RETROSPECT
By George Dyson
Economic Disequilibrium
Can you have your house and spend it too?
» “What remedy is there if we have too little
Money?” asked Sir William Petty (author of Political
Arithmetick and co-founder of the Royal Society)
in his brief Quantulumcunque Concerning Money
in 1682. His answer, amplified by the founding of
the Bank of England in 1694, resonates to this day:
“We must erect a Bank, which well computed, doth
almost double the Effect of our coined Money:
And we have in England Materials for a Bank which
shall furnish Stock enough to drive the Trade of
the whole Commercial World.”
Petty showed that wealth is a function not only
of how much money is accumulated, but also of
the velocity with which the money is moved around.
This led to the realization that money, like information but unlike material objects, can be made to
exist in more than one place at a single time.
An early embodiment of this principle, preceding
the Bank of England by more than 500 years, were
Exchequer tallies — notched wooden sticks issued
as receipts for money deposited with the Exchequer
for the use of the king. “As a financial instrument
and evidence it was at once adaptable, light in
weight and small in size, easy to understand and
practically incapable of fraud,” explained historian
Hilary Jenkinson in 1911.
A precise description was given by Alfred Smee,
resident surgeon to the Bank of England and the son
of the accountant general (as well as the inventor
of electroplating, electrical facsimile transmission,
digital image compression, an artificial muscle, and
other prescient ideas). “The tally-sticks were made
of hazel, willow, or alder wood, differing in length
according to the sum required to be expressed
upon them,” he explained.
They were notched to show the amount and
inscribed on both sides with the name of the person
paying the money along with the date; the stick
was then split down the middle so that each side
retained a copy of the inscription, and one half of
every notch. One part (known as the “stock,” thus
170 Make: Volume 15
the origin of this term) remained at the Exchequer
and the other part was given to the person depositing
their money with the king.
As Smee put it, “Rude and simple as was this very
ancient method of keeping accounts, it appears to
have been completely effectual in preventing both
fraud and forgery for a space of 700 years. No two
sticks could be found so exactly similar, as to admit
of being identically matched with each other, when
split in the coarse manner of cutting tallies; and
certainly no alteration of the particulars expressed by
the notches and inscription could remain undiscovered
when the two parts were again brought together.”
Exchequer tallies were ordered replaced in 1782
by an “indented cheque receipt,” but the Act of Parliament was to take effect only on the death of the
incumbent who, being “vigorous,” continued to cut
tallies until 1826. “After the further statute of 4 and
5 William IV, the destruction of the official collection
of old tallies was ordered,” noted Jenkinson. “The
imprudent zeal with which this order was carried
out caused the fire which destroyed the Houses of
Parliament in 1834.”
The notches were of various sizes and shapes
corresponding to the tallied amount: a 1½" notch
for £ 1,000, a 1" notch for £ 100, a ½" notch for £ 20,
with smaller notches indicating pounds, shillings, and
pence, down to a halfpenny, indicated by a pierced
dot. The code was similar to the notches still used
to identify the emulsion speed of photographic film
in the dark. And the self-authentication achieved by
distributing the information across two halves of a
unique piece of wood is analogous to the way large
numbers, split into two prime factors, are used to
authenticate digital financial instruments today.
So far, so good. The breakthrough was in money
being duplicated: the King gathered real gold and
silver into the treasury through the Exchequer, with
the tally given in return attesting to the credit of the
holder, who could enter into trade, manufacturing,
or other ventures, eventually producing real wealth
