About Current Scholarship

This page contains abstracts and links to recent scholarship on monetary design and related issues. We also welcome posts to older scholarship that should be flagged.

Please submit abstracts to Dan Rohde: editor@justmoney.org

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Crisis of Capitalism and (De-)Politicisation of Monetary Policymaking: Reflections from Hungary and Turkey

Author: Pınar E. Dönmez & Eva J. Zemandl

This article explores the changes in monetary policymaking in Hungary and Turkey in the context of the post-2008 global financial crisis and restructuring. Both countries went through a thorough restructuring process in the pre-2008 context. While this process has introduced and consolidated depoliticised forms of governing to a certain degree in both countries, we suggest that the latest crisis has contributed to the emergence of a politicisation process. In the Hungarian case, these processes are reflected in both discursive attempts and the instalment of visible centralised control over the management of money. In Turkey, intensifying discursive attempts to politicize monetary policy have not led to an explicit change in the formally depoliticised character of central banking until recently but politicised other policy areas. In both countries, the process has accompanied the entrenchment of increasingly oppressive discourse and practices as part of the overall management of the crisis- ridden capitalist social relations. The paper aims to explore these similarities and differences within a critical political economy approach to state, governing strategies and (de)politicisation and to contribute to advancing research beyond the established case studies in the existing literature.

Pınar E. Dönmez & Eva J. Zemandl (2019) Crisis of Capitalism and (De-)Politicisation of Monetary Policymaking: Reflections from Hungary and Turkey, New Political Economy, 24:1, 125-143, DOI: 10.1080/13563467.2017.1421624. 

Modern Capitalism’s Multiple Pasts and Its Possible Future: The Rise of China, Climate Change, and Economic Transformation

Author: R. Bin Wong

Modern capitalism is most often understood as a European development beginning in the late eighteenth century, followed by a global spread accelerating after World War II. Less consensus exists on the reasons for this spread and on how recent episodes of economic development are similar to or differ from those that occurred in European history. Few have pondered the possible relevance of the ideologies and institutions of political economies in different world regions before the modern era and how the spread of modern capitalism has shaped their contemporary approaches to the future. This article sketches Chinese comparisons with and connections to patterns initially European in origin. It highlights the economic challenges of climate change, in particular comparing Chinese and European water policy reforms. The proposed payoff of this exercise is an additional perspective from which to ponder capitalism’s future and what may emerge in its stead.

Wong, R. Bin. “Modern Capitalism’s Multiple Pasts and Its Possible Future: The Rise of China, Climate Change, and Economic Transformation.” Capitalism: A Journal of History and Economics 2, no. 2 (2021): 257-290. doi:10.1353/cap.2021.0014.

A new public digital dollar could be a big boost to American democracy

Author: Jeffrey Sklansky

For the first time since the Lincoln administration introduced a national paper currency during the Civil War, the Federal Reserve may soon create a new kind of federal money: a digital dollar. Now as then, what matters most is not the material form of money but who makes and manages it.

Sklansky, Jeffrey. “A new public digital dollar could be a big boost to American democracy” The Washington Post (July 21, 2021), https://www.washingtonpost.com/outlook/2021/07/21/new-public-digital-dollar-could-be-big-boost-american-democracy/ 

Where is Capital?

Author: Emma Rothschild

The article engages recent literature on microeconomics and intermediate goods in order to outline new models of growth in economic history and the possibility of productive exchanges between economists and historians. It focuses on the process of industrialization in England and France from the 1760s to the 1810s and argues for the diversity of kinds of capital, including the capital embodied in enslaved people, and for the importance of intermediate goods, especially materials, purchased services, and unconventional sources of energy. The article includes excerpts from primary sources.

Rothschild, Emma. “Where is Capital?” Capitalism: A Journal of History and Economics 2, no. 2 (2021): 291-371. muse.jhu.edu/article/798746.

Stimulus for all

Author: Prasad Krishnamurthy

Well into the 21st century, the federal government still lacks the capacity to deliver aid to the poorest and most vulnerable Americans in a crisis. To anyone who has followed the Federal Emergency Management Agency’s struggles to distribute relief in the aftermath of natural disasters, this fact has been obvious since Hurricane Katrina. But COVID-19 puts it in even starker relief. As many as 12 million eligible Americans did not receive a stimulus payment in 2020 — most of whom did not file taxes because of their low income — and there is no reason to believe that the latest round of payments has improved on this dismal figure. 

What is needed is a universal system of public distribution that operates through electronic payments into bank accounts. Unfortunately, more than 6 percent of U.S. households — comprising 14 million adults — are currently unbanked, and these figures are 17 percent and 14 percent, respectively, for Black and Hispanic households.  

The challenge of achieving both universal benefit distribution and universal bank accounts may seem daunting, yet the Treasury Department has already developed a solution to both problems. The Treasury’s little-known Direct Express debit card holds the key to attaining both universal benefit distribution and universal bank accounts in America.  

Krishnamurthy, Prasad, “Stimulus for all,” The Hill, May 14, 2021; https://thehill.com/opinion/finance/553620-stimulus-for-all?rnd=1621022888.

The Student Debt Crisis is a Crisis of Non-Repayment

Author: Marshall Steinbaum

Think of the student debt crisis as an overflowing bathtub. On the one hand, too much water is pouring in: more borrowers are taking on more debt. That is thanks to increased demand for higher education in the face of rising tuition, stagnant wages, diminishing job opportunities for those with less than a college degree, and the power of employers to dictate that would-be hires have the necessary training in advance. On the other hand, the drain is clogged and too little water is draining out: those who have taken on debt are increasingly unable to pay it off.

The last post in the Millennial Student Debt project used a new database of student debtors and their loan characteristics (matched to demographic and economic data in the American Community Survey) to document the former phenomenon, both in aggregate and particularly as it pertains to disadvantaged communities along multiple dimensions. Specifically, it showed the rapid growth of student debt levels and debt-to-income ratios in the population at large, among people of all income levels. But this growth is concentrated among non-white borrowers, who have higher debt conditional on income and whose increased indebtedness over the past decade-plus is greater than for white borrowers. That racial disparity is particularly pronounced in the middle of the income distribution. It also showed that student-debt-to-income ratios have grown fastest in the poorest communities since 2008. This post uses the same data to document the latter: non-repayment by student loan borrowers is getting worse over time, especially so for non-white debtors.

Steinbaum, Marshall, The Student Debt Crisis is a Crisis of Non-Repayment, Jain Family Inst. 2020; https://phenomenalworld.org/analysis/crisis-of-non-repayment

Inconsistent Definitions of Money and Currency in Financial Legislation as a Threat to Innovation and Sustainability

Authors: Leander Bindewald

External shocks, like the climate catastrophe or the COVID-19 pandemic, as well as intrinsic fallacies like the securitization of bad debt leading up to the financial crisis in 2008, point to the need for updating our monetary and financial systems. Ensuring their adequacy and resilience is an important factor for sustainability at large. This paper examines the definitions of “money” and “currency” in financial legislation as a foundational factor in achieving systemic resilience by allowing or hampering monetary innovation and diversity. From the unencumbered vantage point that the practice of complementary currencies offers, definitions of the terms “money” and “currency” are here traced through the laws and regulations of the United States of America, from the beginnings of modern banking to the recent rulings on crypto-currencies. They are both found to be used and defined in contradictory ways that are inapt even in regard to conventional modern banking practices, let alone when applied to novelty in payment, issuance and valuation. Consequently, this paper argues that basic legal definitions need to be reviewed and consolidated to enable the innovation and diversification in monetary systems needed for long term macro-economic stability. With this in mind, a terminology that is consistent with monetary practice—current, past and future—as well as the procedural difficulties of reforming laws and regulations is proposed.

