The origins of money, one of humanity’s most transformative inventions, have long been debated. A recent study by researcher Mikael Fauvelle offers a fresh perspective that money was created for trade between strangers and not to collect taxes. It challenges traditional views and redefines how money may have emerged.
Published in the Journal of Archaeological Method and Theory, the study proposes that money evolved primarily as a tool to facilitate trade between strangers, a concept Fauvelle calls the “trade theory of money.”
Two main theories of money
For decades, two main theories have dominated discussions about money’s origins.
The first, the “money as commodity” theory, suggests that money emerged to solve the inefficiencies of bartering. In barter systems, individuals had to find someone who wanted their goods and offered something desirable in return—a challenge known as the “double coincidence of wants.”
Advocates like Aristotle and economist Carl Menger argue that durable and valuable materials, such as metals, naturally became money due to their practicality and longevity.
The second, the “chartalist” or “money as credit” theory, posits that money was introduced by ancient governments to standardize tax and tribute payments. According to this view, rulers created monetary systems and assigned value to currency. Thinkers like Georg Friedrich Knapp and David Graeber have emphasized that money’s origins were rooted in hierarchical state control.
Both theories, however, face criticism. Historians have found little evidence of societies exclusively dependent on barter, leading some to dismiss the first theory as the “myth of barter.” Similarly, critics argue that the chartalist theory underestimates the role of trade and social interactions in money’s development.
Money as a practical solution for trade between strangers
Fauvelle offers a compelling alternative that combines elements of both theories. He argues that money did not arise solely within small communities or under state control.
Instead, it developed as a practical solution for long-distance trade between strangers, especially in regions where traders encountered linguistic and cultural differences. Money provided a shared, portable medium of exchange that made such interactions possible.
The study draws on archaeological evidence from two key regions: pre-Columbian North America and Europe during the Bronze Age. In California, indigenous societies used shell beads as currency for over a thousand years before European contact.
Produced on the Channel Islands, these beads were lightweight, easily transported, and widely accepted for buying food, tools, and services. Their high value and portability made them essential for long-distance trade across culturally diverse areas.
Bronze items widely circulated as currency
In Europe’s Bronze Age, trade networks linked Scandinavia to the Mediterranean. Bronze items, including ingots, rings, and axes, were standardized in weight and widely circulated as currency. Fauvelle notes that these objects functioned like modern money, enabling transactions in distant markets and reducing disputes through uniform measurements.
The study emphasizes that money’s role extended beyond economics. Shell beads and bronze items also held social significance, used in rituals, as status symbols, and to settle debts. This dual function highlights the multifaceted nature of early monetary systems.
Fauvelle concludes that money likely emerged independently in various regions for different reasons. In some cases, it may have been imposed by states, while in others, it was a response to practical challenges in trade. His research broadens the understanding of money’s origins, emphasizing its adaptability and significance in human history.