Saturday, August 4, 2018

Steve Roth — Four Definitions of Money. All Correct.

Understanding what we mean by the most important word in economics.
The meaning of ordinary language terms is relative to use in context. Conversely, technical terms are defined operationally. The same sign can be used for different technical terms, although such use is discouraged as confusing, but not in the same context, where only one operational definition applies.

Unfortunately, economics often employs ordinary language terminology with specifying the meaning operationally. Confusion ensues.

Evonomics
Four Definitions of Money. All Correct.
Steve Roth | Publisher of Evonomics

23 comments:

Konrad said...

-- OFF TOPIC --

CNN (which pushes the Russia-gate hoax) has resumed pushing the national debt crisis HOAX..

https://www.cnn.com/2018/07/31/opinions/barreling-toward-trillion-dollar-deficits-macguineas/index.html

The purpose of the national debt crisis hoax is to…

[1] Justify cuts in social programs like Medicare and Social Security

[2] Increase private debt by forcing people to seek more loans from greedy bankers.

[3] Distract public attention from the private debt crisis (e.g. medical debts, student loan debts, underwater mortgages, etc etc.)

[4] Make average citizens grovel to politicians for every penny (i.e. for every drop of water from an inexhaustible well)

[5] Shame the peasants (“Quit whining about the poverty that we impose on you. At least we’re not making you pay back the national debt!”)

American culture and society is riddled with hoaxes. This is one reason why we have rich and poor.

st hs said...

Does anybody know what happened to Neil Wilson? It seems all his writing have been taken offline and twitter account is gone too...

Tom Hickey said...

No idea. I was aware of his absence, but I didn't realize that his internet presence had been deleted.

Hope everything is OK. Please post if anyone knows anything.

Clint Ballinger said...

Yeah on Wilson, on the FB MMT sites people asking. He has been so influential with his ultra concise comments always, and I always say his work unifying Steve Keen and MMT will one day be in textbooks; that important. Hope he is ok, can't understand why his work would come down though just because he is not actively writing.

Footsoldier said...

Neil Quit the UK MMT group for nearly two years now.


Politics !


Some thought MMT should be used for Labour party only.

Some thought MMT should be used for the Green Agenda.

Some thought MMT should be used to keep the UK together.

Then there is me who thinks MMT should be the basis for Scottish Independence.

These divisons were not bitter divisions we all worked well together.


My arguement was MMT should be all inclusive and include all of the above since MMT is not political. If MMT'rs were saying MMT should be used to Help Greece and other countries in the Eurozone leave and use their own currencies then you can't say Scotland is not allowed to do that.

Neil didn't agree he thought MMT in the UK was being taking over by the Greens and should never be used to break up the union. He felt so strongly about it he quit the UK MMT group that he set up and grew what it is today and decided to concentrate on the job guarentee instead.

There was nothing we could do to make him change his mind. I booked Bill to come to Scotland on October 5th in conjunction with the Common Weal project to answer the Scottish currency question once and for all and show what an Independant Scotland would look like if it floated its own currency and created its own central bank and introduce a job guarentee.

I asked Neil to be a speaker along side Bill to make his case that MMT should be used to make the Union stronger and show the differences between MMT in the UK and MMT in Scotland. He feels so strongly about it he didn't want to do it.

Then you have brexit half of the UK MMT group wanted to stay in the EU and half wanted to leave the EU that caused even more divisions. He didn't like that the establishment were trying to overturn the referendum result.

A couple of weeks later everything disappeared. All his work was taken off the internet.

3 spoken the original UK MMT site.

His Twitter Feed.

His articles on Medium.


The last thing he did was the talk on the JG with Joe Firestone.


Now I'm not saying these are the reasons why everything has been deleted something else might of happened but that that is the recent historical back drop before he vanished.

Neil had very strong views that we should leave the EU and was very passionate about keeping the UK together and that MMT should be used for the working class via the Labour party.

My own personal view is that if this is the reason he has vanished then it is tragic and such a waste of an amzing talent who taught all of us In the UK everything we know.

However, MMT should be all inclusive and used by everyone if it makes lives better and balances the war of Capital v's Labour.

