War Externalities of Livestock Money
Update 2020-02-10: This article is updated with further sources to better reflect its chapter in my book, Money Dethroned.
It is important to understand that money, in some regards, is not uniform in its externalities. An appreciation in the value of livestock money, for example, has other externalities than an appreciation in the value of gold. History has shown us that gold vaults and mines have been obvious military objectives in war, and a price increase of that money magnifies the temptation to capture storage- and production centers. As Nick Szabo bluntly put it: "Aztecs took gold tribute from their subject tribes. Spanish conquistadors looted the Aztecs. Sir Francis Drake looted Spanish galleons. Seizing gold vaults was a universal war objective."
The gold of nation states have always been defended by strategically located armies or militias. But what do people do when the very land they walk on belongs to the sphere of the production of money of their warlike neighbors? It is likely that this phenomenon manifested itself among the many Mongol tribes in Eurasia, who for a long period of time appear to have operated on livestock money. If livestock was money, it must have had a premium on its value due to the added utility of facilitating economic exchange. Any such premium would, given all else equal, put an upward pressure on the amount of capital allocated toward production or collection as it made it more profitable to breed or in other ways obtain livestock. In other words, if their own graze-lands were not enough, this premium gave direct economic incentives for the Mongols to aggressively conquer new graze-lands.
Much evidence of Mongol livestock-money admittedly stems from the 19th and 20th century, but it is highly likely that the Mongols utilized a similar standard before conquering China and other more civilized nations. The slaughter they brought with them as they trampled these other societies was on a scale seldom seen before; it is estimated that many millions died as a result of systematic executions and deliberate starvation. Einzig makes this very point:
There can be no doubt that this search for new grazing lands was largely responsible for the aggressive expansionary policy of the pastoral races which were surging westward towards the end of the Ancient Period, and in particular of the Mongols towards the middle of the 13th century. It was largely because they chose to use livestock as their currency that they had to find more and more room for their livestock which tended to be well in excess of normal economic requirements. (Einzig, 1949, pp. 283-284)
A similar aggression-dynamic was to be found in the overstocking of cattle money among the Colombian Indians (Einzig, 1949, p. 187).
Some would argue that the ruthlessness of the Mongols was game-theoretic; any new foe knew what happened if they did not surrender. But this cannot be the only explanation of the mass murdering, or other nations and tribes would have historically been equally harsh after subjugating their neighbors. Henry Yule has a brief excerpt on the Mongol conquest of Balkh in north-eastern Persia, which lends support against the game-theory argument:
Balk, "the mother of cities," suffered mercilessly from Chinghiz. Though the city had yielded without resistance, the whole population was marched by companies into the plain, on the usual Mongol pretext of counting them, and then brutally massacred. (Polo, The Book of Ser Marco Polo, the Venetian Vol I, 1271-1295, p. 143)
This livestock-money externality described here seems in other words plausible enough to warrant mentioning. The dethroning of livestock money, however, may have been caused not by this externality, nor by a lack of hardness, but due to rising storage costs as the nomads settled down in cities such as Sarai. A similar storage cost argument was brought forward also by Carl Menger. So, the very money that once pushed men to war, can be said to have been tamed, just as the nomads were when they slowly chose to settle.