We have seen how the ancient mind inhabited a cosmos alive with agency, where narratives served as technical systems for survival and the self remained porous to the influence of gods and spirits. This same profound integration extended to the material exchanges of daily life. Myth functioned as a mechanism for navigating reality, just as the circulation of goods operated as a ritual maintenance of the social and cosmic order. To understand the economies of the past, we must abandon the modern abstraction of the isolated market and step back into a world where debt was a form of moral gravity and trust was secured by the sacred.
For the better part of two centuries, the popular understanding of economic history has been dominated by a single, overarching narrative: a grand struggle between capitalism and socialism, the market and the state. This framework has become the primary lens through which we view the past and debate the future, reducing the vast and varied history of human economic life to a simple binary choice. This chapter argues that this perspective proves insufficient and deeply anachronistic, a projection of modern conflicts onto a past that operated on entirely different principles.
The ideological cornerstone of this flawed binary is a foundational story, an elegant thought experiment articulated by Adam Smith and taught as gospel in introductory economics courses. It begins with the inconvenience of barter. A butcher with a surplus of meat must find a baker who not only wants meat but also has a surplus of bread to trade. This problem of a "double coincidence of wants" is presented as the natural state of pre-monetary society - inefficient, cumbersome, and crying out for a solution. That solution, the story goes, is money, which gives rise to markets, credit, and the entire edifice of modern finance. This narrative is logical, compelling, and appears to be a theoretical construct rather than historical fact. Decades of anthropological research have failed to uncover any evidence of a society that operated primarily on barter.[1]
To be fair, Smith did not have access to the archaeological evidence available today; the clay tablets of Mesopotamia, which document thousands of years of sophisticated exchange systems, would not be deciphered for another century. Lacking these records, he engaged in "conjectural history," projecting the commercial logic of his own time backward to construct a plausible, if historically unfounded, origin story.
This historical error is not trivial; it creates a fictional "state of nature" populated by atomized individuals, obscuring the fact that the "impersonal" mode of interaction did not begin with the free market, but with the ancient administrative state. It strips economic activity of its social, moral, and religious context, obscuring the fact that for most of human history, economies were deeply embedded in the fabric of community life.
This chapter argues that the true foundation of human economies is not a choice between these two poles, but a constant negotiation across layered systems of social obligation. It proposes that the historical sequence of development is not primitive barter leading to money and then credit, but rather the reverse: first came credit and debt, then money, and only in specific, low-trust circumstances, barter. Exploring this revised history - tracing the evolution from the primordial obligations of community life to the invention of accounting, coinage, and complex finance - reveals that the capitalism/socialism framework is a historical blip, incapable of explaining the true, complex, and deeply human economies of the past.
If the standard economic narrative of "barter to money to credit" is a myth, what does the actual historical record show? Anthropologists and historians have long observed that pre-modern economies were never autonomous "markets" operating outside of social bonds. Instead, economic life was deeply embedded in social relations, where the nature of an exchange depended entirely on the relationship between the two parties.
To understand this landscape, we can turn to the seminal work of anthropologist Marshall Sahlins. In his classic Stone Age Economics[2], Sahlins proposed a typology of exchange that was not based on efficiency or profit, but on social distance. He identified three distinct forms of reciprocity that radiate outward from the self to the stranger:
For the purposes of this analysis, we can adapt Sahlins's sociological categories into a structural framework of "Economic Levels." This allows us to see how different historical societies emphasized different layers of this universal spectrum.
Level 1: Communal Reciprocity (The Intimate Sphere)
Corresponds to Sahlins's Generalized Reciprocity. This level governs interactions within the closest social circles: the household, immediate kin, and intimate friends. Exchange here is based on communal principles. To keep a precise ledger of who owes what would be socially taboo, as it would violate the trust that underpins these relationships. The time horizon for reciprocation is indefinite. These are "human economies," where the primary purpose is the creation and maintenance of relationships rather than the accumulation of wealth.
Level 2: Social Reciprocity (The Community Sphere)
Corresponds to Sahlins's Balanced Reciprocity. This level governs relations among neighbors, colleagues, and allies. Here, obligations are tracked more consciously. There is a clear expectation of a return of equivalent value within a reasonable timeframe. This is the economy of reputation. Honoring these obligations maintains one's standing in the community, while failure to reciprocate can lead to ostracism. This logic underpins the informal IOUs and reputation-based credit systems that allow village life to function.
Level 3: The Impersonal Sphere (Administrative & Commercial)