Getting all Tied Up (3)

This series considers Paul Mason’s “Risks are ‘a Thing’… and so is the Death of Capitalism”, a critique of MMT.

Mason believes to have detected in MMT a monetary theory of value. In the previous post I argued that is just a mirage. So, where did he take a wrong turn?

Much like Marxists, MMTers write a lot. Out of the ever expanding MMT literature, academic and popular, this single sentence, taken from one of Prof. Pavlina Tcherneva’s papers, is the smoking gun proving the existence of an MMT ToV: “since the currency is a public monopoly, the government has at its disposal a direct way of determining its value” (Mason’s emphasis).

As proof of the existence of a MMT ToV that’s a stretch. 

Let’s think about it. Step into a department store and count how many different items they offer. Soon enough, I’m sure, you’ll give up. It may easily number in the thousands. And that doesn’t begin to give an idea how many items are there in the market. Among books, for example, Amazon supposedly offers 44.2 million different titles/editions.

Amazon IT techies, I imagine, could easily produce a long and impossibly unwieldy list of equivalents similar to the one I present below. For our purposes, the much shorter example Marx offers in Capital, which I can present here, will do just fine:

(source)

All items there (Marx calls them use values; neoclassicals call them goods) are equally worth. That makes them mutually exchangeable. Say 10 lbs of tea are worth ½ a ton of iron, which is worth 2 ounces of gold and so forth.

As its name suggests, use values are useful things (they fulfill someone’s needs; somewhat similar to neoclassical utility). Produced for the market, those use values also have a value (neoclassicals’ relative price; Smith and Ricardo called that exchange value). The three things [(1) use value, (2) produced for the market with a (3) value] make of those items commodities.

Marxists and neoclassicals agree on very little. One thing they do is in the need to explain those values/relative prices. Neoclassicals invoke preferences, supply and demand schedules, etc. for that.

Marx explains those values (hence his theory of value) in terms of labour time socially necessary.

One may disagree with one explanation or the other or even with both, what’s undeniable is that is what they aim to do.

Remember Lee’s critique? That’s not what post Keynesians do and, much more to the point, try as one might, it’s hard to imagine that’s what Tcherneva tries to do in her 2005 paper “The Nature, Origins, and Role of Money”, which Mason links to. Nowhere she mentions the values of millions of other goods, or commodities. No “20 yards of linen are worth 1 coat” in her paper. What Mason interpreted as a MMT ToV is the MMT answer to this much more limited question: how can one single thing, fiat money [which (1) is not produced to be sold in the market, (2) is not a use value, and (3) has no value because it does not incorporate any social necessary labour], officiates as the uber-commodity: the “universal equivalent form” which in the scheme above is presented at the right?

Tcherneva’s answer: by governmental fiat. The government (in the somewhat idiosyncratic MMT usage) says so and will punish you for disobeying. Fiat money requires coercion.

In Marx’s time gold often played that role, although any other commodity could do. Silver was used in Marx’s native Germany, for example; both silver and gold elsewhere. Money was commodity money (Marx himself writes that gold “becomes the money commodity”). Whatever the material, by definition commodity money was a use value and had value: like all commodities, it incorporated socially necessary labour time. Arguments to the contrary notwithstanding, there was little need, if any, of government coercion.

All that changed when fiat money replaced commodity money. Tcherneva tries to explain how fiat money achieves that. No more, no less. If she did something else in that paper, I missed it.

Marxists should have been doing that, because the fact is money no longer is a commodity. Lacking that, at least we should be grateful Tcherneva and MMT did it for us. Instead, we have to be dragged, kicking and screaming (I’m looking at you, Michael Roberts).

And the way fiat money fits into Marx’s theory of value is actually quite obvious -- to me at any effect -- with one added advantage: it spare us the dizziness resulting from reading Sam Williams’ frantic verbal juggling.

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It’s up to readers to judge, but I believe Mitchell was right: Mason really got all tied up. By focusing entirely on money, Mason sees MMT bigger than it is; bigger indeed than what MMT founders claim it to be. And all that based on a lonesome sentence taken out of context that doesn’t support his claim! That’s a wrong turn. A really wrong one, because, in my opinion and for what it might be worth, MMT’s original sin is the lack of a theory of value.

But before going into that, there’s an additional piece of evidence Mason presented I must consider. There, I believe, he is on firmer ground. Paradoxically, it's a good introduction to the problems MMT’s lack of theory of value causes. That's the subject of the next post.