Bindewald, Leander, Inconsistent Definitions of Money and Currency in Financial Legislation as a Threat to Innovation and Sustainability, J. Risk Financial Manag. 2021, 14(2), 55; https://doi.org/10.3390/jrfm14020055

Written Testimony before the U.S. House of Representative Committee on on Financial Services Task Force on Financial Technology

Authors: Rohan Grey

Written Testimony of Rohan Grey for the hearing entitled “Digitizing the Dollar: Investigating the Technological Infrastructure, Privacy, and Financial Inclusion Implications of Central Bank Digital Currencies” before the U.S. House of Representative Committee on on Financial Services Task Force on Financial Technology.

Available at: https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-greyr-20210615.pdf

Written Testimony in a Senate Hearing on Building a Stronger Financial System: Opportunities of a Central Bank Digital Currency

Authors: Lev Menand

Written Testimony of Lev Menand for the hearing entitled “Building a Stronger Financial System: Opportunities for a Central Bank Digital Currency” before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Subcommittee on Economic Policy.

Menand, Lev, Written Testimony in a Senate Hearing on Building a Stronger Financial System: Opportunities of a Central Bank Digital Currency (June 9, 2021). Available at SSRN: https://ssrn.com/abstract=3863395 or http://dx.doi.org/10.2139/ssrn.3863395

Assets need audiences: How venture capitalists boost valuations by recruiting investors to asset circles

Authors: Dave Elder-Vass

Narratives and conventions have received considerable attention in recent discussions of the valuation of financial assets. Narratives and conventions, however, can only be effective to the extent that they attract and persuade audiences, and this article makes the case for paying more attention to those audiences. In particular, the article argues that financial assets can only be established as assets if there is a group of potential investors that has been persuaded to accept them as such: to take them seriously as potential investments. The article coins the term asset circles to refer to such groups and supports the argument with a discussion of venture capital and its role in the production of unicorns: private companies with extraordinary valuations. Venture capital firms may be thought of as value entrepreneurs, and much of the venture capital process is oriented towards constructing both value narratives for the companies they invest in and asset circles prepared to accept those value narratives. Their aim in these processes is a profitable exit, in which the venture capital firm converts its investment back into cash at a considerable profit through either an acquisition or a flotation.

Dave Elder-Vass, “Assets need audiences: How venture capitalists boost valuations by recruiting investors to asset circles”,  Finance and Society, 2021, 7(1): 1-19

The Wild Card: Colonial Paper Money in French North America, 1685 to 1719

Authors: Bryan Cutsinger, Vincent Geloso and Mathieu Bédard

During the colonial era, the French colonial government in Canada experimented with paper money printed on the back of playing cards. The first experiment lasted from 1685 to 1719. In the first years, there was little inflation in spite of a rapidly expanding stock of playing card money. It is only in the later years of the experiment that prices rose. The behavior of the money stock and nominal output suggest that velocity fluctuated throughout the period. We argue here that these fluctuations can be explained by variations in the enforcement of legal tender laws. This interpretation provides insights into the debate over the inflationary impact of paper money in the colonial United States.

Cutsinger, Bryan and Geloso, Vincent and Bédard, Mathieu, The Wild Card: Colonial Paper Money in French North America, 1685 to 1719 (July 31, 2020). Available at SSRN: https://ssrn.com/abstract=2995560 or http://dx.doi.org/10.2139/ssrn.2995560

When Kuznets Went to Rome: Roman Economic Well-Being and the Reframing of Roman History

Author: Kim Bowes

This essay offers a critique of, and a set of alternative approaches to, the study of Roman economic well-being. It examines the calculations, methods, and assumptions used to estimate both gross domestic product and inequality, and how they fit into attempts at long-term cliometrics from Maddison to Piketty. The essay further asks what role the Roman world is asked to play in the two-thousand-year economic arcs laid out in these narratives, and what kind of Roman history this new cliometric work produces. I argue that these studies have been tacitly used to reanimate long-discarded macro and meta-historical teleologies of rise, decline, and “natural” inequality, now narrated through economics. The essay concludes by offering some different approaches grounded in household-level data.

Bowes, Kim. “When Kuznets Went to Rome: Roman Economic Well-Being and the Reframing of Roman History.” Capitalism: A Journal of History and Economics 2, no. 1 (2021): 7-40. doi:10.1353/cap.2021.0000.

Some Thoughts on Central Bank Digital Currency

Author: David Andolfatto

The literature examining the question of central bank digital currency (CBDC) has grown immensely in a very short time. Much progress has been made since I first learned of the idea in a blogpost authored by J. P. Koning in 2014. That modest article soon led me to openly speculate on the merits of a central bank cryptocurrency in a talk I delivered at the International Workshop on P2P Financial Systems in Frankfurt (Andolfatto 2015). My audience, which consisted mainly of entrepreneurs, seemed to receive my talk with a polite mixture of bemusement and anxiety. Surely, I couldn’t be serious? To be honest, I’m not sure that I was. But then the threat of Facebook’s Libra came along, and central bankers around the world suddenly began to take the idea very seriously indeed.

In this article, I will share some of my thoughts on CBDC — what it is, the rationale behind the endeavor, and how it might be implemented in broad terms. I’ll also address some of the concerns expressed by skeptics — in particular, the possible impact on banks and the implications for financial stability. I discuss these issues primarily in the context of the United States.

Andolfatto, David, “Some Thoughts on Central Bank Digital Currency”, Cato Journal, Vol. 41 No. 2. Available at: https://www.cato.org/cato-journal/spring/summer-2021/some-thoughts-central-bank-digital-currency 

Central Bank Activism

Author: Christina Parajon Skinner

Today, the Federal Reserve is at a critical juncture in its evolution. Unlike any prior period in U.S. history, the Fed now faces increasing demands to expand its policy objectives to tackle a wide range of social and political problems—including climate change, income and racial inequality, and foreign and small business aid.

This Article develops a framework for recognizing, and identifying the problems with, “central bank activism.” It refers to central bank activism as situations in which immediate public policy problems push central banks to aggrandize their power beyond the text and purpose of their legal mandates, which Congress has established. To illustrate, the Article provides in-depth exploration of both contemporary and historic episodes of central bank activism, thus clarifying the indicia of central bank activism and drawing out the lessons that past episodes should teach us going forward.

The Article urges that, while activism may be expedient in the near term, there are long-term social costs. Activism undermines the legitimacy of central bank authority, erodes its political independence, and ultimately renders a weaker central bank. In the end, the Article issues an urgent call to resist the allure of activism. And it places front and center the need for vibrant public discourse on the role of a central bank in American political and economic life today.

Skinner, Christina Parajon, Central Bank Activism (February 1, 2021). Duke Law Journal, Vol. 71, 2021, Available at SSRN: https://ssrn.com/abstract=3817123

Competition Law as Collective Bargaining Law

Authors: Nathan Tankus & Luke Herrine

This chapter provides an alternative basis for the economic analysis of competition law from conventional neoclassical theory. It makes three primary points.

First, markets—and processes of price formation in particular—are always governed. There is no “free market” in which prices “find their level”—nor is there any important sense in which some actually existing markets are better or worse approximations of an ideal-form “free market”. Instead, there are different ways of stabilizing and regularizing the pricing process, all of which require active coordination between market participants. Sometimes these institutions are weak and fragile, which leads to increasing market and price instability. When that occurs, either participants, suppliers, customers or the state will act to build a new strong form of market governance which attempts to increase market stability. It follows that it is impossible to eliminate coordination between market participants and attempts to eliminate such coordination will only result in a different form of coordination taking its place.

