimes sent as part of a dowry accompanying a daughter and sometimes just sent as gifts, come from other kings…We should also note that the “messengers” referred to in these, and other, letters were often ministers, essentially sent as ambassadors, but were frequently also merchants, apparently serving double duty for both themselves and the king.

In these letters, the kings involved often referred to each other was relatives, calling one another “brother” or “father/son,” even though they were usually not actually related, thereby creating “trade partnerships. ” Anthropologists have noted that such efforts to create imaginary family relationships happen most frequently in preindustrial societies, specifically to solve the problem of trading when there are no kinship ties or state-supervised markets. It is not always clear what relationship merits the use of the term “brother,” as opposed to “father’ and ‘son,” but it usually seems to indicate equality in status or in age, with “father/son” being reserved to show respect..[1]

This “global sphere of trading” fell apart during the twelfth and thirteenth centuries B.C., during a period referred to by historians as the “Bronze Age Collapse” Societies all around the Mediterranean region became less complex and decentralized. Many different factors contributed to the collapse; so many that historians tend not to refer to a single cause, but rather a “perfect storm” of events which precipitated the collapse. Among them are:

-Climate change
-Environmental destruction
-Resource depletion (e.g. topsoil, timber)
-Volcanic eruptions
-Disease epidemics
-Military invasions of the so-called “Sea Peoples”

The Palace Economies of the Minoans and Mycenaeans faltered and disappeared. In their place, landed estates, often controlling large herds of livestock, became the new centers of power. The Dorian invaders came down from the north and colonized Greece, ushering in a tribal society ruled by an aristocratic warrior elite. This was an early regime of privatization as Michael Hudson describes:

From 1200 BC to about 750 BC in the Mediterranean you have a Dark Age. Apparently you had not only very bad weather around 1200 BC – maybe a small Ice Age and drought – but the weather and crop failures led to mass migrations and invasions. The palaces of Mycenaean Greece were burned and syllabic writing disappeared for nearly 500 years.

Then, when you have alphabetic writing emerging, the person whose title originally meant “local branch manager” of the palace workshop suddenly appears as the basileus, the ruler. But mostly you have landholding aristocracies holding the population in debt serfdom (like the Athenian hektimoroi, “sixth parters” liberated by Solon in 594 BC). It was much like the post-Soviet kleptocrats when Red Managers gave themselves control of their companies. When central power falls apart, local headmen take over. The dissolution of royal power led to privatization – including the privatization of credit, taking it and its rules out of royal hands. So Clean Slates stopped.[2]

Dark Age Greece

This is the culture that is depicted in the foundational tales of Western Literature—the Iliad and the Odyssey. The Greek warrior aristocracy was based around certain key principles:

1.) Absolute loyalty to one’s chief/ruler/king.
3.) Reciprocal gift exchange among aristocrats, especially upon parting.
1.) The sharing out of booty to warriors after the successful sack of a city or the defeat of one’s enemies.
2.) Ritual sacrifice to the gods, especially of oxen, and the partitioning out of roast meat to all adult male members of the tribe.

Greek oligarchs would commonly exchange “prestige goods” such as sacrificial tripods in a form of ceremonial gift exchange. The would also often exchange brides. Bride exchange, reciprocal gift giving among chieftains and distribution of booty to warriors in raids formed the basis for economic life in Dark-Age Greece. In these institutions, we see the same basic mechanisms at work in tribal societies studied by anthropologists today:

These three simple mechanisms for organising society in the absence of money-the interlocking institutions of booty distribution, reciprocal gift-exchange, and the distribution of the sacrifice-are far from unique to Dark Age Greece. Rather, modern research in anthropology and comparative history has shown them to be cypical of the practices of small-scale, tribal societies.

Of course, such pre-monetary social institutions have assumed many forms, reflecting the peculiar circumstances and beliefs of the peoples in question. But the anthropologists Maurice Bloch and Jonathan Parry have identified a widespread twofold classification. Comparative studies a similar pattern of two related but separate transactional orders: on the one hand, transactions concerned with the reproduction of the long-term social or cosmic order; on the other, a sphere’ of short-term transactions concerned with the arena of individual competition. The premonetary institutions of the Homeric world conform to the scheme.

On the one hand, there was the primeval institution of the sacrifice and the egalitarian distribution and communal consumption of its roast meat-a ritual expression of tribal solidarity before deity probably inherited from the most distant Indo-European past. This was the institution that governed the long-term transactional order. The other, there were the conventions of reciprocal gift-exchange and of booty distribution. These were the rules that governed the “short-term transactional order,” concerned not with cosmic order and harmony between the classes but with the more mundane matter of ensuring that the everyday business of primitive society-drinking and hunting when at peace; rape and pillage when at war-did not dissolve into chaos.[3]

The ritual sacrificial meal was particularly notable. Unlike the more hierarchical societies of the Near East, the sacrificial meal enforced a more egalitarian social order in which every individual member of the community had value in relation to their status. There was also the notion of debt to the gods and redistributive justice. Such rituals were under the control of the warrior aristocracy and were conducted in their estates, which also functioned as early temples. Meat was distributed on metal spits, called obols, and ownership of the spit was to affirm one’s status as an adult male member of the tribe:

…the most important redistributive activity was…a highly ritualized communal sacrificial meal. Conducted in honor of a commonly-worshiped divinity, the tradition consisted of a public killing, roasting, and eating of sacrificial animals. The objective of the ritual was to establish solidarity and social cohesion among the members of the community.

Perhaps the most prominent feature of the communal sacrificial model was its egalitarian emphasis, manifest in “just” and “equal” distribution of roasted bull’s meat among the ritual participants…While the ritual employed the principles of collective participation (koinōnia) and “equal distribution to all”, one’s equal share corresponded to one’s social status…The just shares allocated to ritual participants differed not only in quantity, but in quality as well. The more honored parts of the sacrificial animal, such as the limbs, were customarily allotted to religious officials…

…Purporting to allocate just and equal shares to the members of the not-so-equal community, the all-inclusive rituals of communal sacrificial meals aimed to create an appearance of harmonious and consensual social relations, thus concealing the underlying reality of social hierarchies and economic inequalities…

To service the ritual, sacrificial offerings were made, mostly in oxen, whereby religious officials stipulated the precise quality, type and quantity of cattle to be contributed, thereby establishing the first standardized unit of account guaranteed by the authorities… [4]

This “ox-unit standard” resembled the silver standard used in Mesopotamia insofar as the religious authorities determined the “standard of value” by which everything else was measured. This was the origin of pricing systems – ranking values of disparate things against each other, as David Graeber points out:

Why were cattle so often used as money? The German historian Bernard Laum long ago pointed out that in Homer, when people measure the value of a ship or suit of armor, they always measure it in oxen-even though when they actually exchange things, they never pay for anything in oxen. It is hard to escape the conclusion that this was because an ox was what one of­fered the gods in sacrifice. Hence they represented absolute value. From Sumer to Classical Greece, silver and gold were dedicated as offerings in temples. Everywhere, money seems to have emerged from the thing most appropriate for giving to the gods. [5]

Meat-sharing is an ancient concept which goes back to the hunter-gatherer origins of humanity (and earlier). The offering of specially-selected parts of the sacrificial animal to elites is reminiscent of the “thigh-eating chiefs” of the Kachin hill tribes in Burma studied by Edmund Leach, and the role meat distribution played in their society. Such rituals both reaffirmed the tribe’s debts to their ancestral spirits, and reinforced the status hierarchy in the material world. In these cases, the sacrifice indicated a debt was owed to the spiritual world of the gods and ancestors:

The animal sacrifices of the Kachin, called nat galaw, or “spirit making,” were built on the age-old principle of reciprocal gift-giving. One sacrificed to a nat (a nature spirit) to put him in one’s debt, expecting him to return the favor. The nat took only the nsa, “breath or essence,” from the sacrificial animal, leaving the meat to be shared by humans at a feast…When the Kachin were in rank mode, the ritual required an additional step: one hind leg from each animal sacrificed was given to the hereditary chief. This was a form of tribute, justified by the chief’s genealogical relationship to Madai (a highly-ranked nat). The high nat partook of the essence of the animal, while the chief’s family ate the meat. As some Kachin expressed it, they were ruled by “thigh-eating chiefs.” [6]

It’s worth pointing out once again that distinction between religion and the state which is common in our own modern cultures was nonexistent in past societies. Societies were bound by concepts like kinship, tribal affiliation, geographical origin, language, custom, and religion. The impersonal nation-state which binds strangers together through bureaucracy and the rule of law is an imaginary concept which was yet unknown.

Due to the fact that possession of the sacrificial spits–the oboloi–affirmed one’s membership in the tribe, they acquired a certain value as currency. They were commonly placed in tombs and acquired a symbolic value in exchange apart from their metal content:

In contrast to most ancient near-eastern societies, the Greek polis had retained sacrificial ritual that embodied the principle of communal egalitarian distribution. The fact that the Greek word for this distribution (moira) came to mean ‘fate’ indicates the importance of the distributional imperative. Citizenship was marked by participation in communal sacrifice, which also provided a model for the egalitarian distribution of metallic wealth in standardised pieces.

Probably the spits were distributed with meat on them. They were dedicated in sanctuaries and placed in tombs, because they had communal prestige deriving from their role in the communally central ritual of sacrificial distribution. It was because they had this communal prestige that they could work as proto-money. Greek money (in contrast to say Babylonian silver) was not just a generally exchangeable commodity: rather, it had a conventional value that depended on communal confidence (and in that sense was a kind of IOU), and so prefigured modern money, which is merely transferable credit. [7]

From the spits by which sacrificial meat was distributed, it appears that bronze, copper and iron ingots determined by weights were utilized as a form of proto-currency as early as 1100 BC in Greek culture. Sparta maintained its currency in the form of metal ingots and never made the transition to coinage in order to preserve the hierarchical non-monetarized relations of its society: “Plutarch states the Spartans had an iron obol of four coppers. They retained the cumbersome and impractical bars rather than proper coins to discourage the pursuit of wealth.”[8] The use of money would have engendered unacceptable levels of inequality and undermined the esprit d’corps required for Sparta’s distinctive warrior society to function.

