A Few Notes on L Randall Wray's New Paper

I came across L Randall Wray's new paper "Introduction to an Alternative History of Money" on Lord Keynes' blog.

Whether or not I agree with, or find some enlightenment, in my reading I am always very happy to see writing on the origin of money appear. Unsurprisingly Wray knocks a few more bricks out of the ruin that is the 'barter myth'. Thankfully though he doesn't just waste energy grinding that particular origin story into dust, but bravely attempts to build a new heaven, with new bricks. Unfortunately, I think that the new heaven he builds will not lead to a new earth.

Here's why.

1. The paper fails to place money within psychological context. He talks about 'existential uncertainty' but this is not really a meaty enough ingredient with which to create a truly palatable story about the nature of money.

2. Leading on from above, he fails to get to grips with the significance of 'property'. He describes it as a pre-requisite to the development as money as a unit of account, but doesn't really get into how or why the idea of property entered human conciousness at an individual or group level.

3. His assertion that money is endogenous may serve the purpose of exposing the silliness of seeing money as exclusively exogenous and neutral thus emphasising the need to discuss current economic modelling. However, it doesn't really explain the nature of money. In each of our relationships with money we experience it as exogenous and endogenous - as personal and impersonal. Creating a story that leads to the conclusion that money is wholly endogenous means it is likely that your story is wrong.

Wray claims that with the paper he seeks 'to offer a vision of the nature of money, banks and the monetary system' [his emphasis]. This is a noble and worthy thing. I think at the moment though his vision is too bounded by past economic stories and economics itself. Invariably the best books I've read about money have been either general histories, or cross-disciplinary. I understand that for academics a cross-disciplinary approach is just asking for trouble. And Wray should be commended for giving anthropological explanations and evidence good weight in his story. It is however, not enough. Money touches all things. Its nature will need a broad understanding.

Finally, - and this is no way directed at Wray himself and there is no evidence of this in the paper - the creation of a new heaven, and in its image a new earth, is troublesome for me. Not because of the striving to a new understanding of money, but because of the political exigency it can engender. I am wary. The stakes in understanding money are the highest and most immediate imaginable. If a theory of money's origins became accepted as scientific fact - or just generally accepted as true - that would have huge policy implications.

I have the feeling that there is a morality underlying (what I'll describe here as) the MMT project* - a feeling that social justice is being negated in economic policy as a direct result of misunderstandings about the nature of money. And that if the nature of money can be understood economic policy could be better effected to eliminate poverty. Which makes it all the more important to *really* understand money. And to answer that question 'What is Money?'.  To answer it honestly we need to be vigilant to the danger of political exigency creating a new earth based on an illusion of what we want heaven to be.


*there is also of course the same morality underlying the libertarian project.


(New Heaven, New Earth is an anthropological text by Kenelm Burridge which suggest that money is the most frequent axis for millenarian movements)

Money Wisdom #31

"For Caldwell the order of Chaos, Earth, Tartarus [the lowest region of the world - Jon], Eros is psychoanalytically significant. Just as the earliest psychic state of the child is symbiotic, of 'undifferentiation, fusion with the mother', so the mythical world begins with undifferentiated oneness. And just as the infantile sense of self then develops by a separation (from the mother) which is also a loss, so in the myth the undifferentiated state is ended by the perception of the mother (Gaia) as separate; but she is only known at the price of being lost. And it on the basis of loss that desire (Eros) comes into being."

(Bold highlighting is my own - Jon )

Caldwell 1989 p.132-142

quoted in Richard Seaford Money and the Early Greek Mind 2004 p.220

Money Wisdom #30

"A feast is made for laughter, and wine maketh merry: but money answereth all things"

Ecclesiastes 10.19 (of the early Greek period - late fourth to early third century BC)

quoted in Richard Seaford Money and the Early Greek Mind 2004 p.165

A Review of Economy & Nature in the Fourteenth Century by Joel Kaye

The subtitle of the book 'Money, Market Exchange and the Emergence of Scientific Thought' gives the reader a good idea about the thrust of Kaye's argument. The connection between money and the development of abstract thought is something in which I'm very interested, although I approached the book as a general reader not a medieval historian. And as such I found it very well written and engaging. The footnotes are extensive, reassuring the reader that this man knows his (medieval) onions. But they also serve to help the flow of Kaye's writing by allowing him to better balance detail with narrative, in the main text.