Second, which form of market governance prevails at any given point in time will depend, at least in part, on how the governing legal system allocates coordination rights. Coordination rights need not be granted expressly. What is relevant is that some prior legal grant of authority (such as a property right) allows a market actor to initiate some sort of conduct and the legal system, particularly competition law, will either sanction, ignore, or legitimate that conduct.

Third, the tripartite hierarchy of coordination rights that Sanjukta Paul has identified in United States competition law (favoring intra-firm coordination and vertical cross-firm coordination over explicit horizontal cross-firm coordination) calls forth specific patterns of price coordination. Most price coordination happens within hierarchical massive multinational corporations, with only the most marginal input from lower-level employees when it comes to fundamental business decisionmaking. The markets dominated by these firms tend to coordinate prices through price leadership, a form of inter-firm coordination that has been explicitly granted an exemption from antitrust scrutiny in part by presenting it as non-coordination. Many of these firms also control the pricing process of upstream and downstream firms through a variety of legal mechanisms that have also been exempted from antitrust enforcement. Attempts to resist the domination of these dominant firms are looked upon with a skeptical eye, and, if they do not fail due to private repression, are frequently quashed by the legal system.

En route to making these points, the chapter grounds the theory of market governance with the heterodox economics and sociological literature and reinterprets how market governance changed with the rise of large capitalist firms.

Tankus, Nathan and Herrine, Luke, Competition Law as Collective Bargaining Law (May 15, 2021). Labour in Competition Law, Cambridge University Press (forthcoming), Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3847377

World Maps for the Debt Paradigm: Risk Ranking the Poorer Nations in the 1970s

Author: Quinn Slobodian

This article offers a new account of the rise of the ranked nation-state through a genealogy of the category of country risk, which emerged in the 1970s as part of a response to the explosion of sovereign borrowing of petrodollars by Global South and Eastern bloc countries. Incorporating intangible qualities like political stability and the social fabric through a version of environmental scanning, country risk ratings quantified both the ability and the willingness of sovereigns to repay their debts. Adopted by the US Federal Reserve as a means of imposing the rule of law on global finance in the run-up to the Third World debt crisis, country risk returned in the research of the 1990s as a proxy for good governance, transforming the subjective impressions of managers and bankers into objective realities with policy effects.

Slobodian, Quinn, World Maps for the Debt Paradigm: Risk Ranking the Poorer Nations in the 1970s, Critical Historical Studies, Volume 8, Number 1 (Spring 2021) March 24, 2021). Available at: https://doi.org/10.1086/713524

Regional Monetary Standards and Medieval Bracteates

Author:Roger Svensson

In the Middle Ages, tens of thousands types of uni-faced bracteate coins were struck in the period 1140−1520. The existence of hundreds of small independent currency areas with their own mints in central, eastern, and northern Europe and the strong link between bracteates and periodic re-coinage explain the large number of bracteate types. The classification and dating of coins can provide insight into economic and monetary development when studying coin hoards and cumulative finds. A central problem when classifying bracteates is that most of them are anonymous, i.e., there are seldom any legends or letters. However, bracteates struck in closely located mints almost always have the same regional monetary standard. In this study, I show how monetary standards in combination with social attributes can be used to classify bracteates when both legends and find information are lacking. I also provide an economic explanation why closely related mints voluntary joined a specific monetary standard.

Svensson, Roger, Regional Monetary Standards and Medieval Bracteates (March 24, 2021). Polish Numismatic News, Vol. 64, pp. 123-56, 2020., Available at SSRN: https://ssrn.com/abstract=3811679

Cannabis Banking: What Marijuana Can Learn from Hemp

Author: Julie Andersen Hill

Marijuana-related businesses have banking problems. Many banks explain that because marijuana is illegal under federal law, they will not serve the industry. Even when marijuana-related businesses can open bank accounts, they still have trouble accepting credit cards and getting loans. Some hope to fix marijuana’s banking problems with changes to federal law. Proposals range from broad reforms removing marijuana from the list of controlled substances to narrower legislation prohibiting banking regulators from punishing banks that serve the marijuana industry. But would these proposals solve marijuana’s banking problems?

In 2018, Congress legalized another variant of the Cannabis plant species—hemp. Prior to legalization, hemp-related businesses, like marijuana-related businesses, struggled with banking. Some hoped legalization would solve hemp’s banking problems. It did not. By analyzing the hemp banking experience, this Article provides three insights. First, legalization does not necessarily lead to inexpensive, widespread banking services. Second, regulatory uncertainty hampers access to banking services. When banks were unsure what state and federal law required of hemp businesses and were unclear about bank regulators’ compliance expectations for hemp-related accounts, they were less likely to serve the hemp industry. Regulatory structures that allow banks to easily identify who can operate cannabis businesses and verify whether the business is compliant with the law are more conducive to banking. Finally, even with clear law and favorable regulatory structures, the emerging cannabis industry still presents credit, market, and other risks that make some banks hesitant to lend.

Hill, Julie Andersen, Cannabis Banking: What Marijuana Can Learn from Hemp (February 26, 2021). Boston University Law Review, 2021, U of Alabama Legal Studies Research Paper No. 3793939, Available at SSRN: https://ssrn.com/abstract=3793939 or http://dx.doi.org/10.2139/ssrn.3793939

A Proposition for the Redefinition of the Bank from a Historical Sociolegal Perspective

Author: Reda Mokhtar El Ftouh

Throughout history, banking has been key to the development of fundamental institutions and structures of capitalism, while also having been instrumental in its recurrent crises. However, this significance isn’t reflected in its definitions. In this brief note, I present a critical definition of banking institutions that takes into account their importance, as it approaches banking from a variety of perspectives. It conceives the bank as a mercantile-rentier that overlays social inefficiencies in monetary allocation through the transmission of internally-produced fungible rights in personam.

El Ftouh, Reda Mokhtar, A Proposition for the Redefinition of the Bank from a Historical Sociolegal Perspective (February 27, 2020). Available at SSRN: https://ssrn.com/abstract=3546177 or http://dx.doi.org/10.2139/ssrn.3546177

Banks, Marijuana, and Federalism

Author: Julie Andersen Hill

Although marijuana is illegal under federal law, twenty-three states have legalized some marijuana use. The state-legal marijuana industry is flourishing, but marijuana-related businesses report difficulty accessing banking services. Because financial institutions will not allow marijuana-related businesses to open accounts, the marijuana industry largely operates on a cash-only basis — a situation that attracts thieves and tax cheats.

This Article explores the root of the marijuana banking problem as well as possible solutions. It explains that although the United States’ dual banking system comprises of both federal- and state-chartered institutions, when it comes to marijuana banking, federal regulation is pervasive and controlling. Marijuana banking access cannot be solved by the states acting alone for two reasons. First, marijuana is illegal under federal law. Second, federal law enforcement and federal financial regulators have significant power to punish institutions that do not comply with federal law. Unless Congress acts to remove one or both of these barriers, most financial institutions will not provide services to the marijuana industry. But marijuana banking requires more than just congressional action. It requires that federal financial regulators set clear and achievable due diligence requirements for institutions with marijuana-business customers. As long as financial institutions risk federal punishment for any marijuana business customer’s misstep, institutions will not provide marijuana banking.

