MONEY IN CLASSICAL ANTIQUITY

Sita von Reden

Cambridge Univ. Press, Cambridge, U. K., 2010, 237 pgs., Index, References, Appendices, footnotes, maps, figures, tables

Reviewer Comment - This is an extremely important scholarly study of 'money' in ancient Greece and Rome, with some attention also to Egypt. For us today the chapter 4 on Cash and Credit is the most important. In this the author demolishes the typical presumption that money equals currency. The money supply has always included exchangeable (transferable) credit. And Dr. von Reden also shows that payments in kind do not mean barter. Her introduction also contains important corrections to current opinion about money. Money in its various forms (and she shows that it has many forms) is the key tool that enables convenient exchange of goods. So her descriptions of the forms and uses of money naturally includes much of interest about economic activity in different social -cultural conditions. Since the title indicates focus on Classical Antiquity it is likely that students of economics today will overlook it, thinking it is only a scholarly description of some ancient era. But this is exactly the era in which currency was invented in the West and its use expanded. It is also the time in which philosophers such as Aristotle and Plato were already commenting on the effect currency was having on society and its ethics. It should be in the required reading list of everyone interested in economics.

Introduction - There is so much critical information packed already into the introduction that it really cannot be summarized. Here are a few selected examples. "Money is more easily lost than gained; it requires a host of laws, regulations and controls to work and have value; in the form of coinage it costs something to be produced; and- above all - it makes people dependent on anonymous authorities such as governments, federal institutions and central banks." "Money destabilizes wealth and social relationships, and transforms tangible, useful property into mere options for the future." The author understands that credit=debt is a component of the total money supply and, indeed, was the basis of money prior to the development of coinage, yet in the text she jumps back and forth between using the word 'money' to mean coinage (currency) or to mean all money in general. She uses the term 'monetization' to refer to the expansion of use of coinage, but also, sometimes, uses the term in a more general sense to mean a developing process of using 'money' as the basis for establishing 'value.'
She notes that Aristotle, living practically at the time of origin of coinage, nevertheless had an 'imagined' concept of how economic exchange was transacted prior to this origin. She refers to J. S. Mill's concept of 'money' and its origin, in which he considered 'money' to be synonymous with currency. She poses several very interesting questions related to the impact on society of the introduction of coinage - such as 'to whose benefit was it' - what were its rules - "what political, social and cultural systems made certain forms of money acceptable and other monetary systems collapse?" Here she is recognizing that coinage (currency) was not the only form of money.
She then get to the root of the confusion. "Money, in contrast to coinage, has never been deliberately invented (either by traders, citizens or states), but comes into being as regular transactions are made by means of the same medium. She gives examples. When many individuals use the same process for conducting exchanges then that form is money. She then gives the standard basic functions that in theory define money - but note her critical terms. "Money can be defined by four basic, but interdependent, functions. It is a means of exchange IF people make payments for goods and services; it is a means of payment, IF people pay taxes, rents and penalties; it is a store of value, IF people keep it in a treasure box, display it at home, or put it in a bank account, and it is a unit of account, IF people compare the value of different goods on the basis of that medium, or account for debts, future payments, and so on. Note the big IF that I have stressed. Money is money IF it performs ONE of these functions, not all of them. In the following chapters Dr. von Reden gives examples of different types of money performing different of these functions simultaneously. For instance, coins are used as means of exchange, while grain is used as means of payment, while weight in metal is used as unit of account, and value is stored in yet other, tangible, assets. In this case the money supply is composed of ALL of these things. And the exchange conducted by means of coinage need not be limited to physical goods, - for instance coins are exchanged for forgiveness of sin. Money can be exchanged for sex but not for love.
The author continues with yet more examples of the varieties of 'money', including rather different concepts prevalent in China. She concludes from this that, "The fact that certain questions arose in one rather than another monetary culture shows that precious metal coinage, too, is not a natural consequence of monetary evolution, but a specific historical development." "There were other forms of money than coinage in antiquity." She notes a result in the problem created by new coinage "a conceptual challenge as the later (coinage) destabilized the value of money that so far had been linked to what was assumed to have universal value.".
This brings up a different problem, not discussed, what is the meaning of 'value' itself.
But she notes that monetary value then could be based on political decision rather than universal or super-natural qualities."
"In antiquity, however, the concept of money was closely linked to valuable objects. And so monetary value, too, was considered to be the price of objects that were purchasable. Since both Aristotle and the Roman jurists were well acquainted with price variation, monetary value was clearly perceived as a SOCIAL rather than INTRINSIC factor of objects."
Well, they were far ahead of our modern economists (quants) who spend time and money trying to model mathematically the "intrinsic' value of stocks and things. There is no such thing as 'intrinsic' value since value is not an attribute that can be ascribed to an object of service. Bravo for the Greeks and Romans.
Dr. von Reden continues with much more important discussion of money with more specifics. She writes: "Rather, different forms of economic and political organization, conditions of transaction, monetary institutions and forms of law suggested a narrower and at the same time broader notion of money than is current today." "While functions and meanings of money are dependent on a wide range of social and cultural conditions, it is most strongly associated with markets and the economy." She continues by pointing out that the 'economy' of classical societies was different from the 'economy' of modern times. She then discusses the ideological and polemical content of discussions about money today, and indicates how these current beliefs translate back into pre-conceptions (unhistorical) about what money must have been and done in ancient societies.
Dr. von Reden shifts the subject. "I shall argue throughout this book that money was a dynamic that under changing political and social circumstances increased the complexity of transactions and reduced costs ." She continues with this concept applied to classical society. But one wishes today that our economists applied the same kind of analysis.
Here is another significant concept. The collective property of the polis in classical Greece, for example, was a category economically and legally distinct from that of the private property of individual citizens and their oikoi. In Rome, the emperor Augustus made a point of distinguishing his own property from the imperial treasury, the fiscus, and the (republican) public treasury." The concept is much different from economic theory today.