Two things really impressed me. Firstly, Kaye is not afraid to say what he thinks. Particularly towards the end of the book he describes how he sees the development of scholastic models of money and exchange lead to 'proto-science'. Too often I find academics seek to gain the reader's acceptance of their ideas via the sheer volume of data they provide. But Kaye avoids this by being brave enough to say, in relatively simple and practical terms, how he thinks this  change occurred. Secondly, Kaye does not set up boundaries of definition for his understanding of money. This helps to make the medieval scholar's thought the lens by which money is viewed, and it immunises the book from the political bias that happens when an author decides to view money as either debt or commodity.

Overall I found the book to be a brilliant intellectual examination of the phenomenon money as it impacted upon and interacted with the scholastic minds of medieval Europe. At no time did I feel that Kaye patronised his subjects and he avoids that awful phrase 'we now know'. I'm grateful that he introduced me - a non-medieval historian - to the ideas of Anneliese Maier who:

"brought attention to the creation of a new image du monde in the natural philosophy of the fourteenth century in which all phenomena and processes were conceived of as continuous magnitudes in constant expansion and contraction." 

Joel Kaye Economy & Nature in the Fourteenth Century 1998 p.201 

My amazon review is here. If you liked my review please do give it a thumbs up on amazon. Thanks.

Commodity Schmodity

I've been thinking about 'commodity' lately. Commodity Schmodity is the working title I've given to the next as-yet-unwritten part of my Owning and Owing essay.

The idea of commodity is, of course, one of the key themes your friend and mine Mr Karl Marx uses explore economic relations. I'm rapidly coming to the conclusion that I am going to have to knuckle down and finally read the original text of 'Capital' rather than just read about it. There is an excellent series of lectures available online to accompany such a venture at http://davidharvey.org/ . I did pick up 'Capital'  about 15 years ago, but gave up less than a third of the way into volume one.

I think my reticent to read it stems in part from the fact that I already have a set of ideas about commodity myself. Basically, it goes like this. Commodity is inherently subjective. It does not describe any real feature or property of an object, but instead describes our relation to that object. It's a descriptive rather than an explanatory term which essentially refers to a psychological state rather than a material one. Which is odd, because when we say commodity in everyday life we are usually referring to something material. And, as far as I can tell at the moment, my view is also pretty much the opposite of how Marx thinks about commodities.

Simmel has some useful stuff to say about all this too. But like Marx - and as I'm finding out writing this little piece - its hard to write clearly about commodity.

Nevertheless, you might think like many others that commodity is a powerful term that is useful in explaining economic life. Indeed, Marx uses commodity to explain the origin of money. It also forms an integral part of the Austrians' story of origin. The shorthand version of the argument underlying these opposing traditions is that alienating an object and turning it into a commodity allows for more efficient exchange, and ultimately this gives us iPhones.

So how does money fit into this picture? In one sense it would seem to be the ultimate commodity. It's the thing we're most alienated from, and that is most easily exchanged. But people can't seem to agree on it. Some say money is commodity, some say it isn't, and some say its a *special* commodity. At this point a klaxon sounds in my head.

In the book I'm reading at the moment (Seaford's Money & the Early Greek Mind) the pre-conditions of coinage are explored. A seal mark - something used since very ancient times to mark possessions, and later with writing to use as receipts, contracts & treaties - is the embodiment of the identity of its owner. A coin mark - signifying the purity of metal & value of a coin - is impersonal. When the coin is in your hands, it's your possession. The Queen can't take notes from your wallet just because they have her face on it.

So how do we get from a symbol that is the embodiment of the personal to a symbol that is the embodiment of the impersonal? Seaford and Marx suggest a process. Commoditisation, or alienation perhaps? Certainly a transition from one state to another.

And this is my problem and why my klaxon sounds.

