Friday, January 13, 2012

Stories


"And I had little difficulty in determining the objects with which it was necessary to commence, for I was already persuaded that it must be with the simplest and easiest to know..." -- Descartes


PeterC at Heteconomist, 18 December 2011:

The main insight of Polanyi that I emphasized previously is that throughout history money had long been recognized as a social relation, or more specifically a debt relation, but that with the industrial revolution there was an attempt through the gold standard to tie money more closely to the market economy by making it a ‘commodity’.

I have trouble understanding the concept of money as a social relation. I can understand the economy as a set of social relations, as transactions: work done or value provided in exchange for money now or in the future. But the social relation "value exchanged for money" is by no means identical to the "money thing".

So I tend to think Peter's story is a load of crap. But I'm trying to understand, so I go back to his previous post.

Heteconomist, 17 December 2011:

The first thing that caught my attention was a passage from The Great Transformation. On page 71, Polanyi argues that in all social systems prior to the industrial revolution, “the economic order is merely a function of the social, in which it is contained”.

???

These are big concepts, the economic order and the social order, and the containment of order by order. I don't really know what those concepts mean, nor what Peter thinks Polanyi means. But the concepts are certainly big, general concepts. Peter's post sure sounds important.


"Prior to the industrial revolution." When was that? Let's say, before 1760. So what was the economy like, in the centuries before 1760?


Based on numbers from MeasuringWorth, there really was not much of an "economic order" at all, before 1760. No wonder the social order was dominant.


Do you suppose Polanyi included ancient Rome and Greece and Egypt and Babylon and stuff, in with "all social systems" "throughout history" up to 1760? I cannot say, but I doubt it. If I am wrong, let me know.

Meanwhile, suppose we consider civilization after the fall of Rome.

Peter and Polanyi say that throughout history (until the Industrial Revolution) money had been "recognized as a social relation, or more specifically a debt relation". Peter calls money a "fictitious commodit[y]". Let me provide some background to contradict that small piece of the Heteconomist post.

Regarding the early years after the fall, Carlo M. Cipolla writes:

Money, Prices, and Civilization in the Mediterranean World, Fifth to Seventeenth Centuries, by Carlo M. Cipolla. Gordian Press, Inc. New York, 1967. (C) 1956 by Princeton University Press
As a matter of fact, since the beginning of the fifth century Mediterranean Europe, like the rest of Western Europe, had fallen into a stage of economic life near that of primitive societies.... [p.3]

The general impression is that any commodity was considered a potential means of exchange, and coins were considered just like any other commodity, one among hundreds of possible means of exchange, sometimes particularly desired and sometimes not. [p.6]

...the very notion of money ...[in the examples given] was the primitive notion of a standard of weight. [p.7]

[This is] indicative enough of the direction in which the system of payments was moving. [p.7]

This vagueness in the notion of money when it was used as a standard of value was another step from the stage of 'monetary' economy in the direction of a 'barter' economy.[p.7]

Vagueness in the notion of money went hand-in-hand with the decline of society, according to the historian Cipolla. But money and society were two different things. Money was a "commodity". It was not a "relation".

With the beginning of modern times the social implications of the petty coins were completely changed. Through a progressive secular debasement the small coins were now reduced to very low units of value. On the other side, through the sixteenth century, the general level of prices and wages moved markedly upward. Consequently, during the sixteenth century it became more and more common to see gold scudi or gold ducati or big silver ducatoni in the hands of the wage-earning people, just as it became more and more common to see these pieces used as means of payment in local and petty transactions.

The gold coins lost the character of 'aristocratic money.' Their 'democratization' was indicative of the direction in which the times were moving. [pp.36-37.]

It is quite clear that money was not a "relation" at all, but rather a "thing" that was, and is, used for the storage and exchange of value.


Another writer offers a similar view. In The Wealth of Nations, Adam Smith wrote:

The northern nations who established themselves upon the ruins of the Roman empire, seem to have had silver money from the first beginning of their settlements, and not to have known either gold or copper coins for several ages thereafter. There were silver coins in England in the time of the Saxons; but there was little gold coined till the time of Edward III nor any copper till that of James I. of Great Britain. In England, therefore, and for the same reason, I believe, in all other modern nations of Europe, all accounts are kept, and the value of all goods and of all estates is generally computed, in silver: and when we mean to express the amount of a person's fortune, we seldom mention the number of guineas, but the number of pounds sterling which we suppose would be given for it.

The money was silver, according to Adam Smith. It was not a relation, whatever that may be supposed to mean.


