Re: Putting Chartalism In Its Place?

["Esteban Perez" <eperez@xxxxxxxxxxxx>]

I don´t think the authors I cited are Chartalists or understand its implications. My point was simply that NC theory cannot explain within its own logic money as a medium of exchange or that as monetarists believe, the unit of account function is subsidiary to that of the medium of exchange. The example I gave simply illustrates that even within NC money cannot perform its function of medium of exchange unless it is first a unit of account sanctioned by an institution that can enforce the payment of taxes. And this leads to a contradictory stance between their views on money and their policy prescriptions.
The alternatives are either some type of infinite horizon model which has its own logical problems or commodity money (Metallist).

Esteban Perez


<<< "Matias Vernengo" <matias.vernengo@xxxxxxxxxxxxxxxxxx>  9/16  4:38p >>>
Fair enough.  It is true that some neoclassical authors are in fact chartalist.
Goodhart is one example of that.  This goes to show that if PKs are not all chartalists
and some neoclassicals are, chartalism per se is not what makes PKs distinctive.
Matias

Date sent:      	Tue, 16 Sep 2003 15:59:44 -0400
From:           	"Esteban Perez" <eperez@xxxxxxxxxxxx>
To:             	<pkt@xxxxxxxxxxxxxxxx>, <matias.vernengo@xxxxxxxxxxxxxxxxxx>
Subject:        	Re: Putting Chartalism In Its Place?

> "Matias Vernengo" <matias.vernengo@xxxxxxxxxxxxxxxxxx>  9/15  6:09p wrote:
>
> Neoclassicals in fact define what money
> does in technical terms (i.e. technical characteristics that allow it to perform its
three
> traditional functions).  In that sense, the State has no role in determining the
> acceptance of money, by imposing taxes or any other method.
> ------------------------------------------------
>
> I am not so sure.
> NC theory in its neo-walrasian variant has a hard time explaining the existence of
money (or the funtion of money as a means of exchange) that is not commodity
money without resorting to the government (or the backing of money by an institution
that can enforce the payment of taxes).
> In a finite horizon the price of money is equal to 0. Two solutions have been
proposed. The first corresponding to Arrow and Hahn is to asume that money has a
utility which is independent of its exchange value. Money is something more than a
media of exchange. The second solution was proposed by Starr: ´money is accepted
because the government accepts it´ and also found in Gale (1982) applied to a
specific context, trustworthiness in a coopeartive approach to money. Gale writes:
>
> ´First, it is not the invention of paper money  which restores trustworthiness. The
Walras allocations are trustworthy in the monetary economy only becuase there is in
the background, a government which can enforce..the payment of taxes.....´ And
>
> ´the monetary arrangement described in the theory works because it is a social
institution , i.e., it is backed by the power of grovernment to enforce taxes.´
>
> Esteban Perez
>
>
>


Matias Vernengo
Assistant Professor
Dept of Economics
University of Utah
1645 Campus Center Dr, Room 326
Salt Lake City, UT 84112
801 581-8318
801 585-5649 (fax)
http://www.econ.utah.edu/vernengo/