Chapter 1 - Monetization issues - Dr. von Reden shows that both 'monetization' and the concept of 'money' were more complex than is generally understood by economists today. "But when we consider that valuable objects and metal bullion, too, were tendered by custom or public approval, we find that monetization was not a process involving solely the establishment of coinage by governmental act." She discusses the continuing arguments about the origins of 'money' and creation of coinage. She describes much interesting historical evidence. She notes that in ancient Babylonia economic transactions were accounted for in silver bullion (that means not coins but weights). They were not barter. There were loans and of course debts with interest accounted for in silver bullion. But after the invention of coinage that form for money rapidly expanded although exchange continued to include transfer of 'valuable' objects, but so long as these objects then could be given a 'value' in the monetary units. Thus, lack of cash (coins) on hand was compensated for by exchange of other things including credit=debt.

Chapter 2 - Monetization cases - In this chapter the author focuses on specific known cases of the use of money. She begins with references to Aristotle's views on the social impact of the introduction of coinage. She believes he had no knowledge of the real historical antecedents of coinage or the reasons for its invention. But he did accurately describe its function in contemporary Athens. She turns to Naukratis, Samos and Egypt for more examples. For Egypt, she notes: "Until the Greco-Macedonian conquest in 332 BC Egypt had no regular coinage." "Pharonic Egypt, however, is a particularly good example of a society that had money without using coinage. "Baskets of grain, vessels of oil, weighed bronze and foreign silver in total fulfilled most monetary functions. Over the long period of ancient Egyptian history some were used as measures of value, others as stores of wealth, and all of them were in particular contexts accepted as a means of payment." "Coinage was introduced into Egypt by Alexander in 332 BC."
She describes the subsequent history of coinage and money into the Roman era. Then she turns to a lengthy discussion of coinage and money in Rome. "The most important conclusion to be drawn from the numismatic evidence is that coinage was a subordinate phenomenon of monetization; for by any reasonable calculation the amount of money earned and spent by the Roman state in the first half of the third century BC was much greater than the small amount of coinage and aes bars recknoned to have been produced could have covered."
Next, she turns to Celtic Gaul and Britain.
In conclusion she comments about the whole process of monetization; "There was an increasing demand for money that was not always met by an adequate supply of coinage. This led to a thriving culture of credit, and any increase in the supply of coinage had a high chance of being absorbed into economies insufficiently supplied with it."

Chapter 3 - Monetary networks - In this chapter Dr. von Reden describes the rapid but fragmented expansion of coinage throughout the Mediterranean region. An amazing number of mints were established, each producing coins of weights based on the corresponding local weight systems. Then political power led to the supremacy in use of the coins of a dominant city, such as Athens. "Every precious metal monetary system is based on a principal unit of weight (normally slightly lighter than the unit of metal weight itself). She describes the process, noting that payment of military forces was a significant cause for spread of various coins. With the political expansion of Roman power the use of the silver denarius also spread. But even so, there were bronze coins of small value minted locally for local use.

