It affects every aspect of our lives, is often said to be the root of all evil, and the analysis of the world that it makes possible – what we call "the economy" – is so important to us that economists have become the high priests of our society. Yet, oddly, there is absolutely no consensus among economists about what money really is.
Some see it primarily as a commodity traded against other commodities, others as a promise, an IOU, and still others as a government edict, or a kind of ration coupon. Most see it as a kind of chaotic amalgam of all of these. Economics textbooks, whose aim is to reassure us that everything is under control, boil money down to three things: it's a "medium of exchange", a "measure of value" and a "store of value". The problem here, though, is that economists cannot agree on the meaning of "value" either.
Perhaps this isn't that surprising. If economists are high priests, then isn't it the role of the priest to preside over some fundamental mystery? No system of unquestioning authority can really work unless there's something at the core of it that nobody could possibly understand. The effectiveness of this approach can be measured by how difficult it is for critics of the current economic system to come up with a convincing alternative. This is crucial because those defending capitalism have long since given up arguing that it is a particularly good economic system, in the sense of one that has any possibility of creating widespread human happiness, security, or even broadly shared prosperity. The only argument they have left is that any other system would be even worse, or, increasingly, that no other system would even be possible. The challenge is always: tell us exactly how a different system would work. This is especially difficult when we don't even know how this one works. (Had anyone tried to explain contemporary capitalism to anyone who had never experienced it, they would never imagine it could possibly work either.)Read the rest at The Guardian (UK)
Note worthy: what is the meaning of money?
by David Graeber
David tweeted "Guardian asked me to write a text accompanying "post-capitalist" money, then changed the headline."
Tom,
ReplyDeleteSeems like something is drawing a lot of attention towards the words "money" and "capital" lately.
Peter at Heteconomist put up a nice piece here on these same words this week.
http://heteconomist.com/?p=3121
But Peter (in MMT paradigm) adds the word "fiat" in front of "money" and hits the nail. I think Graeber is not quite there (not in MMT) so he looks at "money" as some sort of nebulous concept. If you just refer to "money" I agree it is nebulous.
David Graeber would do well to immerse himself in the MMT literature for a short time.
"No system of unquestioning authority can really work unless there's something at the core of it that nobody could possibly understand."
Here Graeber uses the phrase 'unquestioning authority', well there are plenty of folks out there questioning this mainstream economic 'authority' (just look at the title of Peter's blog) in the MMT area. But I guess he may be right the orthodoxy never questions these concepts of "money" and "capital". (Ive said before both of these words are garbage I will never use them from here on out without quotes around them)
He refers to Marx: " For Karl Marx, money ultimately represented the value of human labour, of those energies through which we create the world. It was a way of measuring and parcelling it out, though, in the process, allowing those who controlled the resources to play all sorts of tricks and games."
I think this is similar to what Peter wrote over at Hetecon about Marx's view. But I would point out that Marx did not qualify his word "money" either, so perhaps Marx didnt exactly get it either.
Use of simply the word "money" creates a huge intellectual blindspot.
I'm going to flip this Graeber post over to Peter.
Tom, "synagogue" >> together-teach.... good stuff!
Resp,
" In the current system it's not the government but banks – central banks such as the US Federal Reserve or Bank of England. "
ReplyDeleteGraeber buys into the independent CB nonsense.
This is pure chaos:
ReplyDelete"Perhaps the best solution would be to ensure everyone has the freedom to create whatever sort of game they fancy, which would probably mean an endless proliferation of types of money, but also that the losers will still never want for feather pillows and something nice to eat."
I believe that type of set up ran in the 1700's and 1800's with numerous crashes and panics, etc...
MMT shows how we do not need to run a chaotic/anarchic system to ensure that everyone "gets something to eat" via the JG, and that we dont have to "blow up the banks" but rather get a handle on them via the ZIRP.
But again I bring this up: There is what someone like Graeber may look at as a VERY authoritarian aspect of MMT that uses the coercive forces of taxation to impart "value" to the currency. He (and people like him) will not like this. A righteous Govt authority MUST be recognized in MMT.
Resp,
I didn’t think much of the Graeber article.
ReplyDeleteMatt, Re the 1700s and 1800s, the booms and slumps were a bit worse than in the 1900s, but not VASTLY worse. See:
http://ralphanomics.blogspot.com/2011/08/economic-fluctuations-since-1870_26.html
I’m not sure that government’s power to tax imparts VALUE to a currency: Mugabwe imposed taxes, and look at the value of his currency, at least as of 5 – 10 years ago. He has actually become more responsible on monetary matters recently.