We don't need a story of transition to explain money - because that presumes its development rather than its existence. There is no evidence that it developed - was invented - that is an assumption that we have made since the earliest times (as I have pointed out in a previous post). So it's better to work with what we know as a fact. Money exists. Is then there something that can help explain our relationship to its existence? Dr Freud? Ambivalence, perhaps? A coin has two sides, after all. We relate to money in contrary ways. In fact, as Dr Freud suggests, we can relate to anything in contrary ways.

With the concept of commodity we've tried to create something that is absolutely not about us. That has no part of us in it at all. The embodiment of alien.

And yet, there we are. In it, up to our necks. By describing something as a commodity we are declaring a particular type of relation we have to that object. The relation of 'no relation'. Which is about as meaningless and helpful as the term commodity itself. Commodity schmodity.

I'll revisit this post after I've read Marx. See what I think then. But now for me commodity is a signpost on the way to ambivalence. My suspicion is that when I do knuckle down to reading Marx will he will tell me stuff about hierarchy that will blow my mind.

Sorry for the rather rambling nature of this post. These things are tricky to fit into words.

A Very Boring Post

I tweeted this morning that this Governor's Today Programme lecture from 2nd May 2012 had only received 171 views on Youtube. At the time of writing it had managed to scrape to 208.

These are incredibly low viewing figures. The speech was broadcast (and I presume trailered on BBC Radio 4) and elements of the speech were given front page billing in this morning's Times, Independent, and Telegraph. It was even being discussed when I turned on The Wright Stuff to watch with my tea & frosties.

So, these low viewing figures are really staggering. Amazingly low.

I listened to it late last night when I saw a tweet from Robert Peston appear in my stream. It had around 70 views by that time. I can't say I was riveted by it. In fact, it was the epitome of dull. A grey man stating the bleeding obvious. The word I'd use to describe Mr King's performance is 'measured'. Just what you want from a Bank's governor.

But the speech being boring doesn't really explain why so few people have listened to it. What Mervyn King has to say about the greatest financial crises in living memory is important, surely? Not just to financial journalists, but to all of us.

The fact is, whilst it may be important, it's not interesting to us. What really is interesting, is WHY no-one is interested.

Something significant is being said here about our relationship to money and authority. Mervyn King - quite deliberately - has no hook. Nothing baits us or tugs at our heart strings. We seem to have no emotional connection to what is being said. The tone of the Governor has a soporific effect. But I don't think this is some kind of conspiracy by clever bankers to lull us into complacency. I think we are just as culpable as they are. We all want things to be like this. It stops the fear. It prevents the panic.

The nexus of authority and money that the Bank of England represents seems immune from emotional connection. It is - in a very real sense - apolitical. This all seems significant in trying to understand money.

So - to answer my own question - Why is no-one interested? Because we don't want to be, and they don't want us to be.

Money then Maths

This morning I saw a quote attributed to Mervyn King, Governor of the Bank of England. I'll share it with you.

"There is no reason products and services could not be swapped directly by consumers and producers through a system of direct exchange – essentially a massive barter economy. All it requires is some commonly used unit of account and adequate computing power to make sure all transactions could be settled immediately. People would pay each other electronically, without the payment being routed through anything that we would currently recognize as a bank. Central banks in their present form would no longer exist – nor would money."

The quote has encouraged those folks who are interested in finding new ways to exchange goods and services, and creating alternative currencies. 

I'm all for the exploration of Money. But I'm not happy to see Money as 'just a technological problem to be solved'. I remember back in the early naughties there was a project set up with some government funding - I think it was called timebank, but I might be wrong - which sought to create a website where services could be swapped. So I could swap two hours babysitting, for say 30 minutes of acupuncture, or whatever. Service suppliers would be reviewed by users and given a reputation score, like on Ebay. I applied for a job with them. Didn't get it. I don't think the project ever really got going.

Anyway, the point I want to make is that when you see money 'as a technological problem to be solved' you are assuming something that might not be true.

The story of most people believe is that we were little more than monkeys until 50 000 years ago, then we evolved language and learned to count. Sometime later, most likely between 10 000 & 5000 years ago, after we started farming, we invented money. Money is a tool - a technology - like methods of farming, or flint axes, or ipads that help us to do stuff better.

But we don't know that's true.

I think that Money came before Maths and Language. I appreciate that seems like an odd thing to say. But (thankfully) I'm not the only one to suggest that Money has had a crucial role (perhaps a causal role) in the development of abstract thought. 

