"Lord Keynes" Contra White on the Beginnings of Coinage

lydian, stater, electrum, white, selgin, coinage, origins of money
Public Domain. https://commons.wikimedia.org/wiki/File:Claude_Vignon_-_Parable_of_the_Unforgiving_Servant_(detail).jpg
lydian, stater, electrum, white, selgin, coinage, origins of money
Croesus Receiving Tribute from a Lydian Peasant by Claude Vignon (1629)

I fully expected Larry White's recent post challenging the state theory of money, and particularly that theory's understanding of the origins of metallic coinage, to generate some critical feedback. In particular, I expected it to raise the hackles of "Lord Keynes" (henceforth LK), the otherwise anonymous author of the blog, Social Democracy for the 21st Century, who has discussed the same topic on several occasions (e.g. herehere, and here), and who is inclined to favor the alternative, "cartalist" (or "chartalist") perspective.

Nor was I disappointed. Indeed, within moments of tweeting a link to Larry's post I found myself in a twitter debate with LK regarding the origins of Lydia's electrum coins, which are generally considered the world's earliest. In response to my tweet, LK tweeted in return that "The consensus of modern ancient historians is that coined money in Anatolia and Greece was invented by the state."

LK has since published a post specifically countering White's claims, including the claim that, although sovereigns eventually monopolized ancient coinage,

as far as we know coins were already in use among merchants before that happened. Very early coins from ancient Lydia, in what is now Turkey, were not inscribed with human faces but rather animal figures. The Ancient History Encyclopedia states: "It appears that many early Lydian coins were minted by merchants as tokens to be used in trade transactions. The Lydian state also minted coins." Regarding Lydian coins inscribed with the names Walwel and Kalil, the British Museum comments: "It is unclear whether these are names of kings or just rich men who produced the earliest coins." Regarding a nearly contemporary ancient Greek coin bearing the legend "I am the badge of Phanes," the Museum comments: "We cannot be certain who this Phanes was, but it seems that he was placing his badge on coins as a guarantee of their quality."

According to LK, White here is "clearly asserting that coined money was invented by the private sector in ancient Lydia and Greece." That seems to me a problematic interpretation, since White's qualifier, "As far as we know," makes his statement tentative: to say that X is true "as far as we know" is not to say that X is definitely true. It is merely to observe that we have no good reason for believing that X is not true. Consequently the fact that the positive evidence for the private beginnings of coinage is, as LK goes on to declare, "feeble at best," doesn't itself refute White's claim, for the the positive evidence for kings having been the first coiners could be even more "feeble."

But is it?

That Supposed Consensus

The one thing we know for sure is that a fair portion of all known electrum coins — one inventory places the share at about 25 percent — bear markings that point to official origins. As for the rest, although expert opinion is divided concerning their sources, most authorities continue to allow that they may bear private markings. "We do not know," Koray Konuk observes (in his contribution, on coinage in Asia Minor, to the Oxford Handbook on Greek and Roman Coinage), "whether there was a state  monopoly of issuing coinage or whether some wealthy private individuals  such as bankers or merchants were also allowed to  strike coins of their own." The British Museum's ancient coin curators, with whom I once had a lengthy discussion of the subject, are of the same opinion. Another relatively recent source, finally, sums matters up by observing how "the enormous bibliography on the origins of coinage partly serves to highlight the continued absence of definitive answers to the fundamental questions of 'who, what, when, why, where?'"

Naturally this lack of definitive answers hasn't prevented authorities from taking sides in the debate. But despite LK's remarks, their doing so can hardly be said to have resulted in a "consensus of modern ancient historians" favoring the view that coinage was a state invention. Although some authorities (notably Robert Wallace) clearly favor that view, others, no less recent or authoritative, lean the other way. According to David Schaps, the author of the superb monograph,The Invention of Ancient Coinage and the Monetization of Ancient Greece (2004), "the prevailing opinion," far from holding "that the first coins were official private issues,"

is that the types of the coins (there are some twenty, many more than the two or three kings who reigned from the time coins were invented until the end of the Lydian empire) identify not the king under whom they were struck, but the producer of the coin — perhaps a royal functionary, more likely an independent gold merchant ("The Invention of Coinage in Lydia, in India, and in China," 2006, emphasis added).

