Helen Schofield noted a couple of videos in the comments a few days ago, both produced by X+Chsrritine Desan to whose work she has been introducing some of us. PSR said in he comments of these videos:
I tell you that Helen's You tube clips are really worth watching — particularly the second one where Desan describes how personal profit began to be accepted as a moral way to make money out of what was a public orientated utility — honestly — it's well worth looking watching.
So, I am sharing them, with thanks to both. Of the first the Oxford University Press says:
Christine Desan discusses her exciting new ‘Stakeholder' theory of the history of the modern monetary system, describing its origins and the eventual development of capitalism as discussed in her book.
Christine A. Desan is the Leo Gottlieb Professor of Law at Harvard Law School. She teaches about the international monetary system, the constitutional law of money, constitutional history, political economy, and legal theory. She is the co-founder of Harvard's Program on the Study of Capitalism; with its co-director, Professor Sven Beckert (History), she has taught the Program's anchoring research seminar, the Workshop on the Political Economy of Modern Capitalism, since 2005. Desan's research explores money as a legal and political project, one that configures the market it sets out to measure.
The second is from Harvard Law School and discusses Christine Desan's "Making Money: Coin, Currency, and the Coming of Capitalism" in more detail. I cannot for love no money (joke) embed this in this post for reasons I cannot fathom, but it's available here and is the more useful of the two.
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Have watched one already – agree, highly recommended
Very interesting post. The conceptual archaeology of money helps to make sense of the present. The receipt for early service becomes fungible, alas more likely to be used as beer tokens, which maybe explains why beer is an early tax target.
I believe there were innovations in statecraft, like record keeping, in the early medieval state when it was realised that war making by the state could be made more effective if it was better regulated. Today death in military service means that inheritance tax is not liable, thus a nexus of interest between landed interest and the armed forces. It also encouraged the landed to enforce the levees. Latterly, military service becomes a form of tax indemnity, often disguised as a form of patriotism. I gather a large part of the present Duke of Westminster’s fortune depended on a medical case in the 1950s.
Prof Desan’s book has been added to my Amazon favourites. Is the latter an asset, liability or unfulfilled service?
Wow!
Anyhow – what I find wonderful about all of this is that it is WOMEN (Desan, Kelton, Mazzocuto, Zubhoff and others) who are attempting to set the record straight on our ‘man made’ world and challenge what we have been taught.
And by taking on the concept of money, Desan and Kelton are aiming right where it hurts – Chicago Boys please note!
And it is nice to see women taking on that most unwomanly of women – The Tory Bint in Chief – one Margaret Hilda Thatcher who said ‘There is no such thing as Government money’.
I once read a book called ‘Sex & Destiny’ by Germaine Greer, and on the front cover was a picture of a starving African woman with a child on her breast. The description read something along the lines of women ‘having the power to create life, but being disempowered in sustaining it’ by the way the world was ran.
I’m not sure about Desan (she’s new to me) but I think that Kelton and the others have children and I think that this adds to the urgency and to the poignancy of their work – having carried and brought their kids into the world, they want to keep them there.
And as a parent, I’m all for that.
Another (woman) who writes brilliantly on money, debt and much else is Mary Mellor, Professor Emeritus at Northumbria University.
See https://www.waterstones.com/author/mary-mellor/387433 for her amazing book list.
She’s fully onboard with Modern Monetary Theory, but I think she may also be involved with the recent re-incarnation of Positive Money – which now seems to accept MMT.
I have worked with Mary Mellor on a couple of events, she is very good on explaining money and debt and has been doing so for many years,as well as been very funny and charming. I loved her book “Debt or Democracy”. She said she had a foot in both MMT and Positive Money camps a few years back but hse said that hoped PM would move more towards MMT . PM have certainly changed tack of late and are more MMT aligned now. Mary has probably helped them do that ,amongst others, but I don’t think she is acts in an official capacity for PM.
Thanks
Thanks for clarifying Vince. I have her book on Money, which is a very easy and informative read.
