Jumping in first, I want to recommend Debt: The First 5000 Years as a book that ought to interest just about everyone interested in the way societies are organized. I learned a lot from it, well beyond the core point about the centrality of debt. I haven’t managed to collect my thoughts into a coherent response, so I’m just going to put one or two of them up for discussion, and read the other posts with interest
My first observation is that while economists are the target of quite a few well-armed barbs in Graeber’s book, his message is one that will actually make economics a bit easier to do, by ridding us of the need to treat money as a medium of exchange, designed to overcome the problem that barter requires “a double coincidence of wants”
Graeber shows, convincingly enough for me, that the story conventionally told by economists, in which money emerges as a replacement for barter systems, is nonsense. In fact, as he notes this point has been made by anthropologists many times and ignored just as often. Thanks to the marvels of auto-googling, I’ve been aware for some time that my namesake, Alison Hingston Quiggin gave the definitive demonstration long ago in her ‘Survey of Primitive Money’. Graeber sharpens the point by arguing that the real source of money is as a way of specifying debts.
While it’s embarrassing to be shown that economists from Adam Smith onwards have been engaged in amateur (and armchair) anthropology, I think the end of the ‘double coincidence of wants’ story should actually come as a something of a liberation for economists (at least for most of the schools of thought for which I’m familiar). In the typology taught to all econ students, money is a medium of exchange (that is, a replacement for barter), a unit of account (in the professional jargon, a numeraire) and a store of value (in which role it serves as a denominator of debt).
The use of money as a numeraire is handy for economists of all kinds. It means that we can refer to the “price” of apples or oranges, rather than to the various pairwise relative prices. That’s useful, whether or not you accept the classical view that “money is a veil” having no real effects (to be clear, I don’t).
The role of money as a store of value is important and controversial. For Keynesians, it makes possible saving without investment and therefore explains why unemployment can occur in equilibrium. The neoclassical counter, the Pigou or real balance effect, also depends on these features of money.
Both as a unit of account, and as a store of value, money appears all the time in economics, from the introductory textbooks to the most advanced work. By contrast, money as a medium of exchange is something of an embarrassment. It doesn’t fit will into standard models, and theoretical attempts to formalize the “double coincidence of wants” idea, while useful as a five-finger exercise for grad students, haven’t yielded much in the way of insight.
So, if we had the kind of disciplinary modesty richly merited by our performance as a profession over the past few years, economists would recognise that we owe an intellectual debt to Graeber. From now on, we can treat money primarily as a store of value, and stop worrying about how it works as a medium of exchange.