The Polanyi School of Anthrpology on Money

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The Polanyi School of Anthropology on Money:An Economists ViewJACQUES MELITZ

Tulane UniversityThis paper questions the popular anthropological assumption that al l purpose money rulesin the West today. Contrary to the followers ofKarl Polanyi in anthropology, modern aswell as primitive money is special purpose money, I t is argued further that serious dilfi-culties and confusions arise fr om indiscriminate use of the term money to refer both to( 1 ) media of exchange and means of payment and ( 2 ) units of account. Lastly, thescholarship and perspicacity of the Polanyist verdicts about economists views in the areaof mon ey is disputed. [primitive mon ey; economic anthropology; economic theory]

One source of ambiguity in the literature isthe quest for a single, all-purpose definitionof money that would include our own kind(and presumably Soviet money), as well asthe welter of types in use in primitive andpeasant economies differing widely in orga-nization [Dalton 1965:280].I think it misleading to suggest, as Jevonsdoes [1875], that the attempt to define aclass-name necessarily implies a neglect ofthe specific differences of the things con-tained in the class. Indeed, when he goes onto say that the many things which are ormay be called money-bullion, standardcoin, convertible and inconvertible notes . ..etc.-require each its own definition, heapparently maintains the rather paradoxicalposition that it is logically correct to givedefinitions of a number of species, but logi-cally erroneous to try to define their commongenus [Sidgwick 1901 (1883):224, n. 11 .

INTRODUCTIONOST EVERYONE would agree thatM he institutions and habits of ou rworld must not completely dominate ourthinking about other social orders. Thisstricture is the basis of a current challengeto economic theory in the s tudy of nearlyevery recorded society. The late Karl Polan-yi argues (1957a:243-270) that econo mictheory imposes habits of thought that aredetrimental in examining societies that, un-like our own, are not market-oriented andhighly market-integrated (see also Polanyi1944; Bohannan and Dal ton 1965: 1509;an d Da lton 1968:xxviii-xxix). Th us far PO-

Accepted for publication 8 October 1969.

lanyis main success has been in anthropol-ogy, where he has rallied a vocal and ener-getic group to his banner. T he m ajor inroadsof this grou p have been in the are a of primi-tive money. I shall try to show that the P olan-yists monetary views are fairly insubstan-tial.My trea tment of the Polanyist monetarystand will focus successively on (1) the dis-tinction between contemporary and primi-tive money, (2) the general nature ofmoney, and ( 3 ) the application of the mone-tary theory of economists to the study ofprimitive society.

THE DISTINCTION BETWEEN CON-TEMPORARY AND PRIMITIVEMONEYThe Polanyis t Po si t ion

Polanyi and his followers offer the seem-ingly innocuous, yet highly contestable, viewthat contemporary Western money is all-purpose, whereas primitive money is special-purpo se (Polan yi 1957a:264-266; 1957 b:178-181; Dalto n 196 1: 12-13). All-purposemoney performs all the functions tradi-tionally cited in the undergraduate moneyand banking textbooks: (1) medium of ex -change, (2) unit of account , (3) s tore ofvalue, and ( 4 ) standard of deferred pay-ments.* In addition, anthropologists regu-larly stress one extra monetary function re-lating basically to wife purchase and unilat-eral payments such as fines, tributes, andcompensations for wrongs: that of means of

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[MELITZ] The Polanyi School 1021payment. This fifth function is clearly dis-tinct from the more widely recognized oneof medium of exchange.O n the basis of stric t Polanyist definitions,which usually occur in discussing currentWestern money, a money is special purposeif it serves less than all five of t he p recedingfunctions. But the Polanyists regularly stressa second meaning of special-purpose money,which often overshadows the first. Accord-ing to this separate meaning a special-pur-pose money performs any of the monetaryfunctions only in a very circumscribed way(Polanyi 1957a:264-266; Bohannan 1959:124, 126; Bohannan and Dalton 1962:lO-12; Dalton 1965:260-261, 265-266). Oneapparent member of the Polanyist fold, cen-tering on this second meaning, defines spe-cial-purpose money essentially as confinedto a particular circuit of exchange (Nash1964:6) .8 On either of the two precedingdefinitions, I shall argue, contrary to th e Po-lanyists, contemporary Western money isspecial-purpose, not general-purpose, money.In terms of the first definition, currentWestern money cannot be all-purpose, ifonly because of the presence of abstract un-its of account. Contemporary Western ac-counting units, such as the dollar and thefranc, are arbitrary measures, like the footor the quart, that cannot possibly coincidewith any particular good. For example, theU.S. dollar is not the Federal Reserve notewith a face value of $1. Even if there wereno such currency denomination, or this de-nomination sold f or oth er goods with differ-ent accounting prices tha n $1, the dollar stillwould be the U.S. unit of account. In argu-ing that US. dollars are a single monetaryinstrument to perform all monetary uses,Dalton (1965:257-258) completely over-looks this point and confuses the US. ac-counting unit with specific US. goods.

In fact, George Daltons whole argumentfor the all-purpose nature of current U.S.money in his well-known essay PrimitiveMoney (1965) rests on th e previous confu-sion. Thus in purporting to illustrate how ahypothetical $20,000 payment for a house

tion (Dalton 1965:258 n.), he omits men-tion of $20,000 of what. He might equallyhave argued that dogs teeth in the Admi-ralty Islands during the early 1930s were all-purpose money because, as I understand(Herskovits 1952:255) , at this t ime on theisland every good was valued in dogs teeth(as well as shell money), and thereforedogs teeth, in one form or another, couldperform every monetary function. Ratherthan merely dollars, Dalton ought to haveconsidered checking accounts, currencynotes, and the like, as such, in discussingmoney in th e Un ited States.

In regard to the performance of the re-maining fo ur monetary functions by curren tWestern money goods, we must first con-sider the actual composition of these goods.During the last seven centuries of recordedthought, there h as often been wide disagree-ment among serious economic thinkers overwh at constitutes the stock of money. A t themoment, economists generally would termcoin, paper currency, and demand depositsas money (apart from lesser items such astravelers checks, postal money orders, cash-iers checks, and certified ch eck s). But mu chdebate co ntinues over the inclusion of savingdeposits, particularly those at commercialbanks as opposed to other financial institu-tions. For this reason, ( 1 ) coin, paper cur-rency, and demand deposits and ( 2 ) savingdeposits ought to be treated separately.There is no doubt that coin, paper cur-rency, and checking acco unts serve a s meansof payment and media of exchange in theW est today. B ut the Polanyists a re too quickto view these assets as standard s of deferredpayments and stores of value. First, as con-cerns the function of a standard of deferredpayments, there is an unfortunate ambiguityin the term. Coin, paper currency, and de-mand deposits are effective means of meet-ing payment obligations on debts. But unlikethe unit of account, they are no t the un it interms of which payment obligations arestated.Even more problematic, however, is thesupposed store of value function of the pre-migh t serve every relevant mo netary func- ceding Western money goo ds. Any asset,


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1022 American Anthropologist [72, 1970whether held for making payments or any-thing else, is a store of value. However, ref-erences to a store-of-value function ofmoney clearly imply more, namely, thatmoney is a particularly satisfactory means ofstoring wealth and, more significantly, ispartly valued as such. But it is not plain thatpeople hold coin, paper currency, andchecking accounts, in any part, in order tostore wealth rather than to obtain the ser-vices of media of exchange. Generally thevalue of any good as a means of storingwealth depends on the available substitutes.In contemporary Western society, if peoplebehaved rationally, that is, if they tried tominimize the costs of achieving their chosenends, there is one asset that necessarilywould completely dominate coins, papercurrency, and demand deposits as a tool forstoring wealth: the savings deposit. This in-strument offers equal security against a fallin (nominal) capital value, suffers no moreunder inflation, and has the extra merit ofpaying interest. Consequently, coins, papercurrency, and checking accounts are notplainly stores of value today in the most rel-evant sense.Th e savings deposit, however, though usu-ally an important store of value, is not a me-dium of exchange, a means of payment, astandard of deferred payments (in either ofthe two preceding senses), or a unit of ac-count. I conclude then that there is littlemerit in Polanyis statement: In modern so-ciety, the money employed as a m eans of ex-change is endowed with the capacity of per-forming all the other functions as well(1957b : 178) .The second Polanyist definition, centeringon the limited exercise of those monetaryfunctions that are performed, opens up awhole new field of observations supportingspecial-purpose money in the West today.First, our coins are mainly limited to thepayment of petty sums. Otherwise, they aretoo cumbersome to carry and too time-con-suming to count (although increasingly im-portant in operating vending machines).Our paper currency is also unsuitable forpaym ents abov e m od era te levels-say, no t

