Stuart Chase – a visionary ahead of his time

I recently re-read several books (well books), the first of which was published in 1932, and, the others published in the early 1940s, which were written by a relatively unknown American economist Stuart Chase. He not only wrote about economics but also ventured in the area of semantics (which is one reason I wanted to re-read the collection). As a economist and a social theorist, he was way ahead of his times. Much of his insights and ideas still have currency today, especially as it appears that an oppositional Left is finally starting to emerge from the wreckage of the conventional social democratic political parties and is in no small way due to the engagement of young voters in the political process who know that neo-liberalism is not the way of the future. Stuart Chase understood that the limits of the government’s spending capacity was defined by the available real productive resources and he also understood that the natural environment had to be accessed in a sustainable way. Very modern insights – 75 odd years ago.

In 1932, Stuart Chase published his book A New Deal (Macmillan), which became the totem for Franklin Roosevelt’s response to the Great Depression.

Later in the Second World War, he was commissioned by the The Twentieth Century Fund, which is “a progressive think tank headquartered in New York City”, to produce a series of six short books designed to provide a manifesto for the future peace time, once the War ended.

In 1942, The Twentieth Century Fund was much more progressive than its modern counterpart, The Century Foundation. The modern incarnation has fallen into the neo-liberal Democrat-type economic narrative (see book by Blinder and Yellen in 2001 extolling the virtues of Bill Clinton’s period as President).

His 55-page book – The Road We Are Traveling 1914-1942 – published in 1942, which carried the sub-title “Guide lines to America’s Future”, was the first in this series of six booklets written by Chase.

The 1942 book by Stuart Chase provided a blueprint on how government’s should behave with respect to economic policy after the Second World War was over.

Towards the end of ‘Chapter 3 Goals for America’, Chase outlines what he considers to be the “Postwar Platform”, which he summarised as follows:

Full Employment. All men and women seeking work which cannot be found in private industry should be employed by the state. If citizens are going to be guaranteed minimum standards on the one hand, they must help provide those standards by their labor on the other. Congental loafers may be cared for in sanatoriums.

Full and prudent use of material resources. Idle plant and idle machines must become as great a scandal as idle me. Natural resources, however, especially soils, waters, forests, must be utilized without progressive deterioration of these assets. The resource budget must be balanced, and our national heritage maintained. Minerals are by their nature wasting assets, but they must be exploited thriftily, with constant research devoted to substitutes.

Guarantee of the five essentials to every citizen – food, housing, clothing, health services, and education …

Social Insurance at all major exposed points in the social structure. This would include old-age allowances, benefits for sickness, accident, temporary unemployment, childbearing. It is interesting to note that the Australian government, despite its heavy war commitments, has just voted an allowance for every child in the country where the family has more than one.

Labor standards. These would include minimum wages, maximum hours, standards for working conditions …

He then anticipated a later booklet by posing the question:

Where’s the money coming from? Out of that one hundred million man-years of work wasted; out of that two hundred billion dollars of production which never was produced. It will come from the same place that the bombers, tanks and battleships are now coming from – out of the full employment of people.

By which he was referring to that the only constraints on progress were the available real resources and utilising those resources fully (but noting his concern – in 1942 – for environmental sustainability).

A wonderful vision that still resonates today – as evidenced by the rising importance of the ‘oppositional Left’ that is now gaining political support from people as they abandon the traditional social democratic parties or politicians who have in the words of British comedian Jonathan Pie just become “Tory Tribute Bands”.

In the next chapter, ‘Chapter 4 Back to Business as Usual?’, Chase noted that the platform he outlined above “is incompatible with a program of business as usual”.

By “business as usual” he meant “where prices are set in the open market, where hope of profit is the mainspring of new investment, and where government acts only as umpire for a system of free enterprise”.

Earlier, Chase’s book A New Deal (Macmillan) talks about “What is an economic system for?” (p.3).

He questions the soundness of the belief that “laissez faire” is the best way to organise society (p.5) and why “certain rules and procedures have grown up” and “taken for granted” whereby “the business man and the banker, attempt to satisfy their egos and appetites, and to play their games”.

He argued that in laissez-faire, there is no “divine providence looking after the system”.

