Coinage was not invented to facilitate trade

Tuesday, April 27th, 2010

The so-called Axial Age — when Rome was rising and falling, China was fragmenting into warring states and re-merging into an empire, and all the world’s great religions were forming — was a time of great creativity and great violence, and these came together in the development of coinage:

Coinage, which allowed for the actual use of gold and silver as a medium of exchange, also made possible the creation of markets in the now more familiar, impersonal sense of the term. [...] Coinage, certainly, was not invented to facilitate trade (the Phoenicians, consummate traders of the ancient world, were among the last to adopt it). It appears to have been first invented to pay soldiers, probably first of all by rulers of Lydia in Asia Minor to pay their Greek mercenaries. Carthage, another great trading nation, only started minting coins very late, and then explicitly to pay its foreign soldiers.


  1. Mala Lex says:

    “Coinage, which allowed for the actual use of gold and silver as a medium of exchange”

    Relevant to our other convo, gold and silver (and cows and tobacco and wampum) were mediums of exchange long before coinage. Perhaps coinage was a slight convenience over grains of gold, but this is set against the ability to debase (inflate) the currency.

  2. Anomaly UK says:

    Arnold Kling has been putting the same view forward for a while.

  3. DRG says:

    Wampum was only used as a medium of exchange between foreigners, never to my knowledge between Native Americans and each other (though it was used for diplomacy, settling disputes, condolence, etc).

    Gold and silver had been used as a medium of exchange largely in long-distance trade; it was also stockpiled in (for instance) Mesopotamian temples as a store on value on which people could make credit arrangements, rather like the gold kept underneath the New York Fed at Liberty street nowadays, which can be moved back and forth between different vaults but never seems to leave the complex itself.

    I was talking about the use of precious metals in small denominations for everyday purposes, which was definitely not going on in ancient Mesopotamia, let alone Egypt (the scales weren’t made accurate enough to measure such tiny pieces of silver as would have been required to buy eggs and shovels and the like) — here again people seem to have relied on credit. The first markets where people seem to have been using coins for everyday purchases might have been in Greece, though they soon followed in the Ganges valley, N. China, etc.

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