The Rise of the Greek Polis

As the Dark Ages waned and the Classical World dawned, a new form of social order emerged: the Greek polis, a self-governing community of landholders centered on a city-state. Victor Davis-Hanson, in his book,The Other Greeks, attributes this development primarily to Greek farming practices.

The Greeks had developed a highly efficient method of mixed farming centered around the cultivation of barley, grapes, and olives, supplemented with gardening and animal husbandry (especially of sheep and goats). Grapes and olives were well-suited to the rocky soil of Greece, and allowed farmers to produce a consistent surplus. While large landowners grew cereals (mainly barley) on level, fertile land using many slaves, the hillsides were terraced and intensively cultivated and irrigated by small landowners in order to grow grapes and olives in small plots of 10 to 20 acres using 1 or 2 slaves.

Over time, this marginal land became highly productive, and the independent small landowners became the center of the political life rather than aristocrats with large estates. This led to a much more egalitarian social structure. Small farms fed by rainfall meant that key resources could not be put under the centralized control of a bureaucratic elite, unlike the irrigation agriculture systems of the Near East. The power of the old warrior aristocracies, with their large herds, landed estates, raiding parties, gift exchange, and ancestral temples, gave way to a different social order–the polis. The relative equality in wealth led these middling yeoman farmers (the ‘Other Greeks’) to create a political structure which protected their common interests–i.e. democracy, where leaders were chosen from among the general (male) population, and key decisions were made by citizens. Rather than justice being meted out by a semi-divine king, justice would be dispensed by an assembly of the people, with fines assessed according to the unit of account and paid with the common currency of the polis:

How would the polis affirm the equal worth of its members? It took the idea of sacrificial meat distribution and extended it, distributing standardized lumps of metal in place of the spits with roast meat on them. These metallic pieces could be used in exchange, much as the handfuls of spits were. As with the spits, the value would derive from the communal confidence of members of the polis, and would circulate as token money with values determined by the civic body.

At first, the pieces of metal distributed were the iron spits utilized for the roasting of the sacrificial animals. The production of such spits began on a large scale during the late eighth century BC (or around 700 BC) leading to their mass production during the entire seventh century BC. The roasting spits continued to circulate, though in smaller quantities, until the first half of the sixth century BC. During this period, the roasting spits (which were destined for communal distribution) came to be standardized in size, reflecting the old sacrificial tradition of “equal portions to all”.

Gradually then, the distribution of roasting spits came to be replaced by the allotment of coinage, which likewise came to be standardized. It is no wonder, then, that obolos, a sixth century BC silver Greek coin, derived its name from obelos meaning an iron spit. Another sixth century BC Greek coin of a larger denomination, drachma, originally meant a handful of six spits…the earliest Greek and Lydian coins did not begin as media of exchange in commerce, but functioned “in the same fashion as the portion of food distributed at the sacred meal”…coinage was distributed by the polis to its male citizens. It has also been established that some of the earliest monetary “transactions” were carried out among unequal social partners, and included sexual “exchange” between men and women…the use of coinage in payment for goods evolved out of its use in payment for personal services.

The administration of distributive justice is…key to understanding the origins and functions of early Greek money and coinage…The unequal distribution of wealth prompted a “decline of faith in the reliability of divine justice”, thereby creating a new social problem of instituting “a political means of payment controlled by humans so that they would not have to rely on the uncertain rewards of the gods”

…Introduced by the city-state as a unit of account for expressing the worth of its male citizens, the purpose of coinage was to resolve the crisis of distributive justice…Rather than facilitate trade, whether foreign or domestic, the initial purpose of coinage was to “(re)establish social justice within the polis”. In contrast to the uncertainty associated with divine justice, coinage could compensate virtue “immediately and precisely”, and payment in “stamped tokens” came to be associated with “just recompense”. Possession of coinage came to signify the acceptance of the civic authority of the polis.

In establishing its own model of distributive justice, the emerging authority of the polis adopted the idealized model of communal egalitarian distribution, but substituted durable metal objects for perishable pieces of meat…The emerging authority of the polis, then, attempted to dismantle the aristocratic model of power by distributing metal pieces to those who accepted the political authority of the polis instead. The distribution of metal pieces into the hands of the citizens would subvert the aristocracy’s monopoly over the use of (precious) metal in the closed sphere of aristocratic gift-giving.[10]

The first coins were issued by civic temples, which functioned as the first treasuries. The public temple usurped the role of the landholder’s private estate and ancestral temple and created a radically new egalitarian social structure which facilitated the use of money. They also reaffirm the link between money and the sacred:

…the temple-state was at the center of the polis and its priests mediated the relationship between subjects and deities. Deities were owed sacrifices and the temples who received these goods and services as sacrifices eventually came to replace the cooked flesh of bulls–which was originally given as a gift for contributing to the temple–with coins made of electrum (a natural gold and silver alloy). Coins essentially represented a receipt that subjects had contributed to the temple…Thus…the origins of money can be found in religious sacrifice and recompense mediated by priestly authorities.[11]

Indeed, contributions to religious societies have been offered as another source of the origins of money, going back to the work of Bernard Laum in the 1920’s:

Bernard Laum…traced money back to the contributions of food and other commodities to guild organisations of a religious character. In his view, their root is to be found in the communal sacrifice. Members of temple brotherhoods were obliged to make ceremonial contributions or kindred payments to the temples or other redistributive households. Laum interpreted these payments as early food money, for whose value the monetary metals later were substituted. But although food contributions bore an administered price in the sense of being standardized in amount, it would be a quantum leap to deem them ‘money.’ Along with injury fines these formalities represent personal liabilities, mainly for restitution or, in time, tax assessment, but not yet the freely negotiated market exchange of commodities.

The media for tax payments would seem to be the bridge concept. The German word for money, Geld, derives from Gothic gild, ‘tax,’ but an early connection to paying fines is indicated by Old Icelandic gjald, ‘recompense, punishment, payment’, and Old English gield, ‘substitute, indemnity, sacrifice’. The idea combines the ethic of mutual aid with the idea of a standardized equality of contributions.

In the first instance religious institutions would have sanctified these contributions and given them the connotation of fixed obligatory payments. Such payments to the community’s corporate bodies appear to have been transformed into tributary taxation when cities were conquered by imperial overlords and turned these institutions into collection agents. This inverted the traditional relationship of voluntary gift givers or sacrificers gaining status by their contributions reflecting openhandedness and wealth. As taxes were coercive levies, their payers lost status by submitting to a tributary position. [12]

The issuance of an official currency stamped with the government’s “seal of approval” (e.g. Lydian lion, Athenian owl, Corinthian horse) was an activity that affirmed the identity and independence of the city. As historians Austin and Vidal-Naquet put it, “In the history of Greek cities coinage was always first and foremost a civic emblem. To strike coins with the badge of the city was to proclaim one’s political independence.”

These coins came to acquire value throughout the Greek world, facilitating trading and markets. Their value derived from the faith placed in the polis, the community of equals. In turn, the issuance of money and the rise of markets came to influence the political development of Greek society:

Besides its egalitarian effects, coined money also promoted individual autonomy, which would tend to dissolve the vertical lines of patronage (based on reciprocity) that we find for instance in Homer (e.g. Odysseus and Eumaios). This was, I suspect, a precondition for democracy, which at Athens arrived a mere generation or so after coinage.

Moreover, control of the central supply of money was (in contrast to now) visible and simple. It was usurped first in various cities by the ‘tyrants’ and then, at Athens, by the people (demos), and remained essential to democracy. Many of the numerous city-states minted their own coinage, and so had this potential for democracy. But Athens was a special case, not least because (almost uniquely) it had its own supplies of silver, and then came in the fifth century to control the money supply of most of the Aegean Sea.

Coinage arrived in Attica later than in the cities of the eastern Aegean, where philosophy originated in the early sixth century BCE. Athens was culturally insignificant until the late sixth century BCE, by which time it finally had coinage en masse and moreover had begun to extract much silver from the mines at Laurium in south-east Attica. In a newly monetised world this silver (together with gold and silver from Thrace) was crucial for the development of festivals and of temples, for the origin and splendour of drama, for the building of a fleet, and eventually for Athens as a cultural center to which (as we see in the dialogues of Plato) philosophers were attracted from various parts of the Greek world.[13]

This strongly affirms the idea that money is a creation of the state, or whatever we wish to term the collective entity to which everyone owes a social obligation which exists in every society over band level (often referred to as the ‘sovereign’ by monetary theorists). Monetary theorists point out, for example, that the prime way for a fledgling political entity such as the Islamic State (IS) to define itself as a “legitimate” government is to issue its own “official” currency which is legal tender in the areas under its control. It then assesses taxes in this unit of account. The unit of account must be established by a supra-market entity before monetization of the economy and internal trading can take place.

Coinage and Metals

It is well-known that the first “official” stamped coins (in the West) were minted in Lydia and Ionia on the coast of present-day Turkey. Metal deposits of electrum, an alloy of gold and silver, were under the control of the royal household. This substance was issued in lumps by the government with stamps certifying the government’s authority. It was illegal for any other entity to issue these stamped coins.

It is often stated that what gave the coins their value was the certification by the state of their metal content. Because they were issued by an “official” government mint, it is claimed, a trader or merchant could be assured that he or she was getting the “correct” amount of metal in the coin without the costly and time-consuming process of weighing the coins. He could be assured by the “seal of approval” that coins did indeed contain the quantity of metal that they desired. In this view, issuing standardized “official” lumps of metal greased the wheels of commerce which had existed long before then, but were encumbered by uncertainty. Put another way, “coins were simply the form in which precious metal traveled.”

This fits with the “metallist” doctrine that markets are spontaneous and self-regulating, and that issuing currency is merely a ‘convenience’ on the part of governments. Even without such issuance, the argument goes, “free” markets would muddle along just fine, just with the added inconvenience of having to weigh out the gold and silver everyone is exchanging goods for. Furthermore, changing the “official” metal content in any way is “debasing” the currency, and should never, ever be done, because the amount of metal in the coin is fixed for all time, and it is this metal which gives the coin its value. Furthermore, paper money is just a promise to redeem a certain amount of precious metal in some form.

