Where does money come from? The familiar story is that barter comes first. I’m a fisherman. You’re a farmer. We swap some fish for some potatoes. But what if you don’t want fish or I’m tired of potatoes? How do we find the people who have what we want but who also want what we have? And when we do find them, how do you set the exchange rate? One fish for two potatoes? How big are the potatoes? How bony is the fish? There is no end to such questions.
The familiar story is mostly bunk, according to David Graeber in his book Debt: The First 5,000 Years. It’s a sweeping history of debt, money, credit arrangements; but it’s also an evolutionary history of trade, war, slavery, government, banking, and more. (Graeber is an anthropologist; I previously blogged about his latest book here.) Chapter Two of Debt is titled “The Myth of Barter” but it opens with a superb quote by H. L. Mencken that I’ve now memorized because we humans, so-called rational beings, prefer to be lazy and take heuristic shortcuts. Anyway, here’s the quote:
For every subtle and complicated question, there is a perfectly simple and straightforward answer, which is wrong.
The familiar (yet wrong) story imagines a stone-age village where individuals who find mutually desirable exchanges resort to barter. This proves unwieldy and so money is introduced with metal coins (for a variety of reasons), and eventually they become cumbersome to carry so we proceeded to paper money and then to credit arrangements which works especially well in our digital age. There’s little evidence for this linear story and most of it is backwards. Credit arrangements, debts, and IOUs show up first. And if some sort of monetary object shows up as a medium of exchange, it’s inevitably between strangers (for one-off transcations) and not among your fellow villagers. Then some sort of government (or tyranny) comes along and tries to capitalize on this by introducing money (coins, salt, or grain) for taxation or other purposes. This is often backed up with the threat of violence. Wars and the breakdown of society lead to urban flight, and it’s then that barter does show up in limited circumstances, but there is a reversion to credit-style arrangements. I’m not doing justice to this panoramic sweep and I highly recommend reading Debt for yourself. (Yes, it’s some 400 pages not counting the notes and index, but it’s an insightful and engaging book.)
Graeber divides his historical sweep into several ages, each with their dominant characteristics: “the First Agrarian Empires (3500–800 BC), dominated by virtual credit money… the Axial Age (800 BC – 600 AD) which saw the rise of coinage and a general shift to metal bullion… the Middle Ages (600–1450 AD), which saw a return to virtual credit money… the Age of Capitalist Empires, which began around 1450 with a massive planetary switch back to gold and silver bullion… ended in 1971 when Richard Nixon announced that the U.S. dollar would no longer be redeemable in gold… marked the beginning of a yet another phase of virtual money…” One thing Graeber does well is bring together insights from all over the globe. There are many similarities, but there are also significant differences between different regions.
So what is money? Essentially, it’s an abstraction that measures a ratio. The collective “we” (or a tyrant who rules with “might makes right”) agrees on a reference state: let’s say gold. Why gold? From my chemist point of view, it’s quite easy to purify, unlike many other metals that exist as ores (mostly oxides). It’s a relatively soft metal and it’s not hard to melt and reshape it, or even stamp a number or a symbol. You can divide it into small bits such as coins. The Islamic philosopher Ghazali would say that it’s ideal because gold (or silver) is of no use for anything else: “A thing can only be exactly linked to other things if it has no particular special form or feature of its own – for example, a mirror that has no color can reflect all colors. The same is the case with money – it has no purpose of its own, but it serves as medium for the purpose of exchanging goods.”
Graeber follows up with the following insight: “Money is thus a unit of measure that provides a means of assessing the value of goods, but also one that operates as such only if it stays in constant motion.” It reminds me of another abstraction that we can measure but fluidly exchanges: Energy. Hard to define, but we can keep track of it. A tally of sorts. The Greek word for tally is symbolon. Graeber describes Aristotle using the same word to argue that “coins are merely social conventions”. A tally is symbolic. An abstraction that represents a ratio of exchange. (Interestingly, the Chinese word has a similar origin, which Graeber also ties to the “agreement between Heaven’s appointment and human affairs”.)