John Kroll, another highly-regarded, contemporary expert on ancient coins, also maintains that the "profusion of type symbols" found on early electrum coins suggests

that in addition to the coins that were minted by Lydian monarchs and Greek city states, much early electrum may have been struck by local dynasts, large landholders, and other petty rulers in Lydia and neighboring regions — anyone, in short, with wealth in electrum and a need to spend it.

A recent paper by Peter Van Alfen, the American Numismatic Society's curator of Greek coins, directly challenges one of the main arguments offered in support of the "state invention" hypothesis, namely the claim that only state authorities could command the "trust" needed to make coins circulate. Although he recognizes that kings were probably not the only source of early electrum coins, John Kroll also supplies a typical instance of this view, in his contribution to the Oxford Handbook on Greek and Roman Coins:

The key factor, which made coinage possible and distinguished it from all earlier forms of money, was the involvement of the state. Unlike anonymously supplied bullion, coins were supplied by the state and were guaranteed by its authority. As small, preweighed and hence prevalued ingots of precious metal that were stamped with the certifying badge of the issuing government, they were instantly acceptable in payment on trust.

Had he reflected on such names as Browne & Brind, Johnson Matthey, and Englehard, Kroll might not have been so quick to claim that bullion must either be supplied by the state or "anonymously." His perspective is, nonetheless, all too common. To his credit, Van Alfen will have none it. "The generation of trust and guarantees," he observes,

does not always require state intervention or backing. Indeed, in some cases, state intervention is decidedly to be avoided. While states can serve to mitigate transactional chaos through their various formal institutions, like market regulators and courts, there are numerous non-state institutional responses to the same the problems, including reputation and trust networks, that can be just as effective, particularly when the geographical scope and population size in question is comparatively small.

Moreover, he adds,

there is no necessary relationship between states and monetary instruments, like coinage; there often is a functional relationship between the two, but the state is not a necessary component for generating trust, even for fiduciary instruments….In cases where we have contextual evidence, problems of trust were overcome primarily through private guarantee mechanisms.

As an alternative to the view that coinage began as a state innovation, Van Alfen proposes and defends the hypothesis that originally "the so-called right of coinage was not limited to the state alone, but was rather a (property) right held universally."

Within the larger context of archaic state formation and the more specific dynamic of Asia Minor monarchies, we should not then expect to find a single established set of relationships between the individual polities and coinage ab initio, but rather a process working out what that set of relationships might become. Coinage, with its potential to enhance social, political and economic might, was no doubt one of many sites where the extension and centralization of power was being negotiated between monarchs and their competitors, and monarchs and the ruled.

In Lydia, Van Alfen speculates, "as state capacity increased, so too did political stability along with general elite consent to Mermnad rule." Eventually — by Croesus' time —  the Mermnad's political influence was such that they had "achieved monopolization over coin production, not so much by decree, but by default."

If Van Alfen's account is indeed correct, the notion that coinage was a "state" invention makes little sense, for at the birth of coinage the distinction between "the state" on one hand and relatively important individuals ("elites") on the other was itself murky. All that can be said is that the consolidation of power in certain rulers tended to coincide with the monopolization of coinage — a claim no one has ever contested.


So much for the "consensus" that supposedly contradicts White's stand. Now let's consider the particular "counterarguments" LK offers against it.  The first concerns the sources of electrum itself.  According to LK, "Lydian king's either controlled the mines in their kingdom directly and/or levied taxes on mining or extraction of metals." Therefore, he says, "it is most probable the kings also minted the first electrum coinage." But the conclusion is a plain non-sequitur: no less than mining and jewelry-making (concerning which more anon), mining and coining are each distinct, specialized activities, which have historically been undertaken by separate outfits; and this has been no less true when mines themselves have been nationalized than when they have been privately owned and operated.