The problem with this is that throughout history, there has been no consistent metallic standard for coins. While later Lydian coins eventually became standardized in weight and composition, this was more for convenience of manufacture rather than adherence to some sort of standard (defined by whom?). The early coins were amalgams of gold and silver, with no way of determining the proportion of each:

Evidently, the value of the earliest coins could not derive from their metal component: the earliest Lydian coins were made of electrum, a natural alloy of gold and silver, the internal composition of which is highly variable by nature. This means that a coin’s weight, purity and fineness could not be standardized…the final choice of silver as the minting metal for coinage was a political decision and had little to do with the intrinsic properties of the metal…

Given the association of gold with the old aristocracy, and the crisis of redistribution as manifest by unequal distribution of metallic wealth (most importantly, gold and gold artifacts), the polis chose silver as the minting metal, and silver coinage aimed to represent “the community of citizens” who were all equal as they were made of “the same noble substance”.

Rather, it appears that the nominal exchange value of metal coins was set by governments, and always has been. This value was assessed according to the prevailing unit of account. Coins circulated at a value higher than their commodity value, otherwise they would simply have been melted down. In fact, this has happened throughout history when the commodity value of the coin has risen above its nominal value. The commodity value of the metal functions as a “floor” underneath the value of a coin–a level beneath which it will not fall, encouraging its use.

The reason we tend to think that precious metal is what gave the coins value is because coins are what have survived. They are what sit in museums and what are found by the thousands at archaeological sites. Meanwhile, the systems of credit clearing, taxation, and establishment of monetary value by state authorities have long since vanished. So we mistakenly assume that people were exchanging coins for their metal content, despite the fact coins have a dizzying array of metal quantities and standards throughout history, often even in the same time period and geographic location, as Alfred Mitchell-Innes writes:

…throughout the whole range of history, not only is there no evidence of the existence of a metallic standard of value to which the commercial monetary denomination, the “money of account” as it is usually called, corresponds, but there is overwhelming evidence that there never was a monetary unit which depended on the value of coin or on a weight of metal; that there never was, until quite modern days, any fixed relationship between the monetary unit and any metal; that, in fact, there never was such a thing as a metallic standard of value…

The earliest known coins of the western world are those of ancient Greece, the oldest of which, belonging to the settlements on the coast of Asia Minor, date from the sixth or seventh centuries B. C. Some are of gold, some of silver, others are of bronze, while the oldest of all are of an alloy of the gold and silver, known as electrum. So numerous are the variations in size and weight of these coins that hardly any two are alike, and none bear any indication of value. Many learned writers…have essayed to classify these coins so as to discover the standard of value of the different Greek States; but the system adopted by each is different; the weights given by them are merely the mean weight calculated from a number of coins, the weights of which more or less approximate to that mean; and there are many coins which cannot be made to fit into any of the systems, while the weights of the supposed fractional coins do not correspond to those of the units in the system to which they are held to belong.

As to the electrum coins, which are the oldest coins known to us, their composition varies in the most extraordinary way. While some contain more than 60 per cent of gold, others known to be of the same origin contain more than 60 per cent of silver, and between these extremes, there is every degree of alloy, so that they could not possibly have a fixed intrinsic value. All writers are agreed that the bronze coins of ancient Greece are tokens, the value of which does not depend on their weight. All that is definitely known is that, while the various Greek States used the same money denominations, stater, drachma, etc., the value of these units differed greatly in different States, and their relative value was not constant—in modern parlance the exchange between the different States varied at different periods. There is, in fact, no historical evidence in ancient Greece on which a theory of a metallic standard can be based…[15]

Coinage and Mercenaries

It is thought that minting coins eventually evolved into a way for the “state” (i.e. the  sovereign) to procure the resources it needed, and as a way to transfer private goods and services to itself as required.

One of the biggest requirements was paying for professional soldiers in place of the landholding citizen-soldier to facilitate external military conquest. These soldiers were transient, so a form of portable, anonymous wealth was needed. It furthermore appears that sex was one of the first services on offer using coins—women would work in brothels of Sardis to earn money for their dowry– with other services soon following in its wake (mercenaries and prostitutes may tie as the world’s oldest professions). The earliest “free” markets to spring up in coin appear to be for the slaves produced by such conquest.

The way it worked was this: The ruling class required mercenaries, and since they controlled the metal deposits, they issued lumps of metal stamped with the ruler’s insignia, signifying their “official” capacity. They then demanded these coins back from producers, and the only way to get their hands on them was to sell something to soldiers, allowing the soldiers buy the things they wanted and needed from the conquered population. Tim Johnson writes:

Around 4,000 years ago, people started making ornaments out of electrum (an alloy of gold and silver), copper and gold, metals found naturally (i.e. without processing) in nature. Metals have an almost unique, natural, physical property; they reflect light. The only other material that stone-age humans would have come across that reflected light would have been water, so to these people gold would appear to combine the essence of both water and the sun, the basis of life.

Imagine the awe that humans would have felt the first time they spotted a nugget of gold sparkling in a river bed, here was an object that seemed to captured and store life-giving sunlight, the ‘tears of the Sun’ as the Incas said. In the medieval period, European alchemists believed that metals were produced by some mechanism involving rays from different ‘planets’: gold from the Sun, silver from the Moon, mercury from Mercury, copper from Venus, iron from Mars, tin from Jupiter and lead from Saturn.

In ancient Babylon, Egypt and Greece, temples became associated with stores of metals, gold for the Greeks, silver for the Babylonians and copper for the Egyptians. It seems that these metals had developed a religious significance and become important as temple offerings. Consequently followers of the religion would look to acquire the metal, to enable them to make an offering, and so the metal became the commodity in the most universal demand. Athens treasury was in the Temple of Athena, and Jesus cast the money-lenders, exchanging worldly Roman money for divine shekels, out of the Temple.

The earliest tokens used as ‘money’ were not specific weights of a certain metal but roughly cut pieces of metal with an official stamp on them – monopoly money as it were. The emergence of money, in the sense of coins, in Greece coincides with the emergence of mercenary troops, the term ‘soldier’ is derived from the word for a Roman gold coin, solidus. A simple economic model developed, states paid soldiers in gold, who then spent it in the community. The government then recovered the gold by taxing the merchants and innkeepers that the soldiers had paid for food and lodgings.

This model would survive and drive colonialism until the modern age. A power, such as Alexander’s Greece, Imperial Rome, Napoleonic France or Industrial Britain, would take control of a region through force of arms. They would then demand tax from the conquered nation, which would have to be paid in currency specified by the coloniser. The conquered nation could only obtain the currency by exchanging their produce for the specified currency…

Why magic? ⇔ Why gold? (Magic, Maths and Money)

David Graeber describes this as a “military-coinage-slavery” complex, and sees this as a defining feature of the Axial Age. With coinage, slavery becomes a much greater factor in the economy of the Classical world than it ever was in the ancient Near East (inverting the “conventional” view of history as a contest between the “freedom” of the Classical World versus “Oriental Despotism”).

This strongly fits with the idea that supplanting the traditional relations of reciprocity, redistribution and householding with impersonal markets mediated by money was not a spontaneous development based on human instincts to “truck, barter and exchange,” but a top-down project facilitated by ruling elites. All of this is tied to the emergence of inequality and class-based society rather than freedom and egalitarianism. Markets did not emerge out of simple barter. Rather barter occurs after organic social relations have been dismantled and monetized, and the quantity of money becomes curtailed, such as by economic collapse.

The use of coinage was spread by Greek mercenaries throughout the Mediterranean world and beyond. Although coinage spread east to the Persian empire, it appears that older credit/debit systems and householding continued to prevail as the dominant economic paradigm. That changed with the conquest of the Persian Empire by Alexander the Great. Alexander melted down Persian gold and silver and used them to pay his troops. This spread both Hellenic culture and markets throughout the East. Greek silver and coins would find their way as far east as China:

Although silver, by becoming a medium of exchange, must have acquired a value higher than its intrinsic value as a not very useful commodity, the Babylonians did not invent anything like modern coinage, which has…a value in exchange even further above its intrinsic value as metal. Even after the people of Asia Minor had invented coins and they had been adopted by the Greek world, the Babylonians still preferred to measure silver by weight, under the illusion no doubt that that mattered! It was not until Alexander the Great conquered the region that coins were commonly used. It seems quite likely that in the area which was the heartland of the great Persian Empire, documentary credits were used in preference to physical silver.

Was the silver merely stored as a reserve, just as in the modern era gold has been accumulated in the Bank of England and in Fort Knox in the USA? Alexander certainly found vast hoards of gold and silver in the palaces and temples of Persia, and the Greeks thought it was odd it had just been stored…The Greeks probably did not realise that the Babylonians had found a convenient way of monetising precious metals, and had minimised the expensive and risky movement of precious metals by the use of an accounting system.

But with the conquest came no doubt the breakdown of the legal system, together with its religious backing, on which the documentary credits were founded. Alexander coined (monetised) the gold and silver he found, no doubt to pay his soldiers who would have had little use for documentary credits issued by foreign merchants or strange temples. It appears that trade increased dramatically between the nations in the eastern part of Alexander’s empire after the monetisation by coining of the precious metals he found. This and other experience suggests that coins which contain a high proportion of the precious metals did facilitate foreign trade, even though they are unnecessary in a more parochial society. Modern communication systems have made it possible to use documentary credits worldwide, and the case for coins made of precious metals hardly now exists.[16]

This is the “state theory” of money creation. Jack Goody argued that the state made war and war made the state. But we can update that to say that the state made money, and money made markets, and markets are what allowed for the bureaucratic state to form. The state, by issuing currency, could transfer “private” resources to itself via taxation. It could also hire expertise, at first in war, and later in technocratic management. Issuing currency money gave the state the power to transfer resources to itself and pay for armies. This paper describes the process in more detail:

A stylised story based upon the use of stamped metal might go as follows; a ruler might decide what she or he desired, for example, palaces, amphitheatres and an army of conquest. She or he could utilise their monopoly power over the monetary system to obtain what they desired.

They would first define the unit of account and then decide upon the money things acceptable in payment of debts denominated in this unit, say, stamped metal discs clearly marked with her or his head. The disc may contain precious metal. This precious metal content (if any) would be decided upon by the state (the mint standard). The use of precious metal may help prevent counterfeiting and raise the prestige of the issuer but the intrinsic value of the coins provided only a floor value for the currency. The nominal value would be higher and determined by decree.

