Shelling Out: The Origins of Money


…many kinds of wealth transfers – one-way and mutual, voluntary and coerced – face transaction costs. In voluntary trades both parties gain; a truly free gift is usually an act of kin altruism. These transactions create value for one or both parties as much as the physical act of making something. Tribute benefits the victor and a judgment of damages can prevent further violence as well as benefiting the victim. Inheritance made humans the first animals to pass wealth to their next-generation kin. These heirlooms could in turn be used as collateral or payment in trade for goods, for food to stave off starvation, or to pay a marriage bride price. Whether the costs of making these transfers – transaction costs – are low enough to make the transfers worthwhile is another matter. Collectibles were crucial in making these kinds of transactions possible for the first time.

Collectibles augmented our large brains and language as solutions to the Prisoner’s Dilemma that keeps almost all animals from cooperating via delayed reciprocation with nonkin. Reputational beliefs can suffer from two major kinds of errors – errors of about which person did what, and errors in appraising the value or damages caused by that act. Within clans (the small and immediately local kin group, or extended family, which formed a subset of a tribe), our large brains could minimize these errors, so that public reputation and coercive sanctions superseded the limited motivation provided by the counterparty’s ability to cooperate or defect in the future as the main enforcer of delayed reciprocation. In both Homo sapiens neanderthalensis and Homo sapiens sapiens, with the same large brain size, it is quite likely that every local clan member kept track of everybody other local clan member’s favors. The use of collectibles for trade within the small local kin group may have been minimal. Between clans within a tribe both favor tracking and collectibles were used. Between tribes, collectibles entirely replaced reputation as the enforcer of reciprocation, although violence still played a major role in enforcing rights as well as being a high transaction cost that prevented most kinds of trade.

To be useful as a general-purpose store of wealth and means of wealth transfer, a collectible had to be embedded in at least one institution with a closed-loop cycle, so that the cost of discovering and/or manufacturing the object was amortized over multiple transactions. Furthermore, a collectible was not just any kind of beautiful decorative object. It had to have certain functional properties, such as the security of being wearable on the person, compactness for hiding or burial, and unforgeable costliness. That costliness must have been verifiable by the recipient of the transfer – using many of the same skills that collectors use to appraise collectibles today.

The theories presented in this paper can be tested by looking for these characteristics (or the lack of them) in the “valuables” often exchanged in these cultures, by examining the economic gains from the cycles through which these valuables move, and by observing preferences for objects with these characteristics in a wide variety of cultures (including modern ones).

With their unprecedented technology of cooperation, humans had become the most fearsome predator ever seen on the planet. They adapted to a shifting climate, while dozens of their large herd prey were driven, by hunting and climate change in America, Europe, and Asia, to extinction. Today, most large animals on the planet are afraid of projectiles – an adaption to only one species of predator [R97]. Cultures based more on gathering than hunting also greatly benefitted. A population explosion followed – Homo sapiens sapiens was able to populate more parts of the planet and at a density over ten times that of Homo sapiens neanderthalensis [C94], despite weaker bones and no increase in brain size. Much of this increase may be attributed to the social institutions made possible by effective wealth transfer and language – trade, marriage, inheritance, tribute, collateral, and the ability to assess damages to dampen cycles of vengeance.

Primitive money was not modern money as we know it. It took on some of the functions modern money now performs, but its form was that of heirlooms, jewelry, and other collectibles. The use of these is so ancient that the desires to explore, collect, make, display, appraise, carefully store, and trade collectibles are human universals – to some extent instincts. This constellation of human desires might be called the collecting instinct. Searching for the raw materials, such as shells and teeth, and manufacturing of collectibles took up a considerable portion of many ancient humans’ time, just as many modern humans expend substantial resources on these activities as hobbies. The results for our ancient forebears were the first secure forms of embodied value very different from concrete utility – and the forerunner of today’s money.



Shelling Out: The Origins of Money by Manuel Fraga is licensed under a Creative Commons Attribution 4.0 International License.

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