Although you might think its crazy to suggest Money could have such an existence, the point Mervyn King should remember that its not safe to assume it is merely a technology. Its has some deep relationship with our psyches. That much should be obvious from the words Sir Mervyn uses about money - confidence, fear, worry etc. If Money did come before Maths (in other words if it was giving & receiving, owning & owing, that allowed our mind to conceive of number) then it is unlikely that Money can be accurately replicated by a computer program. 

Hopefully, when my essay on Owning & Owing is finished I can give you something approaching a coherent explanation of my thinking on the origins of Money. But in the meantime, do me a favour. If you ever find yourself writing "Money is just.....", check yourself. If our minds were less shackled by science we'd describe the workings of Money as magic. It does things that we cannot. In ways we do not - as yet - understand. Stay humble, folks. 

Money Wisdom #29

"On the most basic level money is linked to number, and one of the significant effects of monetization is the expansion of the place of numerical calculation in everyday life. Isidore of Seville underlined the link between money and number in the Etymologies, when in chapter 3 under the heading "What number is" he wrote: "Nummus (coin) gave its name to numerus (number) and, from being frequently used, originated the word." A similar association of number and coins can be found in the work of Islamic mathematicians where the common unit was called dirham after the name of a common coin."

Joel Kaye Economy and Nature in the Fourteenth Century p.211 (1998)

The Invention of Money

"So impressed were [C14th] scholastic thinkers by the measuring successes of money and by the multiplicity of its uses that they credited ancient philosophers with having invented it."

Joel Kaye Economy and Nature in the Fourteenth Century p.198 (1998)

I've been reading a lot about the Greeks of late. Not the modern ones, the ancient ones. It's all good preparation for me to read Richard Seaford's Money and the Early Greek Mind, which has been bubbling away at the top of my reading list for the best part of a year now. I just wanted to make a quick note about something I've noticed; no matter how far back you go, Money has always been thought of as the 'invention' of an earlier time.

You have to be careful about the language. The words have been translated and interpreted, and despite the best efforts of scholars we can't be certain of the exact meaning ascribed. So invention may mean something different to Aristotle than it does to us, now. Talk about 'invention' and the questions that spring to my mind are who invented it? and when? I don't think that Aristotle or anyone else refers to money as an 'invention' in this way; they don't mean someone had a Eureka moment and money was born. It's more likely that in describing Money as an 'invention' what's meant is it's some form of institutional response to a problem (of commensurably, or of judgement). So not a technology created by an individual mind, but successful response to problems experienced within a group. I think anthropologists refer to it as a 'cultural invention'.

I'm not sure all this is very helpful though. Giving a broad definition of 'invention', doesn't help us to understand Money. Really it's just a way of accounting for its existence. Yeah, we invented it. After all monkeys don't have credit cards, do they? Move on. Next question?

If you're going to say Money is an invention then you might just as well say that civilisation is an invention too. Invention ceases to have a definite meaning (or at least a meaning within a range of possibilities) and becomes 'that which has the mind as a causal factor'. And, according to some philosophies at least, that means everything, everywhere, every-time.

'Invention' is just another wizard's curtain. The place to look for meaningful answers about Money and Civilisation is in the development of 'mind' rather than anywhere else. Hence, my excitement about reading Seaford's book, and my defence of, and admiration for Freud. Any coherent explanation of Money (and civilisation) requires a theory of mind.

Money Wisdom #28

"In seeking to define the technological model of money in administration, many of the elements of money in exchange are applicable. In both cases money serves as an extendable, divisable, graded, and numbered continuum used as a common scale of measurement. But there are important differences. Money in exchange facilitates relation by expressing the diverse and shifting values of all commodities in common numerical terms. Money in administration also facilitates relation but it does so along a single axis. It provides a numbered scale superimposed on pre-existing relationships within a unified field. Within each field it acts as an instrument of proportionalization. Where money in exchange serves as a medium for connecting diverse goods and services by making them commensurable, money in administration serves as a medium for dividing values along a single continuous axis.

Joel Kaye Economy and Nature in the Fourteenth Century p.174 (1998)