Against Money
The book formerly known as Money and Things is finished, and will be out early next year
I started this news letter with an announcement that I was working on a book with Arjun Jayadev, then called Money and Things. The book, now called Against Money, is finally done: After two rounds of revisions, Arjun and I sent the final manuscript to University of Chicago Press earlier this month. The book itself will not be coming out until next spring; that’s the kind of schedule academic publishers work on. But since I recently had to write up a summary of the book, I thought I’d share it here a bit in advance.
The goal of the book is to take longstanding arguments about the nature and function of money from the Keynesian tradition and bring them into contact with concrete historical and policy questions. Central to these arguments is a rejection of the idea that money is neutral, a veil over a non monetary “real economy. (“The Veil” was one of the working titles for the book.)
Economists — and not only economists — tend to assume that money values merely reflect the inherent scarcity and usefulness of objects existing in the world, and that the organization of economic life via money merely reflects more fundamental relationships of production and exchange. Against this, we argue that many important historical developments — from the rise of household debt in the United States to the sovereign-debt crisis in 2010s Europe — can only be understood in specifically monetary terms. Similarly, we argue that the interest rate cannot be understood in terms of a tradeoff between present versus future consumption, but only in terms of the scarcity of money itself, and that statistics like GDP are merely the aggregate of a certain set of money payments, rather then reflecting some underlying “real” quantity. Money, we argue, plays a critical coordinating role in modern societies, which has facilitated cooperation between strangers on a vast scale but which has shaped society in particular ways that are often inimical to human flourishing, and which must ultimately give way to other forms of cooperation.
The title Against Money is trying to do a few different things. Most directly, it highlights the distinction between the network of money payments and values, on the one hand, and the social and material reality that depends on them. The latter, we argue, operates by quite different logics. When we say against money, we mean not only that money has acquired an outsized hold on life in the real world; it has. We also mean “against” in the same way one might distinguish a figure against a background: by writing about money, we seek to clarify our vision of the social world that exists around, outside and in opposition to money. The title also announces our criticism of familiar ways of thinking as well as our challenge to the dominant view of money within economics. Finally, the title links the book to a political project that seeks to transcend markets and property rights as the organizing principles of economic life—to imagine a future in which money no longer defines the scope and possibilities of our collective existence.
The first chapter points to the broad hold of the idea that money is, or ought to be, a neutral representation of some underlying “real” economy, and proposes as an alternative the idea that money plays an active role as a device for coordinating productive activity. We discuss this in terms of several fundamental tensions or paradoxes inherent in the nature of money: that it functions as an objective, quantitative measurement, but there is no external quantity that it is measuring; that as a unit of measurement, it is an abstract, universal equivalent, but that in use it must always take some particular form; that its coordinating function requires it to be both rigid and elastic.
Chapters two and three explore how the two great monetary aggregates debt and capital evolve according to their own autonomous logics, actively reshaping — rather than merely reflecting — the organization of material life. With respect to debt, we highlight the importance of inflation and interest rates — as opposed to new borrowing — for its evolution over time, as well as the importance of political choices by central banks.
With respect to capital, our starting point is the tension between the conception of it as a mass of concrete means of production, on the one hand, and of a quantity of money, on the other. While economic theory treats capital as a quasi-physical substance that grows through the accumulation of savings, in reality, we argue, long run changes in measured capital are almost entirely due to changes in the value of existing assets. These in turn are explained by liquidity and financial conditions, on the one hand, and shifts in the relative social power of asset owners as against workers and the broader society, on the other.
Chapters four and five are concerned with the interest rate, the subject of some of the most difficult and important questions around money. We begin by criticizing both the conventional account of the interest rate in terms of substitution over time in a nonmonetary economy, and the related concept of the “”natural rate of interest” that is supposed to link this theoretical concept with the financial contracts that we observe around us. After rejecting these approaches to interest, we turn to Keynes’ alternatives. Keynes, we argue, offered two distinct accounts of interest — first, as the price of liquidity, and second, as a conventional price determined by the self-confirming speculative dynamics of bond markets. Both these stories, we argue, offer important insights into the interest rate, but they are two different stories, with sometimes quite different implications.
Chapter six focuses on money as measurement, interrogating the conventional practice of adjusting monetary quantities with a price index in order to compute underlying “real” quantities. In our view, what is real in an ontological sense is precisely the monetary payments and quantities. The ubiquitous practice of treating deflated money quantities as objects with an independent existence is deeply rooted in a ideological vision of the world that naturalizes markets and property rights; it distorts our efforts to understand the world in important ways.
