Origin of money

Piece of work, "Information and the cost of money" Kokshotta, Cottrell, Wright and Michelson

Conventional economic theory attributed to the emergence of money barter, in which one product stood out as a means of exchange. Usually find this product — a coin or a piece of silver, the standard unit of which could thus serve as a unit of account. Coinage is explained as due to the needs of society by the state mass production pieces of precious metals standard weight. This tale migrates the early history of money the common practice of Victorian Britain.

Even before the release of coins were certain goods unit of account for tax purposes in the extended system of exchange. Polanyi et al (1957) describes this process in ancient Mesopotamia, where commercial transactions are translated at the shekel, the appropriate number of barley or silver. But that does not mean that the payments actually made with barley or silver. Rather, the overall unit calculation allows to offset debts incurred as a result of barter. When you trade outside the country, the payment seems to happen with metal bars.

There is an important difference between coins and pieces of silver a certain standard weight. The coins were made "in a row", that is, the cost of the bag of coins was determined by counting their number and multiplying by the denomination. Precious metals are accepted by weight. Their weight is checked at every transaction, because neither side wants to be deceived. However, the hypothesis of the origin of coins as the standard unit of weight of gold or silver is not supported by the data of numismatics.

Ancient coins were far from pieces of silver or gold with a standard weight. The first coins were issued in Lydia in the 7th century BC They had a standard weight staters, about 220 g, but were not made of pure gold, and of the electron — an alloy of gold, silver and copper (Bolin, 1957). Because of the addition of copper coins looked golden and had a whitish hue, typical of a simple alloy of gold and silver. If the intention was to use them as standard ingots of pure gold, then, is that the Lydian state simply fooled his subjects. And if they were issued to facilitate the exchange of goods in the markets of the kingdom, that is why they are so heavy and expensive?

Why the price was approximately monthly cost of the average man?

An alternative explanation is that they were used to pay taxes to the king. His theory gives the money back, connecting them with the development of the emergence of class society and the state. This theory is being developed by scholars such as Wray (2004), Ingham (2004), Forstater (2003), based on the traditions laid down by Knapp (2004) and Innes (1913). According to this state or chartalistskoy theory, the state creates money, demanding that taxes paid by them. In the earlier stages of development, for example, in ancient Egypt, the government collects taxes in the form of labor service or obligations to deliver agricultural products. Taking taxes only coins and simultaneously offering coins as payment for the work, the state provided the massive use of its currency. Ancient Lydian stater was too expensive to maintain daily transactions, but the amount equal to the monthly expenses reasonably appears to the minimum annual tax.

If the monarch will introduce to its citizens the duty to pay taxes only special coins, then these citizens must either work directly for the state — to build roads, to serve the soldiers, etc., or to provide goods for sale to those who serve in the army or build roads. According to this concept, the penetration of commodity production in the body of society is accelerating coercion by the state. Adam Smith called money "the power to control the labor of others." This power is in its original form is state owned. Of issue marked the royal emblem, the state delegates this power to those who own coins. Possession of coins shows that they host or personally fulfilled his duties to the state, served as a soldier, etc., or made them indirectly by providing services to soldiers. So money tied to the production and appropriation of surplus. State who first appropriated the surplus product. That state power over the surplus product through the replacement of natural causes tax money initially self-sufficient peasants to work in the market and in the end creates a civil or a bourgeois society.

The use of precious metals is in the process — a matter of chance. Wray points out that in Britain until the XIX century, the main form of public money was not a gold coin, a tag with notches.

Usually the money payable is always expressed in terms of the calculation, which consisted of a number of grains of wheat or barley. Actually, all of the first currencies were weighted measures of grain — ming, shekel, lira, pound. As soon as the government sets the tax service, the taxable population must somehow get what the state would have to pay taxes. This can be anything at will state: clay tablets, tags walnut, iron bars or coins made of precious metals. This, in turn, means that the government can buy everything that is offered for sale by simply releasing the thing which is going to take in taxes. If the state produces peanut tag marked "cost 20 pounds," then it will cost £ 20 in procurement affairs of the state, while the state will take the label in the payment of taxes on the cost of 20 pounds. This tag will circulate as a medium of exchange with the cost of 20 pounds, even among those who do not bear the tax service, while there are those who have to pay taxes. Meeting those who have a label, but there are no taxes, with those who have a tax liability, but there is no tag, organize bankers — who have always been intermediaries government just in the organization of such meetings.

