by Mr. Innes’s next point is that the idea, that “in modern days a money-saving device has been introduced called credit, and that, before this device was known, all purchases were paid for in cash, in other words in coins,” is simply a popular fallacy. The use of credit, he thinks, is far older than that of cash. The numerous instances, he adduces in support of this, from very remote times are certainly interesting … Mr. Innes’s development of this thesis is of unquestionable interest. It is difficult to check his assertions or to be certain that they do not contain some element of exaggeration. But the main historical conclusions which he seeks to drive home have, I think, much foundation, and have often been unduly neglected by writers excessively influenced by the “sound
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Mr. Innes’s next point is that the idea, that “in modern days a money-saving device has been introduced called credit, and that, before this device was known, all purchases were paid for in cash, in other words in coins,” is simply a popular fallacy. The use of credit, he thinks, is far older than that of cash. The numerous instances, he adduces in support of this, from very remote times are certainly interesting …
Mr. Innes’s development of this thesis is of unquestionable interest. It is difficult to check his assertions or to be certain that they do not contain some element of exaggeration. But the main historical conclusions which he seeks to drive home have, I think, much foundation, and have often been unduly neglected by writers excessively influenced by the “sound currency” dogmas of the mid-nineteenth century. Not only has it been held that only intrinsic-value money is “sound,” but an appeal to the history of currency has often been supposed to show that intrinsic-value money is the ancient and primitive ideal, from which only the wicked have fallen away. Mr. Innes has gone some way towards showing that such a history is quite mythical.
For anyone with an earnest interest in the debate on the origin of money, Innes’ book is still a must read.
In mot economics textbooks money is presented as something that was invented to replace a more onerous and inefficient barter system. The problem with this story is that there is hardly any evidence that support it. Human societies have used some kind of credit systems long before we invented coins and cash.
Keynes’ review is a good reminder of how important it is for economists to remember that what may perhaps be conceived as a logical development is far from self-evidently what also happened in the real world: history and economic theory doesn’t always go hand in hand.