The origin of money has long been a subject of debate among scholars, with two dominant theories often cited: the commodity theory and the chartalist theory. Both of these theories aim to explain how and why societies developed the concept of money, but each comes with its own set of challenges and criticisms. In recent years, however, a third theory—proposed by archaeologist Dr. Mikael Fauvelle—has gained attention. This theory, called the Trade Money Theory, suggests that the development of money was driven by long-distance trade rather than local barter or state-imposed systems.
The Commodity Theory
The commodity theory of money posits that money was developed as a solution to inefficiencies in barter systems. In societies where trade was primarily conducted through barter, the process could be cumbersome. The fundamental issue with barter is the double coincidence of wants: in order to exchange goods, both parties must have what the other desires. For example, if Person A has fish but needs grain, and Person B has grain but needs fish, only then can an exchange take place. The commodity theory suggests that money arose as a universal medium of exchange, something that could be easily traded for any good or service, without the need for a perfect match of needs.
The theory holds that goods like gold, silver, cattle, and even grain were initially used as money because they were widely recognized as valuable. Over time, these goods became standardized forms of money—easier to carry, more durable, and universally accepted. In this view, money was a direct evolution of barter, designed to streamline exchanges within a society.
However, this theory has been called into question by ethnographic and historical research, which shows that pure barter systems are exceedingly rare in real-world economies. Most traditional societies use systems based on delayed reciprocity or trust networks, rather than engaging in one-to-one exchanges of goods. In these systems, goods or services are exchanged over time with the expectation that favors will be returned in the future, reducing the need for money.
The Chartalist Theory
In contrast, the chartalist theory argues that money was a tool created by the state to facilitate taxation, tribute collection, and the financing of war. According to this theory, money didn’t necessarily arise from a need for exchange, but rather as a unit of account that made it easier for rulers to collect taxes and tribute from their subjects. The state imposed money on its citizens as a means to centralize economic control.
Chartalists suggest that early forms of money were state-issued and had no intrinsic value; their value was derived from the authority of the state. Money, in this sense, was not a commodity in itself but a tool used by the state to facilitate the flow of resources and maintain political control. The most famous example of this in modern times is fiat money, which has no intrinsic value but is accepted because of the government’s guarantee to honor it.
However, while this theory holds true for state-controlled societies, it struggles to explain the origin of money in pre-state societies—those that had no taxation or tribute systems to support. Many early human societies existed without centralized states, making it difficult to apply the chartalist theory to explain the development of money in these contexts.
Dr. Mikael Fauvelle’s Trade Money Theory
Dr. Mikael Fauvelle’s Trade Money Theory challenges the assumptions of both the commodity and chartalist theories. Fauvelle proposes that money was not primarily used to solve problems with internal barter or to serve state functions like taxation. Instead, money was developed to facilitate long-distance trade between societies with differing languages, customs, and political structures. These external trade networks posed challenges that traditional barter systems, based on trust and delayed reciprocity, could not solve.
To support this theory, Fauvelle examines the monetary systems of two pre-state societies: the use of shell beads in Western North America and bronze money in Bronze Age Europe. In both cases, money developed not for everyday transactions but for use in inter-regional trade. These trade networks spanned vast distances and involved the exchange of goods between different cultures and communities, often without any pre-established relationships or trust.
Shell Beads as Money in Pre-Colonial North America
In Western North America, many Indigenous cultures used shell beads as a form of money. These beads were highly valued and used to facilitate long-distance trade networks that spanned from the Pacific Coast to the Mississippi River. According to accounts from European explorers and colonists, these beads were not only used for ceremonial purposes but were also traded for goods across vast territories. These trade networks often required individuals to travel through diverse social, linguistic, and political landscapes. In such contexts, relying solely on delayed reciprocity or other informal exchange methods would have been ineffective.
In his research, Fauvelle points out that these beads were used by traders to facilitate exchanges with strangers, ensuring that transactions could occur even when individuals had no pre-existing relationships. As trade routes grew longer and more complex, shell beads became a standardized form of money that provided a means of conducting trade with unfamiliar people across different cultural boundaries.
This long-distance exchange network helped promote social integration across wide geographic areas. Traders who had to traverse vast stretches of land could rely on shell beads as a form of payment, which ensured that goods could be exchanged smoothly despite the absence of a shared language or system of trust.
Bronze Ingots and Money in Ancient Europe
Similarly, in Bronze Age Europe, the use of bronze and copper ingots as money was common. These ingots were often used in trade between regions that required raw materials such as metals. As archaeological evidence suggests, these materials were not readily available in all areas, and so trade networks spanned much of Europe, from the British Isles to the Mediterranean. In these trade systems, objects like bronze axes, rings, and ingots served as standardized forms of money, making it easier to conduct transactions over vast distances.
Fauvelle highlights that these bronze objects were often crafted in standardized sizes and weights, which allowed them to be easily exchanged across cultural and geographic boundaries. The standardization of value helped to ensure that these bronze objects were recognized as valuable, even in regions where they were not produced. In this way, bronze ingots and shell beads served similar roles: they enabled long-distance trade and helped facilitate exchanges between communities that did not share a language, culture, or system of trust.
The Transition from External to Internal Use of Money
According to Fauvelle, these early forms of money, developed for external trade, eventually made their way into internal economies as societies began to formalize political and social structures. In regions like ancient California, the development of regional chiefdoms was likely facilitated by the influx of wealth resulting from long-distance trade. As these societies grew in complexity, the need for more efficient systems of exchange and resource distribution would have led to the internal use of money, for purposes like taxation, tribute collection, and payment for labor.
Fauvelle suggests that the use of money in these early societies helped foster regional interactions, creating economic systems that transcended individual communities. Money, in this context, acted as a catalyst for the growth of more complex social and political structures, including the emergence of elites who could control the flow of wealth.
Conclusion: Rethinking the Origins of Money
Dr. Mikael Fauvelle’s Trade Money Theory offers a fresh perspective on the origin of money, one that emphasizes the role of long-distance trade in the development of early monetary systems. Rather than focusing solely on the internal inefficiencies of barter or the imposition of state authority, Fauvelle’s research highlights the importance of inter-regional interactions in the development of early monetary economies. His theory not only broadens our understanding of the history of money but also opens new avenues for future research into non-state societies and their complex economic systems.
Fauvelle’s work challenges traditional assumptions and shows that money was not necessarily a tool of the state or a byproduct of barter. Instead, it emerged as a practical solution to the challenges posed by long-distance trade, helping to overcome cultural and social differences and facilitating the exchange of goods across vast and diverse regions. As such, the origins of money may have been more global than previously thought, evolving from the practical needs of early societies engaged in complex trade networks.
Reference: Mikael Fauvelle, The Trade Theory of Money: External Exchange and the Origins of Money, Journal of Archaeological Method and Theory (2025). DOI: 10.1007/s10816-025-09694-9