Hill, Julie Andersen, Banks, Marijuana, and Federalism (August 29, 2014). Case Western Reserve Law Review (Symposium Issue), Vol. 65, p. 597, 2015, U of Alabama Legal Studies Research Paper No. 2489089, Available at SSRN: https://ssrn.com/abstract=2489089 or http://dx.doi.org/10.2139/ssrn.2489089

Commodifying Marginalization

Author: Abbye Atkinson

Once pillars of American social provision, public pension funds now rely significantly on private investment to meet their chronically underfunded promises to America’s workers. Moreover, desperate for returns, pension funds are increasingly investing in marginalized debt, namely the array of high-interest-rate, subprime, risky debt—including small-dollar installment loans and other forms of subprime debt—that tends to concentrate in and among historically marginalized communities. Notwithstanding its often-catastrophic effects on communities, marginalized debt is a valuable investment because its characteristically high interest rates and myriad fees engender higher returns. In turn, higher returns ostensibly mean greater retirement security for ordinary workers who are themselves economically vulnerable in the current atmosphere of public welfare retrenchment. They must increasingly fend for themselves if they hope to retire at a decent age and with dignity, if at all.

This Article surfaces this debt-centered connection between two economically vulnerable groups: workers on the one hand and marginalized borrowers on the other. It argues that the current public-private welfare regime has thoroughly shifted retirement security into the hands of private financial markets, whose fiduciary duties and profit-sensitive incentives eschew broader moral considerations of the source of profits or the subsequent consequences of wealth extraction. Consequently, the rise of marginalized debt as a source of retiree wealth maximization shows how the tenuous socio-economic condition of one community is now openly a source of wealth accumulation for another vulnerable community. Moreover, this incursion of private entities into the arena of public welfare is pernicious because it commodifies and reinforces the subordinate socioeconomic conditions that make the persistence of marginalized debt predictable.

Atkinson, Abbye, Commodifying Marginalization (April 12, 2021). Duke Law Journal, Vol. 71, 2022, Available at SSRN: https://ssrn.com/abstract=3824467

Unbundling Banking, Money, and Payments

Author: Dan Awrey

For centuries, our systems of banking, money, and payments have been legally and institutionally intertwined. The fact that these three—theoretically distinct—systems have been bundled together so tightly and for so long reflects a combination of historical accident, powerful economic and political forces, path dependence, and technological capacity. Importantly, it also reflects the unique and often under-appreciated privileges and protections that the law bestows on conventional deposit-taking banks. These privileges and protections have served to entrench banks as the dominant suppliers of both money and payments: erecting significant barriers to entry, undermining financial innovation and inclusion, spurring destabilizing regulatory arbitrage, and exacerbating the “too-big-to-fail” problem. Against this backdrop, the recent emergence of a variety of new financial technologies, platforms, and policy tools hold out the tantalizing prospect of breaking this centuries-old stranglehold over our basic financial infrastructure. The essential policy problem, at least as conventionally understood, is that creating a level legal playing field would pose a serious threat to both monetary and financial stability. This Article demonstrates that this need not be the case and advances a blueprint for how we can safely unbundle banking, money, and payments, thereby enhancing competition, promoting greater financial innovation and inclusion, and ameliorating the too-big-to-fail problem.

Awrey, Dan, Unbundling Banking, Money, and Payments (January 31, 2021). European Corporate Governance Institute – Law Working Paper No. 565/2021, Available at SSRN: https://ssrn.com/abstract=3776739 or http://dx.doi.org/10.2139/ssrn.3776739

Government has always picked winners and losers

Author: David M.P. Freund

A welfare state doesn’t distort the market; it just makes government aid fairer. 

Freund, David M.P., Washington Post, March 29, 2021: https://www.washingtonpost.com/outlook/2021/03/29/government-has-always-picked-winners-losers/

The Cambridge economic tradition and the distribution of the social surplus

Author: Nuno Ornelas Martins

Various research projects in economics developed at Cambridge share common philosophical presuppositions, within what can be termed as the Cambridge economic tradition. I argue here that the Cambridge economic tradition can be distinguished from other traditions in terms of its underlying ontology, methodology and ethics, and also in terms of the way in which those philosophical presuppositions are expressed in competing theoretical approaches to the distribution of the social surplus. I also distinguish between an economic tradition and a school of economics and note that various schools have existed within the Cambridge economic tradition. The various Cambridge schools can themselves be identified in terms of the specific analytical frameworks they adopted when addressing the distribution of the social surplus.

Cambridge Journal of Economics, Volume 45, Issue 2, March 2021, Pages 225–241, https://doi.org/10.1093/cje/beaa049

Histories of Bank Supervision

Author: Sean Vanatta

In this essay, I make the case for the historical study of bank supervision—both that historical methods are necessary to understanding the shape and structure of supervision in the present and that the study of supervision will contribute to active and important historiographical debates. First, I summarize how scholars—including my own work, with Peter Conti-Brown—are grappling with the definitional complexities of supervision as a set of layered, overlapping, and contingent governing practices. Then, I survey the extant sources of supervisory history; briefly because they are so few, largely comprised of institutional histories of supervisory institutions, as well as memoirs and biographies of practitioners. Finally, I offer a prospective historical agenda, in two parts. I narrate a history of supervision in the United States through the New Deal to demonstrate where the history of supervision, once further developed, will contribute to debates about the co-development of financial institutions and regulatory governance. Then, I suggest ways that supervisory history can also enrich—and be enriched by—histories of science, gender, race, and sexuality. In sum, this essay suggests paths forward for scholars for whom bank supervision is self-evidently important and for those who may have never encountered the term before.

Vanatta, Sean, Histories of Bank Supervision (December 15, 2020). Available at SSRN: https://ssrn.com/abstract=3749116 or http://dx.doi.org/10.2139/ssrn.3749116

Consumer Protection after Consumer Sovereignty

Author: Luke Herrine

This article argues for a fundamental rethinking of the function of consumer protection. It is time to abandon welfare economics and adopt what this article refers to as “moral economy”.

While it is increasingly accepted that the standard neoclassical model makes unrealistic assumptions about consumers and that it tends to portray markets too rosily, many scholars seem to think that a few tweaks to the model are enough to redeem it. This article argues against that notion. Most of the claimed benefits of the law-and-economics approach—its “scientific rigor”, its “anti-paternalism”, its respect for “choice”, its ability to transcend “moralism”, and the like—depend on the unrealistic assumptions of its baseline model. It is only in this model’s hothouse version of markets that normativity can depend entirely on what consumers, suitably “informed” and properly “rational”, choose for themselves. And it is this notion of rational informed choice—of “consumer sovereignty”—that serves as the problematic Grundnorm for even the most behaviorally inflected, transaction-cost-rich forms of welfare economics.

Consumer protection should instead be seen as a series of tools that allow a community to (appoint representatives to) determine the values any given market ought to further and to experiment with ways to ensure that the market lives up to those values. From this “moral economy” perspective, markets are not pale shadows of an ideal form of perfect aggregation of individual choices but rather socio-legally constructed spaces that serve different interests depending on how they are structured. Consumer protection operates via more conventionally political forms of sovereignty: it is a way for a political community to correct for forms of market ordering that are not living up to the values of that community.

The presentation of this theoretical argument is grounded in the analysis of a particular law: the FTC’s authority to ban and remediate “unfair…acts and practices”. Making sense of this law historically and conceptually requires grappling concretely with theoretical issues that might otherwise seem airy.

Herrine, Luke, Consumer Protection after Consumer Sovereignty (February 8, 2021). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3781762

The aporetic financialisation of insurance liabilities: Reserving under Solvency II.