How does the tally work? You take the object and break it into two pieces. Each person in the agreement takes one piece. These objects could be notched sticks, rings, crockery, clay (“friendship”) tablets, or even a sheet of paper with a written agreement. Doesn’t matter what the object is because it now functions as a symbol of an agreement. These agreements were often IOUs of a sort, i.e., one person is in debt to another and one could call in that debt by presenting your piece to the holder of the other piece. It didn’t even have to be the original holder because the IOUs could move with credit swaps. Graeber, the anthropologist, argues that debt underlies social relationships. What is debt? “[The] peculiar agreement between two equals that they shall no longer be equals, until such time as they become equals once again.” But the impact takes on global and existential significance: “Inevitably, arguments about wealth and markets became arguments about debt and morality, and arguments about debt and morality became arguments about the nature of our place in the universe.”
As a chemist who studies the origin of life, I find an uncanny resemblance between Graeber’s evolutionary approach to debt and the chemical evolution of energy transduction. Let me be clear that there are also many differences between humans making agreements about ratios via tallies, and molecules making energy exchanges akin to a circulating currency. Today, the molecular analogy to money is ATP (adenosine triphosphate). It “releases” energy by hydrolyzing ATP (a “downhill” reaction), and this energy can be utilized by other “uphill” biochemical reactions. ATP is regenerated at a cost via other “downhill” biochemical reactions such as when molecular fuels are “burned” for energy.
We can keep a tally of this energy quantitatively. That’s what the science of thermodynamics is all about. But that energy is constantly moving around. ATP is not the only molecule that “stores” this energy currency. All molecules do that. Whenever there is a chemical reaction involving making and breaking bonds, there is almost inevitably a difference in energy between the reactants and the products. (One might say that debts are created or repaid in this process.) Tallies (broken objects to be rejoined) invokes the same process at the molecular level. That being said, a subset of molecules have been evolutionarily selected to act as a common currency of sorts, shuttling around and making their exchanges. Besides ATP, you may have encountered NAD, FAD, and other such acronyms, in a biology or biochemistry course.
ATP is a particularly interesting case because it plays double duty as a substrate in nucleic acids which function prominently for information storage and retrieval. Are nucleic acid polymers like banks or government-controlled banks? NAD is closely related to ATP in structure. So is the ubiquitous signaling molecule cAMP. But before the establishment of ATP and its close cousins as the de facto currency shuffler (among disparate parts of the cell which were previously strangers to each other), was there something akin to stone age virtual credit and IOUs among related (familial) molecules? Here’s where I think Christian De Duve’s thioester world is attractive. The core of metabolism involving a small subset of molecules containing just carbon, hydrogen, and oxygen, has closely related cousins that substitute sulfur for oxygen. Not a lot of sulfur, mind you. And since sulfur is just below oxygen in the same column of the periodic table, you might expect similar molecular structure and chemistry. The origins of metabolism could be envisioned as family and neighbors exchanging energy to do what they want to do (chemically speaking). But how did that evolve into today’s metabolism and molecular currency? Well, that’s the zillion-dollar question!
I’m doing my small part to figure out this conundrum, but sometimes one gets so steeped in the minutiae and forgets to look at the big picture and find inspiration from outside sources. That may be why I’ve particularly enjoyed reading Debt. The conceptual ideas of tallies and ratios, and Graeber’s evolutionary framework in telling the story, resonate with the problems I’m working on. Debt may play a key role in the inner workings of life, governed by the rules of thermodynamics, constrained by kinetics, but with plenty of room for creative interplay as energy flows through our planet from the sun to the deepness of space. New molecular systems are created to capture and harness that energy, which led to organisms doing the same thing today on an unprecedented scale. But perhaps I’m simplifying things too much. Let’s remember Mencken’s dictum.
For every subtle and complicated question, there is a perfectly simple and straightforward answer, which is wrong.
No comments:
Post a Comment