Thursday, March 22, 2007

Money in Yunnan during the Ming (c. 1350-1600)

Macroeconomics in pre-modern southeast Asian economies besides lacking data can also be quite conceptually complex. Take Yunnan, for instance. Several currencies existed, yet markets hardly existed. The currencies included:

1. The Ming emperor injecting paper money into the economy with the money he gives to the tribute missions of different ethnic groups to the capital. Can be seen in the tribute entries of Wade's (2005) translation of the Ming Shi-lu.

2. The longstanding use of cowries imported from the south until the 1700s. Covered in the work of Vogel (1993).

3. Most importantly silver produced in Yunnan and used throughout China. Covered in detail in Sun Lai-chen's (2000) dissertation.

4. Copper cash also, probably.

Stylized facts provide some hints about the role markets and money played in Yunnan:

"Yunnan has peaks upon peaks of mountain ranges and swift gorges winding through them. In the central region where the capital is, the land is well-watered and abounds in food-stuffs. This place does not rely on merchants, yet merchants gather here because it is a place where cinnabar, red mercury, glittering stones, and precious stones are produced. The lands of Linan, Dali, Yongning, Heqing, and Chuxiong can claim to be fertile, but the merchants are extremely few. Such places as Yuanjiang, Lincang, Yongchang, and Lijiang border on foreign territories; their customs are contrary and different." (Brook, 203)

“Comment: The long and difficult routes from Yunnan to the rest of China made the transport of anything but lightweight luxuries prohibitive. Yunnan was an important source of gems, and there were heavy proscriptions against non-imperial trading in gems with the local people (footnote 35: The involvement in eunuchs in this trade is mentioned in the biography of Wang Shu in the Dictionary of Ming Biography)” (Brook, 203-204)

What was happening with all these moneys is an open historical question and requires getting back to fundamental intuitions about the function of money that Brad DeLong touched upon in his blog recently:

Sam Brittan writes: / Columnists / Samuel Brittan - Money is making a comeback: Any IoU that is accepted in payment for services rendered can be regarded as money. There is a legendary exam question about a traveller who paid for a meal on a remote island by cheque. The natives were so impressed by this strange piece of paper that they passed it from hand to hand without anyone attempting to cash it. Who then paid for the traveller’s meal? (Please don’t tell me)...

Ha! I'm going to tell you whether you want me to tell you or not!

There are three possibilities. The check could serve as an expansion of the real money supply, if it is sufficiently easier to carry around and keep track of then previous moneys--previous markers of claims to purchasing power. If so, then nobody pays for the traveller's meal: the traveller's writing the check increased social wealth by more than the resources consumed, and everybody is better off. It is a free lunch.

A second possibility is that the check--being easier to carry around and keep track of--could crowd out and displace some other asset used as money. Say that the nominal (and real) money supplies remain fixed, and that the circulation of the check means that somebody loses their job stringing cowrie shells together, and has to get another lower-paying lower-value job doing something else. In this case, part of the lunch is paid for by the dismissed worker who loses his or her best opportunity. The rest of the lunch, however, is still free.

A third possibility, however, is that the check increases the nominal but not the real money supply. People are happy to hold the check, but the check is no easier to use than other forms of money, which are in fixed supply. In this case the price level rises, and everybody else with money in their pockets finds that their money buys less. In this case their is no free lunch: the lunch is paid for by an inflation tax implicitly levied on other money holders.

Those are the three possible answers. There will be a test.[Source]


Brook, Timothy "The Merchant Network in 16th Century China: A discussion and translation of Zhang Han’s 'On Merchants'," Journal of Economic and Social History of the Orient, Vol. XXIV, Part II, pages 165-214.

Sun, Laichen (2000). Ming-Southeast Asian overland interactions, c. 1368-1644. Unpublished PhD Dissertation, University of Michigan.

Vogel, Hans Ulrich (1993). "Cowry trade and its role in the economy of Yunnan: From the ninth to the mid-seventeenth century," Journal of the Economic and Social History of the Orient, 36, 3 (1993): 211-252; 36, 4 (1993): 309-353.

Wade, Geoff. tr (2005). Southeast Asia in the Ming Shi-lu: an open access resource, Singapore: Asia Research Institute and the Singapore E-Press, National
University of Singapore, []