Author: Charalampos Fytros

The valuation of insurance liabilities has traditionally been dealt with by actuaries, who closely monitored underlying illiquid features, assumed a long-term perspective, and exercised their own subjective, expert judgment. However, the new EU regulatory regime of Solvency II (S2) has come to require market-consistent valuation supplemented by a risk-sensitive capital. This is considered an unwanted shift towards short-termism that is misaligned with the industry’s long term and countercyclical character. The new principles place the ‘technicalising’ logic of financial economics over ‘contextualising’ actuarial know-how. Following existing analytics of valuation from the ethnography of reinsurance markets and the social studies of finance, such requirements appear either as an alarming attack against the actuarial component of traditional valuation practice, or else as a preserver of it, through a process of enfolding at the heart of the financialisation project. This article holds that the case of S2 challenges both these analytics of valuation. S2’s financialisation project, precisely by attempting to construct itself, deconstructs itself into an actuarial project, in a recurring, aporetic process. In this respect, fair (or otherwise) valuation remains always undecidable, inconclusive, and thus responsible.

The aporetic financialisation of insurance liabilities: Reserving under Solvency II.
Charalampos Fytros. Finance and Society, EarlyView (2021).

The emergence of systemic risk: The Federal Reserve, bailouts, and monetary government at the limits

Author: Onur Özgöde

Why does the Federal Reserve bail banks out in violation of a core principle of free-market capitalism: private gain–private loss? This article argues the Fed rescues banks not because it is captured by financial interests, but because it is captured by the paradigm of ‘systemic risk’. Systemic risk emerged in the 1960s out of a jurisdictional struggle over the Fed between two expert groups, ‘monetary substantivists’ and ‘monetary formalists’. The latter’s triumph transformed the Fed into a macroeconomic institution, responsible for managing growth. It also led to the institutionalization of ‘systemic risk’—a conception of the financial system as a vital and yet vulnerable economic system and of the Fed’s responsibility for protecting it. In this process, policymakers grew to fear bank failures as they began to see financial disasters through the lens of systemic risk.

Onur Özgöde, The emergence of systemic risk: The Federal Reserve, bailouts, and monetary government at the limits, Socio-Economic Review, 2021;, mwaa053, https://doi.org/10.1093/ser/mwaa053

The New Bailments

Author: Danielle D’Onfro

The rise of cloud computing has dramatically changed how consumers and firms store their belongings. Property that owners once managed directly now exists primarily on infrastructure maintained by intermediaries. Consumers entrust their photos to Apple instead of scrap-books; businesses put their documents on Amazon’s servers instead of in file cabinets; seemingly everything runs in the cloud. Were these belongings tangible, the relationship between owner and intermediary would be governed by the common-law doctrine of bailment. Bailments are mandatory relationships formed when one party entrusts their property to another. Within this relationship, the bailees owe the bailors a duty of care and may be liable if they failed to return the property. The parties can use contract to customize the relationship but not to disclaim entirely.

Tracing the law of bailment relationships from its ancient roots to the present, this Article argues that cloud storage should be understood as creating a bailment relationship. The law of bailment, though developed in the Middle Ages, provides a robust framework for governing twenty-first century electronic intermediaries. Though the kind of stored property has changed, the parties’ expectations and incentives have not. Yet the decline of litigation, the rise of arbitration, federal diversity jurisdiction, and the ever-growing dominance of contract has thus far prevented courts from applying the law of bailments to these new services.

Recognizing cloud storage as a bailment would have significant implications. Most immediately, it would suggest that important provisions in many cloud storage services’ contracts are unenforceable. A hand-collected dataset of 61 cloud storage contracts, reveals that most have include general disclaimers for any liability for lost data. These disclaimers are inconsistent with the duty of care that is the foundation of the law of bailment. In addition, understand-ing cloud storage as a bailment would have important implications for both the law of consumer protection and Fourth Amendment protections.

D’Onfro, Danielle Frances, The New Bailments (February 12, 2021). Available at SSRN: https://ssrn.com/abstract=3785711

The Intellectual Origins of Sudan’s “Decades of Solitude,” 1989–2019

Author: Alden Young

The three decades between 1989 and 2019, when the National Salvation regime of Islamists and the military ruled Sudan, are now frequently remembered by international and Sudanese policymakers, politicians, intellectuals, and business elites as “lost decades” or “decades of solitude” marked by poor policymaking, corruption, and international isolation. These standard accounts, as well as much of the scholarly literature, assume that ideas played very little role in the development of Sudan’s political economy. Instead, most observers of Sudan’s political economy assume its evolution between 1989 and 2019 was shaped by happenstance and competing interests that settled into brief moments of equilibrium. This dismissal of the role that ideas play in shaping the political economy of Sudan in particular, and that of African states in general, is not only a result of prejudice or historical myopia, but also the result of recent trends that privilege the analysis of material, class, or sectoral interests over ideas in scholarship on political economy. These explanations obscure the intellectual traditions that gave rise to the particular contours of the Sudanese economy between 1989 and 2019. This article argues that the idea of tamkeen, or economic consolidation, guided the economic policies put forth by the National Salvation regime between 1989 and 2019. To explicate tamkeen—its origins and its meaning—this article examines the writings of two Sudanese intellectuals: Fatima Babiker Mahmoud and Muhammad Abu al-Qasim Hajj Hamad. In publications from the 1980s, these two wrote extensively about the failures of the Sudanese developmental state in the 1960s. In their critique of this earlier Sudanese state, we discover the preconditions for the idea of tamkeen, which guided the political economy of Sudan during the so-called “decades of solitude.”

Young, Alden. “The Intellectual Origins of Sudan’s “Decades of Solitude,” 1989–2019.” Capitalism: A Journal of History and Economics 2, no. 1 (2021): 196-226. doi:10.1353/cap.2021.0007.

Technocratic Pragmatism, Bureaucratic Expertise, and the Federal Reserve

Authors: Peter Conti-Brown & David A. Wishnick

The Federal Reserve (Fed) regularly faces novel challenges to its broad statutory mandates. Often, these challenges—from financial crises to pandemics to climate change—raise a critical question. When should the Fed act beyond the boundaries of its core institutional identity and expertise? On the one hand, some voices demand the Fed “stay in its own lane,” avoiding experimentation so that it may preserve its perceived legitimacy to carry out core historical functions. On the other, hewing too closely to precedent and existing expertise risks institutional failure of a different sort.

To navigate that tension, this Feature sketches an ethos of technocratic pragmatism—one that permits the Fed to develop the expertise necessary to address emergent problems as long as it remains constrained by norms designed to preserve its long-run legitimacy. We illustrate the ethos by examining three cases where the Fed has confronted, or is confronting, challenges that test the boundaries of its expertise: engagement with cyber risk, emergency lending before and during the COVID-19 pandemic, and nascent efforts to understand the intersection of central banking and global climate change. We also engage with cases where the Fed has transgressed legitimacy-preserving limits by intervening in policy disputes beyond the range of its statutory concerns. Taken together, these cases illustrate how the Fed must walk a fine line between valuable experimentation and the usurpation of politics.

Peter Conti-Brown & David A. Wishnick, Technocratic Pragmatism, Bureaucratic Expertise, and the Federal Reserve, Yale Law Journal 636, (2021): https://www.yalelawjournal.org/feature/technocratic-pragmatism-bureaucratic-expertise-and-the-federal-reserve

Borrowing Equality

Author:  Abbye Atkinson

For the last fifty years, Congress has valorized the act of borrowing money as a catalyst for equality, embracing the proposition that equality can be bought with a loan. In a series of bedrock statutes aimed at democratizing access to loans and purchase money for marginalized groups, Congress has evinced a “borrowing-as-equality” policy that has largely focused on the capacity of “credit,” while acoustically separating its treatment of “debt” as though one can meaningfully exist without the other. In taking this approach, Congress has proffered credit as a means of equality without expressly accounting for the countervailing force of debt relative to social subordination. Yet, debt has itself functioned as a mechanism of the very subordination that Congress’s invocation of “credit” aspires to address.

