Home > Uncategorized > ‘Money as electricity’ – redux

‘Money as electricity’ – redux

Morris_A__CopelandThe heterodox heritage of economic statistics is underestimated. Too often I encounter the idea that heterodox economics does not provide an alternative to mainstream economics, let alone economic measurement. Ahem. Instead of ignoring (data on) unemployment (Robert Lucas!) or ignoring (data on) money and the monetary system (more on this below), it were heterodox economists who set out to measure it. To quite an extent, economic statistics are the heterodox alternative people want to see, surely when it comes to macro-economics . If alone because unlike mainstream macro it does carefully define variables – modern science! The mainstream equivalent of the tedious statistical manuals which economic statistics use to do this is entirely absent! One example of such data are the Flow of Funds.

This system was designed and estimated by Morris Copeland, a fierce ‘unreformed institutionalists’ (i.e. someone who understood the economy as an evolving and ever changing system) and a leading anti-neoclassical economist who did not only publish in economic journals but also in ‘journals of philosophy, political science, psychology, statistics and accounting’.

these Flow of Funds data are important and widely used. Look here for an Anne Mayhew article in the Real World Economics Review on Copeland and the importance of the Flow of Funds. Look here and here for ECB articles on the use of the Flow of Funds to investigate the financial health of the economy. Look here for a Bank of Japan overview of the Japanese, USA en Eurozone Flow of Funds data. Look here for the Flow of Funds data of the Central Bank of India. I can go on. Here you will find his defining text about this (kudo’s to the NBER, another institutionalist institution, for making this available online). And yes: people like Minsky, Keen, or Bezemer are indebted to Copeland, just like the central banks, According to the Copeland Wikipedia page (assessed 17-7-2017),

“Copeland shared the institutionalist skepticism of “economic laws” that purport to be applicable outside of specific historical institutional contexts. He viewed orthodox theory more as expressions of doctrine rather than empirical observation. For example, he saw the quantity theory of money as a mathematical device convenient for neoclassical doctrine rather than as a hypothesis that emerged from solid empirical observation of economic data. Rather than base economics on introspection and mental states that cannot be empirically verified, he wished to engage in what he viewed as a more science-based approach which necessarily proceeds first from observations about an economy’s actual behavior… According to Copeland, when you look at the economy from the micro perspective of money flows, it provides a powerful new way making phenomena visible that are simply abstracted away by the orthodox Keynesian and Monetarist models. Copeland’s flow of funds set of accounts provides an alternative framework and analytical insights that is unavailable from either the Keynesian NIPA framework or the monetarist quantity theory of money framework… Copeland is recognized as an early Post Keynesian, presenting the view that ‘the changes Keynes introduced represented modifications of neoclassicism, not its rejection’….For his innovations in money flow theory, many colleagues believed that Copeland should have received the Nobel Prize.

Aside – the modern national accounts often do incorporate important elements of the flow of funds, for instance by accepting that {consumption + net purchase of financial assets} is financed by {income + net borrowing}.

Mainstream economics has neglected such innovations at our peril. After 2008 such ideas came into the limelight again and mainstream economists started to tinker with them, and for good reason. But we should not forget money, again. Which among other things means that we should continue to criticize proto-scientific ideas. And to stress that non-mainstream economists contributed decisively to our body of economic knowledge and the importance of the historical context – which is not just the surrounding which enables economic laws to work but which shapes the laws themselves. Money is, as we speak of it, a nice example. Present day money is not the same thing and does not have the same characteristics and possibilities as nineteenth century money. The same for credit. If the war against cash succeeds money might soon be the tool which enables mass surveillance of citizens… which will make for another economy. The nature of the change might have surprised Copeland. The changing itself: not.

  1. July 17, 2017 at 4:36 pm

    So nice to see this focus on institutional issues and particularly money. I have been a member of the Green Money Working Group ( founded in Austria, UK and USA ) and the task is to design new currencies that can be based on solar-generated electricity, better than gold , since a MW. of electricity is a scientific real world phenomenon.
    Now I have found SolarCoin, the first blockchain-based ” reward” currency ( the opposite of bitcoin, which is a thermodynamic black hole). SolarCoin http://www.solarcoin.org rewards anyone on the planet who actually harvest solar energy into usable electricity anywhere on Earth. It is verifiable , recognized in many countries and is now traded on a cryptocurrency exchange. We at Ethical Markets are now partners with SolarCoin .Time to get real , beyond endless theorizing ! This currency may become the world’s SDR !

    • July 17, 2017 at 11:17 pm

      Hazel, I wonder if it has occurred to you that anyone growing green things is harvesting solar energy? And cleaning up, cooling down and inducing the watering of the planet while it is doing so!

  2. July 18, 2017 at 7:44 am

    The socially constructed expectation of women being the main providers of ‘unpaid care’ labor is enforced by gender norms. Research (by non-economists) indicates that women often perform a greater share of household chores and childcare activities, even if employed full-time outside the home. Due to globalization, women have increasingly been expected to take on both paid and unpaid jobs, contributing to family income while still being the main providers of unpaid labor. This inequality emphasizes the global gender division of labor. Creating what researchers call the “double burden” as a norm for women. A gendered economic norm. This has increased the economic vulnerability of women, as women in financial crises are more likely to be poor, unemployed, ill in health, and under-educated. Women often suffer more during financial crises because they tend to be more disadvantaged economically than men.

    Such research is common in sociology and anthropology, and in feminist economics. But it has no place in mainstream economics. Why is one of the major socioeconomic issues facing the planet MIA for mainstream economists? But the few institutional economists left don’t ignore it or dismiss it.

  3. July 18, 2017 at 1:15 pm

    Ken:

    Take a look at the work of philosopher Nancy Fraser, who is pretty good on economics as well, and politics too…she had done a lot of work in precisely the area you have written about: the “double day” for working women.

    Here’s a brief sample of her work from Dissent magazine: https://www.dissentmagazine.org/online_articles/progressive-neoliberalism-reactionary-populism-nancy-fraser

    I think to make long term and contemporary sense of this issue of unpaid labor for women, it surely would help to sketch out, or better, to delineate the long history of work in the home and out of it prior to industrialization. Even unto classical times, Greece and Rome, the long interim before the Medieval system, and then of course, the “putting out” system before Industrialization. That will help illuminate the work “flows” to try to show what has been long inherent – a long history of gender struggles over the division of labor, and just how industrial capitalism altered or not those flows. I think the longer time horizon’s are necessary for the illumination.

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