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1 Introduction and Selected Review of the Literature
I. Methodologies in Flux
A. Current Period
In the current period, methodologies are in flux. There is a wide range of different approaches, including, for example, economics as a science (Mirowski 1989), as well as historical institutionalism (Mahoney and Thelen 2010), evolutionary institutionalism (Hodgson 2015), literary studies (Poovey 1998), behavioral economics (Kahneman 2011), new institutional economics (Greif 2006), philosophy (Searle 2010); technology (Arthur 2015), historical materialism (Wickham 2007, 2016), game theory (Quint and Shubik 2014), world systems theory (Arrighi 1994), network theory (Blockmans 2010; Latour 2005; McLean 2007; Powell 1990; Tilly 2010; Castells 1996; Padgett and Ansell 1993), and cognitive science (Fauconnier 2003; Hutchins 1996). There are disciplines that have risen and fallen, only to reemerge, such as the history of ideas (McMahon and Moyn 2014).
According to Davis (2015), this is a sign of institutions in flux, with key categories in question, such as “property” and “money,” and the associated expertise undergoing reassessment and critique. Yet few methodologies examine money as an institution rather than a self-evident object of convenience. This work will proceed to consider money as an integral aspect of social institutions, subject to the same methodological approaches.
B. Money as a Social Institution
Building on Davis (2015), the organizing concept for this book is that money is a social institution (Desan 2014; Seigel 2012, 271–272, 280; Wray 2004), usefully studied with the method of historical institutionalism. By applying this methodology, one would focus on the category of money, along with the financial institutions and the expert knowledge associated with them. Although the associated literature is voluminous, this approach will focus on the language, the specific terminology, and the shifting meanings over time. Exploring these definitions in a historical context will provide a method for tracing shifting institutions over time and their complex interconnections.
There are several aspects to this proposition, specifically in the case of money. First, money is a symbol, part of a coded system of communication (Habermas 1989; Hutter 1994; Luhmann 2012; Simmel 1978). Second, money is a disciplinary device (Poovey 1998, 2008). Third, money is a form of sovereignty, integrally related to the state (Barkan 2013; Ingham 2004, 49; Kelly and Kaplan 2001, 2009; Santner 2016).
After discussing each of these aspects, the chapter will proceed by a review of the literature, highlighting Marx, Simmel, and Keynes. The three aspects of money emphasized here will be contrasted with other treatments in the literature.
Finally, this discussion will be used to consolidate the proposed framework for the analysis of money for the remainder of the book and key questions and issues to be resolved.
II. Symbol
First, money is a symbol. Money takes a physical, material form that is visible, recognizable, and quickly interpreted, like Kahneman’s “thinking fast” (2011). In this sense, an instantaneous message is communicated subliminally, without the participants’ awareness. As such, money becomes “naturalized,” and its use becomes habitual, not the subject of scrutiny or inspection under normal circumstances. Money is often taken as valuable in itself, which may enhance its functionality (Searle 2010, 107, 140; Poovey 2008, 26).
As a symbol, the message is interpreted by users of a distinct community, who recognize each other as participants, who know the “language” (Hutchins and Johnson 2009; Padgett 2014e, 98). This group becomes a closed community, with its limits delineated by social signs (such as age and gender), as well with the possession and effective utilization of the symbol. The message must be repeated to maintain its meaning, but in this process its message can become distorted and ambiguous. Under these circumstances, the form and content of the message can vary over time, leading to a form of “evolutionary” development (Hutter 1994, 123–128; Luhmann 2012, 38, 114–115; Padgett 2012d, 55–60).
For the sign to maintain its meaning, there must be an operation of “observing repetitions” (Hutter 1994, 114).
Every sign needs another sign to validate its existence: only the next sign proves that the prior sign had meaning, i.e. was a sign. (Hutter 1994, 114; italics in original)
In this process of repetition, communication is differentiated from its environment (Hutter 1994, 116). The boundary of understanding of these signs is called “society” (Hutter 1994, 118) in certain contexts. Money is a type of self-referential system of code, related to property and transactions (Hutter 1994, 119–122). In this sense, money is “fictional,” referring to a meaning that is only understood by the mutually recognized participants, whether clan, group, or organization (Hutter 1994, 127, 136).
Money is a type of, and the subject of, specialized writing, or “expertise,” which reproduces its meanings by professional standards and protocols. One example is double-entry bookkeeping, which has precise rules for representation and for “balancing” the flows of money and commodities (Poovey 1998, 29–65). Money is subject to the “problematic of representation,” nonetheless, whereby the concordance of word and thing becomes questionable (Poovey 2008, 4–7, 14–19). This instability of reference between money and value in general becomes particularly acute in periods of financial crises. At such times, even professional economists can resort to types of “fiction” writing and storytelling to help explain its breakdown. According to Poovey, the development of modern academic disciplines like economics and literary studies, and the distinction between “fact” and “fiction,” can help stabilize the meanings of money even in such times of crisis (Poovey 2008, 77–85).
III. Disciplinary Device
Money has most often been linked to the political authority and served as a disciplinary device, albeit in different ways. In the history of money there have been several stages: money as tribute, taxes, and the capacity to exchange “property” as designated by the official hierarchy; the capacity to hire living labor; and the capacity to make use of money itself by means of a regulated financial market (Ferguson 2008; Goetzmann 2016). Money may be an instrument of “liberal governmentality” in the liberal state (Davis 2015, 214–215).