Finally chapter seven asks what it means to imagine a world beyond money. Here we return to the idea of money as a coordination device, introduced in the opening chapter. Money is one particular way of organizing human activity — one that is especially suited to organizing cooperation between strangers, and separating specific forms of cooperation from the larger social matrix in which they are normally embedded. Thus it has played a central role in the creation of the vast division of labor that is so much more extensive in the modern world than in any previous society. But this is a not a process that continues without limit. Ongoing relationships tend to become reembedded, and conscious planning tends to replace the anonymous coordination of the market. Because we are so accustomed to thinking of productive life in terms of money, we tend to overlook the extent to which production is already socialized. Freeing ourselves from the rule of money may thus be a less utopian project than it appears.
The book is intended for anybody interested in debates about the nature of money, and not (just) for economists. We hope it will make a connection between the rich but often obscure currents of thinking about money in the heterodox economics traditions drawing from Keynes and Marx, and the wider universe of public debates.
We have been working on this book for a long time. I first announced it on my blog in 2020 (promising an early 2022 publication date!), but my earliest notes and outline for the book are from 2016. One way of looking at the book is as an attempt to fill in the argument we sketched out in the conclusion of our 2016 paper on “The post-1980 debt-disinflation”:
It was one of the great insights of Keynes that modern economies cannot be conceived of only as ‘real exchange’ economies; many important questions can be answered only in terms of a model of a ‘monetary production’ economy… In a world where liquidity cannot be identified with any particular asset but is essentially a social relation, analysis of the financial side of the economy requires discussing the asset and liability side of balance sheets independently, rather than netting them out as the pseudo asset ‘net wealth’. Any discussion of debt, in particular, must start from the fact that it is a financial liability, and not simply a negative asset or an accumulated excess of consumption over income. …
Both mainstream and many heterodox economists tend to analyse debt in terms of real flows. … But, in fact, the financial relationships reflected on balance sheets and the real activities of production and consumption compose two separate systems, governed by two distinct sets of relationships. Explanations that reduce debt to the financial counterpart to some real phenomena ignore the specifically financial factors governing the evolution of debt. The evolution of demand and production has to be explained in its own terms, and the evolution of debt and other financial commitments has to be explained in its terms. …
As a historical matter, the evolution of household debt in the US bears little resemblance to any of the real variables whose financial counterpart it is imagined to be. … Indeed, as a first approximation, it would be better to imagine household income and expenditure as evolving according to one set of systematic relationships, and household balance sheets evolving according to an entirely separate set of relationships. Balance sheets and real flows do interact, sometimes strongly. But conceptualizing the two systems independently is an essential first step toward understanding the points of articulation between them.
Arjun and I have made similar arguments about the autonomous development of financial variables here, here, here and here, among other places.
The book also builds on our 2018 article (with Enno Schröder) on “The Political Economy of Financialization, ” where we wrote: “In addition to, or instead of, a method for allocating claims on productive resources, finance can be seen as a system for constraining the choices of other social actors.”
And it builds on my 2016 Jacobin piece “Socialize Finance.” There, I wrote about what money
is imagined to be in ideology: an objective measure of value that reflects the real value of commodities, free of the human judgments of bankers and politicians.
Socialists reject this fantasy. We know that the development of capitalism has from the beginning been a process of “financialization” — of the extension of money claims on human activity, and of the representation of the social world in terms of money payments and commitments. We know that there was no precapitalist world of production and exchange on which money and then credit were later superimposed: Networks of money claims are the substrate on which commodity production has grown and been organized. And we know that the social surplus under capitalism is not allocated by “markets,” despite the fairy tales of economists. Surplus is allocated by banks and other financial institutions, whose activities are coordinated by planners, not markets.
I can’t promise that the book fulfills all the promises made in those earlier pieces. But that is what is an attempt at.
Writing, as they say, is rewriting. Our first draft of the book was 200,000 words. The final version is just over 100,000 words. Some of this was the usual tightening, but a large part was the cutting of three substantial chapters. One was a historical sketch of debates about money and credit over the past two hundred years of economic thought. One was an extension of the chapter on money as measurement to the international context, looking critically at the use of purchasing power parity to compare “real income” across countries. And one was an exploration of the political economy of the corporation, as a central locus of the conflict between the logic of money and concrete productive activity.
The first of these excised chapters we will, I hope, publish relatively soon as a self-contained article. The second is going into the drawer for now; at some point in the future, perhaps it will form part of a successor to this book asking similar questions about a world with many different moneys. The third excised chapter, on the corporation, we are fleshing out into our next book. It is provisionally titled The Hidden Abode: Profits, Production and the Contradictions of the Corporation, and — knock on wood — should be appearing sometime in 2027.
(I posted this announcement on my blog a little while ago, but neglected to send it out on this newsletter.)
Can’t wait to read this.
Look forward to reading it. The simplicity of notions about money found in much economics continues to surprise me. How far away is the profession from re-thinking about this?