exceeding several hundred dollars in theUnited States-because of high vulnerabilityto uninsured theft and accidental loss. Also,all our currency, whether paper or coin, isinconvenient for mail payments. Personalchecks, on the other hand, though suitablefo r large payments and tran sactions by mail,are very costly to use in penny transactions,and-most damaging of all-they ar e no tgenerally accepted, especially fr om travelers.We also accept some peoples checkswhile we refuse others, buy certain goodswith checks but never others. Furthermore,our money cannot buy some goods, such aspolitical offices, children, and professorialchairs. Th ere are also goods that money c an-not buy in our society though money oftenis able to do so in primitive society andclaims that our money will not settle thoughprimitive money often ca n. Wives and slavesare examples of the first; the redress of will-ful injuries to life and limb (involving thetribal blood payment), of the second. Manycrimes in our society cannot be settledthrough private compen sations or publicfines. Our barter sphere admittedly is con-fined. But it includes baby-sitter exchanges,car pools, trade-ins, exchanges of free ser-vices within professsions, and commercialtenders of large varieties of goods in returnfor customer knowledge, allegiance, andgood will. In the poorer segments of o u r so-ciety, em bracing mu ch of the juvenile world,the more traditional forms of barter are evi-dent.The se points plainly dam age the Polanyistview of the all-purpose character of ourmoney. In our own as well as in other soci-eties, different objects are, as a rule, em-ployed in different monetary uses (Polanyi1968 a: 19 1) . Ou r m oney, consisting m ainlyof checking accounts, is hardly impersonalor anonymous, as Dalton says ( 1 9 65 : 2 55 ,262).4Broadly, as the read er ca n check, Po-lanyis grounds for asserting that in regardto monetary organization, HammurabisBabylonia . . . was typically primitive(1957b: lSS) c lear ly cas ts our money asprimitive too.One major conceptual basis for the ne-


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MELITZ] The Polanyi School 1023glect of the preceding special-purpose as-pects of Western money today is probablyaggregation. When we speak of money atpresent we refer t o the aggregate of a heter-ogeneous bundle of goods valued in terms ofa common unit of account. Naturally, thisaggregate has more characteristics andserves more functions than any individualcomponent. Similar aggregation is absent inprimitive societies, though not necessarily al-ways because it cannot be done.5 Yet evenour contemporary money aggregates pre-suppose a unit o f account; they do not pro-vide one. Also, these aggregates ofte n d o notpossess a meaningful store of value. Thismay hold even when saving deposits are in-cluded, because of rapid inflation. In general,the technique of aggregation (which ishardly foolproof anyw here) does no t changethe underlying mo netary situation.I conclude, therefore, that if the Polan-yists ever had bothered to apply the samemethods of investigation and criteria of defi-nition to our society as they have to the Tivand Trobriand Islanders, they could nothave espoused their distinction between spe-cial-purpose an d all-purpose money.6Some Historical As pec ts

The question remains whether Polanyisreferences to all-purpose money are signifi-cant if we put aside his definitions, concen-trating on the empirical part of his work.The relevant material regarding contempo-rary Western money is mainly to be foundin his Great Transformation (1944) . Ac-cording to the sweeping thesis of this vol-ume, all-purpose money w as an essential in-gredient in a great transformation thatshook the West during the nineteenth cen-tury. This transformation supposedly in-volved the first large-scale integration ofeconomies through markets in the annals ofhum an history. This would m ean tha t West-ern money underwent some profoundchange around the turn of the nineteenthcentury. However, investigation shows thatno central aspect of ou r money o r monetarysystem clearly originated in the relevant pe-riod, say, 1776-1848. Thu s, little sense ca n

be made of Polanyis all-purpose designationeven if we focus on the historical part of hiswork.Use of an abstract unit of account, onemajor aspect of our current monetary sys-tem (as generally understood), was knownnot only throughout modern Western his-tory, but in antiquity, and even in primitivesociety (Einzig 1948: 509-510, passim). Th eearly development of abstract accountingunits evidently stems from changes in thequality of individual types of goods overtime. When a cow is adopted as the unit ofaccount, not any old burro will do, andeventually n ot a single cow in existence maybelong to the set bearing an exchange valueof one in terms of the cow unit of account.In a similar way, a commodity unit of ac-count consisting of gold of a certain degreeof fineness and weight may, after some in-terval, cease to have any empirical counter-parts. This factor of alteration in quality ofgoods underlies the evolution of modern ab-stract units of account, like the pound, the(independent) shilling, and the thaler (fromwhich derives the dollar) (Feavearyear1931:6-9; Polanyi 1957b:178).Of course, token money, another majoraspect of present-day money, is also of an-cient lineage. In primitive societies, the rea-son for such monies may lie in contact withmore advanced civilizations. Unquestion-ably, however, token monies of all sorts ex-isted in antiquity, preceding coinage (Polan-yi 1957b: 176; Einzig 1948:409 -410; Burns1927:28-29), the mo dern variety of whichstems, throu gh a continuo us line of diffusion,from the eastern Mediterranean world circathe seventh century B.C. (Einzig 1948: 25-227; Burns 1927:39-43; Weber 1927:240-241) .Of late r vintage than the coin is the tokencoin, a type of token money d ating from th efifth- or sixth-century B.C. Greek practice ofplating coins (Burns 1927: 159-163, 46 4) .This practice began as a deceitful form oftaxation, otherwise known as debasement.But during the first three centuries of theRoman Empire, every form of coin debase-ment known to man today already was ex-


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1024 American Anthropologist [72, 1970ploited, including, besides plating, curtailingthe degree of fineness and weight and exag-gerating the use of alloys (Burns 1927:164-170, 407-440, 461-462) .' These prac-tices, except plating, survived in the MiddleAges despite heavy recorded opposition fol-lowing the thirteenth century. A related,much less offensive medieval practice wasthat of seigniorage, involving an overtcharge for coining over and above the fullcosts of production. In addition, at leastfrom the thirteenth century forward, subsid-iary token coin issues, composed of copperor a mixture of copper and silver (thenknown as vel lon in Spain, billon in France),were steadily present. These subsidiary to-ken coins were practically the sole mediumof exchange for the great bulk of the popu-lation in parts of continental Europe forcenturies, even as late as the eighteenth(Usher 1943: 198, 203-204; Cippola 1956:27-37). Their importance can scarcely beexaggerated; at the time, the smallest silverand gold coins minted were often worthmore than the daily income of skilled labor.Therefore, token money, in any shape orform, clearly has nothing to do with all-pur-pose money.The essence of all-purpose money alsocannot inhere in our paper money instru-ments. The saving deposit is traceable to an-tiquity. The recorded history of the checkdates to late medieval Italy. The instrumentevidently derives from a system of booktransfers of debts (first documented in thethirteenth century) requiring the presence ofall three relevant parties: the debtor, thepayer (or previous creditor), and the payee(new creditor). The next stage in the evolu-tion was the bill of exchange, permitting ge-ographical transfers of debts, though still ne-cessitating the presence of the debtor or hislegal representative at the location of pay-ment. The modern checking account, a six-teenth-century Italian development, emergedwhen an order to pay became negotiable inthe absence of the debtor, or prior to hisawareness of the identity of his new creditor(Usher 1943:3-8, 21-23, 90; DeRoover1948~250-283).

Modern Western currency stems from astill more sophisticated outgrowth, thoughbearing earlier and totally different roots inancient China (Quiggin 1949:248; Kann1937:366-368). In the West, currency isthe stepchild of the negotiable sight note, orthe order to pay, payable by the debtor onsight to whomever presents it. (The ordinarycheck was payable only to the party desig-nated by the creditor of record.) The earlysight note, traceable to sixteenth-centuryBruges and Antwerp (Usher 1943:99, 103),*bore the signature of every person throughwhose hands the instrument had passed. Thedistinct feature of the subsequent currencynote, already manifest in the seventeenthcentury and flourishing in some parts duringthe early decades of the eighteenth (Usher1943: 189-192; Lester 1939:37-160; Sup-ple 1957:239-255), was the absence of allcountersignatures.The essence of all-purpose money is alsodifficult to find in the organizational featuresof our monetary system. Znconvertible cur-rency, in strict form, is very late from thestandpoint of Polanyi's historical thesis,emerging in the West during the 1930s. Inmore flexible form, the system has roots inthe token money of antiquity. From theviewpoint of the moneyholder, there obvi-ously may be little difference between a to-ken coin and a paper denomination (com-pare Burns 1927:464).