Rather (talking about the free enterprise system):

Out of the human need for nourishment, a mechanism has been established … In broad outline it may be compared to the himan body, where the cooperation of millions of cells is essential to the efficient functioning which means health and life. When a group of cells refuses to cooperate, becomes unduly imbued with what might be called the anatomical rugged individualism, we have a cancer and, in the end, death … Fortunately the body has an automatic nervous system which normally keeps the cells in order … The economic system has no such biological protection; it lies defenseless against abuse.

Grave abuses lurk in the means by which men acquire property and make money in Western Civilization …

In Chapter 4 of his 1942 book, Chase recognised that, as a result of the intervention of governments during the Great Depression and the theoretical work that was emerging from the academy around that time (Keynes, Lerner, Kalecki etc) that “something called ‘X’ … is displacing the system of free enterprise all over the world. If we do not know yet what to call it, we can at least describe its major characteristics”.

There followed his famous list, itemising the characteristics of ‘X’:

1. A strong, centralized government.

2. An executive arm growing at the expense of the legislative and judicial arms.

3. The control of banking, credit and security exchanges by the government.

4. The underwriting of employment by the government, either through armaments or public works.

5. The underwriting of social security by the government – old-age pensions, mothers’ pensions, unemployment insurance, and the like.

6. The underwriting of food, housing, and medical care, by the government.

7. The use of deficit spending to finance these underwritings.

8. The abandonment of gold in favor of managed currencies.

9. The control of foreign trade by the government.

10. The control of natural resources.

11. The control of energy sources.

12. The control of transportation.

13. The control of agricultural production.

14. The control of labor organizations.

15. The enlistment of young men and women in youth corps devoted to health, discipline,community service and ideologies consistent with those of the authorities.

16. Heavy taxation, with special emphasis on the estates and incomes of the rich.

17. Control of industry without ownership.

18. State control of communications and propaganda.

If you read the British Labour Party Manifesto: For the Many Not the Few many of the aspirations closely resemble Chase’s description of the main characteristics of “X”.

A similar comparison would apply to the message of Bernie Sanders and Jean-Luc Mélenchon in recent times in the US and France.

The list contrasts with the insipid message that the traditional social democratic parties have been typically putting out in their attempt to attract voters. The lack of hope and differentiation (from the conservatives) in that insipid message explains, in my view, why they are electoral poison now.

Just look at the performance of the French Socialist party (and for that matter the FN) in the first round of the French parliamentary elections on Sunday. The new opppositional left in France is surely La France Insoumise.

Stuart Chase’s list is about hope – about inclusion – about working for all people rather than the government ensuring the ground is tilted in favour of capital.

The following year (1943), Stuart Chase published – Where’s the Money Coming from? Problems of Postwar Finance (Guide lines to America’s Future, No. 3).

It was the third in a series of six short booklets published under the banner of The Twentieth Century Fund. It sold for $US1.00 at the time.

University of Chicago economist Henry Simon Bloch wrote a review of the book for the Amercian Journal of Sociology (Volume 50, No. 1, January 1945) in which he said that:

Stuart Chase … is not what has been called an “economists’ economist”. His brilliant, witty, and smooth style is something which most professional economists lack. If he could combine with these talents a thorough mastery of the tools of economic analysis, Mr. Chase would be God’s gift to economics … It was Chase who was in the forefront of the fight against the myth of the balanced budget; yet his arguments were not always straight. It was Chase who fought many economic superstitions with the zeal of the missionary if not with the methods of professional practitioner …

Chase, of course, knows that many of the statements deserve greater qualification, and much of his oversimplifications purely intentional … he is an artist of the pen, a salesman of ideas, an evangelist and not an economist. All this makes him an idol of the public, an easy target for professional analysts, and a most sympathetic, interesting figure for everybody who likes men with strong convictions.

Faint praise.

Chase was vilified by academic economists but his views were very popular.

But what the government spending associated with the Russian decade after the Bolsheviks took power and later with Hitler in Germany demonstrated was that the theories of public finance (sound finance) held by economists in the West were wrong.

Real resources were the constraint not the government’s currency.

Combined with the publication of the General Theory and a host of supportive literature, the idea that the state was like an
“economic engineer” (a point made by James MacDonad in his 2006 book A Free Nation Deep in Debt: The Financial Roots of Democracy) who could extract real resources for its own uses almost at will.

One commentator at the time noted that in times of war:

Modern nations do not turn themselves over to the enemy for financial reasons.

In a similar vein, Stuart Chase wrote at the time:

Money is the slave, not the master now.

In this booklet, he talked about “modern money”.

