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Shelling Out: The Origins of Money - Essay by Nick Szabo

Abstract

The precursors of money, along with language, enabled early modern humans to solve problems of cooperation that other animals cannot – including problems of reciprocal altruism, kin altruism, and the mitigation of aggression. These precursors shared with non-fiat currencies very specific characteristics – they were not merely symbolic or decorative objects.

Table of Contents Money

From the very start, England's 17th century colonies in America had a problem – a shortage of coins[D94][T01] The British idea was to grow large amounts of tobacco, cut timber for the ships of their global navy and merchant marine, and so forth, sending in return the supplies they felt were needed to keep the Americans working. In effect, early colonists were supposed to both work for the company and shop at the company store. The investors and the Crown much preferred this to paying in coin what the farmers might ask, letting the farmers themselves buy the supplies – and, heaven forbid, keep some of the profit as well.

The colonists' solution was at hand, but it took a few years for them to recognize it. The natives had money, but it was very different from the money Europeans were used to. American Indians had been using money for millenia, and quite useful money it turned out to be for the newly arrived Europeans – despite the prejudice among some that only metal with the faces of their political leaders stamped on it constituted real money. Worse, the New England natives used neither silver nor gold. Instead, they used the most appropriate money to be found in their environment – durable skeleton parts of their prey. Specifically, they used wampum, shells of the clam venus mercenaria and its relatives, strung onto pendants.

Necklace of wampum. During trade the beads were counted, removed, and re-assembled on new necklaces. Native American shell beads were also sometimes woven into belts or oth...

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