Central banking, as an agent of govern-mental financing, harks back to the seven-teenth century. As an institution with re-sponsibility for monetary control, it is veryrecent, possibly dating from World War I1and in many respects not fully operative asyet, if it can ever be.9 Thus on any relevantview, the timing of central banking does notsupport Polanyi's ideas about the nineteenth-century origins of all-purpose money. Orga-nized social control over the quantity ofmoney, the broader issue involved, may wellbe smaller today than it was, say, among theancient Spartans, the ancient Egyptians, andmany primitive societies.In conclusion, the facts of modem mone-tary evolution in the West are basically op-


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MELITZ] The Polanyi School 1025posed to the thesis that something unprece-dented happened to our money during thenineteenth century. Hence Polanyist refer-ences to all-purpose money have meagerpractical import at best. Such referencesma y be perha ps interpreted very modestly asa r m i n g the v ital s ignif icance of moneytransactions and the use of a common unitof accou nt in the m odern industrialized W estsinc e the nineteenth cen tury , if n ot before.No doubt Polanyi and his following main-tain that we could not have achieved thesam e degree of integration of o u r econom ythrough m arkets w ithout the use of a single,widespread unit of account and the moneti-zation of practically th e entire payments andexchange sphere. But this view, though pos-sibly the basis for a distinction between theorder of significance of money in modernand primitive society, cannot support anygeneral distinction between modern andprimitive money.1o Regarding this last sortof distinction, the Polanyists essentiallymake no headway. This is not to deny, how-ever, their contributions to the study ofsome ancient and primitive monetary sys-tems.

ON THE NATURE O F MONEYDefinitional questions are perennially indisrepute. But in regard to primitive money,the issue of the meaning of money is inef-faceable. The Polanyists often imply a sim-ple definition of money as anything thatpartly serves any of the five foregoing m one-tary functions. However, this last defini-tional criterion only suits the m in the case ofprimitive money. I n the area of modernmoney, they rebel against all definitional en-deavor (Polanyi 1957b: 175; Dalton 1965:280-281). This non con form ity, which restson complaints about the overly narrow defi-nitions of past writers, does not help the un-derstanding of their own general referencesto money. But on the definitional issue, Po-lanyi has bequeathed one important legacyto the group demanding serious attention:the idea of money a s a symbol.Money as a Symbol

According to Polanyi, actual money . . .

is merely a token of purchasing power, afiction (1944:72), no object is money perse (1957b: 175) . Fur ther major s ta tementsare :

In truth, money is a system of symbolssimilar to language, writing, or weights andmeasures [1957b: 1751.From a formal angle, modern money, incontrast to primitive money, offers a strikingresemblance to both language and writing.They all possess a uniform grammar. Allthree are organized in an elaborate code ofrules concerning the correct way of employ-ing the symbols-and genera l rules applicab leto all symbols [1957b:178].Thus n ineteenth-century money, employingexchange symbols for various other uses, ap-pears an almost complete parallel to languageand writing with its all-purpose sounds andsigns [1957b: 179; see also i968a: 194; 1966:174, 2811.

Dalton tr ies to accomm odate these claimsby distinguishing between money stuffs andabs tract mon ey (1965:254-281, esp. 27 8) .But this mode of reconciliation fails in thelight of Polanyis idea that money stuffs, atleast in the West today, ar e not m oney at all,but merely vehicles for conveying the ideaof money.Helen Codere deserves credit as the firstto t ry to give meaningful content toPolanyis view that money, in all its guises,is a symbol. Recognizing Daltons previousdepartu re, she says, thoug h in som ew hat un-felicitous language: We forget that theseamounts of money a re abstract am ounts of asymbolic substance (1968:559). She mayeven be going beyond the master in imput-ing symbolism to primitive society wherevermoney is present. All the money-stuffs ofthe world, she asserts, have a physicalform: but whatever this is (a nd form s rangefrom great stone wheels to gold and wood-pecker scalps) it is a symbol (Codere19685 6 0 ) .Codere reasons that any means of ex-change symbolizes all the goods that it canpurchase. Accordingly, the wider the ex-chang e sphere, the m ore inclusive the moneysymbolism. But as she implicitly apprehend s,this view only accommodates the monetary


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functions of medium of exchange and meansof payment. Consequently, Codere alsomaintains, evidently with the unit of accountin mind, that money as a symbolic systemcan interact with other symbolic systems,such as nu mb ers an d writing, thereby achiev-ing higher generality and abstraction.As opposed to Codere, I would argue inregard to the funct ions of medium of ex -change and means of payment that all refer-ences to money symbolism can be expunged.It takes some stu ff to pay a fine or a bloodprice, or to buy a cow. Whatever this stuffmay symbolize, its commodity descriptionadequately denotes the thing that performsthe function of payment or meets the price.Of course, peoples attitudes toward thesestuffs may matter-sufficiently so to induceus to limit the term money to goods peopleview in a certain way. Ye t there can be littleharm in ascribing the label money to aproperly circumscribed class of goods.To say with Codere that money goodsmerely convey the idea of money becausethey represent all the goods that they canbuy not only complicates the language butbreeds misunderstanding. For example, themoney-holder may be oblivious to scores ofgoods his money can buy. In the UnitedStates he may simply consider his FederalReserve notes as money just as an earlytwentieth-century Tiv may have conceivedof his brass rods as money, without regardto symbolism. When people do interpretmon ey goods as symbols, the symbolism maydiffer from the sort Codere imagines. Thus,at best, her view reduces to the statementthat me dia of exchange possibly can be co n-ceived as symbolizing everything purchasa-ble with them.I1The issue of symbolism inescapably arisesin regard to money as traditionally under-stood, solely in connection with the unit ofaccount. Such units ordinarily cannot prop-erly be conceived as a good even if the namesuggests some object. Many parts of Polan-yis work may be construed harmoniously.For example, his treatment of submonetarydevices in Mycenae (1960:321-334) en-tirely centers on accounting practices per-

1026 American Anthropologist [72, 1970mitting valuations of heterogeneous bundlesof goods (fo r taxation pu rposes) withoutsubstantial calculation.12 Furt he r, his discus-sions of symbolic money abound with refer-ences to quantitativity, arithmetical opera-tions, and recording (1 96 8a : 191-193;1957a:264-266; 1957 b: 176, 180-182 ), allof which can be understood only as pertain-ing to the accounting unit, inasmuch ascounting, recording, and the like may beequally important under barter as money ex-change. However, there is little conceivablemerit to Polanyis broad suggestion (quotedabove) that the money symbol has a gram-mar and elaborate set of rules of its own.Clearly, the only gram m ar and rules relatingto the unit of account may be ones belong-ing to language, mathematics, and accou nt-ing, rather than to the accounting unit assuch.I conclude, therefore, in line with a longtradition predating the classical economists,that the only serviceable view of money as asymbol or abstraction concerns the unit ofaccount. But I shall go further now, in op-position to Polanyi (1957b: 180) and a hostof ancient and mode rn writers (Ein zig 1948 :321-322), to advocate restricting the termmoney to media of exchange and means ofpaymen t and letting the uni t of ac cou nt standfor itself.l3M o n e y and the Unit of Account

The association of money and the unit ofaccount goes back to Aristotle, who in hisNicomean Ethics (Bk . 5 , C h. 8 ) presentedthis unit as one of three major functions ofmoney (in addition to the medium of ex-change and the store of value). Thirteenth-and fourteenth-century Scholastic writerslater heavily underscored the idea of moneyas a unit of account (Monroe 1923:20-21and n . 1) . This idea has remained with useve r since.Adherence to the notion of an intrinsiclink between money and the unit of accountcannot be explained on the basis of contem-porary experience. Thus, we may seem toassociate money with the unit of accountprincipally because of the current constancy