I hope he didn't vanish for these reasons and continues fighting for a JG and also hope he has not vanished for more serious reasons like his health.

I'm sure if it is nothing serious and when the time is right Neil will explain what has happened in his usual firebrand, concise, cutting, accurate and straight to the point style.

None of the UK MMT group as it is currently would have the knowledge they have today without him. MMT has spread around the UK like wildfire all because of him. There are branches of MMT spreading their own groups across the country. Neil should hold his head up high and be very proud of that achievement.

I'm hoping he deleted his stuff so that he can run for a seat in parliament and hope he is in good health. Not because of the different political views under the MMT umbrella.

Bob said...

Thank-you for sharing this information.

Matt Franko said...

Neil’s a Science person....

Tom Hickey said...

Thanks, Footsoldier.

Sounds like the UK has Brexit derangement syndrome comparable to Trump derangement syndrome in the US. Politics is driving everyone crazy.

André said...

"My arguement was MMT should be all inclusive and include all of the above since MMT is not political."

Well, the other day I discovered, to my surprise, that MMT is extremely political. I guess I was fooling myself for the last 5 years or so, pretending that it wasn't.

Footsoldier's explanation just add some evidence to it.

I like L Randall Wray's explanation in his book (Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems) when he says that MMT can be divided in a descriptive part (how the monetary system works) and a prescriptive part (what society should do to get better).

The descriptive part is not political, it is technical. The prescriptive part, on the other hand, is extremely political.

However, it doesn't seem that Bill Mitchell agrees with that separation between descriptive and prescriptive. Actually, it doesn't seem that any MMTer but Wray agree with that.

A lot or MMTers believe that the JG proposal is not political...

André said...

"Unfortunately, economics often employs ordinary language terminology with specifying the meaning operationally. Confusion ensues."

Couldn't agree more. Actually, I believe that a lot of discussions here in this blog were very polemical because each person was employing a different definition for the word "money" - so we also were fooled by the ambiguity of the word. It also happens with other words (like "capital", "profit", "cost" and many others).

Also, it seems to me that are more widely used definition than the 4 ones he listed. Also, what he calls "Econ 101 non-definition" seems to me a valid definition too.

Bob said...

"A JG as a macroeconomic stabilizer is not political. Neither is mass unemployment." - anonymous economist.

Tom Hickey said...

Rnady has said that MMT has three aspects.

1. Operational analysis (analytic, performative, institutional, legal)

2. Macroeconomics theory (based on institutional and operational analysis, data, and accounting, explanatory, theoretical in the scientific sense)

3. Policy formulation (political, partially normative and prescriptive, partially descriptive and explanatory)

Only the policy aspect is "political."

I would add from the vantage of philosophical logic and social and political theory that all expression takes place in terms of world views that are presumed and to some degree constitute subjective aspects, including ideology and cognitive-affective biases. This determines how inquiry is initiated and conducted, so there is no purely "objective" knowledge devoid of all subjective influence.

Science is the attempt to minimize irregularity introduced by subjectivity. But science cannot completely eliminate the vagary in all instances, no matter how rigorous owing to presupposition and bias as unknown unknown that may be unknowable for all practical purposes. If that sounds "postmodern," or "relative," or "skeptical," so be it.

Human beings are prisoners of their own minds and the influence of various collective mindsets depending on education, affiliation and exposure — and the impressions of past karma if one accepts reincarnation.

Tom Hickey said...

@ André

I take the operational definition of money to be determines by the four aspects — unit of account, medium of exchange, store of value, and record of debt/credit.

It's not a matter of choosing one over others, but rather seeing how they all work together in a monetary economy with finance.

This can be specified operationally and institutionally, and it covers the bases of the economic and financial concepts of money.

André said...

"I would add from the vantage of philosophical logic and social and political theory that all expression takes place in terms of world views that are presumed and to some degree constitute subjective aspects"

Well, I don't disagree, but you know, there are somethings that are hard facts and should be agreed by everyone, no matter their political alignments - and once I thought that MMT was about that (and then I realized it isn't).

For example, no matter if you are a neoliberal, a communist, a fascist etc, you should acknowledge that Nixon halted dollar conversion to gold. If you believe that dollar is still convertible to gold, you are uniformed or crazy...

