Keynes & MMT

25 Jun, 2017 at 18:40 | Posted in Economics | 6 Comments

[Bendixen says the] old ‘metallist’ view of money is superstitious, and Dr. Bendixen trounces it with the vigour of a convert. Money is the creation of the State; it is not true to say that gold is international currency, for international contracts are never made in terms of gold, but always in terms of some national monetary unit; there is no essential or important distinction between notes and metallic money; money is the measure of value, but to regard it as having value itself is a relic of the view that the value of money is regulated by the value of the substance of which it is made, and is like confusing a theatre ticket with the performance. With the exception of the last, the only true interpretation of which is purely dialectical, these ideas are undoubtedly of the right complexion. It is probably true that the old ‘metallist’ view and the theories of regulation of note issue based on it do greatly stand in the way of currency reform, whether we are thinking of economy and elasticity or of a change in the standard; and a gospel which can be made the basis of a crusade on these lines is likely to be very useful to the world, whatever its crudities or terminology.

J. M. Keynes, “Theorie des Geldes und der Umlaufsmittel, by Ludwig von Mises; Geld und Kapital, by Friedrich Bendixen” (review), Economic Journal, 1914

6 Comments

  1. “money is the measure of value, but to regard it as having value itself is a relic of the view that the value of money is regulated by the value of the substance of which it is made, and is like confusing a theatre ticket with the performance.”

    I’m not convinced that money should be the measure of value because there are so many externalities and market misvaluations. This blog for example has no value because it is free, yet I learn from it … money doesn’t measure knowledge well because information is not a conserved quantity: I can gain knowledge while transmitting it, without losing any of the knowledge I gave away. Using money to measure the value of knowledge is a fundamental mismatch, I think.

    The part about money being like a ticket reminds me of C. H. Douglas. See https://en.wikipedia.org/wiki/Social_credit

    “Douglas believed that money should not be regarded as a commodity but rather as a ticket, a means of distribution of production.”

    Comment by Robert Mitchell— 29 Jun, 2017 #

  2. Money historically was certainly not the product of the state. In the days of Keynes the state may have been producer of paper money but today in the IT age the banks produce money. The source of the money greatly influences its use, politics and the media.
    Its not a coincidence that a former banker is president of france.

    Comment by Rs— 26 Jun, 2017 #

    • Banks can create money through loans, but so can individuals. What makes bank money acceptable to people is that it can be converted into government money on demand. What makes you believe that “Money historically was certainly not the product of the state” ? I happen to believe the opposite.

      Comment by Jerry Brown— 26 Jun, 2017 #

      • Because transactions historically used liquid goods such as gold or tobacoo. It was these goods that became known as ‘money’

        Comment by Rs— 27 Jun, 2017 #

  4. It is very nice to know that John Maynard Keynes would have agreed with my last comment, what ever my crudities or terminology. I guess he was a smart guy after all 🙂

    Comment by Jerry Brown— 25 Jun, 2017 #


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