The relationship between A. Mitchell Innes's theory of chartalism and its reception by John Maynard Keynes. It critiques Keynes's understanding and critique of monetary theory, particularly in contrast to the Austrian school of thought represented by figures like Carl Menger and Ludwig von Mises. The focus is on how Keynes handled Innes's work and the implications for monetary theory.
1. Chartalism and Innes's Contribution:
• A. Mitchell Innes wrote "What Is Money? " in 1913, providing foundational ideas for chartalism, the theory that money's value comes from government regulation rather than intrinsic value or free market agreements.
• Modern Monetary Theory (MMT) owes much to Innes, with advocates like L. Randall Wray acknowledging the importance of his work.
2. Criticism of Monetary Theories:
• MMT proponents often dismiss traditional Austrian theories of money, particularly the Mengerian model, which explains money's evolution from barter systems.
• The argument that barter led to universally accepted media of exchange is often attacked by MMT supporters, who argue that historical evidence supports the idea of state-derived money.
3. Failures of MMT Argumentation:
• Critics highlight that many MMT arguments include misleading representations (strawmen) of traditional theories.
• Evidence from American history, such as the use of tobacco and other commodities as money, contradicts the MMT view that money originated solely from state intervention.
4. Innes’s Misinterpretations:
• Innes claimed that commodities like tobacco were not truly mediums of exchange, suggesting that their primary role was as a market price standard.
• This assertion is challenged by historical evidence that supports the idea of various commodities functioning as money in certain contexts.
5. Keynes's Inconsistencies:
• Keynes's review of Innes's work in 1914 acknowledged the historical strength but critiqued the lack of references to authoritative sources.
• Despite this criticism, Keynes seemed to agree with Innes’s conclusions, which aligned with his own views against traditional monetary theories.
6. Importance of Historical Context:
• Keynes’s conclusions were not based on robust historical evidence, which raises questions about the validity of Innes's claims.
• The article argues that historical analysis is critical in understanding the evolution of money, and MMT proponents must contend with this history.
7. Monetary Theory Challenges:
• The argument is presented that if chartalism cannot adequately explain the origins of money, then it lacks foundational legitimacy in discussing current monetary policies.
• The dismissal of alternative monetary theories without rigorous evaluation is seen as problematic and indicative of intellectual bias.
8. Intellectual Bias:
• The article suggests that Keynes promoted Innes’s ideas not purely for their merit but because they aligned with his existing philosophies on monetary policy.
• Ideas in economics often gain traction based on their appeal rather than their factual validity, posing a risk to sound economic reasoning.
The article critically examines the underpinnings of chartalism as propounded by Innes and examined by Keynes, revealing significant historical inaccuracies and a reliance on ideological alignment. It emphasizes the need for comprehensive historical analysis in the discussion of monetary theory and critiques the tendency to dismiss traditional views without fair evaluation. The debate over the nature of money remains deeply influenced by these foundational texts and their interpretations.
https://mises.org/mises-wire/keyness-intellectual-dishonesty-and-chartalism
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