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MELITZ] The Polanyi School 1027of the accounting prices of money goods:witness the fact that fifty-cent pieces contin-ually trade for other goods priced exactlyfifty cents. But in fact, the tendency to asso-ciate money with the unit of account wasequally strong in the last century when ac-coun ting prices of money goods ofte n variedsizably fro m place to place (within politicalboundaries) and from time to time. I n ear-lier centuries, accounting prices even dif-fered from coin to coin of the same denomi-nation (Usher 1943: 196-198; Bloch 1954:8, 26; Feavearyear 1931:405; Weber 1927:242-243). There have been long periods inmodem Western history when varying ac-counting units existed side by side. Betweenthe Merovingian period and the sixteenthcentury, coins with names corresponding tothe relevant units of account were mostlyrare in Europe (Usher 1943: 01-202, 205-219; Bloch 1954:40, 44, 48-49; Cippola1956:38-5 1; Einaudi 1937: 59-268).Such factors clearly never even ruffled beliefin a fundamental tie between the unit of ac-count and media of exchange.On examination, the idea of this funda-mental link would seem to rest on an an-thropological conjecture about the origin ofunits of account. This follows because thesingle most pervasive ground offered overthe last two a nd a half centuries or more forthe essential tie of money to the unit of ac-count is that accounting units would be im-possible under barter (Gregory 1933:601).A large proportion of current undergraduatemoney and bank ing textbooks still propa gatethis ill-conceived view.14 Acceptance hasbeen widespread despite related sophisti-cated distinctions, even preceding AdamSmith, both between money goods and ab-stract and imaginary monetary units16 andbetween accounting (nominal) and realprices.16 Of course, anthropological andclassical evidence of units of account underbar ter is extensive (Pola nyi 1957b:265; Ein-zig 1948:364-368); and on this groundalone, money, as a medium of exchange,cannot be required to provide a unit of ac-count.Those who recognize the last point still

may wish to argue that there is no harm inletting money cover both units of accountand media of exchange. Such language,however, easily can be shown to be condu-cive t o grave misapprehension.As one instance reflecting a large categoryof cases, observe Raymond Firths declara-tion: Without money there is no simplemeans of reckoning prices (1951: 122). Be-cause Firth is well aware of many simplemeans of reckoning prices under barter, hemust be using money to mean the unit ofaccou nt. Th us his assertion reduces t o a tau-tology. A far more serious peril in the cur-rent terminology, exemplified in the follow-ing two quotations, is the tendency to skipfrom one of the two present meanings ofmoney (as a medium of exchange) to theother (as a unit of account). The resultingelementary fallacies would hardly be possi-ble with clearer language:

General-purpose money provides a com-mon denominator among all the spheres, thusmaking the commodities within each expres-sible in terms of a single standard and henceimmediately exchangeable [Bohannan 1959:1321.

The use of all-purpose money is a requisitefor market-organized economy because alllabor and resource ingredients as well asfinished output must bear price tags expressedin the same money in order for buyers andsellers to transact them through the marketexchange mechanism [Dalton 1961: 131.Contrary to the first statement, by PaulBohannan, two goods do not become imme-diately exchangeable because their prices arestated in a common unit of accou nt. Witnessthe examples of gold, marihuana, childabortion, and the White House in the UnitedStates-all ar e no t ord inar ily purchasablealthough bearing dollar values. Contrary tothe second statement, by Dalton, goods eas-ily may trade even when their prices are

stated in different units-witness intern a-tional trade. Both statem ents exhibit th e ten-dency of adherence to the notion of all-pur-pose money to provo ke mistakes.Further Argument

The strongest argument, however, for re-


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stricting the term money to means of pay-ment and media of exchange is conceptual.There are radically different and much sim-pler grounds for adopting a common ac-counting unit than a medium of exchange.Subordinately, there are also differentgrounds for a common unit of account anduniform means of payment.Consider the example of four goods, A ,B, C , and D, hich are all interchangeableat one time and place. Each good then canbe priced in terms of all three others, result-ing in a total of three times four, or twelvepossible price quotations. Suppose f o r themoment that all twelve prices are mutuallyconsistent. In this case, any one of the fourpossible sets of prices in terms of a singlegood would yield the same information asthe sum of all four sets, o r all twelve pricestogether. For example, if we knew the pricesof B , C, and D in terms of A ( P b a ,P,,, Pda),the price of A in terms of B (Pub ) wouldbe the reciprocal of the price of B in termsof A ( P b a ) ; he price of B in terms of Cwould be the price of B in terms of Adivided by the price of C in terms of A( P b c =P b a / P C u ) ;nd thus all twelve priceswould follow. One advantage of a commonunit of account, hence, is an economy inprice quotations.However, it might be argued that quotingall twelve prices would be preferable todoing all the necessary divisions to obtainthe twelve exchange ratios from informationabout three of the prices alone. This seem-ing objection points to some further bene-fits of a standard unit of account.If prices are stated in terms of differentunits of account, the exchange ratio betweentwo goods in terms of one accounting unitmay differ from the ratio between the sametwo goods in terms of another unit. Forexample, if Pdb is quoted as well as Pa, andP b a , Pdb may fail to equal Pd , /Pb a . Then,as the reader can check, it would be possi-ble to transform any of the four goods intomore of the same good through an appro-priate series of trades. Such private gains,however, obviously would be at the expenseof the other social members, because our

1028 American Anthropologist [72, 1970four-goods example offers no basis for ser-vices of wholesaling and retailing. Thus, asecond advantage of a common unit ofaccount is the prevention of the precedingsocially unintended redistribution of goods.Furthermore, if conditions permitted therelevant price inconsistencies, one wouldneed to know the inconsistencies in order toexploit them or, as well, in order to avoidbeing cheated by them. Even w ith only fo urgoods in the market, this entails a bit ofcomputation, as there are then twelve possi-ble price quotations, any of which may beinconsistent with the rest. If any inconsisten-cies are uncovered, moreover, further com-putational effort is necessary in order to de-cide how best to deal with them. It followsthat a common unit of account may well di-minish total computational effort rather thanthe opposite, as suggested above.The case for a common unit of account,consequently, is strong even under veryprimitive conditions. Besides the fact thatthe preceding argument involves only fourgoods, it would hold for only two tradersand is independent of ma rke t distances.lsTh e conditions for a medium of exchangeare much more exacting and complex. Sucha medium, of course, implies significant cus-tomary trade of goods fo r money, M , and Mfor other goods, in ord er to convert nonmon-ey goods. What is the ground for the inter-mediary, M? Th e answer mus t lie essentiallyin a desire to economize on transactioncosts. Transaction costs rest on two factors:(1 ) imperfect information and ( 2 ) obstaclesto trade, such as distance, transportation,and transfer of title. Without imperfect in-formation, each market participant wouldknow immediately every quality and price,and every potential trade partner on themarket. He could then see at once his bestpossible bargain. Without obstacles to trade,no one would have cause for concern withdistances, bulkiness and fragility of goods,and number of intermediary exchanges.Without either factor, one procedure forconverting A into B throug h trad e necessari-ly would be as good as any other. T hus a me-dium of exchange would be fruitless.


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MELITZ] The Polanyi School 1029Transaction costs, however, do not suffice

to spell the advantage of a medium of ex-change, for the arrangement ties up re-sources that might be used differently. Withonly a handful of trader@ or goods, thepossible economies in transaction coststhrough a medium of exchange plainlywould be negligible relative to the costs. Dis-tances are also a consideration. Even sev-eral hundred traders dealing in scores ofgoods may find barter superior to money ex-change if they are in sufficient proximity.For then they can easily arrange a regularmeeting place where they can display theirwares, sample qualities and prices, readilycommunicate, and enter into triangular oreven more complex trading patterns underbarter. To explain a medium of exchange,then, is a totally separate problem from thatof explaining a unit of account.20

The bases for a common unit of accountand uniform means of payment differ also.The inducement to uniformity of means ofpayment-r uniform means of meeting ma-jor social and political obligations and buy-ing wives-would seem mostly to stemfrom the advantages of institutionalizingprocedures through which the most poten-tially divisive social engagements within agroup take place. This promotes certaintyand harmony. The same reasoning applies inthe case of intertribal blood payments andtributes, which are sometimes the governingfactors.Thus, to recapitulate, means of paymentand settling transactions never perfectly co-incide with accounting units. Units of ac-count have existed in the absence of mediaof exchange. The theories underlying theunit of account and the use of money trans-actions and money payments differ radical-ly.2l The current usage, permitting the sameterm to stand for units of account, on theone side, and media of exchange and meansof payment, on the other, rests on misunder-standing and breeds more misunderstanding.In addition, unit of account is a perfectlygood term, which gains nothing in claritythrough such epithets as monetary unit,money of account, and monetary unit of

account. Therefore, there is much to gainand little to lose by letting money stand onlyfor means of payment and media of ex-change.22Some Definitional Clarification

I do not pretend, however, that means ofpayment and media of exchange sufficeto define money. Most important, theseterms omit any reference to motives. Yetmoney is not the sort of good that can beidentified strictly in terms of technical per-formance characteristics. Rather, like theceremonial dress and the meeting room,money cannot exist unless people think so.Without some vague notion of moneyness ina primitive group, it is arguable that eventhe germ of money can be present. On theother hand, if a concept in a primitive soci-ety is clearly translatable into English asmoney, the group undeniably has experi-enced money even if none is around cur-rently.

