Monday, March 31, 2014

Rodger Mitchell — Is this the end, or just the beginning, of money?


Drawing the implications of Vodafone's M-Pesa (M for mobile, pesa is Swahili for money) for monetary theory.

Federal Debt Is Money

12 comments:

Dan Kervick said...

These kinds of money are effectively just prison cigarette money. That is they, are ad hoc media of exchanged improvised by people who lack economic power and effective political control over the forces that govern their economic lives. Not a surprising development on our prison planet, but also just a way of making do and getting by, not the beginning of a solution to anything.

Tom Hickey said...

I think it is way to early to tell. We are entering a new age and there is generational cohort coming to the fore that has only thought digital and never analogy. this is going to transform cultural and institutions in ways that are presently unforeseeable, especially by people that did not grow up digitally.

Unknown said...

Jason is my son. For some reason, I'm stuck with his account when I comment.

When I first came across MMT, and Jason was 11 years old, I was talking to him about it. And I mentioned that money is mostly electronic entries on computers.

His attitude: Of course, what else could it possibly be????

;)

Unknown said...

BTW, Jason is now 14.

The pick is the philosopher J. L. Austin.

He takes philosophy courses at a local, private college.

He's the youngest student they've ever had.

Anyway, just bragging.

Unknown said...

One more post:

It seems to me that Jason's generation, under 15 years, view the computer quite differently than kids even slightly older than themselves, say 17 and up.

Just my limited experience with my own kids, their friends, nieces, nephews, and such -- but there doesn't seem to be any notion of the computer as at all a novelty.

No obsession with the new iphone, or new this or new that.

Just an assumption that innovation will continue, and a curiosity of where things might lead.

Less hype.

More integration.

Less focus on social networks like facebook.

Less interest in texting. Jason's class does very little texting, and many don't even like it at all.

Anyway, just personal stories....

Wonder if there's larger validity to my observations.

Dan Kervick said...

Right, but this has nothing to do with digital v. analog, Tom. All of our monetary systems are already digital.

Tom Hickey said...

I don't think that most people who didn't grow up digitally know that, unless they have a particular reason to be exposed to it.

The Austrian-Libertarians think that money is gold, People like Scott Sumner think that cash has some special importance. The ordinary person thinks of money in terms of cash, too. They see checks and credit cards, and even digital transfers if they use them, as cash substitutes.

Most people don't realize that banks create money by lending. They think that banks lend out deposits. If you ask most people where money comes from, they will say, "from the government." While they realize that government doesn't spend cash directly, they think of credits to accounts as cash that is withdrawable on demand, which is obviously government issue.

I have seen discussion about ending the use of cash and going all digital, but the thinking is that while it most efficient and would deprive criminals of the use of cash for cover, which is a huge economic inefficiency, the public isn't ready for it since they identify money with cash.

That is poised to change within a generation or two. With M-Pesa, a lot of people that use it may never handle cash or write a check in their lives.

This is going to involve a huge conceptual shift culturally.

Tom Hickey said...

@ Jason Cannon

The pick is the philosopher J. L. Austin.

Tell him to read the later Wittgenstein (Philosophical Investigations). In some ways Austin and Wittgenstein are on the same page, but their methods are different. Austin takes a standard conceptual approach to analytic philosophy, whereas Wittgenstein developed a method of logical elucidation that aims at provoking logical insight rather than conveying conceptual understanding.

Many if not most find Wittgenstein's method difficult if not baffling, and there are many differing interpretations of it. If it could be interpreted conceptually, Wittgenstein would have done it. In his view, what he is elucidating has to be seen rather than understood conceptually, in that logic as the instrument of description cannot describe itself. Having some to this realization, with the assistance of his Cambridge friend, economist Piero Sraffa, he developed his own unique method.

I suspect that someone just starting out could "get" Wittgenstein much more easily than those coming to his work with prior philosophical training, which is the very thing that Wittgenstein was trying to correct by eradicating. In fact, he regarded his method as form of therapy, making pseudo-problems simply disappear by elucidating the underlying logic.

An analogy would be approaching economics in terms of mathematical models rather than accounting and haphazardly confusing stocks and flows. Michal Kalecki: "Economics Is the science of confusing stocks with flows."

Unknown said...

Tom,

Jason has been slowly reading through Wittgenstein.

do you know of a good, short, article either by Kalecki or about him?

The Rombach Report said...

"...the public isn't ready for it since they identify money with cash."

Tom - Reminds me of an Aflac commercial featuring Yogi Berra as a barber commenting to a customer how Aflac supplemental insurance would reimburse him on claims with cash which is as good as money.

Tom Hickey said...

do you know of a good, short, article either by Kalecki or about him?

POLITICAL ASPECTS OF FULL EMPLOYMENT

Dan Kervick said...

I highly recommend Austin's How To Do Things with Words. It's really a delightful book, and while it can seem at first look to be solely about the analysis of the "use of language", it is really about a large sphere of social practices and the role language plays within them.