Home > Uncategorized > Developments in money and finance absent from conventional macro textbooks.

Developments in money and finance absent from conventional macro textbooks.

from Asad Zaman

Somebody aptly quipped that ‘Trying to understand the economy without understanding money and finance is like trying to understand how birds fly, without taking the wings into account”.

The Hegelian anti-thesis of the orthodox economic position that money is neutral, is the idea that “money is everything”. Economics is just the analysis of monetary flows, both within a society, and globally. Karl Marx describes the change in perspective via the formulae C-M-C’ versus M-C-M’. In the first paradigm, commodities C are sold to get money M, in order to buy another set of commodities C’. This picture of a barter economy, in which money just facilitates exchange, is at the heart of modern economics; this is why money does not matter. However, in a capitalist economy, M(oney) is used to produce commodities C, and these are sold for more money M’. Money is the goal of production and sales, not an instrument for exchange of commodities. An economy where the drive for profits is the main motivation for productions and purchases, requires an entirely different analysis.

In his classic work on “The Long Twentieth Century: Money, Power, and the Origins of Our Times”, Giovanni (1994) describes how the accumulation of capital (wealth, money) has been the central driver of history over the past several centuries. Giovanni provides a wealth of historical details and a global context to support this thesis, based on a world-systems perspective. Many other authors, writing from many different perspectives, have documented how “money makes the world go around”.

In particular, Minsky’s (1986) analyses of this phenomena are of special importance from the economic point of view.  read more

  1. Econoclast
    November 4, 2020 at 4:30 am

    I like all of Asad’s posts. But, come on, RWE and WEA, he cites author-date publications but in no case can I find the notes or bibliography to which these refer. This has happened before. Better scholarship protocol, please.
    (Oh, I can find these on my own, but I shouldn’t need to).

  2. November 4, 2020 at 9:28 am

    To read the full paper, see: International Econometric Review, Vol 12 No. 1 (https://dergipark.org.tr/en/pub/ier/issue/54778) or SSRN Version (https://papers.ssrn.com/abstract=3660076). This has all the references

    • Econoclast
      November 5, 2020 at 5:21 am

      Thank you, Asad.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.