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Desan, Christine

In 1750, Archibald Kennedy condemned New York's legislators for their radical constitutional innovation. “They take upon themselves to be the sole judges,” he stormed, and “‘insist… that no order for publick money shall issue, till their judgment has been obtained for it.’” Kennedy meant the charge literally. For almost half a century, New York legislators had preserved their power over the purse by determining claims made against the colony for money. In an arrangement sharply at odds with later legal doctrine on the separation of powers, the legislature—not the courts—had since 1706 settled contract claims for services and materials, demands for military pay and salaries, calls for compensation for the impressment of property, petitions for disability pensions, and a range of other claims.

A myth about the origins of money has long organized modern approaches to the medium. According to that creation story, money is the natural product of human exchange. It can be analogized to a commodity like silver that comes to hand out of the decentralized activity of trading or a convention like language that arises out of a consensus about the value of an item. But if we consider clues about money’s origins and extrapolate from its continuing practice, another story comes into focus. It suggests that money is a constitutional project, a mode of governance for a material world. Money is a means of mobilizing resources across a collective, one created when people advance in-kind value to a stakeholder in return for a unit that represents that advance. The process both entails material value – the advance to the stakeholder is real – and converts it into a form that everyone else recognizes – the advance holds independent value because it offers a countable measure that can be transferred to make final payments. Money creation tied to a fiscal backbone can be expanded in response to the demand for cash: that practice accords both with modern economic theory and the English medieval history that furnishes the setting here. In contrast to the dominating myths about money, the “stakeholder” creation story explains how each of money’s functions is institutionalized and how that activity shapes “the market” that is made by money.