Moreover the premise that kings alone had access to sources of electrum and other precious metals is itself contentious. In his previously-cited paper Van Alfen observes that "While state control of mining by the end of the archaic period seems to have been fairly widespread…there are as well indications that archaic elites individually could gain access to mines far away from the oversight of their home state, and might have had unfettered access to mines within their home territory as well."

LK's second counterargument, that the presence of coins not bearing the images or names of kings is no proof that those coins weren't minted by kings, because "people knew perfectly well that [these coins] had been minted by the state," begs the question. Since marking coins took some effort, why, in that case, should kings have bothered to mark any of their coins?

LK's third counterargument, that the names not belonging to any known kings on some of Lydia's coins may either be those of mints or those of persons who minted coins on behalf of some Lydian king or kings, is almost equally question-begging. Why identify a coin with a mint, or a coiner, when it was the king's status that supposedly lent value to the coin? And, if kings did indeed allow private agents to coin for them, does that not itself suggest that those agents, rather than the kings who employed their skills, may have "invented" the first coins?

According to LK, electrum coins were unlikely to have been manufactured by or on behalf of merchants, because most of them were made in denominations too large to be used in ordinary commercial transactions: a Lydian trite, or one-third of a stater, he notes, is supposed to have been capable of buying 10 sheep.

In fact, a trite may have been worth considerably less: if some experts have said that one could buy 10 sheep, others say it could only buy one sheep, or three jars of wine.  More importantly, as reported in a very recent paper by Ute Wartenberg, the AMS's Executive Director, the denominations of even the earliest known electrum coins are now understood to have ranged "from a stater to a 1/192 stater."[1] It might, in other words, have taken about 21 of the smallest coins, each containing just .06 grams of electrum, to buy a single jar of wine.[2] Furthermore, as François Velde points out in his paper "On the Origin of Specie," extant electrum coins of various denominations display a weight loss pattern suggesting that the coins did in fact "circulate like modern coinages."

Precious Tokens?

The last of LK's counterarguments starts from the premise that, instead of being "full-bodied" coins, Lydia's electrum globules were actually fiduciary or "token" coins, commanding considerably more than their metallic value in payments, including payments to the state, and goes on to insist that they could not possibly have commanded such value had they not been official products.

In accepting this premise, LK appears to completely ignore (he certainly does not address) White's observation that it

fails to explain…why governments chose bits of gold or silver as the material for these tokens, rather than something cheaper, say bits of iron or copper or paper impressed with sovereign emblems. In the market-evolutionary account, preciousness is advantageous in a medium of exchange by lowering the costs of transporting any given value. In a Cartalist pay-token account, preciousness is disadvantageous — it raises the costs of the fiscal operation — and therefore baffling. Issuing tokens made of something cheaper would accomplish the same end at lower cost to the sovereign.

Recent research casts further doubt on the claim that electrum coins must have been tokens. That claim rests on the once widely-held belief that electrum coins, though representing uniform weights, did not represent a consistent alloy of gold and silver. Instead, the blend, and hence then commodity value of coins of any given weight, was understood to vary considerably. It would therefore have been quite inconvenient for the coins circulate by weight, that is, at their true metallic worth, rather than by tale, that is, at nominal values independent of that worth.

This once-common view has recently been challenged.  As Wartenberg reports in her aforementioned paper,

Current investigations by a number of scientists and scholars shed critical new light on the question of how the earliest coins were minted, how their production was organized, and how alloys were produced. By using a variety of new analytical methods and techniques, some of these processes are beginning to be better understood.

Among other things, the new methods and techniques to which Wartenberg refers reveal that Lydia's electrum coins were made, not from naturally-occurring and variable alloy, but from "an alloy deliberately created for coinage." Using a technique called "Synchrotron X-ray photoelectron spectroscopy," Wartenberg discovered that Lydia's electrum coins were in fact "more consistent in their metal composition than previously thought":

What these different results all show is a fully organized system, in which a specific composition of electrum for a coin series was created. All this was clearly done deliberately, and the desired gold:silver ratio was achieved by combining pure gold and silver, which was previously refined. The discovery that it was not naturally found electrum, which was used, illustrates a highly sophisticated process, but not only of metallurgical technology in the 7th and 6th century BC, but also an understanding of monetary systems.

