Forgot Your Password?

New to The Nation? Subscribe

Print subscriber? Activate your online access

.nation-small__b{fill:#fff;}

In their new book, economists Arjun Jayadev and J.W. Mason examine the peculiar role money plays in shaping human life.

Despite using it every day, and spending a lot of time thinking and worrying about it, nobody can quite agree on what money is, or why it so often seems not to do what we want it to. Even economic theory, which you would expect to have the answers, cannot decide whether money doesn’t matter at all, or whether it’s essential to economic life. Most economists agree on what money is for: It is a unit of account, a medium of exchange, and a store of value. Most textbooks claim that it emerged from barter as a private-sector way of making transactions easier, and the total absence of historical or anthropological evidence for this claim has hardly slowed it down. Yet this is where the agreement ends and the problems begin. For many economists, money is “neutral,” meaning that it simply represents a true underlying value and has no power of its own to shape anything. Some, like the early-20th-century economists Irving Fisher and John Maynard Keynes, even spoke of a “money illusion” that fools people into confusing the face value of money with its actual ability to command goods and services, like believing that a dollar in 1875 is the same as a dollar today. It’s not an accident that economists contrast the “nominal” monetary economy with what they call the “real” economy. Money is somehow less than—or at least distinct from—material reality itself.

In their new book, simply titled Against Money, the economists Arjun Jayadev and J.W. Mason set out to show that confusion about money and the peculiar role it plays in shaping human life are the result of confusion within the field of economics. “Money values,” the authors assert, “do not reflect any real things or quantities already existing in the world.” But at the same time, many familiar economic concepts like inflation, gross domestic product, debt, and credit only exist as money values. How, then, do these ideas have power in the world? Recognizing the actual autonomy of money reveals the hidden forms of social authority and, with them, new possibilities for using the systems of money and credit to produce better social outcomes.

An essential preliminary fact about Against Money is that Jayadev and Mason are heterodox economists, and this book is both a presentation of heterodox ideas and an extended critique of what the authors call “mainstream economics.” This fact will certainly shape the book’s reception: Readers invested in mainstream economics will likely dismiss it out of hand; readers skeptical of the mainstream will likely read it with sympathy; and orthodox Marxists will reliably be annoyed by the book, because it aims for radical conclusions that are still expressed in the idiom of traditional economics.

Heterodox economists such as Jayadev and Mason—as well as their teachers, James Crotty and Axel Leijonhufvud—reject the interpretation of Keynes at the heart of neoclassical and neo-Keynesian economics, which is exemplified by leading mainstream economists like Paul Samuelson. While mainstream economists argue that Keynes’s work provides the policy tools to achieve growth and equilibrium, their heterodox counterparts insist that economies do not tend toward stability, efficiency, or equilibrium. For them, economies are at least as likely to end up with monopolies as with competition, and crises are likely to happen even when the systems are working as intended, not just when there’s an outburst of fraud or irrationality. These heterodox economists further argue that their conclusions don’t stem from a rejection of Keynes but from a closer reading of his work, as well as that of his contemporaries Joan Robinson and Pierro Sraffa, who argued that most economic models do not accurately reflect an underlying reality and are therefore of limited explanatory power.

Heterodoxy plays a special role in the field of economics. Heterodox economists often read and respond critically to mainstream economists, who generally don’t return the favor except in moments of crisis, when the poverty of economic theory and policy is revealed and mainstream economists decide to raid the ideas of their heterodox colleagues. One such example: After decades of ignoring Hyman Minsky, mainstream economists finally started to take his theory of financial fragility—the idea that crises can result even from the normal, legal workings of the financial system—seriously after the 2008 subprime-mortgage crisis. Or another: In the midst of the Covid-19 pandemic and vertiginous inflation, mainstream economists reluctantly began to listen to Isabella Weber’s arguments for price controls. Although Paul Krugman once dismissed her proposals as “truly stupid” (for which he later apologized), today Weber’s op-eds........

© The Nation