Chapter 4 - Cash and Credit - In this chapter we reach a topic of great significance today - the role of credit in a monetary system. The author reports on the records of very sizable loans and the role of major bankers. "Not only had the ancient economy expanded over the 600 years between the classical Greek and Roman imperial periods, but the financial resources that supported such expansion had also grown. In this chapter we will investigate the changing financial capacity of the ancient monetary economy, looking in particular at credit and other strategies that were adopted to increase the money supply."
There you have it. In ancient Rome credit was used to expand the size of the money supply just as it is today. Of course for years establishment economists have refused to believe this, because it disrupts their conceptions of the role of credit created by governments and instead they conjure up the notion of 'velocity' of money.
But Dr. von Reden has the facts. "The orthodoxy has now been challenged. In contrast to earlier arguments, scholars have brought together many indications that the circulation of money was not just based on coinage." "There were, first of all, forms of cash-less payments, ranging from a simple setting off of obligations against each other to the use of written debt claims that could be transferred to third parties. There was, furthermore, a flourishing credit economy that made payments possible when cash was not in hand. The importance of credit for cash exchange had already been emphasized by Friedrich Pringsheim, ..." "But credit was not just a legal tool to overcome the complications of cash exchange but a ubiquitous practice that could increase the money supply, if there were proper procedures to recover loans. In fact the law of debt was among the most advanced in ancient private law, and the great range of formal and informal credit institutions that developed in classical antiquity, suggest that the ancient monetary economy was highly dependent on credit."
"Once a cash economy was fully established in classical Athens, money was among the most important things lent and borrowed."
The chapter continues with an extensive description of the role of banks and banking. And all of this should be studied today by those who claim knowledge of banking, money, and economics in general.
In conclusion the author writes: "A deeply rooted culture of credit, by which the social imperative of helping one's friends, neighbors and fellow-citizens was transmitted, formed the background of an extensive monetary credit economy throughout classical antiquity. Already before money developed into coinage, there was some notion of shared responsibility for the economic status of individuals as members of a community, while the resolution of debt crises and settlement of interpersonal disputes remained a political issue from the archaic Greek to the Roman imperial period."

Chapter 5 - Prices and price formation; issues - Dr. von Reden proposes many of the usual questions being asked today about the role of money and the causes and effects of changes in money in relation to the concepts of the supply and demand curves. First, she describes the actual amount of primary source information available and indicates that it is rather spotty. She summarizes some of the standard current theories including the famous 'quantity theory of money' and 'velocity' of circulation. In conclusion she believes the amount of information is not adequate to support a full explanation for such issues is trhe cause of inflation or its lack.

Chapter 6 - Prices and price formations: a case study - To support her opinion in the previous chapter she uses the case of Egypt, an economy she has studied in detail. For this she has the prices of grain for some years between 275 and 80 B.C. She describes the nature of the data and its limitations very clearly. She constructs graphs and tables of prices over time and in locations. She compares data on price of grain with worker wages. The result is that not much can be definitively established.

Chapter 7 - Sacred finance - This is a special topic. The role of temples in ancient society, in the economy, and hence in the use of money was very significant. Dr. von Reden notes that the subject has not been much studied since WWII. She describes the role of the temples, of religious cults, of public worship and the importance of religious belief in classical societies. She believes that monetization had important effects. "Other illustrations of the interdependence of monetization and cult finance were the transformations of dedications into monetary fees, or the transformation of cult utensils into monetary means of payment." She also describes the role of temples as sources of credit. Temples also charged fees and taxes that paid for their services and upkeep. They charged rent on agricultural land from their tenants. These were paid in cash or in grain.

Epilogue: monetary culture - Dr. von Reden opens with this: "In this book I have concentrated on the economic consequences of money and coinage in classical antiquity. But it is well known that money does not just affect economies but is a collective signifier through which individuals and societies construe their identities and lives."
Well, It may be 'well known' to the relative academic community, but I do not think the general public has any such idea, although it should. She devotes most of this discussion to comment on Aristotle's and Pliny's views of money and its impact on Athenian or Roman culture..