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Comment by nk1tz | Hacker News Reader

The more interesting way to analyze history, rather than trying to evaluate the degree of barter, is to seek out the most saleable good which was in use at a given place and time. Humans must solve the problem of "coincidence of wants" (ie. You raise chickens and I'm a woodworker - do we always need each other's goods?). Naturally, they begin to use the most saleable good available to their community as "money" for trade. The most saleable good (the most marketable and easy to sell) is usually the good available to them which scores highest on the following five properties (imagine a radar chart): Divisibility, Durability, Portability, Fungibility, Scarcity.

This way of thinking can provide a satisfying explanation of the emergence of gold as a global store of value.

For more reading: https://mises.org/library/origin-money-and-its-value

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The coincidence of wants is likely a myth.

Humans operate by doing each other favours. You'll find you intuitively know who you've done a favour for and who you owe a favour to. It's inherent to being humans and three year olds can do it - as science has discovered.(https://www.en.uni-muenchen.de/news/newsarchiv/2016/paulus_s...) We all walk around with a favour ledger in our heads.

Essentially "here's a chicken, you owe my a chicken's worth of something sometime".

As groups get larger you end up taking tokens as an IOU aide-memoir. And to nail those who try to cheat.

That then evolves into money. Token money. Tokens representing promises.

When I was a child I used to trade Magic the Gathering cards with other people. I can assure you that the coincidence of wants is not a myth.

By the time you were in the schoolyard you had already been inculcated in modern notions of property and exchange.

That does not take away from the fact that the double coincidence of wants is not a myth. A lot of card trades depended on both party having a card that the other party wanted when no monetary medium was used. I am not saying that this was always the case but it happened often.

The realization that there is (a) a double coincidence of wants and (b) this can be solved with some sort of currency are absolutely questions already answered if not intuitively than explicitly by money in modern society, as are related concepts like debt and interest. When someone talks about the double coincidence of wants being a myth, they are not referring to the obvious fact that this is a problem money solves, but that this reason, alone or primarilty, is the reason money, as a world-historical concept, came to be in all societies.

All I read is: “blah blah blah, i think it’s obvious and intuitive so it must be the truth. Period!”

In my experience; just because something is in use today does not mean that it can’t be critiqued, and evolve.

The 'double coincidence of wants' problem of barter exists. What is a myth is the assumption that any culture used barter as a primary means of exchange. Barter was used on the edges of tribes, clans, etc. between groups of people who do not share the kind of trust that exists between members of groups, who will likely live out the entirety of their lives around each other.

Giordano Bruno said (I've heard) that whatever has the greatest value and least cost of storage becomes money.

https://en.wikipedia.org/wiki/Giordano_Bruno

It turns out that in may cases, that thing was actually people.

> The coincidence of wants is likely a myth.

Humans operate by doing each other favours.

But intuitive tracking of who owes you favors and who you owe favors to does not scale. The double coincidence of wants problem is not a myth; it just doesn't come into play until you start dealing economically with groups that are too large for intuitive tracking of favors to work--roughly, groups larger than the typical hunter-gatherer tribe.

Or if you doubt that you will ever meet that trading partner again, or if you just don’t trust them and there is no legal framework for recourse if they screw you over...

As we see in the comments above, the gift economy scaled to include Bronze-Age Mesopotamian international trade. It's true that a Hittite in Hatti wouldn't know everyone in Nineveh, or indeed anyone, but he knew the Hittite king, who knew the king in Nineveh.

> We all walk around with a favour ledger in our heads.

> Essentially "here's a chicken, you owe my a chicken's worth of something sometime".

Order Without Law has a good discussion of this. (It is a study of modern ranchers in northern California.)

That's not incompatible with the existence of coincidence of wants being a problem. Grubers point is that debt is historically the primary solution to the coincidence if wants, not money.

So, no, part of the point is it didn't happen. That is, neither direct nor indirect barter. In a non-alienated society, you have many tangible and intangible obligations towards your village-mates or tribe-mates, which include distribution what you produce or gather mostly among others (since what will you do with it personally after all). And there isn't a discrete "chicken's worth" which you "owe" someone in particular. and so on.

"Naturally, they begin to use the most saleable good available to their community as "money" for trade." Why do you assume this is natural? As the article talks about, there is no evidence of this happening vs things like a favor or prestige economy. Mises is an economist, not a historian.

Because from a first principles line of reasoning it makes the most sense to my brain. There is plenty of historical reading over at mises.org by various authors.

So what? It doesn't matter what makes sense to us, it matters what actually happened. Plenty of history makes no sense to me, but I would never just deny that it didn't happen for that reason.

It's symptomatic of the economic way of thinking, in terms of game theory and systems that have emerged more or less out of nowhere. Explanation beyond the surface level of transfers of money is relegated to the work of economic historians. The way mainstream economics focuses on "shadow forms" (as Patrick Murray put it) purposefully excludes the supersensible movements below the forms of appearance of money, capital, labour, interest, rent, etc.

