Wednesday, January 14, 2015

Bill Black — What if the Public Understood How Money Works?

Economists as the Secular Priestly Caste Guarding Knowledge of the Holy of Holies
There’s something invigorating about people freaking out about modern monetary theory (MMT). They treat MMT as akin to the Ark of the Covenant in the first Indiana Jones movie. They are petrified that knowledge of the financial equivalent of the “holy of holies” will be released to normal people because they project their greatest terrors onto the possibility that the public will be transformed and empowered by their knowledge of matters that much of the financial world has understood for at least a century.

The Other MMT: Monetary Myth Theory
 
Randy Wray has written about the time when the Nobel Laureate in Economics, Paul Samuelson, explained in an interview with Mark Blaug (in his film on Keynes, “John Maynard Keynes: Life/Ideas/Legacy 1995″) the need to limit the knowledge of true nature of money to the priestly caste of economists.

“I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say “uh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.”
 
Notice the breadth of ideology represented by the economic priesthood – from the hardest right represented by the Nobel Laureate James Buchanan to wherever one places Samuelson on the spectrum. One can see why Samuelson foisted a bowdlerized version of Keynes on economics students for decades in which massive unemployment is essential to avoiding “inefficiency.” 
Notice also the depth of the disdain the priestly caste of economists has for democracy.…
This is one of Bill's best. Trenchant.

Neoliberalism is incompatible with popular participatory democracy and it results in oligarchic "democracy" where the people get to choose candidates selected by oligarchs through the "political" process in which wealth and influence are determinative. That wealth and the influence it creates are generated by the class and power structure than are dependent on extraction of economic rent.

New Economic Perspectives
What if the Public Understood How Money Works?
William K. Black | Associate Professor of Economics and Law, UMKC

10 comments:

Matt Franko said...

"truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. "


this statement is standard gold standard thinking.... there is NO WAY one should assume that this guy had any insight into the type of system we are running post gold standard by reading this....

He talks about "allocation of resources" with "resources" code for the metals... "chaos" code for "inflation" , etc...

MMT people are looking at this statement as waaaay to revealing...

Is Black asserting that Putin read Samuelson? And now Putin wants to balance the budget because he like Samuelson is trying to pull the wool over the eyes of Russia?

LOL!!!!!

The Just Gatekeeper said...

This piece is one for the ages. Too bad it wont be seen by the millions and millions of people for whom Bill is a fearless champion.

Ralph Musgrave said...

Good article by Bill Black. Though Henry Ford wasn't 100% wrong when he said, "It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Kristjan said...

"Neoliberalism is incompatible with popular participatory democracy and it results in oligarchic "democracy" where the people get to choose candidates selected by oligarchs through the "political" process in which wealth and influence are determinative."

You are great Tom, this is exactly right.

Malmo's Ghost said...

Forbes freakout? I read no such thing. Also, where did Worstall claim people can't handle the truth or that he seeks to cause undo harm to the American people? I think he lays out a very cogent argument against a DC blank check government. In other words he's not necessarily a sadist or a quack in his doubts regarding an MMT world, anymore than Krugman is.

Like it or not, the political realities Worstall elucidated aren't going away soon. We are governed under a republic not a mob-ocracy, MMT notwithstanding. Understanding how money works isn't a magic bullet here in America. Good government in our divided polity is way more complicated than that.

Malmo's Ghost said...

Like it or not, Worstall is right in his concerns from a less intrusive federal government perspective, that is--not an anarchist view by any means:

"..Even if everything is paid for by printing money, tax just curbs the inflation that would result without tax, it’s still true that what is being ordered around is us and our labour and the resources around us. And yet ever more of those things being determined by government rather than by us ourselves individually and as voluntary collectives just doesn’t sound like a good idea to me at all.."

A said...

Ralph,

you focus on full reserve banking misses the point.

Greg said...


"..Even if everything is paid for by printing money, tax just curbs the inflation that would result without tax, it’s still true that what is being ordered around is us and our labour and the resources around us. And yet ever more of those things being determined by government rather than by us ourselves individually and as voluntary collectives just doesn’t sound like a good idea to me at all.."

All very true , of course, but the problem as I see it is how Worstall and many others ignore that in fact what we have is not "too much" govt, but too little govt...... for the people. What everyone identifies as govt is in fact a corporate state. He wants, it seems from his last sentence, "us ourselves" and "voluntary collectives" to determine our future budgetary priorities. He probably even derisively uses the term "central planning" somewhere but there is no budget process on a national level without CENTRAL PLANNING. If you think corporations aren't centrally planning your nuts. Each corporation makes its own plans but somewhere a plan of inter corporate planning also must be made........... and is being made... for us... and TO us!!

Malmo's Ghost said...

@Greg

What is too much or too little government? Where exactly should the line be drawn? Do you or anyone else believe there can be too much government? If so please define? Worstall draws a line where he dislikes government intervention when it comes to who gets to decide how and what we do for work. He doesn't desire an MMT inspired bureaucratic fix. That doesn't mean he's anti government or sadistic. Perhaps his thinking is like Charles Murray's and he'd be happy with direct transfer payments of $75k per family? Don't need a giant bureaucratic apparatus for that. But since we're talking democracy here, what percentage of people desire government appointed agents deciding where, what and how they do their daily work as a condition for getting to do the work in the first place? Good luck getting 10% to agree with that arrangement.

Malmo's Ghost said...

I see where Yves Smith is pontificating on the JG over at her site. It's simply hilarious to watch left wingers sound no different the Moral Majority, protestant work ethic cohort. lol.