THE ORIGINS OF MONEY: EVALUATING CHARTALIST AND METALLIST THEORIES IN THE CONTEXT OF ANCIENT GREECE AND MESOPOTAMIA A DISSERTATION IN Economics and Social Science Presented to the Faculty of the University of Missouri-Kansas City in partial fulfillment of the requirement for the degree DOCTOR OF PHILOSOPHY by ALLA SEMENOVA M.A., University of Missouri-Kansas City, 2007 Kansas City, Missouri 2011 0 © 2011 ALLA SEMENOVA ALL RIGHTS RESERVED THE ORIGINS OF MONEY: EVALUATING CHARTALIST AND METALLIST THEORIES IN THE CONTEXT OF ANCIENT GREECE AND MESOPOTAMIA Alla Semenova, Candidate for the Doctor of Philosophy Degree University of Missouri-Kansas City, 2011 ABSTRACT Tracing the origins of money in archaic Greece (roughly 900-500 BC) and ancient Mesopotamia in the fourth millennium BC, this thesis assesses the applicability of Chartalist and Metallist theories of money’s origins. It is demonstrated that Metallism does not withstand a historical test given the marginality of trade, both domestic and foreign, in the period when money and, subsequently, coinage emerged. A wide range of evidence – archeological, etymological, literary and numismatic – demonstrates that money emerged in the context of religious practice and ideology of archaic Greek societies marked by socio-economic hierarchies and inequalities. Money was first embodied in the portions of sacrificial bull’s flesh distributed by religious authorities during the rituals of communal sacrificial meals. Purporting to allocate to each his ‘just’ and ‘equal’ share, the redistributive rituals created a façade of social justice and equality via the use of money. From roasted bull’s flesh, money evolved into sacrificial roasting spits (obeloe), and, finally, into coinage, which initially served as a symbolic representation of roasted bull’s meat. ii A reciprocal relationship between the development of coinage and the establishment of the civic polis is further explored. Whether in Homeric societies or in civic poleis, the power of money and coinage was ideological and ‘egalitarian’. Distinctly non-commercial origins of money as a phenomenon of a Homeric proto-state and, subsequently, as a creature of a civic polis support the Chartalist theories. Yet, there is no evidence that Greek money and coinage emerged as a unit of account in which taxes to the state were denominated. The use of money in a fiscal context developed later in the classical period. Yet, evidence in support of the more traditional Chartalist monetization mechanism pertains to votive offerings in the form of miniature figurines produced by religious establishments as substitutes for contributions in actual goods. Finally, in the context of centralized redistributive temple-economies of ancient Mesopotamia, the evidence of clay tokens is utilized to formulate a hypothesis according to which money was introduced by the temple as a certificate of fulfilled contributions to the temple-state. The ‘certificate of contribution’ hypothesis institutionalizes Chartalism within a concrete historical context. iii APPROVAL PAGE The faculty listed below, appointed by the Dean of the School of Graduate Studies, have examined a dissertation titled “The Origins of Money: Evaluating Chartalist and Metallist Theories in the Context of Ancient Greece and Mesopotamia”. Supervisory Committee L. Randall Wray, Committee Chair Department of Economics John F. Henry, Ph.D. Department of Economics Mathew Forstater, Ph.D. Department of Economics Jeffrey A. Rydberg-Cox, Ph.D. Department of English Language and Literature The Religious Studies Program Max J. Skidmore, Ph.D. Department of Political Science iv CONTENTS ABSTRACT.................................................................................................................................... ii ACKNOWLEDGEMENTS......................................................................................................... viii Chapter 1. INTRODUCTION ...................................................................................................................... 1 2. STATEMENT OF THE PROBLEM AND METHODOLOGY .............................................. 13 The State of Scholarship on the Nature and Origins of Money ................................................ 14 The Case of Economics ......................................................................................................... 14 Chartalism and Metallism: An Overview ...........................................................................14 Chartalism and Metallism: The Problem of a priori Preconceptions..................................16 Chartalism and Metallism: The Problem of Historical Empiricism ...................................17 The Case of Other Historical and Social Sciences ................................................................ 19 Cross-Disciplinary Influence of Neo-Classical Economics and Compartmentalization of Social Science .....................................................................22 The State of Scholarship on the Nature and Origins of Money: Conclusions and Implications................................................................................................ 24 General Theory, Empiricism and Historical Specificity ........................................................... 26 The Problem of General Theory vs. Pure Empiricism .......................................................... 27 The Lessons of the Methodenstreit........................................................................................ 29 How General Is a Theory of Money’s Origins? .................................................................... 31 Defining the Term ‘Money’ ...................................................................................................... 34 The Fallacy of Proceeding with an a priori Definition of the Term ‘Money’ ....................... 35 Thorstein Veblen on the Problem of a priori Preconceptions.............................................38 The Substantivist School of Anthropology on the Problem of a priori Preconceptions.....42 Method Adopted in This Research ........................................................................................ 43 3. CHARTALISM AND METALLISM AS TWO CONTENDING PERSPECTIVES ON THE NATURE AND ORIGINS OF MONEY .................................................................. 45 The Chartalist or State Money Approach.................................................................................. 45 Money as a Chartal Means of Payment ................................................................................. 46 v Money as a Unit of Account for Denominating and Repaying Debts to the State................ 48 Monetization Mechanisms..................................................................................................... 50 Development of Private Markets........................................................................................... 53 The Metallist or Mengerian Approach...................................................................................... 55 Money as a Spontaneous Institution...................................................................................... 57 Money as a Medium of Exchange Commodity Evolving from Barter Exchange................. 59 The Difficulties of Barter, the Different Degrees of ‘Saleability’ of Goods and the Spontaneous Origin of Precious Metal Money ......................................................60 The Role of the State: Adjusting and Perfecting the Institution of Money to Meet the Growing Needs of Commerce .........................................................................64 The Metallist Approach: Some Logical Flaws ...................................................................... 66 4. ON THE EVOLUTION OF CARL MENGER’S MONETARY THOUGHT: A RESPONSE TO REVISIONISTS ........................................................................................ 68 The Revisionist Accounts of Carl Menger’s Monetary Thought.............................................. 68 Menger’s 1909 “Geld”: The Old Metallist Arguments............................................................. 71 Menger’s 1909 “Geld”: The New Chartalist Insights ............................................................... 74 Menger’s 1909 “Geld”: Refuting the “Fallacious Doctrine” of Government Token Money ... 78 Who Are “Those Authors”? ...................................................................................................... 84 Menger’s Posthumous Second Edition of Grundsätze (1923) .................................................. 88 What Menger Really Did: Appeasing the Historical School .................................................... 91 A Response to Revisionists....................................................................................................... 93 5. NON-COMMERCIAL PERSPECTIVES ON THE ORIGINS OF MONEY AND COINAGE: A SURVEY OF INTERDISCIPLINARY LITERATURE.......................... 97 Philip Grierson and the Origins of Money in Wergeld ............................................................. 98 Sitta von Reden and the Origins of Greek Coinage in the Context of ‘Distributive Justice’.. 104 Leslie Kurke and the Politics of Monetization in Archaic and Classical Greece ................... 120 Henry Kim and Advances in Modern Numismatics ............................................................... 131 Martin Price and the Origins of Electrum Coinage in the Sphere of Gift-Giving .................. 135 Fiscal Theories of the