In regard to the money motives, nonecon-omists are highly prone to think of the ser-vices people obtain by letting go of money.Yet nothing is valued because of a desire toget rid of it. If popular desire to possessmoney shrank rapidly, hyperinflation wouldensue, portending some retreat to barter.Thus, the relevant motives in definingmoney concern the reasons for holding on,not for letting go. This may seem paradoxi-cal because prevalent forms of money todayare worthless except for use in payments orexchange. But if so, think of the benefits ofan inventory of any kind, say a grocers. Thegrocer wants to sell his entire present stock,yet he never wants to run out. Moreover, thefaster his goods move, the larger the averagestock of inventories he wants to keep onhand.

Similarly, people want to hold positivelevels of money, varying in size with thescale of the services money yields. Theseservices, as previously underscored, funda-mentally stem from economies in transac-tion costs. That is, the penalty for holdingtoo little money is excessive transactioncosts (for examples, too many trips to the


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1030 American Anthropologist [72, 1970bank or the market, delays in consumption,excessive sales of noncash assets, costs ofkeeping careful accounts). Because transac-tion costs are tied to payments, or morebroadly, transactions, it is therefore possibleto define money for anthropologists, eco-nomic historians, sociologists, and econo-mists alike as goods held, in significant mea-sure, for purposes of settling transactions.This definition is not especially designedto reduce the area of ambiguous cases, but itis intended to enhance order and clarity. Asregard s the em pirical com position of moneygoods, in the case of modern Western soci-ety, the perennial question is one of inclu-siveness. On the other side, with respect toprimitive so ciety, the question is where to be-gin and whether to begin at all. This ques-tion reflects the f act th at in t he field of prim-itive money, the overriding problem is prob-ably the origin and development of moneyand the connected issue of the ramificationsof monetary development for economy andsociety. On these topics, exact demarcationsbetween money and nonmoney are not nec-essarily critical, and excessive attention tosuch dividing lines even may impede prog-ress. Given conceptual clarity, there is littlereason to sanctify adhere nce to a single mea-sure of money. Economists are increasinglytending to use a variety of money measures.

O N THE APPLICATION O F M O N E -T A R Y T H E O R Y TO PRIMITIVESOCIETYI will now briefly comment on the Polan-yist thesis that the monetary analysis ofeconomists applies only to modern Westernmoney, which is too broad for comprehen-sive treatment. There is no effort to showthat this monetary analysis is indispensableto the economic anthropologist. I shallmerely defend the applicability of the analy-

sis to th e field.The major barrier to plying monetaryanalysis, or any modern theoretical tools ofeconomics, in treating primitive money isthe idea that modern money is intrinsicallyeconomically superior to the primitive vari-ety. Economists bear the brunt of the blame

for this error; typical economic discussionsrepresent the evolution of money from suchnatural units as pigs jawbones and buffalohides to more processed goods, such as leadand copper bars, and furthe r to th e sophisti-cated coin and contemporary paper andcredit instrument as the epic conquest of abarrier, the perfection of a technique. ThePolanyists, in fact, carry this view to an ex-treme. In basic harmony with their image ofmoney as a symbol, they consider modernmoney as essentially an advancement inthought. Bohannan, who takes the vanguardon this issue, argues that Western money isso overpowering an idea, that once conceiv-ing it, the primitive man must yield to thenotion, however painful the adjustment. Toquote his most succinct statem ent in a fasci-nating article on the Tiv: Money is one ofthe sh atteringly simplifying ideas of all time,and like any other new and compelling idea,it creates its ow n revolution (Bo hann an1959:135).21Th e notion of the logical or technical su-periority of modern Western money doesnot bear close examination. The desirabilityof adopting any kind of money always de-pends o n costs relative to benefits. Westernthinking traditionally has concentrated al-most exclusively on the benefits of more so-phisticated forms of money. Already in thefourteen th century, the Scholastic writers at-tr ibuted the spread of coinage since Romantimes to the superio r fitness of coins to com-peting moneys and called attention to thefour time-honored desirable characteristicsof money goods: homogeneity, durability,portability, a nd econom ic divisibility (M on -roe 1923:23-24; Cannan 1896:185-186, n.1).Yet they slighted the costs of these bene-fits, which is always conducive to error, butparticularly so perhap s in coping with primi-tive money.24

Coined money requires resources whetherimported or produced domestically. Besideseating up resources, paper money demandssubstantial organizational technique. In gen-eral, a new kind of money resembles any or-dinary economic innovation: it absorbsfresh resources while releasing others previ-


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MELITZ] The Polanyi School 1031ously employed. The economy involvedtherefore hinges greatly on the price of theresources newly required relative to thosefreed. Stated differently, the same compel-ling reasons that show that the plow is oftensuperior to the tractor and the windy bushpath to the paved highway in the poor econ-omy also mean that the metallic bar, thecow, or the pig may be superior to the coinand the pap er instrument as money.Supporting field evidence may be citedtoo. Many primitive societies have rejectedmodern Western money for long periods,others have consigned it to a foreign ex-change sphere, and still others have adoptedit temporarily and ultimately decided againstit (Einzig 1948:439-450; Polanyi 1968a:201). Furthermore, during the period ofWestern colonial expansion, European set-tlers in new areas often rejected their earliermonetary experience with coins and chose toborrow and adapt primitive folkways, notonly in their dealings with natives, but evenamong themselves (as, for example, inmany instances in the American colonies)(Einzig 1 94 8: 178, 287-295, 297-305, 464,468; Quiggin 1949:316-320; Lester 19 39 :10-17).25Once the costs are considered along withthe benefits of monetary innovations, muchof the Polanyist criticism of monetary analy-sis loses force. T he supposedly con tradicto ryfact that money does not arise in primitivesocieties owing to disadvantages of barter(Polanyi 1968a: 190-201), fo r example, be-comes totally conformable. If the Polanyistsare correct in describing primitive societiesas close-knit groups, with very limited ex-change spheres, within which exchange ratesare fixed, then previous reasoning wouldshow that barter is economically immeasur-ably superior to money exchange. In as-cribing primitive money to the inconve-niences of barter, economists simply haveconfused the facts. Polanyi characteristicallytraces this error to the classical economists.But the mistake is found in Aristotle (Poli-tics,Bk. 1, Ch. 9) and prevails in medievaland Renaissance discussions of the origin ofmoney. Broadly speaking, the dominant cur-

rent anthropological view of money as stem-ming from unilateral payments and bridepurchases in primitive societies is entirelyreconcilable with the monetary theory ofeconomists.Some parts of the anthropological evi-dence, moreover, favor economists treat-ment of money. Particularly so are testimo-nies of the im porta nt tie of monetary evolu-tion t o external trade (Polanyi 1944:277;1968a:201; Weber 1927:238). If money is ameans of economizing on transaction costs,as economists conceive, such a tie plainlyfollows, because in the primitive context lit-tle could m agnify th e significance of transac-tion costs as much as does contact with for-eign cultures. Also bolstering monetary the-ory is the tendency for habits of using a me-dium of exchange to develop first amo ng thewealthier groups in highly stratified earlycivilizations, and only later to seep down tothe poorer classes. There is also much evi-dence favoring the economic hypothesis,outlined before, that units of account tend toarise under much more primitive conditionsof social organization than media of ex-change. This hypothesis certainly warrantsfurther investigation.One sor t of disturbing evidence, however,regards the presence of indigenous tokenmonies among primitive societies with a nar-row market base and lacking contact withadvanced civilizations. We may define amoney as token t o the extent that its nonmon-etary value is below its monetary one. Ac-cordingly, a fully token money is worthlessexcept as money. (Such a type of money is alimiting case rarely even approximated inprimitive societies where token monies ordi-narily possess substantial ceremonial or pres-tige value.) It follows, then, o n economic ra-tionality assumptions, that all resources de-voted to tokens or tokenness are entirely ab-sorbed in improving the quality of monetaryservices, or in promoting the previous fourdesirable monetary characteristics: homo-geneity, durability (resulting from partial di-vorce of economic value from physical statein the case of tokens), portability, and eco-nomic divisibility (resulting from enhanced


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capacity to vary sizes and other propertiesattending tokens).2G But in o rde r to meritresources on the scale that a token moneyoften involves, usually these benefits must befairly substantial. Obligatory unilateral pay-ments and bride prices, f or example, wouldnot explain the adoption of any token mon-ies at all. Therefore, though cases of tokenmonies stemming from contact with ad-vanced civilizations,, such as those of cowrieshells and wampum, are quite understanda-ble, similar examples of token money inprimitive groups with a scant trading spherear e difficult to explain.27