She or he then imposed a tax on her or his subjects denominated in its chosen standard, payable by the surrender of the stamped discs. The ruler decided the nominal value of the coins and how many each person must pay to satisfy their tax bill. This process gave the coins value. They were tokens showing the holder had a credit on the state. They were really ‘tax credits’.

The ruler could now spend these tokens on whatever she or he wished as long as it was available in her or his own domain –or ‘monetary space.’ The private sector suppliers of goods accepted the tokens, not because they were made of precious metal but rather because the population needed them to pay taxes. The rulers then paid their soldiers with the stamped metal discs and the soldiers, in turn, were able to go to the villages and buy whatever they wished, provided of course it was available! The populace sold the soldiers real goods to obtain the discs to meet tax liabilities. Clearly, the empress or emperor had to spend before she or he could collect. A private agent minting discs with the ruler’s head on without her or his permission would soon be put to the sword. It may appear that the ruler needed to tax before spending but this is an illusion![17]

Money needs to be spent before it can be collected. It is not something “out there” that the government needs to procure from the “private” sector. Rather, it is a social technology which is issued by the government, and given value by collective confidence in the ruling body ,and its ability to make payments, redistribute, and collect taxes and fines. It is then transferred hand-to-hand, facilitating trading among unrelated strangers. How much of this was ‘planned’ and how much accidental is a matter of speculation.

The Emergence of Markets

As Greek society became increasingly monetized, traditional social obligations were transformed into money relationships. The public spaces of the Greek polis, where debate was conducted, started to double as the place where monetary exchanges took place: the market, such as the famous Agora in Athens. Over time, every Greek polis would come to possess its own market along with its own mint. David Graeber describes the transformation:

The world of the Homeric epics is one dominated by heroic warriors who are disdainful of trade. Money existed, but it was not used to buy anything; important men lived their lives in pursuit of honor, which took material form in followers and treasure. Treasures were given as gifts, awarded as prizes, carried off as loot.

All this was to change dramatically when commercial markets began to develop two hundred years later. Greek coinage seem to have been first used mainly to pay soldiers, as well as to pay fines and fees and payments made to and by the government, but by about 6oo BC, just about every Greek city-state was producing its own coins as a mark of civic independence. It did not take long, though, before coins were in common use in everyday transactions. By the fifth century, in Greek cities, the agora, the place of public debate and communal assembly, also doubled as a marketplace.[18]

As city-states minted money, the traditional social obligations of tribal society were now transformed into very different social obligations mediated by the new invention of money:

Everywhere, traditional social obligations were transformed into financial relationships. In Athens, traditional agricultural sharecroppers were converted into contractual tenants paying money rents. The so-called “liturgies”-the ancient, civic obligations of the thousand wealthiest inhabitants of the city to provide public services ranging from choruses for the theatre to ships for the navy-were now assessed in financial terms. By the last quarter of the fifth century BC, not only military stipends, public and private wages, rents and commodity prices, but also social payments such as dowries, regularly appear as sums of cash. The city states of classical Greece had become the first monetary societies. p. 62

Several characteristics of Greek society helped foster the development of money and markets.

As we’ve seen earlier, Greek diversified farming practices ensured that small farmers were relatively equal during the Dark Ages. The mainland of Greece is rocky and mountainous, preventing the large-scale plantations so common in later Roman Italy and North Africa. This is in contrast to the Near Eastern cultures where all land was owned by the gods/potentates, and administered by palaces and temple bureaucracies. Unrelated people had to deal with one another on more-or-less equal terms.

As we saw last time, in Greek culture, writing and numeracy were democratized. The alphabet, transmitted through the Phoenicians, allowed reading and writing to be easily learned and done by the average person, rather than an priesthood which kept such administrative skills to themselves and transmitted them only through esoteric channels. The departure from exclusively oral communication meant that myths gave way to recorded history, causing a questioning of old social forms.

The Greeks were geographically separated, yet there was a shared conception of what it meant to be Greek. The Greek peoples were scattered across hundreds of islands in the Aegean Sea, the Grecian mainland, the coast of Asia minor, and numerous colonies throughout the Mediterranean (“like frogs around a pond,” in Plato’s famous phrase). This alone would require trading. Greek culture was intimately tied with the ability to cultivate olives, and the ability to speak the Greek language (others’ tongues were just gibberish–“bar-bar-bar,” i.e. barbarians).

So we have decentralization, egalitarianism, individualism, and yet shared cultural notions and concepts. This created a need for trade, but without the necessity of mediation by a centralized governing bureaucracy as seen in Near Eastern redistributive economies. Several other distinct aspects of Greek culture and thought also contributed to the development of abstract, impersonal money and markets.

The first was the concept of a universal standard of value derived from the sacrificial feast, as Felix Martin describes:

…the idea of the equal worth of every member of the tribe was a social constant: a standard against which social value could be measured. At the heart of Greek society, in other words, was nothing other than a nascent concept of universal value and a standard against which to measure it, pret-a-porter.

Here was an answer to the question begged by the new perspective on society and the economy. Where the new understanding of physical reality had man, the observer of an objective universe, the new understanding of the social reality had the idea of the self, separate from society, an objective entity consisting of relationships measurable in a standard unit on the universal scale of economic value. It was a critical conceptual development-the missing link, on the intellectual level, in the invention of money. p. 59

Mesopotamia had for millennia possessed one of the three components of money-a system of accounting, based upon its discoveries of writing and numeracy. But the immense sophistiction of Mesopotamia’s bureaucratic, command economy had no need of any universal concept of economic value. It required and had perfected a variety of limited-purpose concepts of value, each with its respective standard. It therefore did not develop the first component of money: a unit of abstract, universally applicable, economic value.

Dark Age Greece, on the other hand, had a primitive concept of universal value and a standard by which to measure it. But the Greek Dark Ages knew neither literacy nor mimeracy, let alone a system of accounting. They had, in nascent form, the first component of money, but lacked the second. Neither civilisation had all the ingredients for money on its own.

But when the ultra-modem technologies of the East-literacy, numeracy, and accounting-were combined with the idea of a universal scale of value incubated in the barbaric West, the conceptual preconditions for money were at last in place…

This spread of money’s first two components-the idea of a universally applicable unit of value and the practice of keeping accounts in it-reinforced the development of the third: the principle of decentralised negotiability. The new idea of universal economic value made possible the offsetting of obligations without reference to a centralised authority. And the new idea of an objective economic space created the confidence that this possibility would exist indefinitely.

Markets require people to be able to negotiate a sale or agree a wage on their own, instead of feeding their preferences into a central authority in order to receive back a directive on how to act. But successful negotiation requires a common language-a shared idea of what words mean. For markets to function there needs to be a shared concept of value and standardised units in which to measure it. Not a shared idea of what particular goods or services are worth-that is where the haggling comes in-but a shared unit of economic value so that the haggling can take place at all. Without general agreement on what a dollar is, we could no more haggle in the marketplace over prices in dollars than we can talk to the birds and the bees. pp. 61-62


Other ideas that were unique to Greek society included the idea that the abstract was more important than the real, derived from philosophy, and the absolute isolation of the individual from one’s close kin, as seen in Greek tragedies such as Oedipus.

There is also evidence that the adoption of money was critical to the development Greek ideas about democratic political governance and scientific thought, as Tim Johnson explains in this excellent blog post (emphasis mine):

Greek culture that emerged around 600 BCE became known for being distinctive in its attitudes to politics and science. Greek science developed a non-mythical cosmology. The central idea emerged in Miletus, in Anatolia, and was apeiron (‘without limit’), something boundless, homogenous, eternal and abstract yet it held and motivated all things. Simultaneously, across the Aegean in Athens, Greek ideas of democracy were codified.

The standard explanations used to argue that the non-mythical cosmology originated in the polis where citizens were equal and ruled by an impersonal law: democracy generates science. This account did not acknowledge the temporal simultaneity of the origins of the ideas but there geographical separation. There needed to be something that preceded democracy and science common to both Athens and Miletus.

A more empirical explanation for origin of the distinctive nature of Greek politics and science lies in the Greek adoption of money in everyday use. Money can be seen as a prototype for the apeiron. Money is ‘fungible’, meaning one money-token is indistinguishable from any other, it is an empty signifier, like a word used in everyday language. The impersonality of money means that it is universal and makes no distinctions; it is used by rich and poor uniting opposites. There is a discrepancy between the value of money and its commodity value because money an abstract concept signified by a concrete token. Because it is abstracted, unlike any substance, money is unlimited. It has the power to transform objects, being able to turn wheat into wine in the market. Together, these properties enable money to perform multiple functions simultaneously. It is used to meet social obligations, such as tribute, legal compensation, and is the dominant means of conducting exchange; it stores value and is the unit of account. Money’s myriad uses means that it becomes a universal aim of all members of the community using it.

Money centralised social power in a single, abstract and impersonal entity. In monetised, Greek, economies personal power arose from the possession of impersonal and non-substantial money. The impersonality of Greek money nurtured the concept of equality, which is the foundation of democracy. The Greek word nomos, associated with ‘law’, is the root of the Greek word for money, nomisma. When combined with ‘auto’ – self – it gives autonomy, the idea that people can govern themselves and out of it, the concept of the individual emerges.

The foundations of Athenian democracy where laid by Solon (c. 638‒558) when he instituted several legal reforms. These sought to address instability created by conflicts in society caused by growing inequality created by the financialisation of society. Solon’s reforms solved the problems by substituting judicial violence with fines, something that was only possible because money was widely used. In the process, justice was depersonalised so that hostility between people was replaced by an impersonal quantification between an injury and its compensation. While money was disruptive of society it was also integral to Solon’s reforms that created a political system in which all citizens were equal.

Greek’s [sic] highlighted how their culture was distinctive from that of their neighbours, notably those in the civilised East…The essential difference was that Greek society was monetised and operated through inter-personal exchange where as that of the neighbouring societies were re-distributive.

In re-distributive societies, power originated in the gods. Priests (or a king, the distinction was often blurred) were the direct servants of the gods who mediated between the population and the divine. All that the community produced was owned, exclusively, by the gods and managed by a hierarchy of priests/kings. Produce was delivered to the temple (or palace) and the priests, from behind closed doors, would re-distribute the aggregate production per their own rules, taking a cut for their own use. In return, the priest/kings were expected to provide material and social security: food stores, walls, law and order. These societies maintained themselves so long as the priest/kings prevented famine and ensured peace and justice. It was passed through the priests/kings into the community through a clear hierarchy. The transference of power was often done through seals (amulets, talisman) that magically carried the power of the god.

