Money is, and always has been, a “creature of the state”, and currency has always been a state token. Precious metal coins merely represent one kind of state token, and their origins can be traced to the specific social upheaval that took place at the end of the 7th century B.C. This is an important, fascinating, book that should not be ignored by any monetary theorist.

Source: From a Review of the book, Coins, Bodies, Games, and Gold, by Leslie Kurke, Princeton University Press, Princeton, New Jersey, 1999; xxi, 385; paper $29.95 (ISBN 0-691-00736-5), cloth $65.00 (ISBN 0-691-01731-X). Reviewed by L. Randall Wray, University of Missouri—Kansas City.

Excerpted from L. Randall Wray:

“We all know the orthodox story about the origins of coins. A commodity money functioning as a medium of exchange replaced inconvenient barter. Eventually, societies settled on precious metals due to their inherent characteristics (high value-to-weight, divisibility, and so on), which were later stamped to indicate fineness and to reduce counterfeiting. At the same time, it has long been established that the first coins were issued in Lydia and East Greece, probably no earlier than the third or fourth quarter of the seventh century B.C.. The dating is puzzling, because we also know that money, local markets, long-distance trade, and even complex financial instruments existed for several thousands of years before coins were invented. If precious metal coins were indeed invented to reduce transactions costs, one wonders why it took so long for sophisticated traders to discover them. Further, as Innes (1913) has pointed out, while coins might have been important to the Greek world and perhaps to the Roman world, they played a relatively unimportant role throughout most of European history—with bills of exchange far more important for long-distance trade and with tally sticks or entries on merchant ledgers sufficient to finance domestic trade (a point confirmed by recent scholarship, such as that of McIntosh 1988). Unfortunately, economists—even Institutionalists—have paid far too little attention to this paradox.

Numismatists and cultural archeologists have been, at least recently, more reluctant to impose modern economistic thinking on early societies. As Polanyi warned long ago, the Greek economy was “embedded” in other noneconomic institutions, “the economic process itself being instituted through kinship, marriage, age-groups, secret societies, totemic associations, and public solemnities.” (Polanyi 1968 p. 84) Leslie Kurke, Professor of Classics and Comparative Literature at the University of California—Berkeley, tackles this subject from a close analysis of the literary texts of the period, sans economistic blinders. While, as she admits, “this is a hard book to characterize”—and, I might add, a difficult book to read—it provides an analysis that I found to be eminently engaging and largely consistent with an Institutionalist approach. Indeed, Kurke approvingly quotes the passage from Polanyi above, and carefully adopts the embedded/disembedded dichotomy throughout her book, arguing “the fact of an embedded economy must make a difference to the causes for the invention of coinage”. (p. 5) The two main questions she attempts to answer are: Why were coins introduced?, and, Did this represent a conceptual revolution?

She begins by quoting an intriguing passage from Herodotus:

