The Money Question: A New Web Site for Monetary Theorizing

The monetary reform organization Positive Money in the UK has just launched a new web site titled “The Money Question“.

In their own words, this web site is

. . . the place to find the latest debates and discussion on the bedrock of economics: money. This space connects the people seeking to understand how money and the monetary system works and how it could be reformed to better serve society.

The introductory video opens with some very basic questions by the “renegade economist” and author of the widely praised book Doughnut Economics, Kate Raworth:

Who has the power to create money?

What character does it have?

What can it be used for?

According to the eminent Keynes expert Victoria Chick the answer to “these questions are still, believe it or not, up in the air after centuries of discussion” and she hopes that this web site will improve the debate and provide interesting conclusions.

The bedrock of the site is a group of six articles on the theme of monetary reform and covers a temporal span beginning with the origin of money and the history of banking, to an analysis of the current system and present-day monetary theories to, most importantly, the design of and transition to a Sovereign Monetary System.

Given the fundamental differences and sometimes acrimonious relationship between Modern Monetary Theory (MMT) and Sovereign Monetary Reform (SMR) it is somewhat surprising to find an article dedicated to MMT with a sympathetic view of its accomplishments as a new macroeconomic paradigm. Though it mentions critiques from mainstream economists, the article brushes over the many incisive criticisms leveled at the theory from other heterodox corners, especially from the path breaking monetary systems analyst and reformer Joseph Huber and independent analyst Thomas Palley. On the other hand, the article “Economic Perspectives on Money” addresses the difference between MMT and SMR, maybe not as thoroughly as needed and without adequate references, but still, a beginning.

The web site also offers a commendable “Glossary” which is still a work in the make and needs some clarifications here and there. In this section people can leave comments and discuss its merits.

Under “Resources” the site presents “a carefully curated list of papers, newspaper articles and books from Soddy in the 19th century to cutting edge releases from academics and central banks across the world”. The list contains almost 100 items with links to mostly their full text and is searchable by these categories: Year of publication, Publisher, Type and Content.

In the blog section the economist Neil Smith delivers a thoughtful reflection on the strife between orthodox, formalist economics and contemporary, heterodox “heretics”, who might have a more narrativist, historical bend. He makes the case for orthodox economists to step off their formalist horse and provide more “narrative descriptions of formal concepts” and appeals to the heterodox heretics to actually step up their game, especially in communicating with each other, with simple math and spreadsheets.

In that spirit the recently promoted monetary theorist and activist Patrizio Laina addresses the questions of what the research in monetary theory has so far achieved and what still remains to be done. In his blog “Where are we now? The current state of research and next steps” he indicates several areas which need attention.

One area is conceptual clarification and consolidation around the concepts of money and debt. Another is the differentiation between different monetary reform proposals. His observation that the “discussion on monetary reform would be easier and more fruitful if concepts are unambiguous and therefore readily comparable” is of course easier said than done, but it has to be accomplished.

Another area to focus on is the international aspect of monetary reform. How would the international community react to such an experiment? Most economic models running SMR found overall positive results domestically, but the impact on international money flows have not yet been studied, let alone modeled. Interestingly the IMF sees some wiggle room.

The last issue he addresses is the partial implementation of, and experimentation with, central bank digital currency (CBDC):

“Implementing a voluntary or partial full-reserve banking system would provide important data on how public money might work while avoiding risks involved in the full-fledged implementation of full-reserve banking.”

What the web site misses so far is a more detailed account of monetary reform efforts in the USA with the NEED Act engineered by congressman Dennis Kucinich with the help of Stephen Zarlenga of the American Monetary Institute; in Iceland and its government commissioned report; in the UK with its effective activist Positive Money and the parliamentary debate it triggered; in Switzerland and its citizen’s initiative and referendum; in Finland with an event at its parliament; and in the Netherlands with a citizen’s initiative by Ons Geld resulting in a hearing, a parliamentary debate and a scientific report. There is much to learn from these efforts.

The still bit weak parts are the glossary and the categorization of the article on MMT under monetary reform, where it does not belong. We believe MMT to be a flawed theory without a reform component.

Having said that, overall this web site looks like a promising new addition to the internet corner dealing with some of the most basic economic and moral issues of our time, i.e. the analysis of the current monetary system and its possible sweeping reformation for the benefit of humanity and its endangered environment.

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