Strange forms of money throughout history...

I’m reading 1491 – a great book, by the way – and today I was reading about a place in South America, in Peru – “Aspero” I believe it’s called. One of the things the author mentioned was that for this civilization, farming may have been an afterthought, rather than a prerequisite, and that cotton was later used as currency, because it was so necessary to fishermen (which means that this farming wasn’t even for food production). I got to thinking about other types of currency throughout history.

I know that in China, and other places, they used shells (I want to say, in China, it was “cow” shells?), but are there any really strange things that were used as money?

Due to rampant price speculation, tulip bulbs were sometimes used as currency in The Netherlands during the 17th century.

I recall seeing some kind of documentary? about a small tropical village (on an island?) that used GIANT stone wheels for currency. They were each about half the size of a VW bug. Obviously, they didn’t take the stones with them, they were all lined up along a road outside of the village, and each person knew which stone(s) were theirs.

The Yap Islands:

Cowrie shells were used as currency in Africa. Not so sure about China.

Perhaps cowrie shells? The symbol for money in Chinese is supposedly the same as the character for cowrie.

Here is a Wiki article on cultures which used shells as currency.

It won’t make it into the history books, but I used to trick-or-treat with a bunch of other kids, and when we got together at the end of the evening and traded, we used Good-n-Plentys as currency. Nobody actually liked them, but everybody traded well for them, because they knew they could in turn trade them to others.

Not too long ago, in Venezuela, there was a currency shortage and people were using candy and even eggs as currency for change. Merchants would give that junk out for change but wouldn’t take them as payment, of course.

Of course, cacao beans were famously used as money by the Aztecs.

The first monetary systems are the use of key goods, or commodity money. These are intrinsically valuable goods that have certain properties that make them useful as a medium of exchange. When you are bartering the problem is that you have to find someone with the goods you want who also wants the goods you offer. And this might never happen. So an exchange involving a third good is useful. This third good should have various features such as fungibility, durability, transportablility and such. So the third good could be rum, cacao beans, cows, shells, beads, cigarettes, bushels of grain…or metal ingots. You don’t have to find someone who has the fish you want who is also willing to exchange the fish for your eggs. You trade your eggs for rum to anyone who wants eggs, and since rum is a key good everyone has some around even if they don’t drink much. Then you take the rum and go down to the fish market and trade rum for fish. It doesn’t matter that the fisherman doesn’t want rum, since he knows he can trade your rum to anyone that has goods that he wants. And so rum becomes a form of money. Or cigarettes in prison.

And it turns out that metal ingots have many features that make them an ideal key good for barter systems. And then you have governments that manufacture these ingots and certify that they are of a particular weight and purity. And then you get banks that will hold your metal ingots in their vault and give you a paper reciept for that metal. But it turns out that you can trade that paper reciept even more easily than you can metal ingots. So eventually banks don’t even have to keep many metal ingots in the vaults, they can just issue receipts and only keep a small amount of metal on hand. And then we do away with the metal entirely and just trade the receipts, now backed only by the promise that the issuer will accept the receipt for payments.

I’ve never understood the shells as money thing. What is there to stop some poor guy picking up shells on the beach and becoming rich?

Nothing! Bwa-ha-ha-ha-haaa…!

(Historians note that the system collapsed, but are uncertain why…)

Nothing stops people from going to the beach and collecting shells. Except that takes work. You’re out there collecting shells instead of farming or hunting. And the beaches aren’t just covered with cowrie snails, you have to look for them.

Shell money started out simply as a luxury good. The shells are pretty and can be made into jewelry. But they also have properties that make them useful as a key good for barter…they are durable, small, fungible, divisible, transportable. So while before people would gather the shells occasionally to make pretty jewelry, they moved on to gathering the shells just for their value as a key good.

It’s just like a system where cacao beans are a key good. What’s to stop you from becoming a cacao farmer, growing millions of cacao beans, and becoming rich? Or becoming a distiller and manufacturing rum and becoming rich? Or a tobacco farmer who makes cigarettes and therefore becomes rich? These key goods are goods that have actual value, or at least are percieved to have actual value. But the manufacturers don’t become millionaires simply because they produce the key good, any more than owning a gold mine automatically makes you a millionaire in a country that uses gold coins for money. The key goods are still goods that are subject to the laws of supply and demand (and so is paper money, if you think about it, which is why inflation can occur).

So if the beaches are covered with shells, and it only takes a few minutes to gather a fortune in shells, those shells would never have become a key good or a system of proto-money. Instead it takes work to gather the shells, which is a forgone opportunity to do other work. So the value of the shells hovers around some equilibrium depending on how easy the shells are to gather, how long an average shell lasts before getting broken, how often shells are traded, the size of the economy relative to the supply of shells, and so on. Just like money based on gold coins depends on how much gold is mined, how much gold is lost, or traded overseas, the demand for money, and so on. And so we have situations like the Spanish conquest of the Americas that flooded Europe with gold and silver and made Spain incredibly wealthy and powerful, but also created tremendous inflation and destroyed Spain’s domestic industry and eventually drove Spain to bankruptcy…because gold can be used as money but it doesn’t actually create any new wealth.

So discovering vast new beaches full of cowrie shells could make the discoverer rich in a system with shell money, but the net result will be inflation and a sudden decrease in the value of each shell. Find enough of these new beaches and the system of shell money collapses because shells are worth too little, and the guy with millions of shells who thought he was rich finds out he’s ruined.

The same thing that stops that poor guy from digging a gold mine in his backyard. The valuable shells are very rare, and it takes a lot of effort to get the good ones. Which some people do, of course, just like some people do mine for gold.

By the way, anyone interested in money and what exactly money is and the history of money and what it all means could do worse than reading Neal Stephanson’s novels *Cryptonomicon * and The Baroque Cycle.

I’m not so sure – if you do read him, be sure to bring along a big heaping of salt to take him with. Not that Cryptonomicon isn’t worth reading for fun, but in everything I’ve read by him that has a key point with something I know about (e.g. really basic organochlorine chemistry & microbial evolution, computer science, Godel’s Theorem, human neural evolution, physics), he either gets the concept wrong, or completely ignores some aspect of the real worl that makes the concept completely inapplicable. So I don’t really trust him with history, either.

Sounds almost like the economy of Mardi Gras beads, except that the beads are worthless 364 days of the year. During a single day, though, otherwise normal people are willing to perform outlandish deeds for them. I’ve seen grown men fight and women expose themselves for an 85 cent trinket.

I lived six years in the Solomon Islands, where shell money is still used. The reason it is valuable is because it is not shells per se, but tiny (1/4"/6mm) circular beads which are cut and drilled by hand, and then laboriously threaded and woven into long belts. These are called “kastom moni” (custom money), and today are usually used only for “bride price”, the payment to the bride’s family by the groom.

Since a young man typically doesn’t have much or any shell money, the whole village usually pitches in for the payment. This has a couple of effects. One is that it binds the village together with bonds of obligation, and the other is it ensures that marriages have the approval of the community. All in all, a very valuable social custom.


<hijack> Why was cotton so necessary to fisherman?</hijack>

The word “salary” comes from salt. Roman soldiers were paid in salt (or so we were told in Latin class! we wag’ed it may have been part of the pay).

A quick WAG, but perhaps the fishermen need the cotton to make nets and fishing line out of.