Chapter 1 of the booklet – Behind the Dollars – goes through a series of developments in the preceding decade or so which pose the question “Where did the money come from?”

So Stuart Chase wrote:

IN 1925, Russia had been through a devastating war and a violent internal revolution. Her currency had been destroyed in a runaway price inflation, she was the world’s worst financial risk abroad and she had very little gold. Yet by the end of the first Five Year Plan in 1933, Russia had invested some 60 billion rubles in factories, new cities, cities, hydroelectric developments, armaments, houses, schools. There stood the new plant, ugly and solid. Without it Russia could never have met the onslaught of Hitler’s armies.

Where did the money come from?

In 1933 it was freely prophesied that Italy could not invade Ethiopia. She had no credit abroad and almost no gold. The effort would bankrupt her. Italy went ahead, conquered Ethiopia, and emerged without financial collapse.

Where did the money come from?

Hitler took over a Germany which was technically bankrupt. It had defaulted on its foreign obligations. When he proposed to build a powerful army, together with all kinds of grandiose public works, he was laughed at in London and New York. Germany was insolvent, and the whole idea was preposterous. The nations of Europe which have trembled under the thunder of panzer divisions know that Hitler built even more terribly than he promised.

Where did the money come from?

When Japan began to rattle her sword in the direction of Indo-China and challenge the United States and the British Empire, wiseacres said it was a bluff. The long years of the war in China had reduced the Japanese economy to a bag of bones. She was bankrupt and could not sustain a real fight. Yet she opened a new attack with devastating fury, and with military equipment in planes, tanks, artillery, ships, that was as excellent as it was unexpected.

Where did the money come from?

In 1939, the United States Congress declined to appropriate $4 billions for highways, conservation, hospitals, freight cars, in the bitterly contested “lend-spend” bill. It was widely held that the bill would lead to ruin and national bankruptcy. Yet since the fall of France in 1940, Congress has appropriated almost $300 billions for armaments – seventy-five times as much as the lend-spend bill – and a large fraction of it has already gone into tanks and guns. Far from being ruined, our national vitality has never been more vigorous, and great financial moguls assure us that we shall be able to swing the national debt.

Where did the money come from?

After the war America will need to maintain full employment, operate its industries at substantial capacity, provide the essentials of life for all its own citizens, and help foreign peoples who are starving and unable to pay for the supplies. There will be a towering political demand for a world delivered from chronic depression.

Where will the money come from?

It is clear from these examples that what a great nation can “afford” in periods of crisis depends not on its money but on its man power and its goods. Russia, Italy, Germany, Japan, the United States, all used money in the situations mentioned, but money was obviously not the dominant factor. Man power and materials were the dominant factor. Yet at other times, when crisis was not so acute, the money for necessary tasks could not be found. Unemployment, insecurity, want, dragged on. This is a puzzling paradox. At certain times a nation can afford what at other times, with no less money, it cannot afford. At certain times we are afraid of national bankruptcy, and at other times we give it hardly a thought.

The rest of the booklet outlines the flawed reasoning among economists and the policy makers they influence who look the other way when governments are spending billions prosecuting war efforts and bringing all idle resources into productive use (recognising that productive results in this context is, in Chase’s own words, “pretty rough ones”) but in peacetime, continually claim that governments cannot afford anything much.

He noted the hypocrisy in opposing broad-based “welfare projects” in times of high unemployment, because they do not deliver a “pay out” but supporting military expenditure, although “nobody expects tanks to pay out”.

Accordingly:

… the opposition to armament building in Europe was relatively mild. The tanks were built with the labor of the unemployed. The vast rearmament program in the late 1930s did in fact end the depression, but it fill Europe with guns pointing over every frontier.

Chase quoted from Winston Churchill’s 1929 book – The World Crisis: The Aftermath where the conservative Churchill clearly understood the absurdity of the argument that a currency-issuing government could be short of money to advance public welfare.

On Page 33, Churchill wrote:

A requisition, for instance, for a half-million houses would not have seemed more difficult to comply with than those we were already in process of executing for 100,000 airplanes, or 20,000 guns, or 2,000,000 tons of projectiles. But a new set of conditions began to rule from 11 o’clock onwards. The money cost, which had never been considered by us to be a factor capable of limiting the supply of the armies, asserted a claim to priority from the moment the fighting stopped.

11 o’clock was on November 11, 1918, when the peace was declared after WWI.

