The price of money, of course, is the interest rate — as Walter Bagehot and Keynes long understood. In mainstream economics, the interest rate is described as some kind of intertemporal trade-off between spending and saving. In the real world, central banks shape short-term interest rates in the economy. In the United States, changes in the benchmark interest rate are set by the Fed’s federal open market committee.
Yet central bankers like Jerome Powell, note the authors, describe their fine-tuning of monetary policy by appealing to a natural interest rate, as if economic variables were as unchangeable as stars in the night sky. (Paul Volcker, who was responsible for tightening the US money supply that led to skyrocketing unemployment in the early 1980s, also had a penchant for drawing examples from astronomy.) Yet claims about the natural interest rate as well as the natural rate of unemployment — the nonaccelerating inflation rate of unemployment, in economics lingo — are purely ideological.
As Anwar Shaikh wrote in his magnum opus, Capitalism: Competition, Conflict, Crises, Karl Marx himself opposed the idea of a natural interest rate — unlike Adam Smith and David Ricardo for whom the interest rate was proportional to the economy’s general rate of profit. Powell’s call for monetary fine-tuning with the “natural” interest rate as some kind of North Star joins systems (the intertemporal trade-off in orthodox economic theory and real-world liquidity conditions) that don’t necessarily cohere.
Against Money is at its best when pulling the rug out from underneath these kinds of orthodox economic claims. In some ways, the authors’ arguments echo earlier interventions such as those of the late-nineteenth-century German-speaking historical economists, who expressed discomfort with dematerialized visions of the world economy offered up by the British classical liberals. Quite unlike the abstractions of value and price of the great classical economists Smith, Ricardo, and even Marx, the German Austrian economists’ mapping of the world economy was informed by history, geography, and demographics.
There have been serious debates in economics over the nature of capital (e.g., “Cambridge, MA” vs. “Cambridge, UK” controversies). But Mason and Jayadev’s vision is entirely fresh and newly relevant thanks to a whole host of contemporary issues, such as the economics of the energy transition and the present commodity crisis. Of course, the current crisis that centers on the blockaded Strait of Hormuz is about real commodity shortages — but because of the financialization of commodities, it has led to a currency crisis in countries like Turkey. (Importers of oil and gas have been hit by much higher energy costs. The surge in inflation has destabilized the lira, driving the central bank to spend its monetary reserves on defending the currency.)
The authors remind us of the long struggle for monetary sovereignty in Turkey and even Europe. At present, as the gilt market is pummeled by bond-market vigilantes, the Bank of England, cloaked in the mantle of central-bank independence, stands by passively despite the immensely violent economic consequences. But if financial markets limit the political horizon for households and governments (and they aren’t alike), when regulated and retooled, credit can be a powerful source of expanding economic possibilities.
What would economic policy look like if it weren’t solely defined and circumscribed by a scarcity mindset? In modern monetary theory, real resources are the constraint, not money. For Mason and Jayadev, real resources aren’t the fundamental constraints on productive activity; the capacity to make (monetary) promises is. Theirs is a radically capacious view.
In the book’s closing pages, which began as a conversation between Mason and Jayadev in a Japanese curry house on New York City’s Lower East Side and ends at Prospect Park, the authors urge us to turn our backs on the “anti-knowledge” of mainstream economics and step into the sunlight, as it were. It is a radical proposition but one that this book has equipped us to consider seriously.
It takes courage and skill to write about money in accessible and nontechnical prose. The authors use of historical examples is brilliant. Their treks through monetary history can sometimes be long-winded but, in most instances, are enlightening. Good books teach us new ways of seeing the world. And this is such a book. As a specialist in the field, I see myself returning to it in my attempts to teach students how economic theory is constructed.
But Against Money isn’t just for economists. It will find audiences among historians, sociologists, and all those interested in looking at economics with a critical lens. This book is bound to appeal not just to scholars and students but also to a broader audience, just like Thomas Piketty’s Capital in the Twenty-First Century did. Unlike Piketty, who seeks to understand “the deep structures of capital and inequality” by imputing wealth estimates across centuries (with questionable assumptions about the value of both land and capital), Against Money begins by observing buildings and streetscapes. In a world in which economics is often misused, ground-up approaches to the discipline are needed now more than ever.
