Chartalism
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Background
When Knapp was writing, the prevailing view of money was that it had evolved from systems of
A prince, who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind, might thereby give a certain value to this paper money; even though the term of its final discharge and redemption should depend altogether on the will of the prince.
— Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
Forstater also finds support for the concept of tax-driven money, under certain institutional conditions, in the work of Jean-Baptiste Say, John Stuart Mill, Karl Marx and William Stanley Jevons.[5]
Alfred Mitchell-Innes, writing in 1914, argued that money existed not as a medium of exchange but as a standard of deferred payment, with government money being debt the government could reclaim by taxation.[6] Innes argued:
Whenever a tax is imposed, each taxpayer becomes responsible for the redemption of a small part of the debt which the government has contracted by its issues of money, whether coins, certificates, notes, drafts on the treasury, or by whatever name this money is called. He has to acquire his portion of the debt from some holder of a coin or certificate or other form of government money, and present it to the Treasury in liquidation of his legal debt. He has to redeem or cancel that portion of the debt...The redemption of government debt by taxation is the basic law of coinage and of any issue of government ‘money’ in whatever form.
— Alfred Mitchell-Innes, The Credit Theory of Money, The Banking Law Journal
Knapp and "Chartalism" were referenced by
Historian Constantina Katsari sees principles from both metallism and chartalism reflected in the monetary system introduced by Augustus to the eastern provinces of the Roman Empire, from the early 1st century to the late 3rd century AD.[9][10]
Modern proponents
Economists Warren Mosler, L. Randall Wray, Stephanie Kelton, and Bill Mitchell are largely responsible for reviving chartalism as an explanation of money creation; Wray refers to this revived formulation as Neo-Chartalism.[11]
Mitchell, founder of the Centre of Full Employment and Equity or
Rodger Malcolm Mitchell's book Free Money[13] describes in layman's terms the essence of chartalism.
Some contemporary proponents, such as Wray, situate chartalism within post-Keynesian economics, while chartalism has been proposed as an alternative or complementary theory to monetary circuit theory, both being forms of endogenous money, i.e., money created within the economy, as by government deficit spending or bank lending, rather than from outside, as by gold. In the complementary view, chartalism explains the "vertical" (government-to-private and vice versa) interactions, while circuit theory is a model of the "horizontal" (private-to-private) interactions.[14][15]
James K. Galbraith supports chartalism and wrote the foreword for Mosler's book Seven Deadly Innocent Frauds of Economic Policy in 2010.[18]
See also
References
- ISBN 978-1-933633-86-2.
- ^ Knapp, George Friedrich (1924), The State Theory of Money, Macmillan and Company, p. 32
- ^ a b Knapp, George Friedrich (1924), The State Theory of Money, Macmillan and Company
- ^ a b Wray, L. Randall (2000), The Neo-Chartalist Approach to Money, UMKC Center for Full Employment and Price Stability, archived from the original on 2019-10-20, retrieved 2019-08-27
- ^ a b Forstater, Mathew (2004), Tax-Driven Money: Additional Evidence from the History of Thought, Economic History, and Economic Policy (PDF), archived from the original (PDF) on 2020-04-20, retrieved 2014-07-28
- ^ Mitchell-Innes, Alfred (1914). "The Credit Theory of Money". The Banking Law Journal. 31.
- ^ Keynes, John Maynard: A Treatise on Money, 1930, pp. 4, 6
- ^ a b Lerner, Abba P. (May 1947). "Money as a Creature of the State". The American Economic Review. 37 (2).
- ^
Stephanie A. Bell and Edward J. Nell, ed. (2003). The State, the Market, and the Euro: Chartalism Versus Metallism in the theory of money. Edward Elgar. ISBN 1843761564.
- ^
Constantina Katsari (2011). "Chpt. 7". The Roman Monetary System. ISBN 978-0521769464.
- ^ The Economist, 31 December 2011, "Marginal revolutionaries" neo-chartalism, sometimes called “Modern Monetary Theory”
- ^ "Author Page for Scott Fullwiler :: SSRN".
- ISBN 978-0-9658323-1-1
- ^ "Deficit Spending 101 - Part 3" Bill Mitchell, 2 March 2009
- ^ "In the spirit of debate...my reply" Bill Mitchell, 28 September 2009
- ISBN 978-0-07-159299-4
- ISBN 978-0-521-35079-2
- ISBN 978-0-692-00959-8; also available in .DOC