What I like about Christine Desan’s work is she focuses on the design of money. It’s a human invented technology she tells us that it’s been constantly evolving. Ask a UK voter to explain the UK history of this technology and most will make excuses to explain their ignorance of it. The favourite excuse will be what’s the point you either have it or you don’t! They’ll then go on to say government has no money of its own and the government has to balance its books. When you say the history of money’s development shows this can’t be true it’s then you can’t be right hyper-inflation would continuously occur. When you point out there’s no historic UK data showing this after the world finally abandoned the Gold Standard at the beginning of the 1970’s when the Americans left it and the dialogue comes to a halt often descending into personal abuse.
It would therefore perhaps seem more productive to simply ask individuals or groups what they know about the history of money’s design and if not much how they’d go about designing such a new technology from scratch.
Indeed
The only panellist with whom Desan good naturedly disagreed in the second video? Inevitably and fatefully the British central banker Sir Paul Tucker, who ploughed on gamely with the ‘money is neutral’ theme, without adding a fragment of credibility to his explanation. Heaven help us all.
I know from reading Desan’s journal papers that she writes with elegant, simple, pellucid clarity. The panellists all emphasised how easy her major work is to read, even, perhaps especially in the case of difficult ideas; like a ‘novel’ to read one said. This is a terrific advantage. The wider public that would benefit from reading it would, however be the better of a slick or witty title, over one that seems to have been drafted by an academic publisher’s rear-end covering – committee for pointless prolixity.
That’s academia…
“The only panellist with whom Desan good naturedly disagreed in the second video? Inevitably and fatefully the British central banker Sir Paul Tucker, who ploughed on gamely with the ‘money is neutral’ theme, without adding a fragment of credibility to his explanation. Heaven help us all.”
If Sir Paul Tucker had the task of designing money from scratch he would have to ask himself if money just “pops” into existence through the barter process who would spontaneously take on “retiring” it a vital part of money design.
The answer that Christine Desan provided Sir Paul Tucker was that sovereignty from the people provided the necessary clout to do the “retiring” not the market. It was this that appears to have washed over his head during his thirty year long career as a central banker!
Hi Richard,
Thanks for all the info you are putting out there. Scary times!
Not quite relevant to this thread but more on your tweet. I’m trying to get my head around the dangers of QE and why you say it shouldn’t lead to high inflation.
“But would there be inflation then? Not if we then taxed enough and cut spending a bit. But people at work in good jobs do pay more tax. And they claim fewer benefits. So that condition is easy to meet. And if we still needed more tax? Well, we could do that, if needed”
What about inflation on imports. Can’t the QE printing lead to massive inflation on imports? And is that not a huge risk
Se3 other threads I have done in this
If QE was done at full employment inflation is likely
Until then the answer us simply that it us very unlikely – excepting political inflation, like that created by Brexit
The thing is this:
Anything that gets invented, gets utilized by societies in some way – some ways in unexpected ways depending on the creation’s utility potential.
Take the wheel. (You could also say much the same of the internet).
It may have just been put on wagons to move loads more smoothly to begin with. But then we also used wheels to transfer power to other wheels and moving parts; we used wheels to steer ships, land aeroplanes, used its principles to play music on turntables, put them in a caterpillar track to move over rougher ground. Society put the wheel to work as a concept.
Imagine what would happen if a certain sector of the society decided to hoard all the wheels in society for itself? We wouldn’t accept that would we? Nor should we accept the mal-distribution of money.
I like Helen’s statement that money is ‘man made’ – I’ve said it here myself and it’s true. Yet there is so much religiosity about money – who deserves it, where it comes from, ‘unseen hands’ and other false moralities and myths. I think that this reflects that in some sectors of society money is literally worshipped when in fact it is a genuine utility for society as a whole and should be treated as such.
The only question being therefore: does everyone have enough of it? And if not – ought we not do something about that?
This for me now is the only key political imperative of our time because everything else – including reversing the harm we have done to the planet – stems from addressing the ‘money problem’.