Tag was just a "square rod, made of walnut, which made resection, in some way reflects the amount of the purchase or debt," the name of the debtor and the date of the transaction, written on two opposite sides of it (Innes, 1913, p. 394). After applying the rod breaks up the notches in the middle so that the notches were also halved. Rift ended about an inch from the base of the rod, a long piece (in English, called the «stock» — trunk, from where the term «capital stock», ie "fixed assets") kept the borrower, and the "chip" (" stub », the term is still used, for example, within the meaning of« ticket stub »- ticket stub) takes the debtor. Two pieces of folded labels to check the amount of the debt. It is important to note that the government has funded its costs through the so-called «tallia divenda» together with the Treasury issuing tags in payment of goods and services supplied to the royal court (after 1670 wooden labels were replaced by paper "orders of the Treasury", although tags stored in the British House of Commons up to 1834. (Wray, 2004).

Monetary system creates a binary relation that associates each legal entity integer. Each form is known in the history of money is the next step in the development of recording technology of this relationship.

Coin set by the ratio of ownership. The number associated with each person, a coded number of coins that he has. Coin, however, is not very advanced technology records, because they can only record positive numbers. You can not carry in your pocket -50 pounds. And coins and paper money are tokens, fixing the corresponding entry. Changing the recording is conducted by moving tokens.

Tags, books of double-deck of punched cards or computer relational databases are more sophisticated monetary technologies, the ability to contact a legal entity with the state of the credit or debit. Tags — is a specialized system of record tokens. Other technologies are algorithmic. Change of state is performed recording or fixation of characters.

Important to take care of all monetary technologies — the integrity of the records. They should provide some protection against forgery. It is in this light that should be considered for the use of precious metal coins. State always set severe penalties for issuing fake coins. But the punishment would be ineffective if the issue of fake coins would have been too easy. In addition to the legal prohibition of counterfeiting State coin has two other defense mechanisms.

1) The coin is made by stamping the original, that is, using one of the basic technologies for copying, as described in section 3.3.3. Without access to the original to make exact copies of the coin hard. However, well made copies can be mistaken for real coins. To get them, you need to get a copy of the original, which in principle achievable when using a print coins make the matrix and to open the new stamp. Before the invention of the iron casting process was technically impossible, as stamps, made of softer metals are available for castings, like bronze, had no strength necessary for minting coins. Please note that between the chip used as the sample, and the fake coins is three steps up. Copying mistakes accumulate exponentially, so get acceptable quality forgery extremely difficult.

There may be other techniques forgery — manually cut a new stamp or use one coin to make a form with which the coins can be poured, not stamped. And then, and more — quite an expensive process, which is not advantageous for the production of coins of small denominations. For large denominations they can be useful.

2) small denomination coins were made of copper or copper alloy and protected against tampering as described above. But for the high denominations need more protection. It can provide, making the coins from precious materials such as gold or silver. If the nominal value of the coins is not too much higher than the value of their metal content, then, coupled with the complexity of an exact copy, the profits from counterfeiting is greatly reduced.

Using gold and silver coins for coin is not necessarily what is confirmed by replacing metal to paper money printed by using sophisticated methods, complicating up. The use of precious metals was primitive technical means of protection against forgery.

As the transition from subsistence to cash state tax proceeds from the direct appropriation of the surplus product to the indirect, through monetary symbols. Introducing cash taxes, the state symbolically assert their right to a part of the labor of society. When the government spends money received from taxes on goods and labor, it produces the actual appropriation of the surplus product. Civil society, in this case acts as an intermediary, moving labor from those who pay taxes to those who provide specific services to the state.

Box 1.10 British monetary policy in Africa

The strong interdependence of the state and the money is especially noticeable in the history of empires. After the conquest of Africa, the Europeans got the following problem:

If the resources are allowed to maintain the entire population, the inhabitants of the colonies had no desire to offer their labor power to sell. Therefore, the colonial government required any methods to force people to work for pay. From historical records it is clear that one of the most important techniques was the introduction of taxes and tax claim in the colonial currency. He had a distinct advantage. He not only made the people to work for pay, but the cost of creating the colonial currency, introduced in the colony currency. In addition, it can be had, if necessary force the population to grow crops for sale required. What exactly are people supposed to do to get the currency resolved exclusively colonial government, because it is the only source of the currency. (Forstater, 2003).

