THE MYTH OF THE MYTH OF BARTER

George Selgin

Published by Ideas for Alternative Monetary future, March 15, 2016 - January 9, 2017. 11 pgs.

Reviewer Comment:
This is a conentious attack of David Graeber's book - Debt by a libertarian Director of the Center for Monetary and Financial Alternatives at the Cato Institute. The controversy over the existence and claimed role of barter as the mechanism for exchange within societies is directly related to the theory of the origin of money, its creator, and its role in exchange of goods and services. From Adam Smith to Carl Menger to Ludwig von Mises to the present with Murray Rothbard, the presumption that exchange in primitive societies MUST have been conducted by direct barter (goods for goods) between two or more direct participants is presented as an obvious fact needing no examples as proof by those who want to claim that money was and is a gradual development by society itself - in other words the private sector. In this brief editorial Dr. Selgin states the typical argument advanced by the libertarian camp. In other words, not by an argument supported by historical facts but by personal attack on the opponent by stating that he simply does not know economic theory.
His words stand as very reveling of this attitude, not only about barter, but also about the whole epistemological concept of basing argument not on identified historical facts but on theory claiming to be the result of 'reason'.
One may recognize this is a Platonic philosophical position in contrast to the Aristotelian position.
I do not agree with much of what Professor Graeber wrote in Debt, but not for the same reasons as does Dr. Selgin, nor do I engage in polemical attack rather than attempt to point out problems. I do recognize that Graeber believes that the members of prehistoric societies and ancient civilizations had an entirely different conception of reality and strongly believed in metaphysical reality that modern secular materialists cannot understand.

The entry in the Wikipedia entry for History of Money and others give credit to Graeber for his theories. (See below)

The comment in the Wikipedia entry is: ""Graber is the one acting as a scientist by trying to falsify the barter hypotheses, while Selgin is taking a theological stance by taking the hypothesis as truth revealed from authority". A great summary of the typical approach of so many economists (especially libertarians) who for years I have considered 'secular theologians'.

Dr. Selgin opens his attack with this: "So far as some people are concerned, when it comes to bashing economists, an old stick will do. That, at least, seems to be true of those anthropologists and fellow-travelers who imagine that, in demonstrating that certain forms of credit must be older than either monetary exchange or barter, they've got some of the leading lights of our profession by the short hairs. The stick in this case consists of anthropological evidence that's supposed to contradict the theory that monetary exchange is an outgrowth of barter with credit coming afterwards. That view is a staple of economics textbooks. Where it nothing more than that, the attacks would hardly matter, since finding nonsense in textbooks is easier than falling off a log. But these critics have mostly directed their ire at a more heavyweight target: Adam Smith.

Please note the vocabulary and tone of this 'argument'. Well, from reading his other libertarian texts one will realize that Selgin is a master polemicist.

He then turns to the modern economist's substitute for the medieval Aristotle as the unrefutable 'authority', namely, Adam Smith. He provides a lengthy quotation from Smith's Wealth of Nations, the economist's Bible. The text is a standard reference in which Smith theorizes without resort to any historical evidence that ancient economic exchange began with barter, but of course, he notes that barter is simply too complex an effort so people gradually developed monetary exchange.
But Smith did not and could not know anything about Mesopotamian or Egyptian society circa 3000 -1000 BC. No one in Europe of his time did know about the subject. Nor did they know what anthropologists learned about even more primitive societies a century and more after Smith.
What Smith did know was the examples of barter trade being conducted at his time BETWEEN different societies (for instance American Indians and Dutch and French traders exchanging European production such as guns and alcohol for beaver pelts. But historians and anthropologists due indeed ascribe such trade BETWEEN traders and merchants from different societies. (For instance, Assyrian merchants and Hittite cities thousands of miles apart.)

Nevertheless, Dr. Selgin continues with this: 'What's wrong with that? (referring to Smith's theory). In the words of Cambridge anthropologist Caroline Humphrey, as quoted in a recent article on the subject in (The Atlantic) what's wrong is that "No example of barter economy, pure and simple, has ever been described , let alone the emergence of money... All available ethnography suggests that there has never been such a thing".
And then comes his rejoinder. "Now the mere lack of historical or anthropological evidence of past barter economies is itself no more evidence against Smith's account than it is evidence in favor of it: After all, if barter tends to get as 'clogged and embarrassed' as Smith maintains, we should not be surprised to find no evidence of societies that relied on it. That might mean that societies came up with money quickly, or perished equally quickly."

Now. really, this is claimed to pass as an argument. Much more of Selgin's pseudo- argumentation will generate a question about the veracity of all his writing. But he seeks confirmation by quoting another economist, Julio Huato, who makes the same silly argument.

Dr. Selgin continues by moving on to the 'big picture' in which Graeber's 'false' concepts of barter - money, credit and debt are an attack on the entire edifice of modern societies and economic relations themselves as well as of economists' theories about all this. He claims that: "anthropologist David Graeber's claim that the existence of gift economies undermines, not just Adam Smith's account of money's origins, but' the entire discourse of economics'".

I did not find that to be Graeber's position. Rather, it is his conception of the concept and role of 'debt' that he is denouncing.

He continues: "But if fair play is not Professor Graeber's forte, neither is a solid or even a more than exceedingly superficial, understanding of the tenets of modern economics."

Considering that Lawrence White in his extensive study of these 'tenets' in Clash of Economic Ideas, shows the reality of the vast differences between the theories about economics held by many different claimants to know the right answers, Dr. Selgin's point is absurd. And especially so since he, himself, occupies one of the fringe theoretical positions.

