Where Did
Money Come From?

What came before money — From clay tablets to the lion's mark

Textbooks teach that people used to barter, and because it was inconvenient, money was born. However, what old clay tablets tell us is not about barter. It is about allocations, loans, and records.

A Mesopotamian clay tablet from around 3100–2900 BC is inscribed with allocations of barley and emmer wheat. A clay tablet from around 1780 BC records a loan of barley, marked with two cylinder seal impressions (both are in the collection of the Metropolitan Museum of Art). Who owes how much to whom. If that is recorded, payment can be made later. With people you know, a record is enough. Money was needed when transacting with strangers.

The passage from Smith's "The Wealth of Nations" (1776), often cited to explain that money arose from barter, is a hypothesis that begins with "we shall suppose." No records of a society living by barter are presented. This is not to say that barter did not exist. What can be said is that the old records that survive are ledgers of allocations and loans.

Paying by weight

In Babylonia, there was the word shekel. Today it is the name of a currency, but it was originally a unit of weight. In the Louvre Museum in Paris, there is a basalt stele over two meters high. It is the Code of Hammurabi, who reigned from 1792 to 1750 BC. Whoever finds a runaway slave and returns them to their master, the master shall pay two shekels of silver. If a physician makes a large incision with a knife and heals the patient, they shall receive ten shekels. Prices were written in terms of weight. There were no coins yet. People cut off pieces of silver and paid by weighing them on a scale. This is called hacksilver.

In a world where payment is by weight, all you need is a scale. However, for every transaction, you must weigh the metal and verify its fineness. The time spent on verification itself becomes a transaction cost. The invention that would eliminate this hassle would not arrive for over a thousand years.

Shells, knives, cattle

In various parts of the world, people used different things as money. Cowrie shells, harvested from the seas around the Maldive Islands, were transported to various parts of Asia and Africa and served as money for a long time. The historian Yang Bin calls this the first world money. In China, there was money in the shape of small bronze knives and spades. In Homer's epics, the value of goods is told in the number of oxen. The golden armor offered by Glaucus was worth one hundred oxen, while the bronze armor he received was worth nine. The prize for a competition, a large tripod cauldron, was worth twelve oxen.

What shells, knives, and oxen had in common was that everyone knew their value. The condition for currency is not the intrinsic value of the material, but the shared belief that your neighbor will accept it.

Gold from the riverbed

Lydia, in Asia Minor. The Pactolus River, flowing down from Mount Tmolus, carried gold in its sands. Legend has it that King Midas, who turned everything he touched to gold, washed away his curse in this river. Sleeping in the riverbed was electrum, a natural alloy of gold and silver. It was not yet a coin, just a lump of valuable metal.

The trouble was that the proportion of gold and silver differed in each lump taken from the river. Even if they looked the same, their value was different. The receiver had to be suspicious each time. This uncertainty led to the invention of striking a mark.

Striking a mark

With lumps of metal, both weight and purity had to be verified upon receipt. With a bag full of small grains, even rubbing them one by one on a touchstone would not reveal the value of the entire bag. In 7th century BC Asia Minor, an answer was found: strike a mark on small lumps of a uniform weight. It is no longer the metal that determines the value, but the one who struck the mark. Without needing scales or a touchstone, one could pay simply by counting.

Half of the early coins from the temple at Ephesus weighed less than 1.2 grams. It is said that a single piece weighing 1/24th of the standard unit could buy one sheep or a bushel of grain. The mark had entered into even the small daily transactions.

From 1904 to 1905, a British Museum expedition excavated beneath the Temple of Artemis at Ephesus. What they found were ninety-three electrum coins. They had been deposited as offerings in the second half of the 7th century BC. Nine of them had no design. Some had only a square punch mark. Just lumps, without even an image. But they certainly bore a mark. A mark before the seal. The remaining coins had more than ten types of marks, including the head of a Lydian lion, the head of a Phocaean seal, and roosters and beetles of unknown origin. It was not only kings who struck coins.

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The Lion's Mark

Around 600 BC, in Sardis, the capital of Lydia. The king struck a roaring lion's head on electrum. Some coins are inscribed with "Walwet" in the Lydian script. Many scholars read this as the name of King Alyattes. The lion emblem was the king's declaration that this single coin had a certain value. However, analysis revealed that its content was 54% gold and 44% silver. Researcher Kroll believes, based on fairly solid evidence, that the royal house set the value of this coin to be the same as that of naturally occurring Lydian electrum from the river. This natural electrum averaged about 73% gold. This means that silver was added to the alloy before the coins were struck. According to Kroll, when payments were made with these coins, the king retained a profit of 15 to 20 percent. The emblem was a tool to guarantee value, and also a tool to enrich the coffers of the king who determined that value.

Sardis was a city of gold. The historian Herodotus wrote: "So far as we have any knowledge, they [the Lydians] were the first people to introduce the use of gold and silver coin, and the first who sold goods by retail." Being able to use money just by counting meant not having to carry scales. For those who bought and sold dozens of times a day, the time spent weighing was a heavy burden. Herodotus links coinage and retail in the same sentence, as things initiated by the same people.

Separating Gold and Silver

King Croesus of Lydia. His name became a synonym for wealth. The previous lion coins were made of a debased gold alloy. Researcher Kroll believes that coins with an over-assigned value would eventually cease to be accepted. In the mid-6th century BC, Croesus recalled all the electrum coins in the kingdom and replaced them with coins of pure gold and pure silver. This was supported by a refinery outside the city walls, on the banks of the Pactolus River. The metal was hammered into thin sheets, layered with salt in a pot, and heated for many hours at about 800 degrees. The silver was removed by the salt, leaving only the gold.

The first coins made of pure gold, created in this way, were called Croeseids in the Greek world. They feature a design of a lion and a bull confronting each other. A bimetallic system, using gold and silver coins side by side, was born here.

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The State Vanishes, the Mark Remains

In 547 BC, Sardis fell. After a fourteen-day siege, Herodotus writes, a Persian soldier named Hyroeades scaled a cliff where a Lydian soldier had descended the day before to retrieve his helmet, and other soldiers followed. In an excavation over 2,500 years later, the bones of a young man were found in the rubble from that day. Just in front of his skull lay a small silver coin of Croesus. Lydia vanished from the map.

But it was the kingdom that perished, not the invention. Persia made Sardis a satrapal capital and continued to strike the lion and bull coins for about thirty years. The name remained "coin of Croesus," but the money itself was Persian. Around 515 BC, Darius I changed the design to the figure of the Great King with a bow. This was the daric. The weight was the same as the previous coins, and the lump-like shape was also inherited. Even if a country disappears from the map, a single coin in the palm of a hand can remain. A form we will encounter many times in this book appears here for the first time.