Greek religious practice diverged from this standard model. The Greek gods lived on ambrosia and nectar, not on mortal food. When Homeric Greeks, in around 800 BCE, performed an animal sacrifice the smoke ‘honoured’ the gods, who were not located in their icons but ‘somewhere else’, alienated from the people. The sacrificial meat was then shared out amongst the community. The fairness of this sharing was fundamental to Greek culture, with both the Iliad and the Odyssey resting on problems resulting from unfair distribution. Consequently, the wealth of the Greek temples was owned and managed, inclusively, by the community in an egalitarian manner, in contrast to the wealth of temples in re-distributive societies.

There is a relationship between these Greek religious practices and the emergence of money in Greek society. The lowest value Greek coin was the obolos that took its name from the cooking spits (obelos) that were used to distribute sacrificial food and it is almost certain that the word drachma comes from obeliskon drachmai ‒ handfuls of spits.

A Financial Approach to the ‘Clash of Cultures’ (Magic, Maths and Money)

One deleterious result of the money economy was people falling into debt and relinquishing their freedom. This led to steep class divisions, as those who defaulted sold themselves into slavery (debt serfdom). Debt serfdom several times threatened the security of the polis, as debt serfs were unable to maintain military training to help defend the city-state (one reason why Sparta steadfastly refused to use coins). Rather than regular Clean Slates as in the Near East, periodic debt cancellations were legislated under rulers like Solon. The debt serfs would then be shipped off to found colonies across the Mediterranean. This dynamic drove Greek expansion and colonization, as David Graeber explains:

One of the first effects of the arrival of a commercial economy was a series of debt crises, of the sort long familiar from Mesopotamia and Israel. Revolutionary factions emerged, demanding amnesties, and most Greek cities were at least for a while taken over by populist strongmen swept into power partly by the demand for radical debt relief. The solution most cities ultimately found, however, was quite different than it had been in the Near East.

Rather than institutionalize periodic amnesties, Greek cities tended to adopt legislation limiting or abolishing debt peonage altogether, and then, to forestall future crises, they would turn to a policy of expansion, shipping off the children of the poor to found military colonies overseas.
Before long, the entire coast from Crimea to Marseille was dotted with Greek cities, which served, in turn, as conduits for a lively trade in slaves. The sudden abundance of chattel slaves, in turn, completely transformed the nature of Greek society.

First and most famously, it allowed even citizens of modest means to take part in the political and cultural life of the city and have a genuine sense of citizenship. But this, in turn, drove the old aristocratic classes to develop more and more elaborate means of setting themselves off from what they considered the tawdriness and moral corruption of the new democratic state…[20]

The decentralization of economic life and establishment of self-rule had dramatic effects. According to Josiah Ober, at the bottom point of Iron Age circa 1000 B.C., the Greek world was sparsely populated and living near the subsistence level. Almost 700 years later, in the age of Aristotle, the population of the Greek world had increased twentyfold and per capita consumption had doubled, achieving growth rates comparable to those of England or Holland in Early Modern Europe. Ober attributes this growth to low levels of inequality (which Davis-Hanson attributes to farming practices), which led to investments in human capital, economic and political stability, non-authoritarian political structures, and high levels of social trust:

In the 12th century BCE, the palace-centered civilization of Bronze Age Greece collapsed, utterly destroying political and social hierarchies. Surviving Greeks lived in tiny communities, where no one was rich or very powerful.

As Greece slowly recovered, some communities rejected attempts by local elites to install themselves as rulers. Instead, ordinary men established fair rules (fair, that is, for themselves) and governed themselves collectively, as political equals. Women and slaves were, of course, a very different story. But because these emerging citizen-centered states often out-competed elite-dominated rivals, militarily and economically, citizenship proved to be adaptive. Because participatory citizenship was not scalable, Greek states stayed small as they became increasingly democratic. Under conditions of increasingly fair rules, individuals and states rationally invested in human capital, leading to increased specialization and exchange.

The spread of fair rules and a shared culture across an expanding Greek world of independent city-states drove down transaction costs. Meanwhile competition encouraged continuous institutional and technological innovation. The result was 700+ years of world-class efflorescence, marked by exceptional demographic and per capita growth, and by immensely influential ideas, literature, art, and science. But, unlike the more familiar story of ancient empires, no one was in running the show: Greece remained a decentralized ecology of small states. [21]

Greek colonization spreads ideas of democracy, science, religion, money, markets, slavery and debt to other cultures, including the militarized cultures of the Italian peninsula. Eventually, these ideas gave rise to two great powers who fought over control of the Mediterranean: the Latin empire centered in Rome, and the Phoenician-derived colony of Carthage. With the victory of Rome, the entire Mediterranean becomes a giant free-trade zone, and the coinage-mercenary-slave complex expands to an unprecedented degree. We’ll take a brief look at that next time.

[1] Ernest Cline; 1177 B.C.: The Year Civilization Collapsed


[3]Felix Martin; Money: THe Unauthorized Biograhy, p. 38

[4] Semenova and Wray; The Rise of Money and Class Society: The Contributions of John F. Henry. Levy Economics Institute Working papaer no. 832

[5] David Graeber; Debt: The First 5000 Years.

[6] Kent Flannery and Joyce Marcus; The Creation of Inequality, pp. 193-195

[7] Radical Anthropology; Interview with Richard Seaford:

[8] Semenova and Wray; The Rise of Money and Class Society: The Contributions of John F. Henry. Levy Economics Institute Working papaer no. 832

[9] Not Used


[11] Tim Di Muzio, Richard H. Robbins; An Anthropology of Money: A Critical Introduction, p. 48

[12] Wray et. al.; The Credit and State Theories of Money, pp. 96-97

[13] Radical Anthropology; Interview with Richard Seaford:

[14] Semenova and Wray; The Rise of Money and Class Society: The Contributions of John F. Henry. Levy Economics Institute Working papaer no. 832

[15] Wray et. al.; The Credit and State Theories of Money, pp. 96-97

[16] hWray et. al.; The Credit and State Theories of Money, p. 138,

[17] Phil Armstrong; Heterodox Views of Money and Modern Monetary Theory (MMT)

[18] David Graeber; Debt: The First 5000 Years.

[19] Felix Martin; Money: The Unauthorized Biography, p. 60

[20] David Graeber; Debt: The First 5000 Years.


The Origin of Money – 4

2. The First IT Revolution

In order for something like the general-purpose universally-applicable money that we know to form, two critical innovations were needed: numeracy/literacy and standardized measurement.

In order to manage the redistributive economy of ancient Mesopotamia, increasingly sophisticated “information-processing” technologies were invented. We might call this the “First IT Revolution,” and it eventually ushered in writing and mathematics. It is now known that these originally developed in the service of keeping track of goods and labor for this economy– accounting, in other words:

This prehistoric communication revolution began some 9000 Years ago among the early agricultural communities of northern Mesopotamia and Syria. Like the invention of the computer, it involved the creation of an ingenious device which served both to transmit information and to record it for future reference.

In Neolithic Mesopotamia this new device served also to identify property and to ensure its security, and in that sense to signal to us not only that society was becoming more differentiated (that is, that there were those with goods to protect or secure) but that man could no longer trust his fellow man…

…the earliest stage of recording numeracy utilized the geometric token, followed by the use of the complex token and bulla, and still later, with an increasing complexity of communication needs, the cylinder seal was used for securing and identifying property; and finally, the seminal tool of bureaucratic administration, the inscribed tablet.

A theoretical account of this process was developed by Denise Schmandt-Besserat beginning in the 1970’s. She realized that the earliest shapes in cuneiform writing were based on the shapes of tokens found on archaeological sites. This led her to formulating the following sequence describing the development of writing:

1. Small clay tokens about 1-3 centimeters in length shaped into simple geometric forms are found scattered throughout Mesopotamian archaeological sites after about 9000 BC. The tokens represented various primary commodities –grain, jars of olive oil, sheep, beer, etc. They came in a variety of sizes and shapes–cones cylinders, spheres, ovoids, disks and tetrahedrons (three dimensional triangles), often covered with various dots and markings.

Simple tokens represented basic items such as grain and cattle, whereas more incised and perforated tokens represented services and manufactured items. One might think of game pieces (which at one point they were believed to be), or animal crackers. This allowed for a much greater control over varied items than just simple notches on tally sticks. The tokens could be matched one-to-one with the various standardized goods and services.

Number was represented by a phenomenon called correspondence (one-to-one) counting. Five ovoids meant five jars of olive oil, three tokens meant three jars, and so on; there was no abstract notion of “fiveness” apart from the thing being counted. The tokens were “non-lingual,” that is, no matter what language you spoke, both parties could understand that that five ovoid tokens meant five jars of olive oil:

The direct antecedent of the Mesopotamian script was a recording device consisting of clay tokens of multiple shapes. The artifacts, mostly of geometric forms such as cones, spheres, disks, cylinders and ovoids, are recovered in archaeological sites dating 8000–3000 BC.

The tokens, used as counters to keep track of goods, were the earliest code—a system of signs for transmitting information. Each token shape was semantic, referring to a particular unit of merchandise. For example, a cone and a sphere stood respectively for a small and a large measure of grain, and ovoids represented jars of oil.

The repertory of some three hundred types of counters made it feasible to manipulate and store information on multiple categories of goods…The token system showed the number of units of merchandize [sic] in one-to-one correspondence, in other words, the number of tokens matched the number of units counted: x jars of oil were represented by x ovoids. Repeating ‘jar of oil’ x times in order to express plurality is unlike spoken language. [1]

2. The economy expanded and became more complex as urbanization proceeded. The clay tokens also began to get more numerous and more elaborate, tracking the various “secondary commodities” of the Mesopotamian economy –wool, clothing, metals, honey, bread, oil, beer, textiles, garments, rope, mats, carpets, furniture, jewelry, tools, hides, perfume, and so on.