This Article argues that because in articulating a borrowing-as-equality policy Congress is implicitly encouraging debt among marginalized communities, Congress should develop policies that recognize both the potential upside value of borrowing and the particular vulnerabilities that debt creates for socioeconomically marginalized groups. More broadly, any policy that invokes borrowing as a social good must engage more deeply with how credit and debt work in a social context. In other words, credit cannot meaningfully function as a social good without due attention to and a solution for the work of debt as a social ill.

Atkinson, Abbye, Borrowing Equality (October 29, 2020). Columbia Law Review, Available at SSRN: https://ssrn.com/abstract=3721632


Does the national debt matter?

Authors: L. Randall Wray & Yeva Nersisyan

In this paper, we use the Modern Money Theory framework to analyze whether government debt (and deficits) in a country with its own sovereign currency presents a problem. We argue that permanent deficits and even a rising debt ratio are normal, especially in developed nations with current account deficits. In contrast to the conventional approach, which views deficits and debt as policy variables, we demonstrate that they are ex post outcomes which depend on economic performance. Further, in nations with sovereign currency, it is hard to imagine a scenario in which a rising deficit and the debt ratio would trigger an attack by bond vigilantes, lead to government insolvency, or generate high inflation or high interest rates. The claim that debt beyond a certain threshold impairs growth is also suspect since the observed empirical correlations are likely due to lower growth creating higher deficits. Lastly, we argue that deficit and debt ratios have no bearing on a nation’s fiscal policy space, which depends on the real resources it can mobilize.

L. Randall Wray & Yeva Nersisyan (2021) Does the national debt matter?, The Japanese Political Economy, DOI: 10.1080/2329194X.2020.1867586


Banking on Democracy

Author: Mehrsa Baradaran

The financial system is unequal and exclusionary even as it is supported, funded, and subsidized by public institutions. This is not just a flaw in the financial sector; it is a foundational problem for democracy. Across the financial industry, entrepreneurs, regulators, media, and scholars promote the goal of “financial inclusion” or “access to credit.” Facebook’s Libra, Bitcoin, and fintech providers like Square, PayPal, Venmo, and thousands of other new products or startup companies are launched with the stated aim of increasing financial inclusion. These private companies are joined by the Congress, non-profits, and financial regulators with programs and laws promoting financial inclusion. In fact, financial inclusion and access to credit are among the increasingly rare issues that unite the political left and right. Yet, despite consensus and years of effort, many individuals and communities continue to be excluded from the mainstream financial system, which forces them to resort to high cost payday lenders, check cashers, or other fee-based financial transaction products. The financially disenfranchised pay the most for services that the wealthy and the middle class receive at a subsidized rate. This Article proposes a new model of financial inclusion, which situates issues of access and inclusion as central to the legal design of the financial system. This Article argues that these remedies have failed because the current model of financial inclusion is rooted in a mistaken and incomplete theory of the financial market. “Normals” and “mainstream” credit markets are conceived of simply as “markets,” governed by market rules and market dynamics. In contrast, strategies for inclusion or “access to credit” are viewed as ancillary products, gap-filling, or subsidized add-ons for those who are outside of the credit market. This Article argues that the mainstream market and inclusion strategies are both part of the same financial market, which is itself a product of public policy. Instead of financial inclusion, this Article proposes to reframe the problem as a matter of financial redesign. The design of credit markets is an a priori choice embedded in law and policy that determines the contours and scope of the credit markets, including who is included. Reconceptualizing financial inclusion must thus proceed through democratic means because inclusion and access are a byproduct of institutional design rather than private market decision making.

Mehrsa Baradaran, Banking on Democracy, 98 Wash. U. L. Rev. 353 (2020).
Available at: https://openscholarship.wustl.edu/law_lawreview/vol98/iss2/5


Money on the Left Podcast: Money as a Constitutional Project with Christine Desan

Money on the Left Podcast

Hosts: Scott Ferguson, William Saas and Maxximilian Seijo

The Money on the Left Editorial Collective presents a classic episode from our archives along with a previously unavailable transcript & graphic art. In this episode, we are joined by Christine Desan, Leo Goettlieb professor of law at Harvard Law School to discuss her excellent book, Making Money: Coin, Currency, and the Coming of Capitalism. Desan argues that money is a constitutional project, countering the dubious “commodity” theory common to contemporary economic and legal orthodoxies. Desan develops her constitutional theory of money through rigorous historical examinations of money’s evolution, from medieval Anglo-Saxon communities to early-modern England to the American Revolution and beyond.

You can find a link to the podcast and complete transcript here: https://mronline.org/2021/01/01/money-as-a-constitutional-project-with-christine-desan/

A Route to Commons-Based Democratic Monies? Embedding the Governance of Money in Traditional Communal Institutions

Author: Ester Barinaga

The financial crisis of 2008 resulted, among other, on a popular awareness that the monetary system was not working for the interest of the many. The blockchain technology that was launched soon after offered monetary activists and entrepreneurs a tool to re-imagine, re-claim and re-organize money along a vague ideal of a commons paradigm. A wave of monetary experimentation ensued that took a most concrete form in two entrepreneurial spaces: crypto-currencies with global ambitions and local currencies based on communal democracy. Seemingly distinct on the outset, both strands share a determination to develop a monetary system that serves the many. This has led participants on both sides to reach out toward each other. The article looks at one such attempt: the Sarafu community crypto-currencies in Kenya. These currencies are embedding the creation of money in traditional community savings groups. Using Eleanor Ostrom’s framework and building on interview and ethnographic material, the article identifies the economic logic of mutualization proper of the savings groups as one that transforms private assets (one’s savings) into a financial commons for the group. To build on this logic, the Sarafu model in-the-making is embedding the production and governance of the new community cryptocurrencies in these saving groups. In that doing, Sarafu has the potential to advance a new architecture of money. However, findings suggest that the standardization and automation of the new monetary rules through smart contracts impose neoliberal ideas that slipped into the code, risking the erosion of the very communal decision-making processes that made savings groups interesting anchors of a money commons in the first place.

Front. Blockchain, 27 November 2020 | https://doi.org/10.3389/fbloc.2020.575851


Why Financial Regulation Keeps Falling Short

Authors: Dan Awry & Kathryn Judge

This article argues that there is a fundamental mismatch between the nature of finance and current approaches to financial regulation. Today’s financial system is a dynamic and complex ecosystem. For these and other reasons, policy makers and market actors regularly have only a fraction of the information that may be pertinent to decisions they are making. The processes governing financial regulation, however, implicitly assume a high degree of knowability, stability, and predictability. Through two case studies and other examples, this article examines how this mismatch undermines financial stability and other policy aims. This examination further reveals that the procedural rules meant to promote accountability and legitimacy often fail to further either end. They result instead in excessive expenditures before new rules are adopted, counterproductive efforts to perfect ever more detailed rules, and too little re-evaluation of existing rules in light of new information or changed circumstances. The mismatch between the nature of finance and how finance is regulated helps to explain why financial regulation has failed in the past and why it will likely fail again. It also suggests the need for a new approach to financial regulation, one that acknowledges the limits of what can be known given the realities of today’s complex and constantly evolving financial ecosystem.

