Further reflections on the ontology of money: responses to Lapavitsas and Dodd

Abstract

The debate on the nature of money, its origins and conditions of existence has been recently taken further in separate articles in Economy and Society by Lapavitsas and Dodd. Both criticize Ingham's elaboration of Keynes's contention that the money of account is the primary concept in a theory of money. Lapavitisas reiterates and extends his Marxist analysis of money's origins as a universal equivalent in commodity exchange. This fails to explain the existence of a money of account, without which genuinely market exchange cannot take place. Dodd's claim to furnish a much-needed analytical refinement in the analysis of money, used to criticize Ingham's position, is shown to be based on a re-statement of an established and widely accepted distinction in monetary theory.

Keywords:

• money's logical and historical conditions of existence
• the state theory of money
• Marx
• Keynes
• Simmel

Notes

1. It is apparent that the terms of the dispute have a scientific and ideological import that has a much wider resonance than the particular question of money, which, perhaps, accounts to some extent for the persistence of the antinomies (Ingham 2005: xi–xiii).

2. In Marc Bloch's (1954 [1936]: 77) counterintuitive formulation, money would disappear if everyone paid their debts simultaneously.

3. Keynes, with characteristic whimsy, saw the futility of the search for the ‘earliest beginnings’ of money which ‘are lost in the mists when the ice was melting, and may well stretch back into the paradisaic intervals in human history of the interglacial periods, when the weather was delightful and the mind free to be fertile of new ideas – in the Islands of the Hesperides or Atlantis or some Eden of Central Asia’ (1930: 13).

4. Even here there could be quite significant local variations unless these were standardized by an authority – usually the state.

5. If Dodd means only the ‘extant’ sociological literature, then that is a different matter, which incidentally reinforces the arguments that I have made about sociology's loss of direction with regard to money.

6. In passing it should be noted that Dodd persists in erroneously classing ‘airmiles’ as a form of money – both money of account and media. They are, rather, credits with a restricted, not universal, exchange value fixed in a money of account – dollars, euros, etc. They do not fulfil one of the essential criteria for money; that is, the assignability, or transferability, which makes them universally exchangeable (perfectly liquid) in a given monetary space.

7. For example, Dodd also writes: ‘Ingham has suggested that the theory of optimum currency areas … was used as a primary justification for introducing the euro’ and that I am mistaken because most economists agreed that the eurozone was not an optimum currency area. I wrote: ‘Justification for the single currency, as the logical counterpart to the creation of a single market, is often drawn from optimum currency area (OCA) theory.’ I go on to say that the eurozone was not an optimum currency area, but that the theory had rhetorical significance in drawing attention to the putative benefits of reduced transaction costs, etc. (Ingham 2004: 191–2).

8. This is, of course, also the Hayekian vision of purely market money. It would be anarchy.

9. Economists refer to this as the ‘endogenous’ creation of money (Ingham 2004: 52–5).

Additional information

Notes on contributors

Geoffrey Ingham

Geoffrey Ingham studied sociology in the universities of Leicester and Cambridge. He is currently Reader in Political Economy and Sociology in the University of Cambridge and Fellow and Director of Studies in Christ's College, Cambridge. He is the author of the Nature of Money (Cambridge: Polity, 2004)