The tokens represented the various items stored in the “holy storehouse” of the temple. Standardized tokens could be used for keeping track of inventory, or recording tax payments, and even for establishing future transactions–essentially forming the first economic contracts. Tokens could represent anticipated tax payments, deferred payments, or a provide a record of previous payments. They could also provide for secure transmission of goods between stewards.

In order for this to work, some method needed to be developed to keep the transaction secure, that is, safe from tampering after the fact. Two methods were devised to do this. One was using tokens with perforations in them and stringing them together with a cord like a bracelet or necklace, and binding the ends of the cord with a lump of clay called a bulla. This prevented tokens from being added or removed to the string without breaking the clay “seal.”

The other involved sealing them inside a hollow clay “envelope” about 3-5 cm in diameter also called a bulla. The tokens were placed inside and the opening was pinched shut, and then the envelope was then fired. After it was fired, tokens could not be added or removed without breaking open the bulla.

Officials marked the bullae with clay seals testifying to the authenticity of the transaction. There were two types of seals-stamp seals and cylinder seals, which made impressions by being rolled across the wet clay. The seals were unique to the steward and usually depicted some type of religious imagery. The outer surface of the clay envelopes were often covered with seals, probably to make sure that a hole could not be made to add or remove items from the bulla without an official knowing. If any dispute arose about the contents of the bulla, both parties to the contract could break open the clay envelope and verify what was inside.

For some unknown reason, plain tokens were secured by envelopes, while more complex ones were secured with a cord. Both the seals and the tokens are found in burials, indicating that certain designated individuals were in charge of managing the surplus—a sure sign of burgeoning class inequality. Seals found buried with children indicate the transmission of intergenerational status.

3. Because it was unknown exactly what was inside the clay envelopes once they were fired, scribes made impressions in the outer surface of the wet clay to indicate what was inside. These markings are the first definite signs of writing in the sense of using abstract shapes impressed in clay to represent specific items and quantities. Number was still indicated by correspondence counting rather than abstract numerals.

After four millennia, the token system led to writing. The transition from counters to script took place simultaneously in Sumer and Elam, present-day western Iran when, around 3500 BC, Elam was under Sumerian domination. It occurred when tokens, probably representing a debt, were stored in envelopes until payment. These envelopes made of clay in the shape of a hollow ball had the disadvantage of hiding the tokens held inside. Some accountants, therefore, impressed the tokens on the surface of the envelope before enclosing them inside, so that the shape and number of counters held inside could be verified at all times. These markings were the first signs of writing. [1]

4. By the middle of the fourth millennium, instead of just being recorded on the bullae, impressions of tokens are recorded on flat clay tablets and fired. By 3200 BC, puffy clay tablet “receipts” are found recording various disbursements and transactions in temple archives. The tablets simply list numbers of quantities of items without purpose or context. The level of detail recorded by the tablets varied according to administrative level—more detail was recorded by scribes at higher administrative levels.

About 3200 BC, once the system of impressed signs was understood, clay tablets—solid cushion-shaped clay artifacts bearing the impressions of tokens—replaced the envelopes filled with tokens. The impression of a cone and a sphere token, representing measures of grain, resulted respectively in a wedge and a circular marking which bore the same meaning as the tokens they signified. They were ideograms—signs representing one concept. The impressed tablets continued to be used exclusively to record quantities of goods received or disbursed. They still expressed plurality in one-to-one correspondence. [1]

Eventually the clay tablets alone served to record transactions, taking the place of bullae. The tablets become the primary means of recording past and future transactions, even though both “technologies” continued to be used side-by-side for millennia. For unknown reasons, the clay tablet method was extensively adopted in southern Mesopotamia, whereas tokens continued to be the main method used in northern Mesopotamia. Clay tablet records were stored in temple archives, managing payments, contracts, receipts, loans, debts, and so on.

5. Eventually, when the quantities under consideration become too big for correspondence counting to work, symbols were established to separate quantity from the thing being counted – a symbol for “five” and “sheep” are combined together instead of repeating “sheep” five times. These numerals impressed in clay were derived from the shape of the token itself.

Early numerals were not abstract, but derived their value from association with the items they counted. The Sumerians used 60 different number signs grouped in a dozen or so metrological systems. For example, one system counted discrete objects like sheep, while other systems measured areas or volumes.

At the same time, the clay markings evolved into abstract symbols (pictographs) made with a wedge-shaped stylus rather than impressions of tokens. The wedge-shaped pictographs derived from the object they described:

Pictographs—signs representing tokens traced with a stylus rather than impressed—appeared about 3100 BC. These pictographs referring to goods mark an important step in the evolution of writing because they were never repeated in one-to-one correspondence to express numerosity.

Besides them, numerals—signs representing plurality—indicated the quantity of units recorded. For example, ‘33 jars of oil’ were shown by the incised pictographic sign ‘jar of oil’, preceded by three impressed circles and three wedges, the numerals standing respectively for ‘10’ and ‘1’.

The symbols for numerals were not new. They were the impressions of cones and spheres formerly representing measures of grain, which then had acquired a second, abstract, numerical meaning. The invention of numerals meant a considerable economy of signs since 33 jars of oil could be written with 7 rather then [sic] 33 markings. [1]

Sometime around the end of the third millennium BC during the Ur III period, a sexigecimal (base 60) place value notation system was devised. Each place represents a multiple of sixty (just as in our system, each place represents a multiple of ten. Sixty is the first number that 1,2,3,4,5, and 6 all factor into. It’s thought that counting was done by marking the phalanges of outstretched fingers in each hand with the thumb (three phalanges times four outstretched fingers). This could be repeated five times, using the fingers of the other hand to keep track (5 x 12 = 60). Base-60 actually has quite a few advantages. 60 is highly composite and easily divisible by 12 numbers simplifying fractional/decimal notation.

…the origin of the base 12 and of the related base 60 is an often-recurring question, even to non-mathematicians. The usual arithmetic (based on the divisors of 12) and or astronomical explanations (based on the number of moon-months) both are a posterior…

….a counting technique that considers parts of the fingers to represent the numbers from 1 to 12, is still in use in Egypt, Syria, Turkey, Iraq, Iran and Afghanistan, Pakistan, Indochina, India. The thumb of a hand counts the bones in the fingers of the same hand. Four fingers, with each three little bones, evidently yield 12 as a counting unit. The thumb itself is the counting tool, and its bones are not considered. Also, each dozen is counted by the fingers of the other hand, including the thumb, and the multiple 5 x 12 = 60 provides an additional indication of the often simultaneous occurrence of the duodecimal and sexagesimal base…

This physiological explanation for the duodecimal base is only a hypothesis, but number words as present day tribes in Africa use them, provide further evidence. N. W. Thomas [Tho] reported on such number words in his study of the West-African tribes in the region of the actual Nigeria. Between the rivers Benue and Gurara, which flow into the river Niger more westwards, live the Yasgua, the Koro and the Ham.

This explanation is not posterior like the arithmetical or the astronomical ones. This duodecimal base was indeed a practical one for what these early civilisations wanted to count or to represent. In the matriarchal societies, they could associate the number 1 to the woman, the number 3 to the man, and 4 to the union of woman and man. Or, in after some rather general evolution, they designated the male genitals by the number 3, and the genital symbol of women by 4, making 7 the symbol of their union. The number 4 seems to have been the most widespread of the mystical numbers. It was established by associations with colours, with social organisation, and with various customs among numerous tribes. The use of six as a mystical or sacred number was less extensively distributed through history and throughout the world than the four-cult, but sometimes a mythology past from quarters cult to a six cult. For example, the four cardinal points (such as North, South, East, West) are simply augmented by the addition of two other points (such as the zenith, above and nadir, below). On the other hand, the counting skills they obtained in this way, allowed them to note that there are 13 (moon)-months in one (solar) year, and not 12. [2]

The Babylonian cuneiform was not a true sexagesimal system as in there were not 60 different symbols. They basically represented numbers in a hybrid base-60 of a base-10. For example, thirty was made by repeating the symbol for 10 three times, forty was 10 repeated four times, and so on. Base sixty was likely chosen for ease of time/value calculations based on the length of the Mesopotamian year (a 360-day ‘fiscal year” with 5-and-change days set aside for festivals and debt forgiveness). Our divisions of a circle (degrees) and hours/minutes are also derived from this Mesopotamian base sixty, and are still in use.

…the sexagecimal number system of Mesopotamia in the historical period must have arisen from a fusion of a decimal system and a duodecimal system, and possible of a third element based on twenty. The widespread evidence for the very early duodecimal system, especially in the diffusion of the practice of dividing into twelve parts the wide band of fixed stars through which the sun passes its annual revolution (the zodiac), and the association of this feature with painted pottery gardening would indicate that the duodecimal system was characteristic of the Highland Zone Neolithic peasant cultures. The decimal usage probably came from the Semite peoples within the Fertile Crescent. If a vigecimal system also entered the mixture, it might have come from the south or southeast, for there seem to be, in the substrata of Mesopotamian culture, elements of tropical forest origin from this direction. [3]

We continue to use this counting method for time, which may make it somewhat clearer. Think of the value holders like this: (Hours) : (Minutes) : (seconds).

01:00 = 60
01:01 = 61
02:00 = 120
It takes the 60th count to turn the next value holder 1. So,

Interestingly, there is some evidence that the markings on the Ishango bone are based on a base-12 number system.

A good account of this process is given in this BBC article: How the world’s first accountants counted on cuneiform

6. Eventually, the need for recording proper names in contracts gave rise to the establishment of phonetic alphabets where symbols represented not words, but spoken sounds, typically syllables. This was done by using the word attached to a symbol to represent sounds.

For example, when Coca-Cola first arrived in China, shopkeepers needed a way to represent this new product. There was no pre-existing ideogram for “Coca Cola” in Chinese. They used a combination of Chinese characters which phonetically spelled out the sounds “Ko-ka-ko-la.” Many of these signs used the character pronounced “la” meaning “wax.” This led to all sorts of nonsensical phrases when it was read out loud, such as “female horse fastened with wax,” “wax-flattened mare,” and, most famously, “bite the wax tadpole” (eventually the company provided an ‘official’ transcription meaning, roughly, “to allow the mouth to be able to rejoice”). Nonetheless, clearly phonetic sounds were separated from what the ideograms represented. In such a way one could begin to separate the sound of the word from the pictographic image of what it represented.