The Lydians use customs very similar to those of the Greeks, apart from the fact that they prostitute their female children. And first of men whom we know, they struck and used currency of gold and silver, and they were also the first retail traders. And the Lydians themselves claim that also the games that now exist for them and for the Greeks were their invention. (p. 3) Note how Herodotus juxtaposes prostitution, coinage, retail trade, and games—all (inaccurately) attributed to the Lydians, who are otherwise supposed to be much like the Greeks. As Kurke wonders, “why do all these phenomena form a natural class for the historian (if they do)? In a sense, the entire discussion that follows is an attempt to make this a comprehensible list: to explain why it is especially so for a mid-fifth-century writer and why it occurs in Herodotus’s Histories.” (pp. 3-4) Her discussion is based primarily on literary texts, although there is also some analysis of art (of an erotic nature, with photographs). There are two problems. First, as she emphasizes, “we possess only 5 to 10 percent of the original literary and artistic production” (xi). Second, while prostitution, games, and retail trade are frequently discussed and linked in the literature, coinage is virtually never discussed (at least in a positive sense; almost all references are to counterfeiting). One might conclude that coinage must have been quite unimportant, meriting barely a mention. Quite the contrary, Kurke insists, pointing to ample precedent in psychoanalysis, deconstructionism, and Marxist criticism for concern with what the texts don’t say. She also notes that the greatest Greek democracy, Athens, produced not a single text supportive of democracy—rather, all contemporaneous discussion of Athenian political theory was written by a hostile elite. While her line of argument might appear far-fetched, one can imagine the cultural archeologist in 4050 studying today’s economic textbooks. As Heilbroner (1999) has famously argued, the word “capitalism” almost never appears in any current text. Is one to conclude that capitalism is not important at the turn of the new millennium? Or, does the deafening silence tell us more about the ideology of the brown-nosing sycophants who write textbooks? Is capitalism never mentioned because of its overriding dominance in our modern society? Kurke notes that Kraay (1964) revolutionized numismatics when he argued that coins were invented to standardize payments made by and to the state. He challenged the economist’s assumption that coins originated to facilitate trade by noting that the early denominations were too large, that circulation of coins was too narrow, and that use of coins was limited to Greeks while trade existed for thousands of years without coins. Kurke recognizes that some of Kraay’s evidence has since been disputed, however, her primary objection is that Kraay had not paid sufficient attention to culture, institutions, and other social and political motivations. In her view, “the minting of coin would represent the state’s assertion of its ultimate authority to constitute and regulate value in all the spheres in which general-purpose money operated simultaneously—economic, social, political, and religious. Thus, state-issued coinage as a universal equivalent, like the civic agora in which it circulated, symbolized the merger in a single token or site of many different domains of value, all under the final authority of the city.” (pp. 12-13) In a sense, the choice of precious metals for coinage was a historical accident, a pointed challenge to elite monopoly over precious metal. By coining precious metal, the polis appropriated the highest sphere of gift exchange, and with its stamp it asserted its ultimate authority—both inwardly (or domestically) but also outwardly (in long-distance trade): “For every Greek polis that issued its own coin asserted its autonomy and independence from every other Greek city, while coinage also functions as one institution among many through which the city constituted itself as the final instance against the claims of an internal elite.” (p. 13) As the polis used coins for its own payments and insisted on payment in coin, it inserted its sovereignty into retail trade in the agora. Mainstream economists frequently assert that growth of the local market was associated with expansion of democracy, but Kurke stands the typical Austrian argument on its head by noting the critical role played by the polis in wresting control away from the elite. By tying the invention of coinage to the special circumstances of Greece, Kurke’s analysis makes it clear why coins have been so unimportant to other economies before and since.

Of course, from the perspective of Greece, coinage was no historical accident. As Kurke argues, introduction of coins arose out of a “seventh/sixth century crisis of justice and unfair distribution of property”. (p. 13) Coins appeared at this particular time because the polis had gained sufficient strength to rival the symposia, hetaireiai (private drinking clubs) and other institutions and xenia (elite networking) that maintained elite dominance. At the same time, the agora and its use of coined money subverted hierarchies of gift exchange, just as a shift to taxes and regular payments to city officials (as well as severe penalties levied on officials who accepted gifts) challenged the “natural” order that relied on gifts and favors. It is no coincidence that elite literary works disparaged the agora as a place for deceit, and coinage was always noted for its “counterfeit” quality. As Kurke argues, as coins are nothing more than tokens of the city’s authority, they could have been produced from any material. However, because the aristocrats measured a man’s worth by the quantity and quality of the precious metal he had accumulated, the polis was required to mint high quality coins, unvarying in fineness. (Note that gold is called the noble metal because it remains the same through time, like the king.) The citizens of the polis by their association with high quality, uniform, coin (and in the texts the citizen’s “mettle” was tested by the quality of the coin) gained equal status; by providing a standard measure of value, coinage rendered labor comparable and in this sense coinage was an egalitarian innovation. Obviously the elite reacted to such developments, although in a veiled manner. When money is discussed in the texts, its introduction is invariably attributed to tyrants who destroy the nomos, the community, the devine order. It is also interesting that the elite usually attributes invention of money to the requirements of scorned retail trade—just as modern economics does, albeit without scorn—rather than to the struggle to assert sovereignty of the polis. As Kurke argues, this “mystification” of the origins of money is ideological—as it remains today—a purposeful rejection of the legitimacy of democratic government.”