My argument, in sum, has been that in or-der properly to apply monetary theory toprimitive society, we must forsake the ideathat the essential aspects of current Westernmonetary organization are the rational solu-tion to the m onetary problems of all civiliza-tions. I n addition to the fac t that o ur systemwould entail unsupportable wastes in primi-tive settings, its efficiency today is also ques-tionable.The monetary evolution of the West hasnot been guided by an invisible hand ofprogress, but largely imposed by conspicu-ous actions of government. Heavy govern-mental participation in any field often bringsa marked reduction in social experimenta-tion and the survival of inefficient marketforms. Man y of the forem ost features of themonetary system we know today , in fact, arethe result of governmental improvisationsfollowing crises. Furthe rm ore , some of theseimprovisations were fought at every stepalong the way by some of the most enlight-ened minds present during the enactmentperiod.Judged by performance alone, our systemhas a greater inflationary bias than any inhistory. Under commodity money, coin de-basement merely decelerated the pace of de-flation for long decades. Nowadays defla-tions are uniformly mild, fairly short-lived,and limited to a small minority of countriesa t a time. Inflation is the rule. Moreover,with the possible exception of some lateeighteenth-century paper money exper-iments, employing contemporary methods,

1032 American Anthropologist [72, 1970ou r system has produced episodes of hyper-inflation of a dimension that makes all previ-ous examples pale by comparison. Little be-fore 1900 can vaguely match the German,Austrian, Hungarian, Russian, Greek, Pol-ish, and Chinese inflations of this century.28In addition, it has never been convincinglyshown that our system is superior to a num-ber of cogently argued, untried commoditymoney schemes, and 100 percen t reserve re-quirem ent proposals.2Q Anthropologists an deconomists alike, therefore, should bewareof any suggestion that we have reached anapogee in the development of money. If his-tory is any guide, not only can we make siz-able improvements today, but in anothercentury or so our system will belong to theendless exhibits in mankinds museum ofmo netary experiments.

CONCLUSIONSMy several deviations from orthodox po-sitions in economics, as the reader no doubthas noticed, are rather counterrevolutionarysince they tend to reinforce the basic think-ing in my field. Nonetheless, the deviationsshould warn anthropologists against seekingready-made recipes in economics. In myopinion, such efforts are mostly doomed. Tobe of substantial value to the anthropologist,in most cases , economic theory-or a t leas tthe soundings of economists about this the-ory-requires adap tation, recon struction,

and extension. Nothing is more inimical tothis type of work than the frequently pro-mulgated view of economic theory, by sup-porters and antagonists alike, as a polished,complete structure, articulated in every im-portant detail.30In applying economic theory to otherareas, as is occasionally successfully do ne bya minority,3* the one inviolable rule the so-cial scientist must observe is the principlethat the relevant popu lation, either individu-ally or collectively, wants to maximizesomething (usually termed utility, but pos-sibly encom passing, say, a desire f or m ilitarysuperiority) subject to some constraints (forexample, no spilling of goats milk). Theconstraints, if effective, mean that the group


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MELITZ] The Polanyi School 1033and its members cannot have all they desireof w hatever they are trying to maximize. Onthis view, there is little substance to the Po-lanyist denial of economic costs and pricesin primitive society on the m ere ground t ha tthe primitives may do little trade, but relyheavily on gift exchange a nd /o r central deci-sion-making (Polanyi 1957a:243-270;1966:xv-xxii; Da lton 196 1:7).3 * Th e moststriking illustrations of the application ofeconomic theory, as economists well know,occur under aberrations from ordina ry mar-ket assumptions-that is, in such situationsas the post-1917 Soviet Union, World WarI1 price controls, and prisoner-of-war camps.

POLANYI ON THE HISTORY OFECONOMIC THOUGHTEarlier I had contemplated a point-by-point critique of Karl Polanyis treatment ofthe history of economic thought. But as myoverriding objective was to warn the readerabout Polanyis extraordinary unreliabilityin this field, I soon realized that I could ac-complish my aim within less space.In line with his broad historical slant, Po-lanyi insists on viewing the English classicalschool as the fou nt of modern economic the-ory (Polanyi 19 44: 104, 111-129, esp. 124).There is admittedly a tendency, even amongspecialists, to date the birth of economics tothe second half of the eighteenth century,with Adam Smith along with various non-

classical autho rs, such as R ichard Cantillon,FranCois Quesnay, and A. R. J. Turgot. Butthis tendency rests essentially on a desire toassociate the d ebu t of the discipline with theemergence of the embracing, systematic eco-nomic treatise. As is well known, demand-and-supply analysis of the determination ofvalue was thriving in late medieval Scholas-ticism (Schumpeter 1954: 98; DeRoover1957:115-146), and by the early decadesof the eighteenth century, monetary theory,the theory of international trade, a nd the the-ory of taxation were in a fairly m ature state.The English classical school largely pro-moted systematization. Most important, theylinked economic analysis to a significantWeltanschuung, involving a general social

philosophy and a powerful theory of eco-nomic growth. But in the field of microeco-nomic theory, now generally conceived asthe hea rt of econom ic theory, the grou p wasobscure and largely wrong-headed. Theirmain contributions concern the pricing offactors (known as distribution theory) andare distinguished for their systematizationand policy implications rather tha n precisionor originality. Specialists still deb ate wh ethereconomic theory, as it stood in the 1890s, isnot mainly the product of a rich interna-tional harvest that had been reaped by 1775and then advanced through the efforts of acontinental line of writers extending fromAuguste Co urno t to Henrich von Thiinen andLkon Walras, all outside the classical school(as W. S. Jevons proposed, in essence, in1871). The weakness of Polanyis positionmay be easily discovered by skimming thepages of Joseph Schumpeters History ofEconomic Analysis (1954) .Polanyis biases become more evidentelsewhere. For example, he credits the clas-sical economists with originating the notionof the economic man (194 4:43 ; 1947:59-77; Dalton 1968:xxvii). However, it isproverbial in the modem literature on mer-cantilism that seventeenth-century Englisheconomic writings offer a far more pessimis-tic view of common man than did the En-glish classicists (Furness 1920; Buck 1942:88-96; Johnson 1937:28 7-292). More-over, the English classicists conception ofhuman nature should be compared with theearlier Christian notion of the fallen man.It is only in contrast with such eighteenth-century sentimentalists as the Marquis deCondorcet and William Godwin (omittingthe important but earlier third Earl ofShaftesbury) that Bentham and Malthusseem harsh. In addition, the pre-Benthamitehistory of psychological hedonism in En-gland should be evident (Albee 1902).In further pointed opposition to Polanyi,Malthus originality is often contestedamong students of the history of populationtheory. There is also no basis for Polanyisascription of an iron law of wages to clas-sical econom ics (19 44 : 123, 126, 164;


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1034 American Anthropologist [72, 1970196 8b: 131-132). Firs t, this Marxist viewmakes little sense in the context of Malthussophisticated population theory. But moresignificantly, there can be no mistake aboutthe imp ortance of Malthus preventivechecks in Ricardos theory of normalwages, which defines the main classicalposition on wages prior to John Stuart Mill(whom Polanyi evidently excludes amongthe architects of classicism). On all thesetopics, consult particularly Jacob Viners es-says on Adam Smith and Bentham and Mill(V ine r 1958:213-246, 306-332), LionelRobbins (1952), and Elie Halkvy (1928).33Two details of Polanyis exposition areparticularly striking. One is his treatm ent ofA da m Smiths conjec ture about the origin oftrade in a human propensity to truck, bar-ter, and exchange (Sm ith 177 6:Bk . 1, Ch .2) , which Polanyi poses as a cornerstone ofthe classical position.34 In fact, Adam Smithis the only kn ow n w riter ever to express thisopinion, which in turn has been long re-garded as a curiosuni of the Wealth of Nu-tions. Furthermore, the classical trade doc-trine rests on the theory of comparativecosts, which predates Adam Smith (in amore mature form than the latter providedin his masterwork) and is utterly indepen-dent of any propensity to barter.The second detail regards Polanyis por-trayal of Joseph Townsend as a key figure inthe development of classicism (1 94 4: 11 1-Polanyi relies entirely o n fav orab le refer-ences to Townsend in Bentham and M althus(though appearing only in the second edi-tion [1803] of the latters Essay on Populu-tion). However, David Ricardo, John Mc-Cullough, Nassau Senior, and James andJohn Stuart Mill never once mention Town-send in thei r respective Principles.35 T heman is virtually unknown except to special-ists in the history of economic thought andpopulation theory. Townsends place in Po-lanyis analysis plainly stem s fro m a desire toburden the classicists with a biological viewof man. Townsend offers Polanyi otherwiseunavailable support for his slant in an in-

116, 123, 125, 223; 1968b:129-130, 13 2) .

teresting analogy between the population be-havior of hum ans and animals.36Nothing perhaps indicates as well Po-lanyis pretensions in the field as his travestyof Ricardos labor theory of value: In amistaken theorem of t remendous scope he[Ricardo] invested labor with the sole ca-pacity of constituting value (19 44: 12 6) .Though Ricardo is extremely difficult tofollow, anyone with the book before himcan hardly fail to notice Ricardos enum-eration of one way after another in whichcapital affects value. His labor theory ofvalue is a typical Ricardian ceteris paribusother things equal assertion, saying: Un-der conditions x , , x 2 , ... ,, the price of anygood, A , relative to any other good, B , willmove in proportion with the change in theamount of common labor used to produceA relative to B. Ricardo was also sanguineabout the stability of xl, x 2 , . . . , x,. T heidea that labor is the only input that addsto value or net output has no classical rootsexcept in some contradictory passages inSmith, which Ricardo avoided.