I think that what the power to tax does to force most people to acquire the state’s money in order to pay taxes. That normally makes the state’s money the dominant type of money: unless you do a “Mugabwe”, with the result at U.S. dollars for example can become the most widely used currency in the country concerned.
Right Ralph,
ReplyDeleteI put the word "value" in quotes because I was not exactly comfortable with it... but cannot think of a better word for now...
Funny aside:
http://www.millionaireacts.com/wp-content/uploads/2009/02/zimbabwe-currency-1.jpg
Resp,
> I think that what the power to tax does to force most people to acquire the state’s money in order to pay taxes. That normally makes the state’s money the dominant type of money.
ReplyDeleteRalph, I think you've hit the nail (a nail?) on the head.
There is a parallel between the state's role and the role of a "large merchant" in the 1800s Graeber system. If some entity is involved in a large share of economic activity, then this makes the money valuable as a "medium of exchange," not a "taxable unit."
Of course, if two or more large merchants stand adament that they will not use the other's money, we could get weird standoffs. However, I think the oligopoly benefits are usually too high to ignore. And of course, if the state is one of your entities, it can always "nudge" the other entities along. "This is a nice store... it would be a shame if you were violating regulations P, Q, and R..."
Have to disagree with some. "Money" is not particularly ambiguous or unclear, and "money" & "printing money" should be used much more by MMTers. Good scientific terminology builds on, is a precision of, "common knowledge", rather than replacing it with obscure terms which one does not have a gut understanding of. And in the case of economics, man-in-the-street thought & terminology like "money" is far more scientific than the nonsense sub-astrology of most academic "economics". Much of the job of any science is to explicate the relation of the meaning of its general terms like "money" & particular ones like "reserves" in terms of, and as embodying, the theory's structure.
ReplyDeleteMoney is negotiable debt. A social relationship. Period. Economists in the institutionalist vein understood this well 150 years ago. All kinds of money are fiat money. There is no other kind.
Graeber's trichotomy, (a)commodity (b)promise/IOU, and (c)government edict/ration coupon is just confusion. (c) is a special case of (b), and (a) is crazily, crazily wrong. He is a good guy, not some po-mo charlatan, but modern academic discourse is wedded to using a thousand words where ten would do. Just say what is right & makes sense, & wrong & doesn't. It really is just that simple, that trivial. Simple, trivial does not mean obvious or easy to discover. More the opposite.
Calg,
ReplyDeleteIs Jimmy Rogers scientific? Because he says "They're printing money!" all the time... so does Schiff and Farber.
To me this is guilt by association if nothing else.
Resp
Although I usually agree with you, Calgacus, have to disagree about "money." In my experience, most people think of money as currency in their wallet or bank account, i.e., as an asset and not as an IOU. The notion that money is essentially and IOU is very far from most people thinking.
ReplyDeleteI often ask people where money comes from. No one thinks of it in terms of an IOU. Most people realize that the visible form of money, come from the government since state money is easily identifiable by the pictures and writing on it. But beyond that, almost no one has a clue about the money creation process or that state money is the government's liability. They also don't have a clue about reserves, which are a key aspect of HPM, in which final transactions other than cash or intra-bank transfers are settled.
Unless one has a very sophisticated understanding of "money," one cannot possibly know "what money is." Very few people have this level of understanding including many economists, business people, and even bankers, judging from what they say.
There is also a lot confusion about capital also, for example, due to the conflation of financial capital and capital goods, financial assets and real assets, and assets and equity. then there's "human capital," "intellectual capital," etc.
Tom,
ReplyDeleteIt's like "blood". When you give blood they have to determine what type it is.
A+, O, etc... to healthcare professionals it is not just any old "blood". They have to be precise and have figured out how to do it as part of their science of modern medicine. And they have established consistent standard nomenclatures.
To go around saying "money" is sophomoric and in some cases dangerous.
Case in point the morons in Congress asking MF Globals Corzine "where did the 1.2B account holders "money" go?" Rogers/Schiff: "They're printing money!"
Guilt by association imo, if morons are using the term then I think I probably dont want to use it...
Resp,
If you want a much longer-form discussion of Graeber's thoughts on "money", pick up his book Debt: The First 5000 years. When you do, you'll immediately see that he is both quite familiar with MMT, that he cites Hudson frequently, and that he is extremely well-aware of the relation between government, taxation, and the dominance of specific credit systems. It's all well and good to read mistakes into an 800w article posted at the guardian and draw "conclusions" from that, but I would humbly suggest that you are misreading the points he makes.
ReplyDelete(For a quick introduction to some of the topics, see this and this post.)
@ Foppe
ReplyDeleteRight. DG tweeted that this article was written on "post-capitalist money" at the request of the publisher. He complained that they had changed his submitted title (which publishers often do) thereby obscuring the intent of the article.