Although these findings alone don't suffice to establish that Lydia's electrum coins, instead of being mere (if costly) tokens, were valued at their metallic worth, or at that worth plus a premium reflecting coinage costs, and perhaps some seigniorage, they certainly make this view appear more plausible than before. Taking the trouble to regulate the blend of gold and silver contained in what were in fact mere tokens would have been yet another pointless expense, on top of that involved in making tokens from any blend of precious metal instead of from less costly materials.

A Misplaced Burden

I'd like to conclude with some remarks concerning, not LK's particular arguments, but the presumption, implicit in most versions of the "state invention" hypothesis, that sovereigns are at least as capable as other persons, and perhaps more capable, of coming up with monetary innovations. Such a belief flies in the face of all experience. The story of money's evolution — or that part of it concerning which we have certain knowledge — is, essentially, one of recurring private inventions followed, in many instances, by public appropriation of those inventions. It was not kings or governments but private-sector innovators who came up with manual screw presses, as alternatives to hammers, for striking coins, and with their later steam-driven and electrical counterparts. It was private goldsmiths, and not public bankers, who, in the west, issued the first banknotes. Private innovators also gave us the first lines of credit, the first clearinghouses, the first electronic payments (consisting of telegraphic wire transfers), the first credit and debit cards, the first ATMs, and, most recently, the first blockchain-based means of payment. Governments, in contrast, pioneered little, if anything. Instead, they observed what private markets did, and then stuck their mitts in, sometimes regulating, sometimes prohibiting, and sometimes nationalizing, private-sector innovations.

Consider again, in light of these observations, those tiny electrum coins. According to Wartenberg their existence "begs the question how such blank metal flans were produced to such precision." In answer, Wartenberg notes that

The technique of granulation was well-known for Lydian and Achaemenid jewelry, and it is likely that a similar method was used for these coins, which were also struck with obverse and reverse dies. … The dies used for many of these objects have simple emblems, which are stylistically close to archaic gems.

Wartenberg's remarks suggest a link between early coins and jewelry that appears to be just another instance of the even more ancient connection between ornament and money, as described in detail in chapter two of William Carlile's Evolution of Modern MoneyBut to recognize that linkage is to raise what ought to be an obvious question: if anyone was likely to be the true "inventor" of the first electrum coins, why not a Lydian manufacturer of jewelry, who would have possessed the skill and instruments, as well as access to the metal, required for the purpose?

Allowing, as John Kroll (and most other authorities) do, that "electrum in the form of nuggets, weighed ingots, and bags of electrum 'dust' must have been put to use in all sorts of payments for goods and services" well before coins were first made from it, and that "because it was a mixed metal whose gold-silver proportions varied in nature and could be artificially manipulated by adding refined silver to dilute the gold content, it was poorly suited as a dependable means of exchange," would it not have been perfectly natural for some jeweler to have employed familiar techniques, including the augmentation of natural electrum with silver, not in order to deceive, but to make coins of standardized alloy to supply to merchants for use in exchange?[3] Why suppose instead that some Lydian king came up with the idea?

In short, to treat coinage as an exception to the general rule that private parties are the source of technical monetary innovations, on the grounds that we lack affirmative evidence to the contrary, is, in my humble opinion, to place the burden of proof in this controversy precisely where it doesn't belong.


[1]It had previously been supposed that the smallest coins were those of 1/96 stater.

[2]For further criticism of the argument that early coins were unsuited for commercial use see this article by Alain Bresson.

[3]Making coins conform, at least roughly, to a particular standard was a simple matter of employing a touchstone — a device in common use in ancient Greece long before the birth of coinage, and so closely associated with the Lydians that it is also known even today as a "Lydian" stone.