Awrey, Dan and Judge, Kathryn, Why Financial Regulation Keeps Falling Short (February 1, 2020). Columbia Law and Economics Working Paper No. 617, Cornell Legal Studies Research Paper No. 20-03, European Corporate Governance Institute – Law Working Paper No. 494/2020, Available at SSRN: https://ssrn.com/abstract=3530056 or http://dx.doi.org/10.2139/ssrn.3530056


Losing Autonomy: The Norwegian Central Bank During the Second World War

Author: Einar Lie

In the mid‐twentieth century a number of central banks around the western world lost their operational autonomy and were placed under government control. The origin of these policy changes can be traced to the intellectual and political developments of the interwar era in addition to the introduction of the Bretton Woods monetary system. The Norwegian central bank offers a particularly stark example of this phenomenon: experiencing a rapid decline from its high level of autonomy in the interwar years, to a clear subordination to the government after 1945. Through an analysis of the correspondence between the main policy makers in the exiled Norwegian government and central bank management, this article contributes to the understanding of central bank autonomy by tracing the decisive factors that led to the Norwegian central bank’s loss of agency..

Lie, Einar, Losing Autonomy: The Norwegian Central Bank During the Second World War (November 2019). The Economic History Review, Vol. 72, Issue 4, pp. 1363-1383, 2019.


The Capital Commons: Digital Money and Citizens’ Finance in a Productive Commercial Republic

Author: Robert Hockett

All societies must address two questions where the organization of productive activity is concerned. The first is whether production will be mainly publicly managed, privately managed, or ‘mixed.’ The second is whether the financing of production will be mainly publicly managed, privately managed, or mixed.

In the American commercial republic, we seem more or less to have answered the ‘who does production’ question to our own satisfaction. From the founding era to the present, we have elected to leave production primarily, though not of course solely, ‘in private hands.’ Where the financing of production is concerned, on the other hand, we have been more ambivalent.

For the past 160 years, our financial system has operated as a public-private franchise arrangement. At the core of our franchise lie the sovereign public (the ‘public’ of our ‘republic’) and its money-modulator – the issuer and manager of its monetized full faith and credit, its ‘money’ – on the one hand, and the private sector financial institutions and markets we publicly license to allocate most of the resultant Wicksellian ‘bank money’ or ‘credit-money’ on the other hand. At the periphery of the franchise lie those institutions and markets that ‘shadow bank’ through relations with the banking core.

In recent years, developments in several distinct spaces have prompted what amounts to a broad reassessment of our hybrid financial arrangements. One such development is weariness with our system’s penchant for over-generating public credit that fuels bubbles and busts rather than production, a product of leaving our public capital – by far the greater part of investment capital – to private management. This is what the author has long called poor credit modulation.

Another ground of critique is our hybrid system’s poor record on what the author has long called credit allocation, from which modulation turns out to be inseparable. Our morbid fear of explicitly, rather than implicitly, ‘picking winners and losers’ is the culprit here. Finally, other sources of disenchantment are our system’s long-term worsening of inequality, the scandal of commercial and financial exclusion our system permits, and the promise offered by new financial technologies where ending both that and leaky monetary policy are concerned.The current Covid pandemic and recent murder of George Floyd of course underscore these sources of disillusion.

This article embraces these critiques, which the author himself has leveled continuously over the past fifteen years, argues that privately ordered production requires publicly ordered finance, and shows how to order finance publicly on a Fed balance sheet forthrightly recognized as a Citizens’ Ledger. New public investments will make up the asset side of the upgraded Fed balance sheet, while a corresponding system of digital public banking through ‘FedWallets’ will upgrade the liability side of the same. Newly restored regional Fed functionalities (‘Spreading the Fed’), an FSOC-inspired National Reconstruction and Development Council (NRDC) and its financing arm (a restored RFC), and a price-stabilizing ‘People’s Portfolio’ round out the new system of Citizens’ Finance.

In the course of its arguments, the article traces all salient consequences that flow from its complete overhaul of our system of financing production, from banking through ‘shadow banking’ to the capital markets. It also makes some surprising discoveries along the way. Among these is that full separation of Fed and Treasury and hence monetary and fiscal policy, itself an artifact of franchise finance and hence the false hope of separating credit modulation from credit allocation, is no longer tenable. Another is that global central bank digital currency (CBDC) development is now corroborating much of what the article argues.

Hockett, Robert C., The Capital Commons: Digital Money and Citizens’ Finance in a Productive Commercial Republic (June 1, 2018). Review of Banking and Financial Law, Vol. 39, No. 345, 2019-20


Digital Currencies, Stablecoins, and the Evolving Payments Landscape

Author: Lael Brainard

Speech by Governor Lael Brainard of the Federal Reserve at The Future of Money in the Digital Age, Sponsored by the Peterson Institute for International Economics and Princeton University’s Bendheim Center for Finance, Washington, D.C.

Digital Currencies, Stablecoins, and the Evolving Payments Landscape (October 16, 2019).


Book Review: Law and Macroeconomics as Mainstream

Author: Bruno Meyerhof Salama

In spite of its name, economic analysis of law is mostly unconcerned with money and markets. In a recently published book, Law and Macroeconomics: legal remedies for recessions, Professor Yair Listokin challenges this doubtful convention. He advocates “expansionary legal policies” to stimulate the economy when monetary policy reaches the zero-lower bound. This proposal is presented as a straightforward application of mainstream economic views, not a heterodox deviation. My review considers how the book’s main arguments depart from established views in economic analysis of law and discusses how its applications fare in light of the Keynesian perspective that it purports to uphold. I conclude with a discussion of the book’s relevance for the current recession.

Meyerhof Salama, Bruno, Law and Macroeconomics as Mainstream. Law and Macroeconomics: Legal Remedies for Recessions. By Yair Listokin. Cambridge, Mass.: Harvard University Press. 2019. Pp. 269. (August 10, 2020). University of Toronto Law Journal, Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3671097 


The People’s Ledger: How to Democratize Money and Finance the Economy

Author: Saule T. Omarova

The COVID-19 crisis forcefully underscored the urgency of digitizing sovereign money and ensuring broad access to affordable banking services. It pushed two related ideas—the issuance of “central bank digital currency” and the provision of retail deposit services by central banks—to the forefront of the public policy debate. To date, however, this debate remains fundamentally incomplete. Framed by reference to fast payments and financial inclusion, most reform proposals in this vein do not offer a coherent vision of how the act of “democratizing” access to sovereign money would—and should—change the key systemic dynamics of finance. This lack of a systemic perspective both obscures and dilutes the full transformative potential of these increasingly popular ideas.

Taking the debate to a qualitatively new level, this Article offers a blueprint for a comprehensive restructuring of the central bank balance sheet, as the basis for redesigning the core architecture of modern finance. Focusing on the U.S. Federal Reserve (the Fed), the Article outlines a series of structural reforms that would redefine the role of a central bank as the ultimate public platform for generating, modulating, and allocating financial resources in a democratic economy—the People’s Ledger.

On the liability side of the ledger, the Article envisions the full migration of demand deposit accounts to the Fed’s balance sheet and explores the full range of new, more direct and flexible, monetary policy tools enabled by this shift. On the asset side, it advocates a comprehensive restructuring of the Fed’s investment portfolio, which would maximize its capacity to channel credit to productive uses in the nation’s economy. This compositional overhaul of the Fed’s balance sheet would profoundly transform the operations and systemic functions of private banks, securities dealers, and other financial institutions and markets. Tracing these structural implications, the Article shows how the proposed reforms would make the financial system less complex, more stable, and more efficient in serving the long-term needs of the American people.

