Theories over the origin of money are impossible to separate from the function of money the theorist assigns. So for example if the theorist considers the key role of money to be payment of taxes then the theory will assign the origin of money to the origins of the state and the extraction of taxation.
The task here is to examine monetary origins without preconceptions as to what its functions are; rather to consider how those functions came to be and how this changed what came to be modern money.
We shall begin this examination by looking at primitive money, that is money before the invention of coin. This requires us to be careful about preconceptions about what role money performs
“Primitive Money performs some of the functions of our own money, but rarely all…failure to understand the reasons for such differences leas to disputes about bridewaelth versus brideprice, to arguments about whether cows, pig tusks, and potlacj coppers are ‘really’ money, to the assumption that modern coinage merely ‘replaces’ indigenous forms of money, and to disagreements of authorities over minimal definitions of money. In these disputes the characteristics of American or European money are too often used as a model.” Primitive Money, George Dalton American Anthropologist New Series, Vol. 67, No. 1 (Feb., 1965)
A good example of such preconceptions come from some ethnographical writings on the issue. or example a common theme is that money did not have an economic origin.The preconception being that money is a circulating means of exchange with no non-economic role, and utility solely as money. ;But it is rarely that straightforward. Items that developed as money often had other purposes, such as ceremonial, or displays of wealth, which later gradually took on wider economic forms.
Similarly we must look with circumspection that some societies, such as famously the Incas ‘had no money’ when they certainly did use certain goods, such as cacao beans and salt, as a medium of exchange.
Indeed a vast range of goods were used as primitive money. as AH Quiggin points out
Salt, red ochre, tea, feathers, slaves, human skulls, woodpecker scalps, flying fox jaws, teeth, pigs, horses, goats, sheep skins, cocoa beans, almonds, rice, beeswax, tobacco, cloth, giant stone disks and countless other objects have been ‘money’ at various times and places. ( A Survey of Primitive Money. The Beginnings of Currency(London, 1949))
Money did not have a single origin but deems to have developed independently in many different parts of the world.
Most traditional societies evolved money, the main exceptions being some scattered hunter gatherer cultures. Although there is no evidence of socities using barter as a ‘stage’ before money (as was universally bellieved before the 1920s, and still this view is heard today occasionally), it is equally incorrect to believe that there are no non-monetary socities, with is the more common ‘textbook’ view today. There are ethnographical examples of groups that have no conception of a means of exchange but do have of barter.
Indeed some items can both be used as barter – for its own intrinsic worth, and as a means of exchange and store of value.
One of the most important improvements over the simplest forms of early barter was first the tendency to select one or two particular items in preference to others so that the preferred barter items became partly accepted because of their qualities in acting as media of exchange although, of course, they still could be used for their primary purpose of directly satisfying the wants of the traders concerned. Glyn Davies A History of money from ancient times to the present day, new ed. Cardiff: University of Wales Press, 2002. Page 10).
Current thinking amongst archaeologists is that money originated as a store of value, or rather a memory symbol of a store of value, especially in cultures where subsistence depended on the labour of a family, and the loss of a family member, or a bad season or weather event, could lead to starvation. Given that food is perishable finding a store of value enabled exchange of that store for another agricultural surplus that year. The ability to exchange surplus for a bride, to compensate for the loss of labour, may also have been key (WILLIAMS, J. (Editor) Money: A History (London, 1997))
It is worth considering the classical functions of money: In the childrens versions of old textbooks “Money is a matter of functions four, a medium, a measure, a standard, a store.” A medium of exchange, a unit of account, a store of value, a standard of deferred payment (that is a means of settleing a debt).
The functions performed by the earliest types were probably fairly restricted initially and would not have have been the same, necessariliy, in all societies.
Many items can perform the function of a store of value. For example today hoarding a gold bar may perform this, certainly housing is used as such a store. But that doesnt make gold, or housing money.
The example of Yak Stone money, where any good could be used as a unit of account, but only stone money, vast and immovable, could be used to store value, shows us that the storing of value is the necessary function of money, but it is not sufficient. Given that exchange of value requires a store of value storage is logically prior to exchange. But storage requires a means of exchange to enable economic transactions.
Many items that later went on to form early forms of money had symboloic value, for example the display of wealth, religious value, or a symbol of a brideprice, but these were not always tradable initially. It is easy to read backwards and state, as some ethnologists do, that the early ‘functions’ of money were not economic, as the basis of such evidence, rather than corectly adducing that symbolic items acquired monetary use through use.
Glyn Davies quotes linguistic evidence to show how ancient and widespread the association between cattle and money was. The English words “capital”, “chattels” and “cattle” have a common root. Similarly “pecuniary” comes from the Latin word for cattle “pecus” while in Welsh the word “da” used as an adjective means “good” but used as a noun means both “cattle” and “goods”.
This illustrates the importance of cattle as a store of value. But it is difficult to exchange, you cannot exhange a qauarter of a cow without slaugtering it. So goods that could be divided and assessed though weight or number gathered the functions of money as well, aiding the echange function of money. The words “spend”, “expenditure”, and “pound” (as in the main British monetary unit) all come from the Latin “expendere” meaning “to weigh”.
From means of exchange by number and weight – quantative money- it was less of a leap to developm full commodity money. That is objects that have value in themselves as well as for use as money.
Quantative money was used in Ancient China, Africa, and India in the form of cowry shells. Trade in Japan’s feudal system was based on the koku – a unit of rice per year. The shekel was an ancient unit of weight and currency;The name shekel was based on the Akkadian she, which was the early name for barley. Barley was used as the original medium of weight—and the shekel was equal in weight to 180 grains of barley, or around 11 grams. The first usage of the term came from Mesopotamia circa 3000 BC.