We have gone as far as we can now with the old thinking.
This concurs with what I have learnt.
Felix Martins book “Money; An Unauthorised Autobiography” is probably as good an effort to look at money’s history as there is. He takes the source of money(as we now use it) back even further.
Barter never really existed in any society,he shows how even basic economies would use money ,like the Pacific island of Yap with their huge stone money system. What mattered he says is that not what the money was but the system of “credit and clearing ” that in enabled. He also points out that debts can be settled in commodities but commodities are not money.
He goes back even further in history,to a Chinese 4th Century BC warlord called Qi. He set up a “think tank” of the best professors he could find( Jixia Academy). They were probably the first to realise that money was a very important Sovereign tool. They knew that the token used as money was not its “value”, but what mattered most was that how much of it in circulation compared to the goods on offer was what mattered. They had identified how to inflate or deflate an economy. They also stressed the importance of seigniorage which was the “no cost” benefit to the Sovereign of issuing the money. They recommended that the Emperor could use this power to help towards the objective of having a “harmonious society”. They emphasised that only the Sovereign should have this power and that any “usurpers” to that power should not be allowed or else the population would end up “serve two masters”. Of course this advice was largely ignored and the Emperors made the typical mistakes many others did by issuing too much money and less important maybe(though maybe not for a dictator), by allowing other powers to issue money, weakening their power.
The Greeks were one of the earliest “monetary societies” with a market free from government control. Martin explains that money changed societies. Social mobility arrived and a person was now judged by their accumulation of money rather than a traditional social standing in pre money societies. In the Saxon communities Desan mentions and other pre money societies ,there was a pyramid of power and everyone had a place and role in that society. But rank came with responsibility, that you had to have care in the welfare of the people below you, so sharing of food and shelter was a duty pf that power. The arrival of money changed all that and money accumulation replaced a sense of public duty. It got to the point that money accumulation became excessive and society lost its soul as money became more important than society’s needs.
Not all Greeks liked money, the Spartans in particular refused to use any money at all(until late) seeing it as an “evil”. They even banned other regions they conquered from using this relatively new invention. The Greeks money system prevailed however.
Money is a great tool ,but we should be aware of its many pitfalls. I heartily recommend his book, he gives many more historic examples of the trials and errors we have made with it throughout history..
I think Christine Desan’s line of approach may prove of fundamental significance, because it is simple, illuminating and conceptully clear. It exposes the weakness of neo-classical neo-liberalism where it was very weak, but nobody noticed – its bizarre over-dependence on an implausible, effectively 17th/18th century, abstract historical supposition about the origins of money, based on no empirical evidence, on which is built a seductive, but empirically groundless claim to the nature of the ‘real’ economy.
What Desan terms ‘the design of money’, her elegantly simple methodology, changes the narrative framework in which monetary economics performs, in ways that are deeply difficult and uncomfortable for neoliberalism to challenge. I confess that I would prefer to term Desan’s term ‘the evolution of money’, because although ‘design’ puts the classical economics of the Enlightenment on the ‘back foot’; I think the very fact we can end in the 21st century in the mess that neo-liberalism has left supports my proposal; successful design here too easily suggests a capacity for foresight and predictability that cannot be sustained: a point to which one of the panellists drew attention. The answer to that challenge is that we may design the present, but cannot design the future; we may prepare establishments but it is evolution that conducts the orchestra; an untidy, unforecastable theory of both variety and extinction; but it properly describes the nature of monetary reality.
I appeal for the relevance of this terminology over Desan’s with reference to the words of the Enlightenment sociological thinker Adam Ferguson, whose articulation of sociological evolution I submit perfectly fits the real development of money during the period Desan reviews, but that the Enlightenment thinkers ironically missed: “Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design.” (‘History of Civil Society’, 1767)
@ John S Warren
I understand what your driving at but to the ordinary woman or man who knows nothing or very little about the creation of money how can you ask them “How would you go about the “evolution” of money?” when they’d better understand the notion of “design”?