In a similar fashion, when the system became adopted by the Akkadian culture, and Akkadian became the lingua franca of commerce during the Bronze Age, the need to transcribe proper names in written contracts led to ideograms being used to represent sounds rather than concepts. Transactions could be described in writing rather than just items and numbers, making them more meaningful:

With state formation, new regulations required that the names of the individuals who generated or received registered merchandise were entered on the tablets.

The personal names were transcribed by the mean of logograms—signs representing a word in a particular tongue. Logograms were easily drawn pictures of words with a sound close to that desired (for example in English the name Neil could be written with a sign showing bent knees ‘kneel’).

Because Sumerian was mostly a monosyllabic language, the logograms had a syllabic value. A syllable is a unit of spoken language consisting of one or more vowel sounds, alone, or with one or more consonants. When a name required several phonetic units, they were assembled in a rebus fashion. A typical Sumerian name ‘An Gives Life’ combined a star, the logogram for An, god of heaven, and an arrow, because the words for ‘arrow’ and ‘life’ were homonyms. The verb was not transcribed, but inferred, which was easy because the name was common. Phonetic signs allowed writing to break away from accounting…

After 2600–2500 BC, the Sumerian script became a complex system of ideograms mixed more and more frequently with phonetic signs. The resulting syllabary—system of phonetic signs expressing syllables—further modeled writing on to spoken language. With a repertory of about 400 signs, the script could express any topic of human endeavor. Some of the earliest syllabic texts were royal inscriptions, and religious, magic and literary texts. [1]

Far away in Egypt, totemic symbols were adapted to represent these sounds, resulting in the creation of hieroglyphic script. Proper names were recorded, and eventually the sounds of Egyptian speech were written down to transcribe the entire spoken language. Hieroglyphs are found on buildings such as tombs and temples. Early transactions were recorded on pottery shards. Later, the invention of papyrus from sedges growing along the Nile lead to the first written paper scripts.

Phonetic signs to transcribe personal names…created an avenue for writing to spread outside of Mesopotamia…The first Egyptian inscriptions…consisted of ivory labels and ceremonial artifacts such as maces and palettes bearing personal names, written phonetically as a rebus, visibly imitating Sumer…This explains why the Egyptian script was instantaneously phonetic. It also explains why the Egyptians never borrowed Sumerian signs. Their repertory consisted of hieroglyphs representing items familiar in the Egyptian culture that evoked sounds in their own tongue.

The phonetic transcription of personal names also played an important role in the dissemination of writing to the Indus Valley where, during a period of increased contact with Mesopotamia, c. 2500 BC, writing appears on seals featuring individuals’ names and titles. In turn, the Sumerian cuneiform syllabic script was adopted by many Near Eastern cultures who adapted it to their different linguistic families and in particular, Semitic (Akkadians and Eblaites); Indo-European (Mitanni, Hittites, and Persians); Caucasian (Hurriansand Urartians); and finally, Elamite and Kassite. It is likely that Linear A and B, the phonetic scripts of Crete and mainland Greece, c. 1400–1200 BC, were also influenced by the Near East. [1]

7. This system transformed from syllables to the letters as we know them today and spread via the activities of Semitic merchants and traders operating in the eastern Mediterranean. These traders would been familiar with the accounting techniques of the Near East, and their business was conducted with strangers. Since these were strangers, you needed contracts, and so you needed ways to write names and forms of speech. This allowed writing and numbers to grow beyond their original roots in managing centralized economies.

Semitic traders simplified the system into easily written “scratches” to represent distinct consonant sounds. A small repeating number of these “letters” could represent any language the Phoenician traders encountered.

Most vowels were not written in this system, a tradition which persists to this day in the Semitic alphabets of Hebrew and Arabic (although vowel marks are sometimes added). This may seem odd, but it works: I bt y cn rd ths sntnc evn wtht vwls.

The invention of the alphabet about 1500 BC ushered in the third phase in the evolution of writing in the ancient Near East. The first, so-called Proto-Sinaitic or Proto-Canaanite alphabet, which originated in the region of present-day Lebanon, took advantage of the fact that the sounds of any language are few. It consisted of a set of 22 letters, each standing for a single sound of voice, which, combined in countless ways, allowed for an unprecedented flexibility for transcribing speech.

This earliest alphabet was a complete departure from the previous syllabaries. First, the system was based on acrophony—signs to represent the first letter of the word they stood for—for example an ox head (alpu) was ‘a,’ a house (betu) was b. Second, it was consonantal—it dealt only with speech sounds characterized by constriction or closure at one or more points in the breath channel, like b, d, l, m, n, p, etc. Third, it streamlined the system to 22 signs, instead of several hundred. [1]

In the decentralized world after the Bronze Age collapse, this new system took the place of the Linear A and B recording systems of the earlier palace economies.

Alphabets appear to have arisen in only a few places and diffused from there, as this Reddit comment points out:

The cuneiform alphabets of the Middle East were ledgers first, then evolved into words. Egyptian hieroglyphs were totemic first, then evolved numbers and words. Chinese Han characters started as divination marks on turtle shells and ox bones. The Mayans started recording calendar days, and that evolved into a syllabic alphabet. My guess is that recording abstract information is a natural product of structured civilisation, which grows around cereal-based agriculture. That’s the common theme between all of them. Simple writing systems and totemic pictographs are a common theme all round the world. Where they really come into their own is in a trade-based central civilisation.

The “democratization” of script was to have a profound influence on Greek culture. Rather than just remaining in the hands of temple scribes and priests, many more people could use letters and numbers up and down the social ladder. They were not under the exclusive control of one particular social class. Due to the democratization of words and numbers, economic planning passed out of the hands of temple scribes and priests and engendered a radically decentralized approach to economic life. This eventually lead to markets and metallic coinage similar to our own system, as we’ll see.

2. Systems of Measurement

The other crucial innovation of accounting was metrology: partitioning items into discrete units that are divisible by one another. Although we take such measurement for granted today, the creation of standardized weights and measures continued until well into the nineteenth century with the establishment of the system international (SI) units of meter (distance), second (time), kilogram (mass), kelvin (temperature), pascal (pressure), and others. Standard weights and measures are as critical to bureaucracy as are writing and numerals.

Standardization is a fundamental aspect of state formation that is often overlooked. In this review of James C. Scott’s book, Seeing Like a State, Scott Alexander quotes Scott describing the difficulties faced by regional tax collectors in medieval Europe:

A hypothetical case of customary land tenure practices may help demonstrate how difficult it is to assimilate such practices to the barebones scheme of a modern cadastral map [land survey suitable for tax assessment][…]

Let us imagine a community in which families have usufruct rights to parcels of cropland during the main growing season. Only certain crops, however, may be planted, and every seven years the usufruct land is distributed among resident families according to each family’s size and its number of able-bodied adults. After the harvest of the main-season crop, all cropland reverts to common land where any family may glean, graze their fowl and livestock, and even plant quickly maturing, dry-season crops. Rights to graze fowl and livestock on pasture-land held in common by the village is extended to all local families, but the number of animals that can be grazed is restricted according to family size, especially in dry years when forage is scarce. Families not using their grazing rights can give them to other villagers but not to outsiders. Everyone has the right to gather firewood for normal family needs, and the village blacksmith and baker are given larger allotments. No commercial sale from village woodlands is permitted.

Trees that have been planted and any fruit they may bear are the property of the family who planted them, no matter where they are now growing. Fruit fallen from such tree, however, is the property of anyone who gathers it. When a family fells one of its trees or a tree is felled by a storm, the trunk belongs to the family, the branches to the immediate neighbors, and the “tops” (leaves and twigs) to any poorer villager who carries them off. Land is set aside for use or leasing out by widows with children and dependents of conscripted males. Usufruct rights to land and trees may be let to anyone in the village; the only time they may be let to someone outside the village is if no one in the community wishes to claim them. After a crop failure leading to a food shortage, many of these arrangements are readjusted.

Book Review: Seeing Like a State (Slate Star Codex)

Scott’s book reminds us just how much measurement and taxation are the harbingers of the coming of the state, even though these early states were not the impersonal professional bureaucracies that we associate with states today (China appears to have been the first to develop this). The creation of money and markets is what allowed for the state’s ability to channel resources to itself  to pay for soldiers and bureaucratic expertise, as we’ll see.

By the Babylonian period, complex time and material calculations were undertaken in the temples by officials in order to allow for mass production on a much larger scale than cottage industries. These activities, centered in the temples, were the first intentional surplus-generating activities to be undertaken by society. Such activities are not commonplace in traditional societies: production is mainly undertaken for subsistence and hoarding is explicitly discouraged.

Some tablets from the later Old Sumerian period detail bread baking, where a specific amount of bread is listed against the specification of its cereal ingredients, depending on quality as reflected in a production rate for a given type of bread. Other tablets included entries for bread and beer rations and the ingredients required to make them.

These tablets began by listing the names of individuals with the largest rations followed by those with smaller rations. At the end of the tablet, the amounts of bread and beer are totalled by type and the grand total for the flour and barley used was also recorded. The tablets were dated daily, and the scribes showed how the amount of flour corresponded exactly to the amount actually used in baking the bread, and the same applied to barley and beer…

…this checking of actual against theoretical amounts was “Perhaps the most important accounting operation introduced during the third millennium B.C.”…Deficits in one year, arising from shortage of actual amounts compared to theoretical amounts, were carried forward to the following year and were liable to later reimbursement…

…the entries record labour performance, along with theoretical credits and duties. The balancing of expected and actual labour performance was recorded at regular intervals for the foremen of the state-controlled labour force, using an accounting period of a 12-month-year, with each month being 30 days long, a time conception that corresponds exactly to that of ancient Egypt. Balances were carried forward to next periods; most frequently the balances were deficits (overdrawn) as the expected performances seem to have been “fixed as the maximum of what a foreman could reasonably demand of his workers”. Such balancing periodic entries were underpinned by some measure of standardisation of performance and a value equivalence system…[4]

In fact, the entire concept of leadership in these ancient societies appears to have been centered around concepts of fair and accurate standards of measurement, as Michael Hudson describes:

With writing and account-keeping came weights, measures, and standardizarion…Politically, the ideology of Mesopotamian cities was to create an evenly measured and “straight” cosmology of economic and social relations. Sumerian and Babylonian iconography represents rulers characteristically holding the measuring stick and coiled measuring rope to layout temple precincts. This defining royal task is illustrated on Gudea’s statues F and B in Lagash at the end of the third millennium. Such orientation aimed at grounding cities and their rule symbolically in the eternal regularities of natural order, as reflected in the celestial movements of the heavens.[5]

This “natural order” extended to the levies which were collected by the temples. This likely grew out of their role in coordinating the labor required to maintain the canal system which agriculture depended on. Their ability to accurately measure and plan future activities was a logical extension of their ability to scan the heavens and predict future floods and eclipses. From astronomy came the rest of their abilities.

