Linkless: Debt as the Origin of Money

I’ve been reading lately about the origins of money, and came across an idea worth sharing.

The writer wanted to show that the origins of money are much simpler than we imagine them to be. The usual story is that money evolved out of barter by a natural process in which a particular commodity becomes the most popular one for intermediate trades. An intermediate trade is one in which a person trades Item A for Item B to then be able to trade Item B for item C. According to this theory, Item B becomes the generally-accepted medium of exchange for all items.

The writer pointed out that a simpler transaction is possible: Just keep a record of giving Item A to the person who needs it. Later, when the recipient has something to give back, make the trade and cancel the debt.

The observation is striking on many levels. For one thing, the very earliest examples of writing known to history are preponderantly records of this very type. A metallic coin is an analog of such a record — virtually math in physical form (an actual counting piece).

For another, it accounts in some ways for the phenomenon of gift money, a practice that is both ancient and modern, as well as universal.

Finally, one can probably trace the origins of the administrative state to the creation and maintenance of such records.

I wouldn’t say the writer’s observation disproves the theory of the natural evolution of money from barter, but the insight does illustrate a part of the known ancient history of the invention.