Another very different question is what we should do with the world we have today. Then it depends on your political alignment. Some will believe that we should never go back to the gold convertibility, some believe that we should.

André said...

"A JG as a macroeconomic stabilizer is not political. Neither is mass unemployment"

I once thought that I was a MMTer and this kind of claim made me rethink my position. If that is MMT, then I'm not a MMTer. I believe that I should call myself a Chartalist (which corresponds only to the descriptive part of MMT, I think) or something like that.

When you understand the nature of fiat money, you acknowledge an universe of alternatives for the sovereign government. I believe that the JG is just one of many alternatives, and I don't even know if it is the best one. There are many others, and I guess many alternatives will be worked out in the future.

An alternative to JG is the government discretionary spending money in sectors facing underutilization. Another is the AmWorks policy of the House of Hards fictional universe. And I'm sure there are many more.

That's why I don't think that JG is just the description of the best government policy, as if there was a obvious one, and as if it was the descriptive part of MMT. I mean, claiming that "the dollar is not convertible to gold" (a description) is, to me, very different from claiming that "JG is the best policy" (a questionable prescription).

André said...
This comment has been removed by the author.
André said...

"I take the operational definition of money to be determines by the four aspects — unit of account, medium of exchange, store of value, and record of debt/credit."

I like that definition, and it is the Econ 101.

However, the fact is that, in some contexts, that definition is ignored, and other definitions are used, like:
1) money = narrow monetary base (notes, coins and reserves)
2) money = broad monetary base
3) money = bank deposits
4) money = what is used to pay taxes

So, depending on the definition of money, the sentence "private banks can create money" will be true or false.

Usually economists do not explain what definition they are using (which is a shame...)

Tom Hickey said...

Well, I don't disagree, but you know, there are somethings that are hard facts and should be agreed by everyone, no matter their political alignments - and once I thought that MMT was about that

This is true but it is not as obvious as its sounds.

There are no "facts" in the world. What we call facts are selected from observation of the world as whole, and framed as descriptions iaw the logic of description that Wittgenstein lays out at the beginning of the Tractatus, on the way to elucidating the propositional calculus. The structure of the description (descriptive proposition) maps the relations in the world that are being described. Thus the description as a proposition (logical) is a model of a "piece" of the world that is embedded in the sentence expressed in a language. The languages may different but the sentences as based on the same proposition logically in a description of the same fact. The sentences each express the same "state of affairs" in possibility space that is asserted to hold in actual space.

A proposition exits in possibility space and can never on its own prove it self. That requires using the proposition as a sort of map to determine whether a fact in the world corresponds to it.

What this implies that is that expression is quite influential in the process of knowing, hence, the language and everything that affects it use. These influences include the framework, e.,g., world view and any relevant subordinate views. So the claims that there are "alternative facts" is not as ridiculous as many think it is, and DJT does have a point. A lot depends on the framing and differences in framing will result in different views of reality that may be in opposition, so that key "facts" may be in dispute and neither sides accepts the framing or criteria of the other side.

Unless there is an overarching framework for deciding such questions based on universally applicable criteria, those matters are relative to the framing. This is why there are many enduring questions. When I was first a grad student in philosophy, I asked one of the profs why they never debated their different views, which fell under different schools of thought, so that the students could profit from the interaction. He said, Oh, we did that long ago and argued ourselves back to basics and agreed to disagree about them.

In simple cases, the situation is usually decidable but in complicated cases it gets a lot more nuanced. It may even be possible to make a case at a more nuanced level but a lot of people just aren't smart enough to do nuance or they are not aware of the background.

This is why I am reluctant to argue out of my field, for instance, since I don't have the background to grasp the big picture. Early on in my interest in econ, I was making a comment on some economist's blog and he replied that I was using economic terms but not how economists understand and use them. He said that he was interested in what I might be trying to say but could not get it. He advised me to take the weekend and read an intro to econ, any would do, to get the terminology so I could talk intelligibly to economists.