The meaning of money is stabilized by the qualitative relationship of the power to command commodities, resources, and labor; the quantitative ratios of relative prices; and the substitution among various types of financial assets to create “liquidity” (Davis 2015, 149–150). In order to rationalize and analyze the quantitative relationship between money and commodities, a distinction was made by Smith and Marx between “productive” and “unproductive” labor (Smith 1994; Marx 1967; Christophers 2013, 40–51). Only productive labor creates “value,” and competition among producers systematizes the exact quantitative relationships reflected in market prices. Productive labor is distinguished by types of products as well as locations of production. For Smith and Marx, services were not “productive,” and even for contemporary economists, the household does not produce value. Money as a symbol includes the qualitative relationship, the potential of money to command labor power, and the quantitative equivalence of money and commodities in exchange. Yet these relationships are in flux over time (Postone 1993), influenced by relative bargaining power and improvements in methods of production, from skill, science, and mechanization. Yet there is a “normal” or “equilibrium” value that represents the social average, expressed in measures of labor productivity for each sector and in each time period.
In economies characterized by the separation of factory from households, another discipline on the worker is to locate and qualify for employment. Wages from employment typically become the primary means of acquiring necessities as well as luxuries. This search for employment requires the development of skills to produce products that are valued on the market (Meister 1991).
IV. Form of Sovereignty
As an abstract concept, the state has been made analogous to concrete “bodies,” for individual persons, monarchs, and nation-states (Howland and White 2009, 1–2; Padgett 2012a, 122–123; Poovey 1995, 2002). Coin has further represented the political power of the state (Hutter 1994, 132; Spufford 2002; Polanyi 1944), and the issue of money is often the monopoly of the state (Rogoff 2016, 17-30). Hobbes imagined the state as a creature, the Leviathan, larger than life (Barkan 2013, 21–25), a single entity composed of the collective of individuals. For a mercantilist state, corporations were instruments of trade and colonization (Kelly 2006, 160–167), with power beyond the territory of the state (Barkan 2013, 89–109). On the other hand, private business corporations became separate entities, “the legal embodiment of capital separate from the state,” and capable of challenging that state (Barkan 2013, 57).
With the rise in the use of money to mediate trade and production, there also emerged a new composition of the elite and a new form of the state, a type of “co-constitution” (McLean and Padgett 2004, 193–195).
As public debt became a means of raising funds to wage war, the power of the state increased. This new capacity to extend the scale and territory of the state then facilitated increases in fundraising capacity (Arrighi 1994). At the same time, this increasing importance of money in supporting the military and the extension of state power caused the form of the state to change to a state founded on financial flows (Weber 1978, 166–174, 199–201). This concept is further developed in a discussion of the tax/credit form of the state discussed in Chapter 5.
In particular, the modern money school emphasizes money as the creation of the state. Rather than viewing money as always the “creature of the state” (Tcherneva 2016, 6), nonetheless, this analysis stresses the interaction of the state and money. On the one hand, a sovereign currency can enhance the power of the state (Ferguson 2001). On the other hand, hegemonic currencies used to dominate world trade can be an instrument of subordination for peripheral states. The currency hierarchy reflects the competitive status among nation-states. A long-term history of money would highlight the changing role of money along with the changing form of the state, as suggested in Table 1.1.
Another clue to the salience of money as a coordination/control device is the emergence and the flux among competing theories of money in different eras, as illustrated in Table 1.2.
In other words, the term “money” and what counts as money, the related institutions, and the expertise are all important components of a related complex that evolves historically.
Table 1.1 Forms of State and Money
| Type of State | Form of Money |
| Empire | Precious metal or standard commodity |
| Commercial revolution among competing states (Lopez 1971; Spruyt 1994) | Precious metal; private bankers |
| Hereditary monarchical states (Polanyi 1944) | Precious metal (haute finance) |
| British Empire | Gold standard (1880–1914) |
| Liberal trade empire (U.S. dominated) | Dollar/gold standard under Bretton Woods; hegemonic fiat currency post Bretton Woods |
Table 1.2 Theories of Money and Time Period
| School/Theorist of Money | Time Period |
| Aristotle | Ancient Greece |
| Church | Medieval Period |
| Mercantilist | Early Modern |
| Classical (Locke 1988; Smith 1994) | Early Industrial |
| Neoclassical (Marshall 1923); Austrian (Hayek 1933) | Industrial |
| Keynes | Modern Global Trade Regime |
| Modern Theory (Wray 2016) | Post-Neoliberal |
V. Review of the Literature
It is important to review, compare, and build on major contributions to the analysis of money, including Marx, Simmel, Keynes, and others.
A. Marx
For Marx, labor is the central relationship between humankind and the material world and provides an insight into a method for comparing different historical epochs, such as historical materialism. Marx’s labor theory of value is shared by Locke, Smith, and Ricardo, although in a particular form related to the specifics of the institutions of capitalism. In this specific historical form of capitalism, money expresses the value represented by abstract labor time (Postone 1993).
For Marx, money is “ideological” in the sense of hiding a deeper reality compared with the surface appearance (Poovey 2002, 132), which can only be adequately understood by means of a “critique of political economy.” Money can be understood as a symbol (Marx Capital, Vol. I 1967, 90–93, 126–127, 129), capable of becoming “the private property of any individual” (Marx 1967, 132). Money is the abstract form of human labor generally, the “universal equivalent” (Marx 1967, 67). Money is “the individual incarnation of social labour, as the independent form of existence of exch...