But you will think what you want to think, regardless of what I say. I'm just saying, I don't like it when people make up stories to suit their worldview. And maybe it's just me, but when those stories are incomprehensible, they ought to be rejected outright.

Money is not a "social relation". Money is a "thing". Money was not "made into a commodity" by the gold standard. Money was always a commodity. If we refuse to accept such simple fundamentals, how can we ever hope to fix the economy?

Never overlook a lack of clearness and of generality in the premisses.

9 comments:

The Arthurian said...

When I was teaching myself C, I skipped over the introductory stuff so I could get into the meat of it. And for years I struggled with the language, making progress and learning, but always running up against the strangest errors, and I just couldn't fix the errors.

Then one day I went back and read the simple introductory stuff, and I finally learned the difference between "declarations" and "definitions" in C, and why I needed to use declarations.

And all those strange errors went away.

I think it is similar with the economy. I think the problem is simple, but nobody looks for a simple problem. And the longer the problem persists, the more we think the problem must be very complex and difficult to solve. And so people invent these very complex and difficult to understand stories to explain what's wrong with the economy and how to fix it. Like when I was struggling to make C work, before I went back to the simple stuff.

Look for a simple explanation.

Clonal said...

Art

See also David Graeber's work - Debt: The First 5,000 Years

Also PBS video Are we slaves to debt? David Graeber on the history of spending more than we have

Quote:
Graeber’s new book, “Debt: The First 5,000 years,” traces the origins of owing all the way back to Mesopotamia, and explores how debt and morality became intertwined, among other intriguing details. Need to Know’s Alison Stewart spoke with Graeber to help explain why being consumed by debt is nothing new.

Jazzbumpa said...

These are big concepts, the economic order and the social order, and the containment of order by order.

I think it makes sense in the same way as Hartmann's idea that culture precedes religion. Social order is the biggest bowl of a civilization, and the other bowls stack within it.

Consider feudalism. The economic order was essentially based on rent collection. in theory, the King owned the kingdom, and local nobles were stewards of the land, and owed the king payment in terms of the produce or some sort of in-kind equivalent.

Under the nobles were peasants and/or serfs who owed payment in produce, labor units, or some combination.

The social order defined what form the economic order could take.

Feudalism is a form of debt peonage. From this, you can sort of lean into the idea of payment as a social relation, and therefore money, too, as a form of this payment.

Not saying I totally agree, but the concept can be rationalized this way.

Cheers!
JzB

The Arthurian said...

"From this, you can sort of lean into the idea of payment as a social relation, and therefore money, too, as a form of this payment.

Not saying I totally agree, but the concept can be rationalized this way."

Clarity is not achieved by rationalizing all sorts of half-assed arguments into the discussion. Clarity is achieved by throwing out half-assed arguments before you start, and pruning what's left.

Jazzbumpa said...

A thread of logical inferences is not a half-assed argument. It is a possibility to be explored.

The real world is messy. Seeking clarity is what leads economists into believing that their models are true and reality is wrong.

Seek reality, and try to understand it as best you can.

Cheers!
JzB

Jazzbumpa said...

From one of the reviews of Graeger's book (emphasis added):

Beginning with a look at the idea of barter economies (surprise, they never existed) and examining the realities of the earliest economic systems, the author depicts history not as a march towards capitalism but as a cycle where money appears and disappears and human relationships and trust are the basis of economies for a large portion of history.

If you're looking for a book that will challenge your conception of economic history and how we think about debt, and gives you some examples of how economies and human relations have changed and can function differently, I highly recommend this to you!


Hmmmm . . .
JzB

The Arthurian said...

What, so Graeber says history traces out economic cycles? Cycles of Civilization? Really? Who'da thunk it!

Jazzbumpa said...

Buried deeply in the highlighted part of the post was the implication of money as social relation.

Cheers!
JzB

The Arthurian said...

Leaving out the cycles part, then, the highlighted part of your excerpt Jazz:
"money appears and disappears and human relationships and trust are the basis of economies for a large portion of history."

Human relationships and trust are the basis of ECONOMIES (except in the dark ages, of course). Of societies. Of cultures.

I have no problem with that. I say 'the economy is transaction'. To have a transaction you need two parties interacting. Call that a "relationship" if you want. Whatever.
// the economy as dating service, perhaps?

However, an economy is not the same thing as money. Money is typically used in the transaction, one of the things exchanged. Or held apart from transactions, as with hoarding, but there is no social relation there.

I do not deny that people have to interact with each other in order to have an economy. But money is not the same as interaction.

It's not really complicated.