NOTES would like to thank my colleague in theAnthropology Department, Munro S. Edmon-son, and the editor of this journal, Ward H .Goodenough, for valuable comments.According to Karl Polanyi: Payments,standards, and means of exchange are distinc-tions originally developed by classical econom-ics (1957b : 177 ) . Correspondingly, Helen CO-dere says: Karl Polanyi was thoroughly dis-satisfied with the long line of thought aboutmoney that goes back at least to Jevons [1875]( 1 9 6 8 5 7 3 , 5 5 8 ). Contrary to these views, how-ever, the h istory of the distinctions between thestandard monetary functions is very ancient.See A. E. Monroe, Monetary Theory beforeAdam Snrith ( 1 9 2 3 ) . A pertinent summary maybe found in Joseph Schumpeter ( 1 9 5 4 : 2 9 7 ) .

* Manning Nash is expressly influenced bythe apparent anthropo logical evidence of primi-tive monies partly serving all the essentialmonetary functions. See W. H . Davenport(1961:64-65) and Paul Bohannan (19 59: 123-1 3 5 ) . eorge Dalton might have known betterbecause he recognizes demand deposits asmoney. On the other hand, judging from hisentire output of monetary writing, Polanyi evi-


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MELITZ] The Polanyi School 1035dently adheres to an antiquated view of ourmoney as strictly currency. The same narrowview of our money pervades a bizarre passagein Codere (1968:570), mocking the idea ofmoney goods bearing individual names, as doall our checks and deposits.Such aggregation does not require a com-mon unit of account, but will work if only allprices are convertible into a common denom-inator. Even if no common denominator is im-mediately obtainable through price quotations,there may be room for one through imputa-tion, universally practiced today in compilingnational income accounts.Dalton virtually admits the point in a foot-note, saying:

For our purposes we regard U.S. dollars as asingle kind of money. For monetary prob-lems in our own economy it is necessary todistinguish among currency, check deposits,and saving deposits, and sometimes betweenlegal tender and money which is not legaltender; but fo r the matters of contrast thatconcern us, it is not necessary to make thesedistinctions [1965:257, n. 21.Inasmuch as the matters of contrast that con-cern him here are precisely the differences be-tween contemporary and primitive money, thisdenial of the relevance of the major featuresof our money is rather unconvincing. It is in-teresting that in the only other passage whereDalton refers to specific liquid goods in theUnited States, he recognizes jewelry, stocks,and bonds (1965:261) as special-purposemonies.Some use of alloys is beneficial in protect-ing gold and silver coins against wear. Thetreatment of the previous Greek and Romancoins as tokens can be clarified. By definition,a token circulates at a higher value than thesum of its commodity content plus melting ex-pense. (The only way to keep token coins incirculation is to make them sufficiently scarceto discourage people from melting.) It followsthen that the previous Greek and Roman is-sues must have been tokens, as otherwise therewould have been no incentive to issue them inpreference to fine gold and silver pieces. Thatis, the rate of return on coinage of fine pieceswould have been about the same. Arthur Burnserrs in devoting his chapter on token coinage(1927:284-313) to small denomination coinscomposed of lesser metals, such as copper, lead,tin, and electrum. The nature of the metal andthe size of the denomination have no inherentbearing on tokenness. Historically, it happensthat the Western world accepted small-denom-ination token coins long before it would coun-tenance large-denomination tokens. Interest-

ingly enough, in later parts of his work, Burnsrepeatedly discusses token coins in regard todebasement, as I am, rather than in accord withhis own position in his chapter on the subject(1927:417-418, 429-430, 436, 456, 460, 464).The check, however, preceded the sight note(Usher 1943:23, 89-109).Polanyi (1944:Ch. 16) presents a totallyfictitious view of the advance of monetary con-trol during the nineteenth and early twentiethcenturies; Dalton essentially repeats the error(1965:255, 262) . Note that Polanyi also main-tains, though without much impact on his fol-lowing in anthropology, that the market econ-omy has been on the decline in the twentiethcentury, which might well imply a similar re-versal with respect to all-purpose money.Polanyi (1944) also offers no detailed evi-dence to support his claim of a remarkable up-surge in the importance of money in the Westduring the nineteenth century. His fundamentalground for attributing higher significance tomoney in Europe now than, say, in 1650 is theprominence of different methods of allocatingand distributing resources today than existedthen. But the point largely circumvents the is-sue; for whatever the channels through whichthe individual receives his bread, the whole SO -cia1 order may be equally susceptible to aggre-gate monetary shocks. In fact, much of thespur to central banking since 1800 has been adesire to insulate the national economy againstthe tides of monetary forces, internal and ex-ternal. From this point of view, one mightseriously argue that money is less important inEurope now than it was in 1650.Coderes essay, to which I fully subscribein supporting a general concept of money, de-serves broader comment. She offers a distinc-tion between a simple money system (M), amoney-number system (MN), a money-number-amount system (MNA), and a money-number-amount-writing system (MNAW). At first, sheassociates number with counting, and amountwith weights and measures (1968:561-562).Thus, she would seem to contrast abstract nu-merical manipulation with practical numericalapplication. But in her empirical development,her criterion for judging whether a monetarysystem is M, MN, or MNA seems to be solelythe magnitude of the numbers employed inmonetary behavior. If the only number is one,the system is M; if low numbers above oneserve, it is MN; if higher numbers serve, it isMNA. (I am entirely unable to grasp the firstfull paragraph on page 564.)In general four points should be made abouther treatment. First, the system focuses en-tirely on aspects of accounting and recordingthat have no logical connection with money ex-


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1036 American Anthropologist [72, 1970change and would be equally consistent withbarter. Second, the system requires knotty in-ferences about societal use of numbers. It iscertainly arguable, for example, whether Co-dere is right in supposing that the Trobriandand Rossel Islanders (as discussed by BronislawMalinowski and W. E. Johnson, respectively)made no use of the idea of two in their mone-tary behavior. Third, Coderes references to thegood fit of her model are misconceived (1968:565, 566, 575); she offers a classification, nota set of hypotheses. To classify is to box cases,which differs from fitting or checking the cor-respondence between hypothetical implicationsand facts. Fourth and last, calculation and re-cording features do not provide an adequateframework for analyzing many monetary prob-lems, including issues of monetary composition,usage, and organization. Thus Coderes analyti-cal schema is hardly all embracing.Polanyi would have us believe that thesepractices largely obviated the need for anycalculation at all (1 9 6 0 :3 2 8 ) .

l 3I thus also deny the application of the termmoney to stores of value bearing no other tradi-tional monetary functions and not serving asclose substitutes for goods bearing such func-tions. Though this denial is seemingly innocu-ous, the previous usage is widely practiced inanthropology, particularly in regard to cere-monial and exotic goods, which often are styledmoney for no other ostensible reason than thatpeople value them greatly. This notion has noprecedent in any other field of scholarly orpopular writing and has never been properlyexamined. It would seem to rest entirely on acareless analogy with the use of precious metalsin the Orient and the West.According to a highly influential work byJohn Law: [Under barter] no measure bywhich the proportion of value goods had to oneanother could be known ( 1 7 2 0 : 5 ) . Similarstatements occur in Samuel Pufendorf (1672:Bk. 5, Ch. 1 , sec. 1 2 ) ; Baron de Montesquieu(1748: Vol. 1 , Bk. 22 , Ch. 2); John Stuart Mill(1909 [1848]:483); F. A. Walker (1888:137 andn.); and Burns (1927:442). Identical statementsto Laws also may be found in the current text-book literature, as, for example, W. H. Steiner,Ezra Solomon and Eli Shapiro (1 9 5 8 :6 ) ,George Halm (1 9 6 1 :3 ) , J. G. Ranlett (1 9 6 5 :4 ) ,and Harold Barger (1968:lO). Many othercurrent undergraduate textbooks come quiteclose to repeating Laws assertion. One impor-tant prior effort by an economist to lay asidethe view that a medium of exchange must pre-cede a unit of account is J. Laurence Laughlin(1903:6-10). See also T. E. Gregory (1933:601, 603); and Paul Einzig (1948:366).This distinction was unusually common

