Thursday, April 18, 2013

Desan on the Mythic Origins of Money

Christine A. Desan, Harvard Law School, has posted Creation Stories: Myths About the Origins of Money, "the opening chapter of a longer history about the transformation in England from a monetary system based on commodity money to one based on bank-issued money."  Here is the abstract:
A myth about the origins of money has long organized modern approaches to the medium. According to that creation story, money is the natural product of human exchange. It can be analogized to a commodity like silver that comes to hand out of the decentralized activity of trading or a convention like language that arises out of a consensus about the value of an item. Attributing that character to money black-boxes it: whether it is a commodity or a convention, money becomes an opaque instrument that operates to facilitate its more substantive partner, the market. Despite its stature, however, the modern creation story about money bears little resemblance to what we know about money’s invention or, rather, re-invention, in early medieval England. After considering that evidence, the article advances a creation story that explains how money emerges in conditions truly bereft of liquidity. Money is a constitutional project, a political initiative undertaken by a society to mobilize resources. Money comes into circulation when authorities use the unique capacity they have to evaluate the contributions of subjects or citizens and mark them in a common unit of account. People accept money as a token that will extinguish their obligations to the center and can be used in the interim as a medium of exchange and mode of payment. In contrast to the dominating myths about money, this alternative creation story explains how societies install those capacities and how that activity shapes “the market” that is made by money. The essay concludes by suggesting that modern money systems operate on a fiscally constructed base that is supplemented by money sold to individuals for private use.

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