Are you saying that economics is, or should be interested in physical reality?

That might be hard to model mathematically.

> Why do you assume this is natural?

"The most saleable good" in our economy is money. The majority of explicit trades for goods and services involve money. Of course, that is now and we need to explain how this happened.

If I have a good another wants then I may accept something I don't directly want as payment. Of goods I indirectly value, I should value more the goods that are most saleable as they provide the shortest path to goods I directly value. Throughout this my valuations are based on expectations of others' future valuations. We can think of the path from regular good to money like a feedback loop. It's the economic bubble that doesn't burst (except when it does and we all switch to silver or furs).

Of course it's much harder for the value of the anomalously valued good to crash in a real economy because of things like taxation (this is almost chartalism).

Or, you can just accept a debt as the indirect thing. Which works because you live in a small society where everyone trusts each other.

Barter of goods is just inefficient in comparison.

That works within a community. What about inter-community trade?

Then you can of course barter, but where do you think most human interactions happened during that time? Inside small groups of people that trust each other or between different groups that doesn't?

Obviously the former, but I imagine the groups quickly split as the population grew, and met further groups as they expanded.

> Or, you can just accept a debt as the indirect thing

You can :-)

If the debt is non-transferable, so simply between me and the other guy, then it's not money. Debt like this may lead to money but its no more money than barter is. Of course that is not to say that debt cannot be money (even following a similar process). I want to be clear that I would make no normative claims over which goods (or similar things like debt) can become money.

I don't think the argument I made was strictly Misesian but it's similar and to his credit he was careful on this same point. In The Theory of Money and Credit he's clear that he doesn't argue for gold (or metallic currency) based on "intrinsic value". He even goes out of his way to specify cases where metallic tokens (like scheidemünze) may not be considered money in the narrower sense (but may in the broader) and includes things classifiable as debt in both the narrower sense of money and in the broader (as money-substitutes). One key difference I can see in his treatment of debt is that he considers it after the existence of commodity money.

> Which works because you live in a small society where everyone trusts each other

I think this is one of many arguments where there's the unexplored subjective element. Argument A and argument B look reasonable to person A and B because of their upbringings. I wonder how trusting you are compared to me and how your social experiences have differed.

> Barter of goods is just inefficient in comparison.

Yeah, it can be.

"If I have a good another wants then I may accept something I don't directly want as payment. Of goods I indirectly value, I should value more the goods that are most saleable as they provide the shortest path to goods I directly value. Throughout this my valuations are based on expectations of others' future valuations. We can think of the path from regular good to money like a feedback loop. It's the economic bubble that doesn't burst (except when it does and we all switch to silver or furs)."

OK, and here is the key thing, can you provide an example of a pre-money society doing this? Because as far as I am aware there are no examples from either History or Anthropology showing that this happens. Once again it doesn't matter how much sense this idea makes to us coming from a post-money society if it is not what actually happened.

> can you provide an example of a pre-money society doing this?

Can you provide me an example of a pre-money society becoming a post-money society? I can't name any. Unless your point is that any theory would be speculative (which is correct). I think even if we were to see the same evidence our conceptual models would be different but I'd very much sincerely like to see evidence which allows me to rethink things.

Except that historically and worldwide, silver, copper alloys and even grain were far more commonly used as money (medium of trade, unit of account, store of value) than gold.

They scored higher for those times and places / were actually available.

> The most saleable good (the most marketable and easy to sell) is usually the good available to them which scores highest on the following five properties (imagine a radar chart): Divisibility, Durability, Portability, Fungibility, Scarcity.

That's why you see certain agricultural products like grain and olive oil in the ancient Mediterranean serving in the role of currency prior to gold. While less durable than gold, these goods met all the other criteria and ultimately were useful as well. Gold comes on the seen when there is a significant economy-wide surplus of output.

This is what I kept thinking while reading the article. Currency always evolves, it just might not look like currency at first. As someone else said, wheat and copper were popular for a long time.

I remember way back when Diablo 2 was big, in-game gold was essentially worthless as it was so common. So players started using bushels of a somewhat-rare and generally useful magic ring as currency.

>Humans must solve the problem of "coincidence of wants" (ie. You raise chickens and I'm a woodworker - do we always need each other's goods?).

The fact that this must be solved in an exchange economy does not mean that it is the same as the genesis of money. Every historical economist has had a theory as to the genesis of money, from Smith, Ricardo and Marx to Mises. To say that money evolved as a solution to the problem of the coincidence of wants may not be correct. Solving the coincidence of wants may just be a side effect.

The article indicates that that problem did not really exist. If you don't have to barter, you don't need a mutual coincidence of wants. If economic activity is to a greater extent a group activity, than there's a community of wants. etc. If anything, the discreteness of wants is an engineered phenomenon, or at least the result of developments of different social orders with a different position of the individual.

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