By L. Randall Wray

We all know the usual approach to money, that begins with a fantasized story about barter, the search for an efficient medium of exchange, the role of the goldsmith, and then on to the gold standard, the deposit multiplier, fiat money, and monetary neutrality—at least in the long run.[1] It provides a perspective on the nature of money, on the primary functions of money, and on rules for proper monetary management. It frames all mainstream discussions of money—whether by economists, by policymakers and by the population at large. That framing is also largely consistent with the conventional view of the economy and of society more generally. To put it the way that economists usually do, money “lubricates” the market mechanism—a good thing because the conventional view of the market, itself, is overwhelmingly positive. The market “meme” frames our view of the economy and society, too—the market is the place we go to exercise choice, to assert our individuality, to catch and bring home prey to the adoring family. The king of the market, of course is the highly vaunted, entrepreneurial small businessman (gender specific) who provisions society with useful work as well as consumption goods and services. Each productive member of society is appropriately rewarded with money which preserves the freedom to choose how to apportion his claim on output in a manner consistent with preferences. The biggest potential threat to efficient allocation of scarce resources among competing unlimited wants comes from government’s exercise of control over money—first by replacing natural, intrinsically valuable, commodity money with fiat money, second by taking away people’s hard-earned money through taxes, and third by profligate government’s uncontrollable urge to inflate away money’s value.

It is a beautiful meme, entirely consistent with the individualistic sentiment that has dominated public discussion since Margaret Thatcher asserted that there is no such thing as society. Government’s destructive impulses must be constrained by strict rules—balanced budgets, debt limits, and especially an independent father-figure central banker who keeps tight control over the purse strings. Voters must insist on frugality, and can enforce it through tax cuts to “starve the beast”. Wasteful spending—which includes almost all government spending—must be reigned-in to allow the market to allocate scarce resources to more productive, private, use.

We need an alternative meme, one that provides a frame that is consistent with a progressive social view.

To be sure, in my view the conventional story is wrong—it is inconsistent with the findings of historians, anthropologists, legal scholars, sociologists, and political scientists.[2] I’d prefer a meme that is more consistent with these findings.

However, I also know from experience that “truth” doesn’t automatically trump myth. George Lakoff has brilliantly explained how our minds work, using metaphors—memes—to understand the world.[3] This is especially true the more abstract the concept under examination. Economics uses highly abstract concepts and reasoning: “economy”, “market”, “equilibrium”, “productivity”, “supply and demand”, and, especially, “money”. Simple stories—Crusoe and Friday agreeing to use seashells as a medium of exchange—simplify difficult concepts and also draw attention to the lesson the speaker wishes to teach. The “story of money” outlined above provides the proper framing for the conservative’s lesson. Money simplifies life for Crusoe and Friday. More importantly, the story diverts attention away from inconvenient topics: Crusoe and Friday come together as equals, of their own free will to engage in mutually beneficial exchanges, in a “free” market only lubricated by money—not as conqueror and subject. While the simplistic story adopted by economists is inconsistent with historical “facts”, it is not difficult to adapt the story to bring it in line with many of the findings of historians (who, after all, generally do adopt the conservative framing).

As Jack Balin argues, memes serve as the basis of stories, networks of cultural associations, metaphoric and metonymic models, and other mental structures.[4] Memes are self-replicating, sort of like a virus. Since we think through metaphors, according to Lakoff, as the virus spreads through the population, the meme controls the way we think about a topic.

Conservative memes dominate all discussion about the economic sphere. The market is “free”; the government “intervenes”. Consumers “choose”; government “regulates”. Through judicious framing, the conservatives have won all the important economic debates of our times. Deficits crowd out, cause inflation, and bankrupt our nation. We’ve run out of money. Government is the problem. Taxes and regulations destroy initiative. Small business creates jobs and government destroys them. Yet, in every case the conservative claims are demonstrably false. But it does not matter. They’ve got the better framing, the better money memes.

In most cases, the progressives adopt the conservative framing and so have no chance. For example, take the current debate about government budget deficits which progressives propose to reduce by raising taxes on the rich to “pay for” government spending. Without knowing anything about government or budgeting, the listener knows a) deficits are bad—somehow government is “deficient”; and b) the progressive solution relies on more taxes—and no one likes taxes. The conservative framing—government spends too much–has a much more appealing solution: reduce government waste. It addresses the problem more directly, and in a morally superior manner. Lakoff explains why conservatives always win:

They understand the importance of morally-based framing, the importance of language, the importance of repeating language, the importance of not using the opposition’s language, and the importance of an extensive communication system that operates daily everywhere… Everything you understand is a matter of framing. And what counts as a fact depends on the frame used in understanding.

Hence, it is not so much the accuracy of the conventional view of money that we need to question, but rather the framing. We need a new meme for money.

That meme would emphasize the social, not the individual. It would focus on the positive role played by the state not only in the creation and evolution of money, but also in ensuring social control over money. It would explain how money helps to promote a positive relation between citizens and the state, simultaneously promoting shared values such as liberty, democracy, and responsibility. It would explain why social control over money can promote nurturing (“parental bent” as Veblen called it) activities over the destructive impulses of our “undertakers” (Smith’s evocative term for capitalists).

According to Lakoff, there are two competing views of the parent: the strict father figure who constrains and punishes versus the nurturing parents; most individuals simultaneously hold both views—but the conservative views about the dominant father who needs to discipline the kids is most prominent in political discussion. Adults, of course, want to escape the strict father represented by government, and so want to limit its power. Conservatives emphasize that we need to “get government off our backs”. In Lakoff’s terminology, progressives need to emphasize the nurturing characteristics of the state—the mother and father working together in the interest of the “family”, rather than the stern, punishing, “strict father model” with rules and constraints.

With respect to money, the conservatives emphasize “fiscal discipline” and “inflation targets” enforced by our Father Chairman who art at the controls of the Central Bank. Progressives can win this debate only by taking a higher moral stance, emphasizing the nurturing role that can be played by our government working with our monetary system to support us, to help us to achieve more, and to make us better people.

Part 3 will be posted next.