Mz Schofield,
I understand your point, but although in the Desan papers I have looked at, she does not often use the term evolution, the ‘design of money’ thesis (as I understand it so far) is redolent of the principle of evolution; which is a combination of the effects of extinction, and human ignorance: the last an inability to understand the unintended consequences of human ‘design’ beyond the immediate present.
PSR,
Your indulgent flattery should not allow me to avoid the fact that what you take as leadership is actually an expression of uncertainty that I am charging (candidly, more a low scuttle over no-man’s-land between shell craters): at least in the right direction.
We all progress through uncertainty.
This blog only exists because I’ve been determined to work out what the hell is going on.
I have to say John I like this idea of money being in some sort of perpetual development – flexible, evolving etc., because it then presents itself as a dynamic ‘thing’ rather than the static, TINA orientated phenomena that Steve Keen points out about in his excellent critique of Neo-liberal theory.
Money – watch this space! What will it be next?
Having said that, if money does change over time (and we know that it has an elusive side) , we have to ensure that it changes & develops for the reasons many of us come to this blog. Principally, that being social justice.
BTW – I have been reading your comments and seeing how you are bravely and publicly coming to terms with these new insights from Desan et al.
You are doing very well.
It’s not that you are on your own or no one gives a damn about your efforts – I think some of us are with you – just sort of cowering behind you as you lead us into battle that’s all.
We all come to this blog and look at it through slightly different lenses, limitations etc., all seeing and latching onto different things when new ideas present themselves.
Agreed
As a gossipy aside, some years ago I had the BofE as a consulting client so got to meet many of the senior people. Paul Tucker we referred to as Tall *ucker – one of the rudest people Ive ever met. Was even rude and disrespectful to his colleagues.
It was a useful education in the world of central banking and got me interested in macro economics. To be fair, in general I found them to be much more in the mould of civil servants with a sense of public service, and very different to the self serving crooks that surrounded them in the City. Andy Haldane who is now the Chief Economist is relatively speaking, at the more radical end of the spectrum and was of course the author of the paper (2014?) that pointed out that money is created by banks. A useful reference when dealing with the luddites.
@ PSR
This money or currency is “man-made” or “person-made” is interesting as a concept. We know that right-wing economic orthodoxy would have a country’s currency just popping into existence as a consequence of bartering and the desire to improve on the “coincidence of wants” yet we also know that to maintain the value of currency short-term there has to be substantial retirement but not all retirement, cancellation if you prefer.
This raises the question of course of reliability of retirement. We know from the long history of private banks blowing asset bubbles which literally is lending too much on insecure future income flow they aren’t exactly too reliable on this income flow “retiring” front. Sir Paul Tucker in the Desan video neglects to mention this of course in his pep talk for the private sector market doing the bulk of currency creation.
https://www.youtube.com/watch?v=bCdKI5dGn9c
Neither does he really acknowledge that a sovereign people want a government that’s easily able to marshall resources in order to protect that sovereign community from threat be it amongst several possibilities including armed attack and indeed in modern times the very major one of feckless bankers causing burst asset bubbles like the GFC of 2007/2008.
In summary then that’s two reasons for a sovereign people needing the reliability of government currency creation non-private sector banker threat and private banker threat. Thanks to Christine Desan we now have two arguments in support of government created money.
There’s a third argument stemming from the business of currency creation “reliability” which is the one of saving for future threat and/or opportunity. Since all currency creation can be regarded as an “advance” the combined output from both government and private sector banks needs reliability in order to extract from the output for saving. Since historically it’s very obvious from repeat asset bubble bursting from private bank fecklessness “reliability” from this currency creation source is “unreliable” the government creation source is prime. Walter Bagehot realised this in the middle of the 19th century and wrote his famous book “Lombard Street” in which he argued the BoE should be Lender of Last Resort.
The ‘third argument’ is then the ‘safe asset’ concept of Desan – ‘reliability’ pertains to safety.
