20.2 – Money’s Origin Stories
Learning Objectives
By the end of this section, you will be able to:
- Discuss the importance of barter in modern economic analysis
- Explain and compare the two views of money’s origin and theories of value
The Orthodox Origin Story: Metallism and the Barter Myth
What kind of an economy do we live in? Or, what kind of economy do we want to live in? These are not trivial questions. The Enlightenment thinkers took these questions quite seriously. Rejecting the constraints of a feudal society, philosophers such as John Locke, Thomas Hobbes, and Jean-Jacques Rousseau formulated methods for imagining a different world. Their approach was really quite simple: they asked their audience to imagine a place called the state of nature, a blank slate, or a time-equals-zero starting point. Using this state of nature, they considered possible social outcomes when they populated these blank slates with individuals possessing free will. Their method of rational deduction represented a radical departure from the determinist nature of the feudal world, where one was born into their societal role. Use of a fresh state of nature allowed these Enlightenment philosophers to ask fundamental questions about society and human nature. Setting their fictional populations of free individuals loose from the constraints of the feudal order, they deduced possible outcomes. Outcomes such as chaos, barbarism, or a harmonious stable society were imagined to emerge from the summation of individualized acts of free will.
In Locke’s version, individuals needed to follow two simple constraints or rules in order for a harmonious society to emerge and to avoid chaotic barbarism. The first rule is the spoilage constraint. In the state of nature, no individual should collect more food, nuts, and berries than they can consume before they spoil. Second, the prejudice constraint could not be violated. This constraint is “predicated on the right to subsistence: the privatization of land could not disadvantage non-property holders, violating their right to subsistence goods”.[1] As long as all those in the state of nature follow these two simple moral constraints, then a harmonious and stable society is argued to emerge. Through the evolution of similar stories, political economy would add its own plot twists and establish the script for orthodox economics.
What these imaginary stories have in common is the collective illusion that capitalism or free market economics grows out of a state of nature. The basic plot and stage for this story remain the same in orthodox economics today. How often do you get dressed and ready for your day and prepared for class in the Cartesian plane? The Cartesian plane is a two-dimensional mathematical universe and the orthodoxy’s state of nature. In this mathematical space, rational agents maximize by making optimal decisions, like Locke’s imagined individuals facing fruit and nut constraints, the summation or aggregation of ration