But Selgin shows his own polemical style with this: "Had Graeber's purpose been, not to document economists' ignorance of anthropology, but to show that at least one anthropologist doesn't know the first thing about economics, I dare say that he could have done no better than to write Debt: The First 5000 Years.
Of course Selgin does not understand what Graeber's purpose is. He continues to harp on Graeber's conception of 'debt' and its relation to 'money'. He continues to misunderstand Graeber's ideas about monetary exchange. Graeber does not believe that exchange of goods facilitated by money results in a 'zero sum' game. Graeber's description of exchange based on 'gift' giving was not only prevalent in prehistoric societies that anthropologists study but also in well documented Mesopotamian - Egyptian exchange 2000 -1000 BC.

Dr. Selgin claims that: "The idea that money is a 'measure' of value, "like the related idea that exchanges are necessarily exchanges of equivalents, is among the hoariest of economic fallacies." And, "The notion that money is a 'measure of value' is but a particular instance - albeit one that has managed to linger on in some economics text books - of the mistaken belief that economic exchanges are exchanges of equivalents."

Well, tell this to the numerous people (gold bugs) such as Steve Forbes and economists such as Richard Salsman who believe money is a measure of value similar to the meter is a measure of length. But that belief does not include the false concept that 'exchanges are exchanges of equivalents'. Far from it.

Dr. Selgin switches to dispute Felix Martin's ideas in Money: The Unauthorized Biography. He mistakenly wrote "Authorized"
He provides a link at which I could not find, but another replay at in which he links his criticism of Graeber and Martin in his usual polemical style.
I also did not agree with Martin's effort to find a 'universal standard of value'. But do not see a parallel in Graeber's ideas. This idea rests on a misconception of the meaning of 'value', which Selgin apparently understands.

Interestingly, Dr. Selgin writes that he is not concerned with Graeber's 'sweeping condemnation of modern economics, or of the economic arrangements for which modern economists are supposedly to blame. Perhaps that is because Selgin is also condemns much of the same for different reasons. But he claims that Graeber's view "that there is no merit in Smith's account of the origin of money or the later accounts of other economists, including Carl Menger" is false. He continues by noting that Graeber insists that money could not have grown out of barter because the 'land' of barter didn't exist, but that barter came late when people who did use money were exchanging with those who did not.

Well, they are both wrong. Graeber's error is his focus only on anthropology in the description that Selgin attacks. Neither base their opinions on money and its origin on the now well documented Mesopotamian and Egyptian economies circa 3000 - 600 BC.

Dr. Selgin then attempts more support for Smith by writing that Smith did understand such concepts as exchange by 'gift giving' and 'credit' in early societies. He writes, 'at least implicitly'. This section becomes convoluted and has its own misunderstandings. For instance, he claims that 'trade between strangers, credit won't serve'. Of course 'strangers' is not correct, itself. The trade was not between strangers but between different societies or cultures that lacked a common 'money'. The Mesopotamians conducted long distance trade (over thousands of miles) with, for instance, Anatolia, India, Oman, and with Egypt by barter with well known parties even though they used 'money' in internal domestic exchanging. And the hypothetical example Selgin and Menger and von Mises use to show the impossibility of barter describes the effort between two individuals to exchange items they desire themselves. But long distance barter trade was between merchants who had no intention of using the items exchanged, but knew they would find markets for them when back at home, and knew that the items they took also would find ready buyers. And they financed their expeditions by assembling the goods they would take by credit that would be paid off from the profit of what was brought back.

Another fallacy in Dr. Selgin's concept is this comment. "formerly separate communities cease to be so precisely to the extent that commerce takes place between them. Smith, for his part, recognizes this". This is absurd. The vast commerce in the Mediterranean basin, Near and Middle East continued for millennia without any of the trading societies at all merging with each other. In the 16th - 18th centuries Europeans traded by barter with the world (for instance American Indians) without any thought of these considering to merge somehow. Dr. Selgin's quotations from Smith in his attempt to support the later are irrelevant.
As for his further excursion into thinking about 'kinship' giving way, we remember that the great trading companies of Genoa and Venice and the banks of Florence and Sienna established their 'factors' in the foreign lands with family members in charge.

Dr. Selgin turns his attention to Graeber vs Carl Menger. But Menger had no more information about the actual economies or methods of exchange in societies pre-dating Greece and Rome than did Smith.
But Selgin uses this quotation as proof the Menger's theory was valid. "people had probably tried to satisfy their wants, over immeasurable periods of time, essentially in tribal and family-exchange economies until, aided by the emergence of private property especially personal property, there gradually appeared multifarious forms of trade in preparation for the exchange proper of goods." But in reality societies (even cities) in Egypt and Mesopotamia were conducting trade initially WITHOUT private property. The land and its produce was owned by a god or gods whose earthly representative was a 'lugal' or 'Pharaoh'. Private property developed after economic exchange had begun.

Apparently, Selgin is another of the secular materialist modern economists who simply cannot believe that 'rational' individuals could determine their choices for economic activity on their religious beliefs.

History of Money

History of Economic Thought

History of Mesopotamia

Michael Hudson - ... and forgive them their debts

Selgin, George - Graeber, Once More

Selgin, George - Mamon Dearest

Selgin, George - The Theory of Free Banking

Facts and Details - Mesopotamian Economics and Money

Podany, Amanda - Mesopotamia

Landes, David, Joel Mokyr & William Baumol, eds. - The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times

Mises, Ludwig von - The Theory of Money and Credit

Lawrence H. White - The Clash of Economic Ideas

James Otteson - The Essential Adam Smith

Sitta von Reden - Money in Classical Antiquity

Murray Rothbard - The Essential von Mises

Murray Rothbard - What has Government done to Our Money?

Richard Salsman - Gold and Liberty

Michael Johnston - Going for Gold

Steve Forbes - Money

Felix Martin - Money: The Unauthorized Biography