Re: Putting Chartalism In Its Place?

["Barkley Rosser" <rosserjb@xxxxxxx>]

     Certainly high general equilibrium theory
has a problem with money, but more for uniqueness
of equilibrium than for how or why it exists.  There
is a substantial literature that argues that money
as a medium of exchange arises to minimize
transactions costs, notably the old "double
coincidence of wants" problem that arises in barter
economies.  No government is needed for this to
happen, and the original Austrian, Carl Menger,
described very ably how it can happen (Austrian!?
boo hissss!).
       As I have shot off my mouth too much already,
let me go out by making a further point a bit further.
       There is a group on this list that believes
a)  in a strong form of chartalism,
b)  that full employment should be brought about
by governments, using deficit spending if necessary,
and,
c)  that a) and b) are necessarily linked.
     (There is another group on the list that disagrees
silently with much of the above, except for grumbling
in obscure corners about it all.)
      I think c) is questionable, irrespective of one's
views on a) or b) (I happen to be reasonably sympathetic
with b), while obviously not being much of a fan of a) ).
Thus, one might be a chartalist while also rejecting b),
perhaps because one believes that deficit spending will
lead to various economic problems, inflation, a lack of
savings, international indebtedness, etc.
     I understand
that most chartalists on this list do not think that monetary
expansion due to deficit spending is inflationary.  But that
is not a necessary outcome of chartalism.  If velocity of
money is constant, or increases with any increases in
real output due to increases in money supply, then M
can still drive P in a chartalist world and be inflationary.
      Secondarily (closer to my position), I see no reason
why one might not support vigorous fiscal policies to bring
about full employment, even if one does not necessarily
accept the chartalist definition of money.  Why is it necessary
for one to believe in chartalism to accept full employment policies?
       That's all for now, and, Michael P., sorry that I don't know
the answer to your question about the origin of the shekel.
Barkley Rosser

----- Original Message -----
From: "Esteban Perez" <eperez@xxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>; <matias.vernengo@xxxxxxxxxxxxxxxxxx>
Sent: Tuesday, September 16, 2003 3:59 PM
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
>
>
>
>