What is money?6 December, 2012 at 13:23 | Posted in Economics | 15 Comments
As a young research stipendiate in the U.S. back in the 80s, yours truly had the great pleasure and privelege of having Hyman Minsky as teacher. He was a great inspiration at the time. He still is.
Since we live an a world of uncertain-ty and current views about the future affect capital-asset prices, the governor mecha-nism by way of financing terms is often dominated by positive, disequilibrating feedbacks … Because bankers live in the same expectational climate as businessmen, profit-seeking bankers will find ways of accommodating their customers; this behavior by bankes reinforces disequilibrating pressures …
Both the monatarist and standard Keynesian approaches assume that money can be identified quite independently of institutional usages. But in truth, what is money is determined by the workings of the economy, and usually there is a hierarchy of monies, with special money instruments for different purposes. Money not only arises in the process of financing, but an economy has a number of different types of money: everyone can create money; the problem is to get it accepted.
As all students of economics know, time is limited. Given that, there has to be better ways to optimize its utilization than spending hours and hours working through or constructing irrelevant economic models. Instead of risking to just reinvent the wheel, I would rather recommend my students allocating their time also studying great forerunners like Keynes and Minsky, to help them constructing better, real and relevant economic models – models that really help us to explain and understand reality.