What is Modern Money?

The term ‘modern’ in Modern Monetary Theory (MMT) has a double meaning. On one level, ‘modern money’ is a literary reference to Keynes’ A Treatise on Money in which he suggests that the money of modern states has been chartal for at least four thousand years (see, for example, footnote 13 on page 10 of this paper by Randall Wray). On another level, the ‘modern’ in Modern Monetary Theory can be used to denote the period since the breakdown of Bretton Woods in 1971 (see, for instance, this post by Bill Mitchell that distinguishes the gold standard and Bretton Woods eras with the more recent resumption in many countries of sovereign fiat currencies). It is this second sense of the term ‘modern’ that is relevant in the present context.

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The Macro-Institutional Delimitation of Economic Complexity

A while back, Brian Arthur of the Santa Fe Institute wrote a short piece on complexity economics (h/t Tom Hickey). I find much of the work Arthur and others have done on increasing returns, path dependence and related phenomena very interesting. At the same time, I think the basic outlook of complexity theory can be (though need not be) problematic if its emphasis on micro-level behavior is allowed to obscure the delimiting role of macro-level decisions, institutions and the socioeconomic system itself. The outlook, when this occurs, can become akin to the way economists traditionally (though less so now, at the cutting edge) depicted money as emerging spontaneously out of barter rather than recognizing its likely historical emergence in coercive debt relations and the central role played by the state, particularly through its imposition of tax and other obligations denominated in a state money. Certainly, those debt relations came out of prior micro-level and macro-level interactions, but once they are embodied in a society’s legislative and political framework, they significantly shape the parameters within which further behavior, complex or otherwise, plays out.

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