Tuesday, January 8, 2013

Yap stones and moneyness

For diligent readers who have trudged through my first two post on Yap stones (here and here), I promise this will be my last on the subject.

There is an interesting exchange between historian Cora Lee Gillilland, the author of The Stone Money of Yap: A Numismatic Survey (pdf), and critic David M. Schneider in the December 1976 issue of the American Anthropologist. Schneider was a well known anthropologist and contributor to The Micronesians of Yap and their depopulation.

In response to Gillilland's survy, Schneider issues a warning that:
Suffice it to say that traditional Yap does not have “money” in any technical sense of the word. None of the objects listed on page 1 [of Gillilland], like yar, gau, ma, or mbul, are money in any proper sense. It is certainly true that rai has been called “stone money” and that the literature which is cited (all of which is very far out-of-date) calls it “money.” And indeed, the Yapese themselves call rai “stone money.” But to call a “cow” a “dog” does not make the cow a dog. Even if the traditional European name of the object called rai is “stone money,” the most rudimentary scholarship could have established that it is not money.
Gillilland replies:
He [Schneider] has postulated a definition of "money" I know not whether exclusively his or one generally accepted by his discipline. For my part I am a historian, not an anthropologist, and as stated in the title and introduction of my work I take a numismatic view. Schneider's definition of the English word "money" is too narrow and traditional to be acceptable. I am not alone and would cite scholars such as Melville J. Herskovits, Alison H. Quiggin, and Paul Einzig who have all discussed this issue and have concluded that primitive media, including rai, are within the perimeters of "money."
The above quarrel is a great example of the sorts of debate one sees amongst those who have adopted the standard money-view the world. The money-view dictates that before embarking on a monetary exploration of Yap, all valued items on the island must be split into money or non-money. This is always a controversial process. Do we add yar, gau, ma, or mbul to our "money" category, all of which Gillilland lists as media of exchange? (See first post, #5). Furness too reports that for "small change", Yapese used yar (pearl shells), and that when used in exchange, mbul, or banana fibre mats, were valued at the same rate as a rai stone three hands spans in diameter. What about coconuts? Furness writes about a trade in which "Old Ronoboi paid twenty thousand coconuts for a cooking stove 'made in Germany' of thin sheet-iron". Or should we only add rai stones to the money category, relegating coconuts and the rest to the non-money category? If so, then monetary analysis of the island of Yap begins and ends with rai.

On the other hand, if we adopt Schneider's categorization, then nothing appears in the money category, in which case we can't do monetary analysis at all since all we've got is a barter economy. This argument over the contents of the category called "money" is never-ending.

The moneyness view starts its monetary analysis of Yap from a different perspective. Rather than splitting Yap's commodities into money and non-money, we try to analyze the monetary nature, or moneyness/liquidity, of all items that were traded on Yap. According to Gillilland and Furness, this list of traded items includes not only the famous stones, but also yar, mbul, gau, and ma. We can also add a few trade commodities like bĂȘche-de-mer (sea cucumber), turmeric, coconuts, and copra (dried coconut meat) to our list, as well as local commodities like housing materials, fishing equipment, canoes, bananas, yams, taro, and fish. Non-commodities like labour, war indemnities, funeral expenses, women, and dances were also all traded by the Yapese and find their way onto our list.

In adopting the view that the monetary nature of any item is a function of its liquidity, or its ability to be exchanged away, we shift monetary analysis from a focus on one (or a few) item(s) categorized as pure money to analyzing the relative liquidities of all items on our list. How often did each good appear in Yapese exchange? Would we see a flat distribution in which all items appear in roughly the same amount of trades, or a sloped distribution in which certain items appear in more trades? How does this distribution change over time? What sort of liquidity premia would each item have carried? For instance, if a yap stone could never be traded onwards, for how much less would the Yapese have valued that stone? What about the premia on mbul, coconuts, and labour?

So by shifting the axis of what we consider to be "monetary" from money to moneyness, we can ask ourselves a range of different questions. Nor do we need to follow Schneider and halt our monetary analysis when so-called barter prevails, since even then all goods will be liquid to some degree.

Enough yapping away about Yap (sorry, I couldn't resist).


  1. J. Schumpeter once remarked that "You can't ride a claim to a horse, but you can trade with a claim to money." He might have also mentioned that you can trade with a claim to a horse.

    So, we can buy things with gold, or with a horse. We can also buy things with claims to horses and gold, and even with claims to claims. Monetary theory thus boils down to asking what determines the value of gold, horses, and claims. Specifically, what kind of liquidity premium will we see on gold, horses, and claims?

    My answer is "little or nothing", since any premium would attract rival moneys. But the theory of finance does allow for "convenience yield" to play a part in the pricing of financial securities, and money is nothing if not convenient. The thing is that we have to ask "convenient compared to what?" If there is some rival money that is only marginally less convenient than the money actually used, the convenience yield of money will be negligible.

    1. I agree with your equating of a liquidity premium with a convenience yield. A convenience yield seems to me to be a more open-ended concept than a liquidity premium... in my thinking a liquidity yield relates solely to an asset's saleability, whereas the full convenience yield includes the ability to consume some asset.

      Convenient compared to what? Good question. What about comparing the media of exchange to itself under different hypothetical circumstances? A Yapese house is a media of exchange since its owner can buy it knowing that they can sell it next month if they care. If they were to purchase the same house knowing that some law prevented them from selling it for 5 years, how much less would they be willing to pay for the house? The difference is the convenience yield/liquidity premium.

      I agree with you though that rival media of exchange will affect the premia on Yap houses. If there are plenty of other highly liquid media of exchange, then the necessity of holding houses in order to own "liquidity" is less important and the premium on them will shrink. But it won't disappear. I'm still thinking about this stuff though, so don't stop pushing me on it.

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  3. I have really enjoyed your three posts on yap and have learned a lot. Thank you!