Re: Putting Chartalism In Its Place?

["Barkley Rosser" <rosserjb@xxxxxxx>]

     All that I have been objecting to here
is the scattered use by some folks on the
list of the idea that it is paying taxes that
DEFINES what money is.  I am perfectly
amenable to the idea that in modern fiat
economies, this is a very important part
of what money is.
     When I pick up an intro textbook or a
text on monetary theory, I never find the
chartalist theory put forward as the definition
of what money is.  One can easily lapse
into sneering that well these are all just
neoclassical mainstream garbage books.
But I would note that such a view is not
universal even among Post Keynesians,
not to mention many other heterodox
economists, much less among the
mainstream.
     Thus (and I see that he carefully
stays out of these discussions), I just
scanned over my copy of Paul Davidson's
Post Keynesian Macroeconomic Theory
(don't own Money and the Real World but
have read it and remember it as saying
similar things), and there is no mention
of the role of paying taxes to the state at
all in there regarding the definition of money.
Money is to settle contracts and to store
value for future contracts in an uncertain
world.  The state is cited as aiding in
determining what money is by legalizing
it for settling contracts, but not for paying
taxes (that is not mentioned, not denied).
      The standard textbooks usually list
three "functions of money," (medium of
exchange, unit of account, and store of
value) and then basically say that whatever
fulfills all of those functions is money.  This
seems very reasonable to me.  What is
involved in establishing that something
will fulfill those functions is another matter,
and having people pay taxes to the state
is certainly a very important part of
establishing that something will fulfill
those functions.
Barkley Rosser
----- Original Message -----
From: "William F Hummel" <wfhummel@xxxxxxxxxxx>
To: <rosserjb@xxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
Sent: Sunday, September 14, 2003 5:37 PM
Subject: Re: Putting Chartalism In Its Place?


Barkley Rosser wrote:

>     I know I shouldn't get into
>this, as this is an old and much
>beaten up chestnut on this list,
>with many holding views very strongly,
>but, can somebody please remind me
>why the objects whose use as general
>media of exchange in "primitive" economies
>with no state collecting taxes are not
>"money" as is thought by most economists?
>Is this simply a matter of definition,
>or is there something else involved here?

>     Presumably no one is going to pretend
>that no such spontaneously evolved objects
>have existed in world history, even if they
>are now no longer in use much of anywhere.
>I have no problem with someone arguing that
>in our current world economy with well
>developed and domineering states, it is
>irrelevant to speak of anything being
>money that is not used for paying taxes.
>But to argue that it is being able to pay
>taxes with something that makes it money,
>well, what then are we to call those
>objects that most economists call
>"natural commodity monies"?
>Barkley Rosser

Barkley,

I don't claim that the state theory of money explains all historical
examples of money usage.  Money has so many facets that it may be
impossible to find a theory that covers all cases, though it's fun
try.

Where the state theory of money shines is in explaining how a modern
fiat money system works.  Taxes are the key element because they drive
the system and provide the means of controlling the abundance of money
and credit in the system.  I briefly discussed that in another post,
and won't attempt to elaborate here.

William