As has been discussed here, our Government essentially owns the BoE and as Richard has repeated pointed out all the Government has to do is print the money (create it) when it is demanded. That power is the legally underpinned fiscal reliability /safe asset power that Desan refers to and can also be seen in the way it handles QE and bond issuance as well as the banker of last resort.
The sovereign Government is indeed the ‘head waters of the Ganges’ – the source of the economy and markets (as Desan points out in her essay).
Yet you try telling that to your typical Thatcherite moron.
The problem is that that legal power is being deliberately reserved for the rich and the present chumocracy. This is a potential abuse of the law.
We have just seen a case where a young girls death has been certified due to traffic pollution and this landmark result may open up Government to legal challenges as to its acts of omission and commission viz a viz pollution monitoring and target setting.
Might we one day see a Government taken to task for crimes like austerity, and the mal-distribution of money in normal times and times of national emergency?
Agreed Helen.
I would put it this way (not because I am better than anyone else here, only because I am different that’s all and this is what I see – as we all are and do).
I’m attracted to the fact that Desan refers to a ‘sovereign’ entity in her essay. Sovereignty is something in MMT I latched onto very quickly because I am one of those who believes (insists) in a proactive State acting as a moderator for a country’s well being (acting courageously). Sovereignty is also something Kelton identifies as being a salient point concerning MMT.
In Desan’s world, the sovereignty issue is related to the concept of ‘safe assets’ – in her case sovereign debt that can be used to facilitate/enable transactions between people.
Desan also says – rightly in my view – that this function is under-pinned by sovereign law (look at the post above).
With these assertions, the Neo-liberal/Libertarian negation of the State is undone completely in my view, because the State (sovereign) is providing the safest of safe assets to under pin / lubricate the economy potentially for all.
Look how the sovereign state bailed out the financial sector in 2008. We can look back and see QE as an imperfect use of sovereign state safe assets as it helped the rich better than it helped ordinary people – but it needn’t have been like that – that’s the key.
Then look at what happened to Bitcoin. Safe assets? No way. Noooooo way!!
The Neo-lib world cannot have it both ways – slagging off sovereign states but going cap in hand when their greed and stupidity gets the better of them to use sovereign safe asset power to mop up their mess.
The problem is those whom have that sovereignty at their disposal – our politicians – some of the worst we’ve had in a generation who do not understand that money is man made here on earth and see it as something they have no control over because they have failed to understand its true nature.
The other thing they do not understand is tax – or as you say – how money is retired. If you put a bucket under a tap and do not empty it, or find somewhere for the water to flow out, the bucket over flows. We can call that inflation in my view.
As you fill the bucket, tax helps us to empty it, and that money then does not flow into asset markets where is creates bubbles or prices people out of property, or into the political system where it is used to deny state sovereignty, over ride democracy and cements the few into power. Or, along with tax it could be bonds being used to soak up excess money (this is not favoured because our thick politicians think they are creating debt in the worst possible way).
That’s where I’m going with all of this. I go back to a simple question that Richard – out esteem able host – once asked: ‘Why is it that we can’t get the money we need?’.
The answer in my view is that it is because sovereignty (as depicted by Desan & Kelton) is being denied by a rich minority who are hell bent on going to all sorts of pseudo-intellectual lengths to keep us in the dark.
And they’ve been (and still are) successful.
But maybe – just maybe – the game is now up.
“The Neo-lib world cannot have it both ways — slagging off sovereign states but going cap in hand when their greed and stupidity gets the better of them to use sovereign safe asset power to mop up their mess.”
The biggest irony in all this is that Neoliberals spends all their efforts, not on being competent and efficient in the way it operates “markets” (often fake, non-existent, or ill-disguised monopolies); but on capturing the sovereign state – that it claims has no part to play in the solution. It does not in fact capture the state to remove its powers; but in order to run the State exclusively to serve their own vested interests, and exploit State powers that are necessary to sustain the illusion of functioning, self-sufficient neo-liberal markets, without which State support they collapse instantly, when faced by any significant crisis.