Chase noted that in the Depression there was idle labour and other productive resources – the “money cost became a brake on the whole economic machine” – despite the availability of these resources and unsold goods:

I have in my files pictures of veritable mountains of oranges, potatoes, coffee, marked for destruction.

So many of the essential insights that Modern Monetary Theory (MMT) are based on were known 100 years ago and remain as true today as they were then (and every period in between).

Conclusion

The rest of the book explains why this puzzle was easy to solve but came up against an ideological resistance (to government spending in peacetime that advanced well-being).

It is very insightful.

Humans have made massive technological progresses since that time. But the degree of intellectual regress in terms of the way we construct macroeconomics or even simple understandings of money and government is staggering.

That is enough for today!

(c) Copyright 2017 William Mitchell. All Rights Reserved.

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    29 Responses to Stuart Chase – a visionary ahead of his time

    1. Willem says:

      This is brilliant. Also his wording: Where’s the money coming from? -out of the full employment of people. Equally his analogy with biology. Just brilliant.

    2. Steven Hummel says:

      Wisdom is the discernment and integration of the truths in opposing perspectives, not the fine tuning of orthodoxy. The signature of Wisdom is a humble thirdness and more complete overall oneness not increased arrogant and obsessive contention.

      wisdomicsblog.com

    3. MarkH says:

      Where did the money come from?

      It didn’t just come “the full employment of people”. It came from the full employment of people compelled by fear for their lives. Where did it come from for the bellicose nations? It came from the promise of plunder (from people compelled by fear for their lives).

      It’s very easy to motivate people into cooperative action – convince them they are facing an overwhelming and immediate existential threat. You can do that legitimately by pointing to the real advances of a tyrannical warmonger. You can also be that tyrant and make the compulsion very tangible. All the other inconvenient things that make your citizens recognisably human will magically disappear, and you’ll have cogs in an efficient machine, ready for war or whatever peacetime folly you’ve concocted. Twentieth century history, in a nutshell.

      There followed his famous list, itemising the characteristics of ‘X’:

      … is a full-blown nightmare. As is “the idea that the state was like an economic engineer”. Have you ever met an engineer? I am one, and it’s very obvious to me that you don’t want specialists of any sort with political power, especially those who think that a complex system like an economy (or a person) is reducible to the sum of its parts, or even fully knowable. The “stocks and flows” terminology used in MMT economic models come from Systems Dynamics, a field which exists to study the neglected insight that complex dynamic systems cannot be fully controlled, because their behaviour is an emergent phenomenon of other interacting systems. They can only be modeled imperfectly, and perhaps managed if your modeling is good enough.

      Attempting to control the uncontrollable is a dangerous folly. Suggesting it without proper reference to the Soviet and Southeast Asian economic experiments, tests which came after the shopping list detailed above, is both inconceivable and ghastly. The suggestion is nothing less than reducing people to a naive economic model, a handful of inputs and outputs in an equation, and then enforcing that reduction, either through fear of a legitimate existential threat or one invented by those in power. I despise the neoliberals, but I’ll take their brand of compulsion any day over that.

    4. Kingsley Lewis says:

      Yes, Chase’s economic and social principles were way ahead of his times.
      But his translation of these principles into a political program was naive.
      Chase’s policies 1-18 above are exhibited today in Venezuela and North Korea.

    5. Steven Hummel says:

      MarkH,

      I agree regarding reductionism, and yes, perfection is impossible in the temporal universe, yet paradigm change (not tweaking capitalist or socialist orthodoxy) and regulation aligned with it, especially if they free both the individual and enterprise from the dominance of the old financial and monetary paradigms of Debt and Loan only and also integrate macro theory and micro-foundational policy, is a deeper and longer lived progression. 5000 years is long enough for the paradigms of Debt and Loan only.

    6. Simon Cohen says:

      Fascinating blog today-thanks to Bill’s wide ranging reading which he shares with us.

      I’d never hears of Chase till today but, after a cursory glance at his output, I notice he had a connection with an interesting linguist called Benjamin Lee Whorf who had been researching the Hopi language and drawing inferences from that on how language dictates thought and the shaping of our society. Whorf is dismissed today as he is considered a ‘relativist’ and the dominant view of evolutionary psychology ( based on admittedly limited reading) is that language has a variety of metaphors for the same perceived reality -but there are challenges to this. never the less Whorf’s work as published in a collection of some of his writings called ‘Language Thought and reality’ is worth a look at.