Actually, I did my PhD dissertation in philosophy on the logic of justification, so this is an area I know quite a bit about. This is a very quick summary of some points but take my word for it, in most matters of consequence that are controversial or in dispute, it is very difficult to arrive at agreement, if possible at all. Philosophical logic shows why that is based on how the logic of language works.

Tom Hickey said...

Usually economists do not explain what definition they are using (which is a shame...)

Yes, this is the problem. It is endemic when ordinary language terms that are rich in meaning are used technically.

The example above about the different levels of money supply are categories that affect the meaning of "money" in different context, while the meaning doesn't itself change in terms of the operational def. The categories are qualifiers.

Bob said...

When you understand the nature of fiat money, you acknowledge an universe of alternatives for the sovereign government. I believe that the JG is just one of many alternatives, and I don't even know if it is the best one. There are many others, and I guess many alternatives will be worked out in the future.

Hopefully you have ruled out mass unemployment as a macroeconomic stabilizer.

Bill Mitchell doesn't hide his political leanings. His academic work is intended to confront his peers, who, if they take their role seriously, must set aside their political leanings.

André said...

@Tom

Well, I don't know... you can philosophize all you want... but in my mind, I will always consider either ignorance or crazyness when someone claims that "dollar is still convertible to gold", or "the government does not issue fiat currency", or "Kennedy didn't actually die" or "Elvis didn't actually die" or things like that, because, in my mind, those are "hard lies" (opposed to "hard facts").

I mean, I cannot even know if I'm really living a real life or just being simulated into the Matrix or something. But, if I'm indeed alive, then it is as certain as it can possibility be that, in this life, Elvis has already died, you know, as much unfortunate it is...

When you claim that those "hard facts" are true, you are just describing the real world as it is, as certain as anything can be certain. That is what I would call "the descriptive part of MMT"... like, it is a "hard fact" that central banks indirectly (or directly, in some places) buy government bonds with newly issued currency. It is as true as claiming that "the dollar is not convertible to gold anymore" or "Elvis unfortunately isn't alive anymore"...

What is not a "hard fact" is that the JG Program is the only way of solving the unemployment and price instability problems at the same time.

Actually, it is not even a "hard fact" that the main economic/social problems are unemployment and price instability. You know, there are a lot of people with a lot of other agendas out there, and ending unemployment is just one of them...

You can give many lessons on philosophy (which I think would be great), but that won't change a bit my opinion about people who claim that Elvis is still alive...

Tom Hickey said...

I mean, I cannot even know if I'm really living a real life or just being simulated into the Matrix or something.

Now that you bring up The Matrix, red pill v. blue pill.

Now that you bring up The Matrix, red pill v. blue pill.

Actually, it's a bit more nuanced than that, although it was along the right track.

Perennial wisdom explains the nuance.

Meher Baba lays it out in God Speaks in terms of Vedanta, Sufism, and Western mysticism. The same paradigm is found in Qabalah. (Buddha presented the same knowledge from a somewhat different angle.)

Disclosure: God Speaks was edited at Meher Baba's direction by Don Stevens, my most recent mentor, until he passed way in 2011. Don had a degree in chemistry from Johns Hopkins and was the vice-president of Standard Oil of California (now Chevron) in charge of buying oil before he retired. The Supplement to God Speaks was edited by Ivy Duce, wife of Terry Duce/, an executive of ARAMCO.

Tom Hickey said...

BTW, people that believe that Elvis is alive (and this isn't limited to Elvis by any means) don't believe this because they are either mentally ill or mentally deficient. it is either self-induced or group-induced. IN fact, most people believe things in this category but because the group is so large, it may be an entire culture, no one notices it.

An interesting phenomenon is now taking place in the US along these lines. "The Resistance" has created a reality that is group-induced. It is heavily influenced by propaganda and disinformation feed through the corporate media, some of which accepts the narrative as representative of reality.

On the other hand, there are the Never-Trumper's in the GOP that have their own group-induced version of "reality."

Trump, I believe, understands what is going on to delegitimize him and if possible remove him. He is responding by gaslghting aimed at people questioning the reality in which they exist.( I am not pointing out anything original here.)

So America is living in a sort of never-never land of fantasy conflated with reality.

Quite bizarre, really.