Understanding money; Or, why social and financial accounting should not be conflated

Abstract

This article defines social and financial money as distinct institutions that account for different realms of value. I present a fundamental dichotomy among economists' where orthodox theory defines money as a medium of exchange whereas heterodox chartalist economists characterize it as a unit of account. I argue that (pre)historical data provides clear evidence in support of the heterodox position. The unit of account function of money is exemplified by how wampum accounted for social debts and was expanded to also serve financial functions by European colonial governments. The heterodox position is further evidenced with the metal coins that denominated Rome's financial money that transitioned to serve primarily social purposes in early Anglo-Saxon Britain. Focusing on the accounting function of social and financial monies transcends the Polanyian special-versus-general-purpose framework that often still structures archaeological practice. With this framework of money defined by what gives it value, I then evaluate recent claims that financial money was integral to the political economies of Bronze Age Europe. I conclude that the adoption of the orthodox assumption that money is primarily a medium of exchange inhibits understanding of what money is and how the political economies of ancient societies were organized.