Merriam-Webster defines someone who has a chip on their shoulder as a person who has “an angry or unpleasant attitude or way of behaving caused by a belief that one has been treated unfairly in the past.”
This phrase is pretty clearly North American in origin, and dates from the early 19th century, but at first, the idiom was used literally.
Back in the Middle Ages, duels of honor were initiated by throwing a gauntlet (an armored glove) at the feet of an opponent. The person challenged would then pick it up if they agreed to fight their rival. Over the centuries this mode of settling a dispute became so common that in France, Charles IX outlawed it in 1566; anyone taking part in a duel would be put to death (supposing they survived the duel, one assumes).
In the United States, duels were conducted with pistols, and this type of conflict was common in the South and, especially, the American West. But eventually this form of conflict resolution between two individuals gave way to a less lethal form of challenge: Someone who wished to provoke a physical altercation would place a wood chip on their shoulder and dare their adversary to knock it off, thereby expressing a willingness to fight. This was particularly common among adolescents on the East Coast.
The first written record of this practice comes from a letter penned by James Kirke Paulding, novelist and Secretary of the U.S. Navy under President Martin Van Buren. In a letter from 1816 he writes:
“A man rode furiously by on horseback, and swore he’d be d—-d if he could not lick any man who dared to crook his elbow at him. This, it seems, is equivalent to throwing the glove in days of yore, or to the boyish custom of knocking a chip off the shoulder.”
Phrases.or.uk also cites a reference to the practice in an 1830 article from the Long Island Telegraph:
"When two churlish boys were determined to fight, a chip would be placed on the shoulder of one, and the other demanded to knock it off at his peril."
By the mid-1800s the phrase was being used figuratively. One example comes down to us from the Weekly Oregonian, which in 1855 reported on a war of words between two local editors:
"Leland, in his last issue, struts out with a chip on his shoulder, and dares Bush to knock it off."
While the literal meaning of someone having a chip on his shoulder is no longer used, the idiom is still popular today and readily understood by most.
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