    7. I appreciate that you brought this forgotten economist to our attention. That generation that included the likes of Kalecki, Lerner and others had lived through the Depression and WWII. They understood that unemployment could always be addressed by the state. What I find puzzling is that after the Global Financial Crisis of this century most economists seem completely uncapable of extracting similar lessons. It would appear that the modern day economist is less malleable to new ideas.

    8. bill says:

      Dear MarkH (at 2017/06/13 at 2:14 pm)

      You seem to ignore the Post War Period until the 1970s, where there was no fear or oppression in Western nations. Chase’s discussion explains why full employment came with hope and responsible governments. His “X” list is exactly how governments in the ‘free world’ (I note your beat up about Soviet and SE Asian totalitarianism) behaved and delivered much superior outcomes compared to today for the vast majority of citizens.

      I grew up in that world. I felt free and had choice and my parents could kick a government out via votes at elections.

      best wishes
      bill

    9. bill says:

      Dear Kingsley Lewis (at 2017/06/13 at 2:14 pm)

      I guess you have read his full body of work for you to conclude he was politically naive? not!

      His conception of the role of the state describes how governments actually did exercise their responsibilities and achieved equitable and effective outcomes for the majority of citizens, which were also politically popular.

      best wishes
      bill

    10. Mike Wright says:

      Bill,

      This is fantastic. Thank you for bringing this work to our attention. Chase Was way ahead of the game on how to frame the progressive narrative.

      “If citizens are going to be guaranteed minimum standards on the one hand, they must help provide those standards by their labor on the other.”

      When framed in this way, the JG wins every time over UBI.

    11. Neil Wilson says:

      ” I am one, and it’s very obvious to me that you don’t want specialists of any sort with political power,”

      You mean like the ones that run the central bank now, run the ECB and run the European Union? They have the political power because they control the purse strings.

      Or in the USA the ones that run the Supreme Court and preside over dictatorship according to a two hundred year old ossified document?

      And yet we have the audacity to complain about certain Muslims sticking to some of the out of date diktats in the Qu’ran.

      The purpose of MMT and its policy proposals is to repatriate power to the politicians we elect – so at least we have the ability to get rid of them once in a while.

      The anarchic individualist fantasies of the tech industry with everything run by computers still suffers from the same problem – who watches the watchers? Systems still have to be managed by somebody.

      In human terms democracy is still the least bad system we have for doing that. What we need to constrain is the delegation of power away from elected officials towards bureaucrats and technocrats. No democrat should be able to bind their successors in any decision – whether that is interest rate setting or private finance initiative contracts. Only then can the population change course.

      There has to be constraints if you are to have a functioning society. But you have to be able to change those constraints.

    12. larry says:

      Bill, I have used Stuart Chase’s writings in my lectures in the past. He is great. And I agree, ahead of his time.

    13. larry says:

      MarkH, it is a quite different thing to have experts as advisors and having them implement policy. Experts, so-called, already serve as politicians. Many politicians have law degrees or have worked in businesses or have been in the military. And a number of them have never done much other than obtain a law degree. So, while they may have political experience, they don’t have much else.

    14. MarkH says:

      Bill: “You seem to ignore the Post War Period until the 1970s, where there was no fear or oppression in Western nations.”

      I’m no sociologist or historian, but I can see the huge expansion of world population in developed countries and elsewhere post WWII. In Australia growth was a survival imperative, labour productivity was less than a third of current levels, and jobs practically made themselves. ‘Controlling’ the elements of the post-world Australian economy amounted to importing loads of young people and setting them to work building up a new frontier. The opportunities from that development created wealth for many people, until the expansion naturally saturated through sheer weight of human bodies – the Australian population doubled between 1940 and 1980, and has almost doubled again since, almost all of it concentrated in the cities and suburbs Boomers and their families settled as (cheap) blank canvases. Again, this is outside my expertise and I may be way out, but the saturation of opportunity and the increase in labour productivity (and decrease in need for labour) makes this a very different world to the post-war one. A new economic paradigm needs to replace that opportunity – make new frontiers for people to expand into – not just promise ‘jobs’ in public works (or, save us, armaments). Expansion is the key. Physical space was dominated post WWII, so a new paradigm needs new frontiers.