These institutions were not dependent upon “taxpayer funds” unlike governments today; rather they were self-supporting enterprises, with prebends and dependent staff who were paid stipends (salaries) for their work. Because of their pro-social nature (they regularly aided widows and orphans), religious justification, and role in expanding the economy (they regularly produced goods for export), they were allowed to undertake activities such as charging rent and interest–the first written examples of this behavior. We might consider them to be the first antecedents of the modern business corporation (see future chapter).

What gave the ancient Sumerians the idea of charging one another interest? Linguistic evidence provides a clue. In the Sumerian language, the word for interest, mash, was also the term for calves. In ancient Greek, the word for interest, tokos, also refers to the offspring of cattle. The Latin term tecus, or flock, is the root of our word “pecuniary.” The Egyptian word for interest, like the Sumerian word, is ms, and means “to give birth.” All these terms point to the derivation of interest rates from the natural multiplication of livestock. If you lend someone a herd of thirty cattle for one year, you expect to be repaid with more than thirty cattle. The herd multiplies-the herder’s wealth has a natural rate of increase equal to the rate of reproduction of the livestock. If cattle were the standard currency, then loans in all comparable commodities would be expected to “give birth” as well. The idea of interest seems to be a natural one for an agricultural or pastoral society, but not so for hunter-gatherers. [6]

Just as with the scribes and viziers of ancient Egypt, a method had to be devised to standardize various tax, tithe, tribute, fines, and other payments owed to the central institutions from various entities. They also needed a way to evaluate how much was needed for time and material calculations. The way they accomplished this was to create a measurement unit, and to then use that unit to standardize the various goods and services produced by the diversifying Sumerian economy. In other words, a “unit of account.”

The earliest unit of account appears to have been a standard weight of a basket of barley, barley being the staple crop of the Sumerian economy. However, a more stable method was developed based on various weights of silver. This seems to have been related to silver’s role as a sacred substance whose storage and trade was controlled and manipulated by centralized institutions, that is, the temples and their high priests (what anthologists might call ‘prestige goods’):

…At about the same time as cities began to appear people started making ornaments out of electrum (an alloy of gold and silver), copper and gold, metals found naturally in nature. Metals have an almost unique, natural, physical property; they reflect light. The only other material that stone-age humans would have come across that reflected light would have been water, which along with sunlight is the basis of life. The first time a human spotted a nugget of gold sparkling in a river bed they must have experienced a sense of awe, here was an object that seemed to capture life-giving sunlight and water.

Religiously significant metals became important as temple offerings and temples began accumulate large reserves. Followers of the religion would look to acquire the metal, to enable them to make an offering to the gods, and so the metal became the commodity in the most demand.

The Ancient Egyptians, who had easy access to gold, used Cypriot copper for their religious offerings while the Cypriots used Egyptian gold. In Mesopotamia, the metal of choice was silver. When ‘Currency Cranks’ or ‘Bullionists’ argue that the economy would be improved by reverting to a Gold Standard because gold has an ‘inherent value’ they need to explain where is the value in gold, apart from its inherent symbolic, representative, value.

We don’t know much about economics in the ancient cities apart from for Mesopotamia, which has left hordes of clay tablets describing financial transactions. The economy was dominated by the temples who received rents and tribute, provided religious services and loans. The cuneiform tablets recorded the debits and credits associated with these activities. The transactions were denominated in shekels, crude bars of silver. Coins, metal tokens, rarely, if ever, actually changed hands.

Lady Credit (Magic, Maths and Money)

Another theory behind the use of silver bullion is derived from the fact that Mesopotamian city-states were not self-sufficient and needed to trade with each other on a regular basis. Silver was a universal standard of value, since the same religious ideas predominated across the Tigris/Euphrates valley, and this is what allowed is what allowed inter-city trading to take place. The value of silver percolated down through the rest of the society in “private” economic transactions by osmosis from temple activities (debt collection, tithes, trade, etc.)

In either case, money is a creation of the state through writing and measurement; it is not a spontaneous development arising out of countless market transactions. Silver derived from its ability to be accepted as payment to centralized institutions, and not from any intrinsic value. Impersonal economic transactions, to the extent that they existed, used this standard of value long before the emergence of coins or markets. As G.F. Knapp put it, “Within a state the validity of the kinds of money is not a trade phenomenon but rests on authority.”

Michael Hudson summarizes the creation of money in ancient Mesopotamia:

The kind of general-purpose money our civilisation has come to use commercially was developed by the temples and palaces of Sumer (southern Mesopotamia) in the third millennium BC…Their large scale and specialisation of economic functions required an integrated system of weights, measures and price equivalencies to track the crops, wool and other raw materials distributed to their dependent labour force, and to schedule and calculate the flow of rents, debts and interest owed to them. The most important such debts were those owed for consigning handicrafts to merchants for long-distance trade, and land, workshops, ale houses and professional tools of trade to ‘entrepreneurs’ acting as subcontractors.

Accounting prices were assigned to the resources of these large institutions, expressed in silver weight-equivalency, as were public fees and obligations. Setting the value of a unit of silver as equal to the monthly barley ration and land-unit crop yield enabled it to become the standard measure of value and means of payment…Under normal conditions these official proportions were reflected in transactions with the rest of the economy.

…The use of silver in their transactions was economized by the system functioning largely on the basis of debts mounting up as unpaid balances due. For small retail sales…the common practice for consumers was not to pay on the spot but to ‘run up a tab,’ much as is done in bars today[114]…such balances typically were cleared at harvest time, the New Year, the seasonal return of commercial voyages or similar periodic occasions. The most important debts were owed to the chiefs in tribal communities or to the public institutions in redistributive economies…[102]… and their official ‘collectors.’ …it also was through the commercial role of these institutions in long-distance trade that the monetary metals were imported and put into circulation.

The major way most families obtained silver evidently was to sell surplus crops produced on their own land or land leased from these institutions on a sharecropping basis. The palace also may have distributed silver to fighters after military victories, or perhaps on the occasion of the New Year or royal coronation…[115]

Silver’s use in exchange derived from its role as a unit of account. This is what gave it a general character beyond that of just another commodity… these public institutions were the ultimate guarantors of the value of silver, by accepting it in payment of obligations owed to them…

The units of measurement–the shekel in Babylonia and the deben in Egypt, and their various partitions– were the standard by which value was measured in these ancient societies. Yet all the evidence indicates that these standardized units were established and used thousands of years before “free” markets and profits played any significant role in daily economic life. While individual transactions in silver are recorded, it appears that most “commercial” transactions were written contracts – credit/debit relations. There were no coins. Daily transactions were likely undertaken through the traditional methods of redistribution, reciprocity and householding, as well as credit. As Henry summarizes in the case of Egypt:

…goods were…valued in terms of the deben (and labour services in the pyramid cities determined by the deben value of consumption goods), but no debens ever changed hands…In other words, money does not originate as a medium of exchange but as a unit of account (and something of a store of value with regard to the king’s treasury), where the measure of value is arbitrarily specified by decree, and goods and services of various qualities and quantities can then be assigned a monetary value to allow a reasonable form of bookkeeping to keep track of tax obligations and payments and to maintain the separate accounts of the king. It should also be noted that the deben did not serve as means of payment (as with modern money), but did function as the means (or measure) through which payment was made.

He quotes Alfred Mitchell-Innes, who came to the same conclusion from his survey of economic history in his pathbreaking article for the Banking Law Journal:

The theory of an abstract standard is not so extraordinary as it at first appears…All our measures are the same. No one has ever seen an ounce or a foot or an hour .. . We divide, as it were, infinite distance or space into arbitrary parts, and devise more or less accurate implements for measuring such parts when applied to things having a corporeal existence …

Credit and debt are abstract ideas, and we could not, if we would, measure them by the standard of any tangible thing. 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 measures as something fixed and accurate; whereas, as a matter of fact, they are peculiarly liable to fluctuations (Innes, 1914, p. 155).

Essentially, the privileging of the “medium of exchange” aspect of money is not rooted in historical fact, but is based on economists’ desire to set up “free markets” and “private enterprise” as primordial and all state activity as an unnecessary and parasitical appendage. They need this in order to make their philosophical assumptions valid. In other words, this ahistorical view stems from the libertarian bias of modern economic “science” and not from true historical reality.

It is important to note that in Egypt (and this would accord with Mesopotamia and other areas) money was developed in a non-market, non-exchange economy. While some economic historians and anthropologists of a neoclassical persuasion diligently speculate that the Egyptian economy must have paralleled that with which we are now familiar, there is no evidence for exchange in the Old Kingdom. The Egyptians had no vocabulary for buying, selling, or even money; there was no conception of trading at a profit. It is very clear that there was no market in grains. A market economy (of a sort) and the monetization of the economy, including the production of coins, had to wait until Greek domination…

When these concepts become imported into Greek culture by Middle-Eastern traders after the Bronze Age collapse, they will become transmogrified into something closer to the kind of money and markets we know of today. This is the next crucial step in the evolution of money. We’ll consider that history next time.


[2] Vladimir Pletser: Does the Ishango Bone Indicate Knowledge of the base 12? An Interpretation of a Prehistoric Discovery.

[3] Carroll Quigley: The Evolution of Civilizations, pp. 213-214

[4] Carmona and Ezzamel: Accounting and Forms of Accountability in Ancient Civilizations: Mesopotamia and Ancient Egypt. IE Working Paper WP05-21

[5] Urbanization and land ownership summary review

[6] William Goetzmann: Money Changes Everything: How Finance Made Civilization Possible.

[7] Wray, et. al.: Credit and State Theories of Money: The Contributions of Alfred Mitchell-Innes