Seigniorage through Periodic Recoinage: When the Validity of Money Was Restricted in Time

Author: Roger Svensson & Andreas Westermark

A monetary system called periodic re-coinage was used during almost 200 years in large part of medieval Europe. Old coins were frequently declared invalid and had to be exchanged for new ones for an exchange fee. This system – which is equivalent to a Gesell tax – required a limited coin volume in circulation and an exchange monopoly in a geographical area. We show that such a Gesell tax works and do generate incomes for the minting authority if the tax level is sufficiently low and if the punishment for using invalid coins is sufficiently high.

The Janus Faces of Money, Property, and Governance: Fiscal Finance, Empire, and Race

Author: Jamee K. Moudud

This paper contributes to the literature on racial capitalism by deploying a key insight of the Law and Political Economy tradition, which is that politics acting through the law plays a constitutive role in the monetary hardwiring of economies and their property rights. By focusing on two key elements of fiscal finance, central banking and taxation, the paper shows that while the pressures of democratic self-governance created one type of hardwiring in Britain and its white dominions racialized politics created a different type in the colonies of color. In short, the particular monetary hardwiring of the colonies of color effectively “kicked away the ladder” needed for their successful socio-economic development, occluding the very different policies pursued in Britain and the dominions. This left the colonies of color in a vulnerable state at independence, providing much weaker foundations for their subsequent economic development. Given the key role played by gold in the anchoring of banknote emissions by the Bank of England (BoE) Britain’s global politics of gold and silver was central to its domestic economic development. And the BoE, a private joint-stock corporation, was deeply enmeshed in the government’s domestic and colonial governance policies. As with the BoE taxation systems domestically and internationally exemplified the same principle: private property was always embedded in the public sphere following different modes of governance in different historic and geographic contexts. Simply put, politics acting through the law was actively creating markets in different ways rather than protecting pre-existing and privately-created ones.


The Key to Value: The Debate over Commensurability in Neoclassical and Credit Approaches to Money

Author: Christine Desan

Neoclassical and credit approaches to money represent dramatically different theories of value. For many within the neoclassical tradition, the market exists as a conceptual enterprise – a place where independent agents compare and rank real goods, exchanging them afterwards to in accord with their preferences. That theory reflects a particular approach to value, identifying it as a pre-existing quality ranked by individual choice. The theory also generates a particular approach to money, assuming that a term of measurement naturally imports commensurability into evaluation.

By contrast, public credit approaches suggest that creating commensurability in a world heterogeneous in so many aspects is a profound challenge. Modern political communities have responded by substantiating value in a unit that is cognizable to all: they issue credit tokens that can be set off against widely shared public obligations. That means, first, that value cognizable in money follows rather than pre-exists market activity: it is produced as individuals use credit money as a medium. Second, because value is produced as people use money, the character of that money matters: its nature as credit carries with it an allocative bias. Both governments and private lenders (banks) advance credit in order to spend selectively: they create a credit medium by providing credit to some people relative to others. According to the way money is created, definitionally we might say, individuals will not be equally situated in the process that generates prices. Decisions about value are made in the wake of that fact.  The essay closes by contrasting the democratic visions at stake in neoclassical and public credit approaches to value. That exercises suggests that, if the public credit approach better describes money and market, their potential can only be realized by promoting rather than assuming equality.

Christine Desan, The Key to Value: The Debate over Commensurability in Neoclassical and Credit Approaches to Money, 83 Law and Contemporary Problems 1-22 (2020)
Available at: https://scholarship.law.duke.edu/lcp/vol83/iss2/2


Just Published: Finance and Society, Vol. 6, No. 1

Author: Editors, Finance and Society

The editors of Finance and Society are pleased to announce the publication of vol. 6, no. 1 (2020).

The issue includes an article by Photis Lysandrou on financialisation and circuit theory, an essay by Daniel Tischer on Facebook’s Libra currency proposal, and a special forum on critical macro-finance.

The forum is guest-edited by Sahil Jai Dutta, Ruben Kremers, Fabian Pape, and Johannes Petry, and features contributions from Bruno Bonizzi, Daniela Gabor, Annina Kaltenbrunner, Samuel Knafo, Steffen Murau, and Tobias Pforr.

The full issue is available here.


Colonialism’s Currency: Money, State and First Nations in Canada, 1820-1950

Author: Brian Gettler

Money, often portrayed as a straightforward representation of market value, is also a political force, a technology for remaking space and population. This was especially true in nineteenth- and twentieth-century Canada, where money – in many forms – provided an effective means of disseminating colonial social values, laying claim to national space, and disciplining colonized peoples.

Colonialism’s Currency analyzes the historical experiences and interactions of three distinct First Nations – the Wendat of Wendake, the Innu of Mashteuiatsh, and the Moose Factory Cree – with monetary forms and practices created by colonial powers. Whether treaty payments and welfare provisions such as the paper vouchers favoured by the Department of Indian Affairs, the Canadian Dominion’s standardized paper notes, or the “made beaver” (the Hudson’s Bay Company’s money of account), each monetary form allowed the state to communicate and enforce political, economic, and cultural sovereignty over Indigenous peoples and their lands. Surveying a range of historical cases, Brian Gettler shows how currency simultaneously placed First Nations beyond the bounds of settler society while justifying colonial interventions in their communities.

Testifying to the destructive and the legitimizing power of money, Colonialism’s Currency is an intriguing exploration of the complex relationship between First Nations and the state.

Brian Gettler, Colonialism’s Currency: Money, State and First Nations in Canada, 1820-1950 (McGill-Queen’s University Press, 2020).


Inside the Black Box: Credibility and Situational Power of Central Banks

Author: Ayca Zayim

Despite the consensus that the power of finance constraints central banks under financial globalization, the variation in their autonomy from market forces at the micro level of monetary policymaking remains underexplored. This article demonstrates that credibility endows central banks with situational power to make monetary policy decisions that involve less sacrifice of economic growth to price stability. Based on the comparative analysis of the policy decisions of central banks in two emerging economies, South Africa and Turkey, during 2013–2014, I show that this policy space stems from central banks’ capacity to successfully influence market expectations. The argument relies on public texts and over 130 interviews with central bankers in South Africa and Turkey and financiers in Johannesburg, Istanbul and London. The findings contribute to literature on central bank credibility and communication by exploring how credibility functions and creates room for central banks to maneuver through influencing contingent and performative expectations.


The Money Doctors of Seventeenth Century Naples

Author: Francois R. Velde

A collection of texts printed in early seventeenth-century Naples exemplifies the intersection between economic history and the history of thought. A slowly worsening monetary situation led authorities, unsure of what they could and should do, to solicit diagnostics and cures. The unfolding debate is challenging to analyze: participants viewed events through the lenses of their background, training, and interest. Merchant experts competed with university graduates and technical officials. These texts offer us a rich but contradictory set of observations and interpretations in what constitutes an early attempt at applied economic analysis and policy advice.


The ECB and € E-Banknotes

Author: Corinne Zellweger-Gutknecht, Benjamin Geva, Seraina N. Gruenewald

The modern monetary system is controlled by the state and yet linked to private deposit banking. Monetary value held in deposits with commercial banks is known as ‘commercial bank money’ (CoBM). Monetary value held in deposits with the central bank – as well as banknotes issued by the central bank – is called ‘central bank money’ (CeBM). Under this scheme, central banks thus issue two forms of central bank money: cash for the retail sector and balances in traditional reserve accounts for wholesale purposes (reserves). However, for several years now, and most recently in particular against the background of private actors commencing to issue private digital currencies, a growing number of central banks have also been investigating the possibility and implications of issuing a digital form CeBM for the general public: central bank digital currency (CBDC), also known as retail CBDC (rCBDC).