      Neil: engineers who mistake the model for the physical system get squished. It’s pretty fundamental that the model of a bridge is not the bridge itself. Whereas, for a legal professional, the model of the legal system *is* the legal system. It’s all construct. An economic model can be somewhere in between, and that ambiguity leads plenty of people astray. Plenty of smart physicists and engineers become ‘financial engineers’ and play around with exotic numerical models. Enough belief in those models *becomes* reality when they are used as the basis for trillions of dollars in trades per day. Until faith in the model isn’t enough to keep the belief bubble inflated, and … pfft. Mistaking the model for the thing itself is the major gripe MMT has with ‘mainstream’ economics, I surmise. I can sort of see the same thing happening with ‘followers’ of MMT, those who believe that a nice model of national accounts can provide a moral basis for what to *do* with the model.

      larry: the point being made was that many specialists (physical scientists and engineers in particular) are people who are naturally drawn to reductionist thinking. The world is a big and scary place, and working with models of it that ‘work’ in narrow domains of influence is a satisfying way to spend a life. Quite a lot of these people (me included) are drawn to pointless discussions of politics, and it is very dismaying seeing so many of them mistaking their understanding of models for an understanding of the world itself. It is always a disaster when reductionist thinking makes its way into executive branches of government. A lawyer who works with models is a ‘political engineer’ in this sense. If their sphere of influence is a complex system like a whole economy, eek.

    15. Nigel Hargreaves says:

      I fully echo Simon Cohen’s words – “fascinating” and “never heard of Chase”. I’ve followed the link to Chase’s book “A New Deal” and will read it. However, I am continuously baffled by Bill’s ability to read several books at once at ten times the speed I can.

      Also baffling is why no politicians follow these routes. Any fool (including this one) can see how they work. There has got to be an ulterior motive.

    16. Jerry Brown says:

      Mark H is correct that Chase’s list can be used by a Hitler or Stalin just as easily as by a more benevolent government. Maybe more easily. The list seems intended to be descriptive of the direction of many governments in the 1930’s and 40’s. Maybe it is a source of hope in one sense, but it is also a source of fear of government in the hands of totalitarians.

      If Bill wants to hold this list out as a source of “hope-and inclusion”, I suggest he review his more recent writings on the use of language and modify the wording of the list, starting with #1-A strong, centralized government. That needs some qualifications added, maybe such as responsible to the people, and authorized by the people, and accountable to the people. #2 needs some work also. Strong centralized government with powerful executives may be able to get things done and prove the point that government is not financially constrained, but they can just as easily be a source of despair as hope.

      I also suggest finding a different word than “control” for list numbers 9 thru 14, and 17 and 18 if this list was to be used as a political platform. It would be dead on arrival in the US in its current form.

    17. Keith Newman says:

      For MarkH and Kingsley Lewis:
      I have lived in Canada most of my life since the early 1950’s. The first 17 items in Mr. Chase’s list were in effect here until around 1980. It was a time of unequaled prosperity and, more importantly, of hope for the vast majority of people, especially young people. I was a young person then and when I compare those times to the dour, austere, and insecure times my children and their friends are living through today I find it very sad.
      Of course we had free elections and the ability to chose between political parties that actually had significantly different policies, contrary to the current situation where the political parties hew pretty much to the same line. Perhaps politics is becoming more diverse once again. We’ll see.
      I recommend reading the appropriate chapters of Eric Hobsbaum’s book “The Short Twentieth Century“ for an outline of that period. I think you would find that understanding helpful before posting the kinds of comments you did above.
      (Note that some people were excluded but there was hope they too would be included in the general prosperity in the future)

    18. Tom says:

      Willem,

      I agree. I was blown away by that quote about funding those programs.

      Such an important visionary figure, but I never heard of his name until now.

      There is no question what he explained should be goals of sophisticated society–when we see what the free market has wrought right under our noses.

    19. Hepion says:

      I would answer the question ‘where do the money come from?’ “From accounting”. That brings to mind an image of an accounting book where somebody writes up numbers. And that is what the money is, accounting record of debts.

      Writing up numbers on accounting ledger is mentally very different from borrowing where the mental image is to borrow something that already exists, goes missing from the lender and has to be paid back.

    20. Chris Drake says:

      It’s interesting that the Japanese prewar finance minister Takahashi Korekiyo followed vaguely Keynesian theories and was successfully leading Japan out of the Great Depression by stressing non-military uses for deficit spending. Unfortunately he was assassinated by the military when he proposed reducing military spending. It is not known whether or not he read Keynes, but he was fluent in English. In any case, it’s significant that Japan depended on non-military as well as military expenditures to overcome the Depression. See: https://en.wikipedia.org/wiki/Takahashi_Korekiyo

      [Bill edited out link to Amazon]

    21. Andy says:

      I will nick that ‘where’s the money coming from?’ quote if that’s ok.
      very useful.