What a mess of ‘its’ and ‘theirs’ I created there! Clearly neoliberalism has even successfully trolled social media grammar.
Exactly John.
To John S Warren:
You simply took the bull by the horns and worked through you understanding – in other words you appear not to be afraid to be wrong. I on the other hand am more hesitant. But I was reading your posts all the way through and your interpretation helped mine although it does appear that we come from completely different mindsets.
Acknowledging this I think keeps things harmonious because despite our differences, we all want a better world – that is our ‘common purpose’.
James Clerk Maxwell (revolutionary 19th century theoretical physicist, of whom it can unchallengeably be said that he was a world-and-paradigm-changing genius), told his students never to be afraid of making mistakes in experimental physics; he insisted they would learn far more that way than working too hard to avoid them.
You just have to put up with ‘what comes’ in its wake!
Looks like I’ve got another book to put on my “must read” list.
The book debate video mentions that money is a mix of private and public interest. Which is an important aspect of our current money. Money creation it itself reflects great power which is what most of the reviewers here also mention. Sovereign’s did indeed initially have the historic grip on that power. That has obviously changed over time and that is a revolution of power in itself, one that has gone mostly unnoticed by the majority throughout history.
What happened was that private banks eventually became our money creators and the creation of the BoE was the focal point of that revolution. The kings of England gave away their monetary authority to issue money. This had followed many years of European Kings struggling with their finances and having to resort to either raising taxes or devaluing the sovereign coinage, neither proving a popular with the Kings’ subjects. The new banks that had grown to become powerful at that time were able to offer the King a way out of his dilemma. He would promise future tax revenue to the banks in return for the banks’ money. To a desperate King this would have seemed the logical way out, lowering public wrath and in some ways the banks were seen as having succeeded in setting society free from the tyranny of Kings. We had however effectively seen a privatisation of money creation process.
The public benefits of money as a stable medium of exchange,/storage still remained ,but the benefactor of those who created that money had changed. The problem is that this has never been publicised to any extent and is largely not understood, if the public was made aware of this they could voice an opinion as to whether they think money should still be created this way or whether the UK govt should have more of a direct say…as it has been doing since March of this year. This should be more democratic decision, but it can only be made if we have better knowledge of how money is created. If we want more public money creation, as MMT suggests, we should be given the right to decide on that. What we should never accept is that we can only have money created by banks or the private sector for their general benefit. Banks have been given the sovereign power to create money with that the seigniorage benefit of issuing that “first use” of money. They decide where that money goes and as we have seen it is not generally for public benefit. What we need to do is return the power to create money to the Sovereign ,which fortunately is now a democratic Parliament and no longer a King. We should all have more power over money creation, if it is a man made concept we need to take democratic control of it and put it to better use.
MMT does not necessarily suggest more public money creation as far as I know
It does say money creation happens in a way very different from that the public commonly understand
Of course MMTers would only prescribe that in a recession, like now,or say to fund a green investment. I understand it is not carte blanche to print without regard. State funded deficits are way to do that, which is an important point we need to make.
But is it the case that MMT’s explanation of money creation helps us to allocate not ‘more’ money, but the right amount of money for the right purpose? And more widely distributed. And it is also opening up the faulty, illusory choices politicians are making about where it should be created or allocated to and what form that creation should take (base money versus Govt debt, versus private debt issuance)?
That is what I’m getting out of MMT and Desan. As I said, (and to paraphrase you) it’s about putting money where it is needed but also requiring those ‘in charge’ of sovereign powers to wield that power more fairly.
BTW – please find the time to get ready for Christmas! I don’t expect an immediate answer!!
How’s your son doing at Uni BTW?
My feeling is MMT does make that clear
So QE pushes cash upwards in society
MMT shows alternatives are possible….
As for the sons – both at uni – both frustrated, and one writing an essay at the same table I am at right now …. and asking the sorts of questions I am pleased to have a son asking ….