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What if the Public Understood How Money Works?

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Economists as the Secular Priestly Caste Guarding Knowledge of the Holy of Holies

There's something invigorating about people freaking out about modern monetary theory (MMT). They treat MMT as akin to the Ark of the Covenant in the first Indiana Jones movie. They are petrified that knowledge of the financial equivalent of the "holy of holies" will be released to normal people because they project their greatest terrors onto the possibility that the public will be transformed and empowered by their knowledge of matters that much of the financial world has understood for at least a century.

The Other MMT: Monetary Myth Theory

Randy Wray has written about the time when the Nobel Laureate in Economics, Paul Samuelson, explained in an interview with Mark Blaug (in his film on Keynes, "John Maynard Keynes: Life/Ideas/Legacy 1995") the need to limit the knowledge of true nature of money to the priestly caste of economists.

"I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say "uh, oh what you have done" and James Buchanan argues in those terms. I have to say that I see merit in that view."

Notice the breadth of ideology represented by the economic priesthood -- from the hardest right represented by the Nobel Laureate James Buchanan to wherever one places Samuelson on the spectrum. One can see why Samuelson foisted a bowdlerized version of Keynes on economics students for decades in which massive unemployment is essential to avoiding "inefficiency."

Notice also the depth of the disdain the priestly caste of economists has for democracy. Samuelson is vituperative about the folly of allowing the public to learn about the true nature of money -- it will cause not just "chaos," but "anarchistic chaos." Normal humans cannot be trusted with the sacred knowledge of money because they lack the "discipline" of economists. They are at heart anarchists. Samuelson entered the University of Chicago at the age of 16 at a time when anarchists were the most infamous people in America and Chicago had been home to many of the Nation's most famous anarchists. To Samuelson, anarchists were the willful destroyers of all the "bulwarks" necessary to the preservation of society. The mission of the priestly caste of economists was to ensure that the citizenry did not learn the great secret of money. It was meet and right that they should do so by creating and spreading "myths" about money designed to "scare" the citizenry into believing the myths.

But why can economists be trusted with the knowledge of the great secret of money? Economists differ (statistically) from human beings of similar intelligence in one key characteristic -- they score lower in altruism when they begin their studies and by the time they complete their studies they are even worse -- and proud of it. Normal human beings, seeing the misery of the unemployed would use their knowledge of money and the realization that helping the unemployed would improve the economy would rush to make that win-win occur. Altruism and empathy are related concepts.

Economists are not simply (statistically) low on altruism, they are taught to be proud of it. Ayn Rand famously condemned altruism as a vice and praised selfishness as a virtue. Many economists agree with her that "society" does not exist and that individuals owe no duties to the public. Keynes' famous explanation of why Ricardo's most specious claims proved so attractive to so many economists is instructive.

"It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority."

Economists and CEOs' Enema Strategy

A long, slow recovery from a serious recession that depresses wages for a decade or more by creating a massive "reserve army of the unemployed" can be an enormous boon to CEOs. The statement that President Herbert Hoover (controversially) attributed to his Treasury Secretary Andrew Mellon shows that the powerful understood this dynamic. "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system."

Whether or not Mellon actually uttered these phrases, the key is that Hoover knew that conservatives often advised him to liquidate and purge. Hoover rejected that advice, but he also rejected effective stimulus. There is no dispute that a famous economist who is a hero among conservatives, Joseph Schumpeter, argued against government reducing the severity of depressions because "artificial stimulus leaves part of the work of depressions undone." (Public education is "artificial," baubles for the Gatsbies of the world are "real.") Normal human beings, knowing that the government could avoid much of the pain of the recession and make the recovery stronger and faster while causing no harm, would promptly do so.

Economists and Sadomasochism

Many economists are not simply weak on altruism, they are strong on sadism. They write repeatedly about the need to inflict "pain" on the public through austerity. They're not into masochism, of course, as one can observe at any economic conference in which turgid presentations about meaningless models echo off the walls of deserted rooms. Economists who shill shamelessly for CEOs know they will be well rewarded. As the secular priestly caste these economists perform some of the same functions that religious priestly castes have for millennia -- they venerate and legitimize their powerful ruling patrons by creating myths such as the divine right of kings (and CEOs). They sell indulgences that immunize the wealthy from accountability for their crimes. Lawyers, another priestly caste in America that serve CEOs, use economists because they make great expert witnesses (for huge fees), for the defense in the (rare) cases they are sued or prosecuted. If the public were to learn the great secret of money and see through these myths these economists would be exposed as shills and lose income and prestige.

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William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)
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