The state, of course, there before society of commodity production, and has the primary authority to assign part of the social labor time. In the ancient empires of Mesopotamia and Egypt, or in the later Inca Empire this assignment is performed directly. Farmers were required to give their time or their harvest to the state. Some of the crop consumed by priests or government officials, another shape on droughts and distributed among the employees in times of famine. Polanyi called this form of redistributive economy. Such a system requires the development of information technology — writing systems and fixing numbers. That is why the Mesopotamian civilization developed cuneiform numbers, and later — and a letter. Inca invented a pile, a system of writing numbers, based on the rope knots.

This system of records should:

  • track physical stocks of grain stored by the state or temples;
  • track is made in the delivery of a tax from individuals and groups;
  • fix the tax obligations of these groups.

All this required the development of recording technology, a standard set of measures and reliable methods of arithmetic. Then the state would match the number of taxpayers and by product. It could add up the taxes of individual groups to find out the total number of stocks — so needed a reliable method of adding large numbers. To determine whether a group of their tax obligations, required a subtraction method, weaning already delivered products from duties.

If a man has hired a boatman, he shall pay him six Gurov grain a year

If a man has hired an ox, he should give his master four gur grain of hiring back bull and three gur of hiring front bull.

If a man has hired an employee, he should give it an 8 Gurov grain a year. If a person is hired shepherd, he should give him 6 Gurov grain a year.

The Code of Hammurabi, a quote by Postgate, 1992.

Sumerian civilization developed a sophisticated system of recording numbers using positional notation, similar to the standards in use today. The main difference was the radix. Our positional record, originating from India, uses base 10, and the Sumerians used to do this number 60. Positional notation concise and makes it easy to handle large numbers. Is a written notation, suitable for table entries tax revenues. Without this technology, recording and processing the social complexity of the ancient empires would be unattainable. All social systems, but the most simple, the social relations embodied by means of information technology. Without fixing method public debt ratio creditor / debtor can not be saved. Without a way to measure the land and possessions of fixing the relationship between the land owner and the tenant can not exist.

1 gur of barley for one shekel of silver

3 liters of oil for a better one shekel of silver

1.2 liters of vegetable oil for 1 shekel silver

1.5 lard for 1 shekel silver

40 liters of bitumen for 1 shekel silver

6 min wool for 1 shekel silver

2 gur salt for 1 shekel silver

The opening section Esnunnskogo code of law, quoted by Postgate, 1992.

His subjects of the empire can supply different cultures depending on the circumstances. Some can grow barley, others — dates, and others — to send dried fish or several different products at once. Therefore necessary to determine whether to pay tax farmer, who brought basket of dates and three gur of barley. This applies to the following decision: taxes are appointed in terms of barley, and then the state determines how many fish, dates, etc. match the specified amount of barley. The standard unit of barley, gur, about 300 liters, then became a unit of measurement of other products. Gur barley had the equivalent in silver — sickle, defined as the amount of silver equal to the mass of 240 grains of barley. Most likely, these units were the basis of purely counting the monetary system. Shekel / gur never released in the form of coins, they exist only as bookkeeping entries on clay tablets. Thus, the amount of speculative barley acted as a generic method for measuring values and commitments. Initially adjusting only the obligations of the state, gur is becoming a unit of bond between individuals. Such a payment system based on credit, was possible only because of the numerous class of educated and scribes. It is based on the positional number system and algorithmic computation. If you want to master the positional number system, you have to spend all his childhood, learning by heart the table. You have to remember tables of addition, subtraction, and multiplication. Even to the decimal number system is a rather difficult task. With the sexagesimal system was probably even harder. Naive estimate shows that the size of the tables is 36 times greater than those that study The present-day students. However, this re-evaluation, since the Babylonian number system is better represented as a decimal, and alternating in shestirichnuyu. Therefore, the tables have duplicate sites that facilitate memorization by comparison with shestidesyatirichnoy system. All the same, for the establishment of the monetary system, based on netting needed a class of people with costly education, which was absent in the small kingdoms and city-states, where he first began to mint coins. Coins allowed to enter the monetary relations in societies, does not have a class of scribes, skilled in the calculations.

Original: http://www.dcs.gla.ac.uk/ ~ wpc / reports / info_book.pdf

Translation Yuri Zhilovtsa

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