Here are two – of many possible – approaches to driving currency acceptance. Both assume property rights are enforced by the state. The choice is presented in stark terms to illustrate a simple point. The state can:heteconomist
1. Impose an exogenous tax on all non-owners.
2. Impose an exogenous tax on owners and give non-owners a basic income.…
In the chartalist view, taxes drive acceptance of state money. Through one channel, taxes induce labor services. The need to obtain state money to pay taxes ensures a willingness of some individuals to accept employment in the public sector in exchange for the state money. There is another channel that exists under a broader range of conditions. It is the power of government to induce supply of real output from private enterprise. Not only does government induce a private supply of real output to itself (a transfer of resources from the private to public sector), but it also induces a supply of real output to private consumers. Unlike the inducement of labor services, the inducement of private-sector output would apply equally to a pure labor economy or a purely mechanized economy, as well as to intermediate cases.heteconomist
I wonder why this is relatively easy for those who work in financial markets, but almost impossible for economists of any stripe to “get it”? Some might say that financial markets people are just smarter—but I doubt that explains it. A lot of economists are fairly bright. But they are not used to thinking about “money” as anything but what Friedman’s helicopters drop into an otherwise well-functioning economy, screwing things up and causing inflation. In any case, read this excerpt and judge for yourself. I think Jon Shayne has provided a pretty good summary of the “TDM” (taxes drive money) view. Note he cites Jamie Galbraith (no surprise) but also one of my favorite economists, Zvi Bodie who knows of our work but is outside the loop.Economonitor — Great Leap Forward
