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September 9, 2011

So I’ve been reading David Graeber’s book about debt. He really has quite a few interesting and, I would say, wonderful points in his book, among them:

1) Debt came before money, often in the form of gift giving (you can read about this in his interview with Naked Capitalism)

2) In ancient cultures, and even in more recent cultures before the introduction of money, there were typically two separate spheres of accounting: the first was for daily goods like food and goats, which worked on the credit system, and the second for rearranging human relationships. Here there were things like dowries and symbolic exchanges of gold, meant to acknowledge the changing human relationship, but not as a “price” per se – because it was understood that you couldn’t put a price on a human.

3) Money as we know it is intricately tied in with slavery because it was when a person became a thing that could be sold for profit that we had a sense of price and when these two separate spheres were united. In particular the existence of money also implies the existence of a threat of violence. Moreover, it is this “decontextualizing” of people from their homes, their communities, and families who are forced into slavery that allows us to measure them with a dollar value, and in general it is only through pure decontextualizing that we can have a money system. It is this paradigm, where everyone and everything has no context, that economists rely on to describe the standard game theory of economics.

4) There are three social structures that people come into contact with in their daily lives and in which they give each other things: communistic, reciprocal, and hierarchical. For example, among parents and children, it is communistic; among a CEO and his workers it is often hierarchical, and among two strangers at a market it is reciprocal.

Even though I could (and might) write a post on any of the above points, because I find them each rich with stimulating and challenging concepts (and I haven’t even finished the book yet!), I want to first describe something Graeber mentions about the last one. Also, if someone is reading this that thinks I’ve misrepresented Graeber’s points then please comment.

Namely, Graeber mentions that, although we each have experience, and maybe lots of experience, in the three different social structures, when we tell the story of economics and exchange we invariably talk about reciprocal exchange. So, for example, I have three sons and I spend way more time hanging out with my sons, attending to their needs and making sure their infected toes are treated and helping them find their raincoats, then I spend at any market. In other words, if I were tallying up my contributions to things, my kids would be a far greater drain on my resources than groceries. But our “story” of how we give things and take things is inevitably about buying stocks or negotiating for a house price. In other words, we have been trained (by economists?) or we have trained ourselves to define exchange as a reciprocal, Austrian schoolish, “be selfish and take advantage whenever possible” endeavor, even when in the face of it we can’t claim to be like that.

Since I’m unwaveringly interested in how one tells the story of oneself, this fascinates me. It’s a really excellent example of how we are blind to the most obvious things. It also makes me think that economic theory has a loooong way to go before it can really explain meaningful things about “how things work”. After all, when you allow yourself to include “personal feelings” in your definition of giving and receiving, you realize that the reciprocal exchange part of your life is actually pretty insignificant, and in fact if that’s all that economists can even hope to explain (and it’s not clear they can), then there is more left unexplained than explained.

Moreover, the fact that we don’t see this as a failing (or at least a major hole) in the economic theory, because we are blind to it in ourselves, also immediately points to the possibility that we have overemphasized this aspect, the reciprocal exchange sphere, in our current economic system. In other words, if we had a healthy understanding of how the other two systems work (communistic and hierarchical) we may have developed them in parallel with the reciprocal system, and we may well be better off for it. We may even have an economics system that doesn’t reward rich people and punish poor people, who knows.


By the way, ridiculous and ignorant critique of Graeber’s book here (as in he didn’t read the book) with rebuff in comments by Graeber himself. Thanks to a commenter for that link!

Categories: finance, rant
  1. FogOfWar
    September 9, 2011 at 8:59 pm

    Very interesting!

    Ok, I am stuck on the beginning of point 3: that doesn’t seem at all intuitive to me as the “source” of money.

    Also, to nitpick, I wouldn’t lay rational self interest at the foot of the Austrian school–it’s the core underpinning of the Chicago School as well I believe (although I’m by no means an economic historian).



  2. September 9, 2011 at 9:58 pm

    In the critique you mention and the follow-up comments, I was particularly struck by those folks who claim that the invention of money and debt is as self-evident as the evolution of the game of chess. I can’t speak about chess, but I do know something about the board game Go. As “self-evident” as its evolution may seem to modern, educated people, those educated guesses are probably wrong: archeological evidence suggests Go evolved from earlier fortune-telling grids. If something as simple as Go has a history so contrary to conventional wisdom, why should the conventional wisdom of economists be any more likely for the history of money and debt?


  3. September 10, 2011 at 4:17 am

    I read the Graeber interview, the ‘knuckle-headed’ critique, and your blog post in that order. To my mind Graeber’s analysis of the origins of money and it sounds like a plausible origin story.

    My previous favourite account of the evolution of money was ‘Money, whence it came and where it went’ by J K Galbraith. The interesting thing about the Galbraith book is that it is really episodic – so if the basic underlying concept of money is as Graeber describes it changes the start of the story (episode 1) a bit, but subsequent episodes proceed as Galbraith describes, and the difference that adopting Graeber’s interpretation of the beginning of money has very little consequence for subsequent episodes (all of which are in recorded history). However, note that most evidence we have for the origin of writing indicate that it emerges form tallying and accounting systems (in other words the reason why we have no record of ‘money’ emerging from tax, barter or debt systems is precisely that the data recording systems only evolve in response to the evolution of money).

    The second point is almost certainly true (except for the introductory clause ‘In ancient civilisations). The research described by Dan Ariely in Predictably Irrational confirms that it is consistent with observation of the way people respond to social and economic obligations in today’s ‘Western’ culture.

    The third point is irrelevant – notions of slavery and the obligations of slave to master and vice versa have varied over time. For example, are indentured labourer’s slaves? Indeed the advantage to the employer of employees working for money over slaves is precisely that the relationship does not create excessive moral obligations on the employer to look after the workers. For example, if a slave got old or sick, the slave owner was still supposed to house, feed and look after them indefinitely even though they were no longer contributing labour.

    The final point, and the one on which you posted is the hybrid nature of all real world social systems. The realisation that things like ‘captialism’, ‘communism’ and ‘feudalism’ are abstractions that we have made in our analysis of human relations by ignoring other aspects of human relations. You don’t find the pure forms in the real world. I don’t know why we keep mistaking the simplifying assumptions used in making social analyses tractable for moral imperatives to be applied in the real world – if some physicist suggested that we forced all gases to be adiabetic so that they obeyed the gas laws perfectly we would rightly ridicule them.

    In economics we tend to ridicule those making inconvenient observations of truth. We ridicule Thomas Malthus for suggesting that infinite growth and finite resources are incompatible concepts. We ridicule Karl Marx for observing that economics and politics are inseparable. And the ‘free marketers’, who take Adam Smith as gospel, conveniently ignore those parts of Adam Smith’s work in which he looks at market failures (such as it’s tendency to lower wages below that required for replenishment of the work force).

    Anyway, thanks for bringing Graeber’s analysis to my attention. As you can tell from the length of my comment, I certainly found it interesting.


  4. FogOfWar
  1. October 19, 2011 at 1:52 pm
  2. November 13, 2011 at 7:03 am
  3. August 26, 2012 at 7:58 am
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