among 1700-1770 Italian writers. See MonroeSee, for example, Max Beer (1938:167-1 7 1 ) . Notice at this point Polanyis exaggeratedstatement: Ricardo indoctrinated nineteenthcentury England with the conviction that theterm money meant a medium of exchange(1944: 196 ). Surely David Ricardo and theclassicists as a group were wary of attachingmuch significance to money as a unit of ac-count, but only because of a strong concernwith the deficiencies of accounting prices as ameasure of value.Cyril S. Belshaw (1965:9-10) waxes instill greater confusion.* In addition, as is easily shown, the argumentis not limited to any number of goods, but per-fectly general. With n interchangeable goods,there are n(n - ) price quotations. The adop-tion of a common unit of account reduces thisnumber to n - , or by a factor of n. If theunit of account is totally abstract, n rather thann - accounting prices remain (because thereis no longer a commodity necessarily possessingan accounting price of one). Thus, the larger n,the greater the economy in price quotations.Also, the larger n, he greater the possible num-ber of price inconsistencies, and therefore the

more likely the benefits of avoiding the afore-mentioned redistribution of goods. Alongside,the higher n, the greater the probable benefitsof lower computation. The argument notablydoes not intrinsically call for a single unit ofaccount for society as a whole, but only for anumber of accounting units equal to or lessthan the quantity of separate, nonoverlappingexchange and payments spheres.The number of traders requires clarifica-tion. In regard to the Kwakiutl of 1820, thisnumber should be understood as the entirecircle of people that any good traded by thesetribesmen profitably could reach within the rele-vant price range, The issue of price range isimportant because at zero prices of acquiringKwakiutl goods, the group would be in one bigworld market.Note, of course, that the case for a mediumof exchange may call for a number of suchmedia, possibly covering different classes oftransactions or limited to transactions betweendifferent sets of people.Observe the parallel emphasis of Polanyisargument for the independent institutional ori-gins of money uses (1957b:178-190; 1968a:191-194). What separates us at present is onlyhis view that these separate origins cease tomatter in respect to modern Western money.On the contrary, my position is that the essen-tial basis for the persisting association of cur-rent Western money goods with the unit of

(1 9 2 3 ~1 8 3 -1 8 6 ) .


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MELITZ] The Polanyi School 1037account is a disregard of these separate origins.I am ignoring the distinct large issue of thecommon application of the concept of moneyto means of payment and media of exchange.At least in the West today, the same goods servein both roles. But since the same is often un-true among primitives, the subject demands(a nd frequen tly receives) special car e in an-thropology.Similarly Polanyi states (1966: 166 ): *Theunilateral introduction of a fictitious money ofaccount, whether English or French, or other,was bound to cause serious disturbances in theslave trade. Compare Dalton (1965:280). Icannot subscribe to Coderes interpretation ofBohannans results (1968:573).%For n example of such error in Polanyi,see his Dahomey and the Slave Trade (1966:

=Did Western money really destroy the Tivmulticentric economy? More exactly, what wasthe marginal contribution of Western money tothis fateful event? On Bohannans account,Western money was imposed on the Tiv onlyin two ways: ( 1 ) compulsory payment of taxes,which required the establishment of some cashcrop and ( 2 ) compulsory sale of brass rodsover some (imprecisely specified) period in thepast. But these two factors combined clearlyexplain only a fraction of Tiv acceptance ofWestern money and a Western accounting unit.Also critical, on the basis of Bohannans treat-ment, was the Tiv response to the opportunitiesof Western trade. If the same opportunities oftrade with the West had been presented to theTiv on a barter basis, would they have ab-stained? R ather th an Western m oney, were theynot mainly victims of their own inability toresist the lure of wives, other prestige goods,and higher subsistence standards, which theWestern market cast open before them? Bohan-nan is overly impressed with the Tivs socialperception of their own situation. True, theyblamed Western money, but they needed ascapegoat (Bohannan 1955:60-70; 1959: 123-135).n T h e use of tokens in higher civilizations isoften a deliberate means of taxation. But it canbe shown that unless token money is advanta-geous to the tax-incipients, other means of taxa-tion would yield more revenue to the author-ities. On this basis, the taxation issue can besubordinated.* In the latter case, however, the prestige,ceremonial, or ornamental value of the goodsconcerned always raises questions about thetoken aspect. We would generally recognize,for example, that a gold coin that can fetch asmuch as part of jewelry is no token at all(compare note 7 ) . Thus, we should concede as

285-287).

much in the case of primitive money. MelvilleHerskovits (1952:Ch. 11 ) is alert to the issue(and many kindred ones besides), going so fa ras to renounce Yap stones as money (1952:246, 264). It would be simpler, of course, toreject these stones as token money.211 The confederate inflation during the U.S.Civil War was of at least one-fourth the scale.The earlier Roman and Chinese inflations andthe mondial inflation following the discovery ofthe New World, so fa r as one can tell, are trulyof a different order. A s a general source of references on thistopic, consult Leland Yeager (1 9 6 2 ) .*See D. B. Fusfeld (1957:342-356). W. C.Neale (1957:357-372), and Dalton (1961:1-26). Through the use of strict, narrow,monolithic constructions, these writers suc-

ceed admirably in painting economic theoryas utterly uninteresting. For a more profitableview, see E. E. LeClair, Jr. (1962:1179-1203).Two particularly readable examples areAnthony Downs (1957) and James Buchananand Gordon Tullock (1 9 6 2 ) .*Adherents to Polanyis view th at supply anddemand are irrelevant if prices are set by au-thorities should consult his chapter Exchange:Isolated Markets (1966:81-95). Consider why,for example. according to Polanyis account,supplies practically always were sold by daysend, and most important, why the set pricesoccasionally were changed. Price controls, ofcourse, are a favorite classroom example ofthe operation of supply and demand. See thecogent remarks by S. C. Humphreys in a recentwell-balanced review of Polanyis lifetime work( 19 69 : 1 8 6 1 9 1 ) .= O n e can hardly fail to advert to Polanyisincredible slander: Bentham despised equali-tarianism, ridiculed the rights of man and bentheavily towards laissez-faire (1944:110). Thisassessment concerns the foremost late eigh-teenth-century advocate of universal adult suf-frage, for poor and rich, men and women alike;birth control measures for the masses; humaneprison policy based on rehabilitation and totallyeschewing retribution; free legal aid to th epoor; legalization of trade unions; sanitary re-form and preventive medicine at public ex-pense, and so forth. Further, in ascribing alaissez-faire position to Bentham, Polanyi neg-lects a formidable opposition (as is his wontoutside of anthropology and antiquity), includ-ing Elie HalCvys monumental and painstakingGrowth of Philosophical Radicalism (1928),which is devoted exclusively to Bentham andBenthamism. Friedrich Hayeks idea of Ben-tham (1960:Ch. 4 ) as a leading founder ofmodern socialism deserves to be carefullyweighed against Polanyis position.


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1038 American Anthropologist [72, 1970The orthodox teaching started from manspropensity to truck, barter, and exchange(1944:58). Again, Polanyi writes of a biaswhich made Adam Smiths generation viewprimeval man as bent on barter and truck

(1944:45), and, in company with ConradArensberg and Harry Pearson, bemoans thefact that the social scientist is still hamperedby an intellectual heritage of man as an entitywith an innate propensity to truck, barter andexchange (1957:239; see also Polanyi 1944:Ch. 4 passim; 1968a:195).The omissions by James McCullough andthe younger Mill are especially noteworthy inthat both tend to mention moderately importantsources. On the other hand, James Mill avoidsreference to anyone.Polanyi himself admits that the charge ofa biological view of man does not apply toAdam Smith (1944:115) and ends with Ricardo(1944: 126) . Also notably writing about popula-tion in England between the time of Smith(1776) and Malthus (1798) were Arthur Young,William Paley, Richard Price, and George Chal-mers, all of whom have as much claim to beconsidered as influences on the classicists asJoseph Townsend. It is also interesting thatSchumpeter makes only four references to Town-send in his History , three of which (those citedin the author index) are buried in a string ofnames. The other, relating to late eighteenth-cen-tury interpretations of the policy implications ofthe then current overpopulation view, says: Iknow of only one writer who at least soundedthe eugenic note. It was Townsend (Schum-peter 1954:257).

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The Polanyi School of Anthrpology on Money

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