    22. roger erickson says:

      My take? Nation-based economic systems do not [YET] have established protection systems (like those found in smaller tribal populations & bigger physiological cellular populations)

      It’s up to us to design richer feedback systems capable of providing that function. Methods drive results, and Desired Outcomes drive methods.

      others noted similar patterns;
      Ludwig Boltzmann, for one (~1906; human culture analogous to a brain)
      https://en.wikipedia.org/wiki/Ludwig_Boltzmann#Energetics_of_evolution

      and prior to that: “The Physiology of Industry, 1890”
      https://ia902701.us.archive.org/19/items/physiologyofindu00mummuoft/physiologyofindu00mummuoft.pdf

      A bigger question here is, “What happened to prior common sense?”
      One answer is sheer population size, plus the distractions that come with it. Our aggregate organizational challenge rises as a factorial function (or worse) of network/population elements.

      It’s no mystery that, to organize, we need:
      Far richer human feedback networks (connectomes? interactomes?)
      Far more interaction (data are meaningless w/o context)
      Less work, and more interaction/innovation/coordination time.

    23. roger erickson says:

      “Chase was vilified by academic economists but his views were very popular.”
      [what’s that tell you about economists?
      does it make you wonder “What is an economic system for?” :( ]

      Like practicing academic economics for the academics themselves?

      e.g., Fighting a war for the war system itself
      http://www.truth-out.org/news/item/40916-why-afghanistan-fighting-a-war-for-the-war-system-itself

    24. John Doyle says:

      It’s no wonder he has been ignored. Far too inconvenient for neo-liberals and the mainstream today.

    25. Sam says:

      Mosler is always saying how the essence of money creation was commonly understood throughout history.

      This is a brilliant recent example.

      Thanks, Bill.

    26. larry says:

      MarkH, I am familiar with research dealing with just the question you mention. And the results are more nuanced than you indicate. Not all such researchers are reductionist. For instance, one has to distinguish between theoretical and experimental physicists. The former tend to be less reductionist, to use your term, than the latter. Einstein or Feynman or Oppenheimer are good examples of the former, while Teller is a good example of the latter. I unfortunately don’t have the references to hand so can’t refer to them. But it is my recollection that this is so.

      While the view taken of lawyers is akin to Jack Webb’s admonition to witnesses: Just the facts, ma’am, just the facts, not all lawyers are necessarily like this. To wit, Clarence Darrow, who often took a broad brief with respect to many of his cases, like the infamous Scopes “monkey trial”.

      I would argue that any field that inhibits reflection or otherwise restricts constructive thinking, or takes what could be interpreted as an ecclesiastical stance regarding its “mission” should not be placed in central decision-making positions. In this respect, computers modeling can provide information about the world provided it is properly employed. Like anything else, if misused, it can seriously mislead. Such modeling exercises can provide a testing ground for suitable theories. But one must temper one’s interpretation and especially take note of the limitations inherent in such exercises in doing so. Note: these models are themselves neither true nor false but only useful or not. Any truth-value comes via the theories being tested. Proper models can show a theory’s limitations but not thereby whether it is actually true.

    27. Jan Stuart says:

      Bill,
      It’s actually comedian Tom Walker as fictional reporter Jonathan Pie, doing a rant to camera before/after he goes ‘live’. Very funny and so spot-on.

    28. Guima says:

      Markh

      The model of the bridge is only as good as the assumptions taken when modelling that bridge, but it still gets built, and performs far better than the model anyway.

    29. Howard Switzer says:

      I think Chase’s list is being misconstrued by some here. We live in an illusion that government is a self-interested party and thus any control it exerts is in opposition to all other’s personal interests. Our government is not “our” government, it is the government of those who issue and control the money supply and it is they who determine public policy and have their pets in Congress pass. You can imagine otherwise all you want but it won’t change the reality that we are ruled by private self-interested parties. Chase’s list was imagining a democratic government with such powers serving the general welfare of society, something apparently few can even imagine today, most having been made completely ignorant of what democracy is. The question should be, Where should the money come from? A private banking system issuing money as debt for personal gain or the government issuing money as a public asset for the general welfare?

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