The Trouble with Heterodoxy

By Shane Herron
Issue 2 December 13, 2018 Download PDF


“Socialists have certainly good reason to be grateful to Professor Mises, the great advocatus diaboli of their cause. For it was his powerful challenge that forced the socialists to recognise the importance of an adequate system of economic accounting to guide the allocation of resources in a socialist economy […] Both as an expression of recognition for the great service rendered by him and as a memento of the prime importance of sound economic accounting, a statue of Professor Mises ought to occupy an honourable place in the great hall of the Ministry of Socialisation or of the Central Planning Board of the socialist state. However, I am afraid that Professor Mises would scarcely enjoy what seems the only adequate way to repay the debt […] to complete the misfortune, a socialist teacher might invite his students in a class on dialectical materialism to go and look at the statue, in order to exemplify the Hegelian List der Vernunft which made even the staunchest of bourgeois economists unwittingly serve the proletarian cause.”

— Oscar Lange[1]


While Matthew Lesko may not be a household name, anyone who has watched broadcast television after 10pm in the last decade or so is undoubtedly familiar with his work. Lesko is the informercial pitchman best known for donning a green suit covered with question marks and proclaiming that he can provide viewers with free government money—provided that you purchase his book, of course. Lesko looks like the bastard child of Groucho Marx and a lithe carnival barker. His fuzzy eyebrows and awkwardly-tilted glasses imbue his outlandish puffery with the air of a huckster from a bygone era. Despite this dubious image, little of what is contained in his books is inaccurate. In fact, most of it is perfectly valid, though already widely available, public information. His is a unique grift. It consists in treating the public sphere of language and knowledge as if it were some secret and proprietary reserve of arcane wisdom, accessible only to those in the know. His question marks are a trenchant symbol of how his particular variety of charlatanism functions: it does not provide bullshit answers to real questions, but marries bullshit questions to real answers.

Scott Ferguson’s Declarations of Dependence relies on something called Modern Monetary Theory (MMT), a theoretical paradigm that, like Lesko, also makes wild promises about providing free government money. It goes one better than Lesko, however. Not only can MMT, it claims, provide you with free government money, but all money is basically free government money: the only problem is that the government does not print enough of it. If this claim hardly inspires confidence in the soundness of MMT as an intellectual framework for economic analysis, that is with good reason: as with Lesko, MMT’s particular brand of malarkey works through the legerdemain of taking publicly available information, draping it with the veil of mystery and profundity, and then claiming to have discovered some obscure and previously disavowed wisdom.

In reality, MMT’s claims are not so much false and dangerous as they are pedestrian and uninteresting. One of the supposedly unique claims of MMT, that fiat currency—money created “by fiat” at government whim and not backed by an asset such as gold—can be produced in unlimited quantities, is actually not a controversial claim in the least. As one critic of MMT puts it, “These guys don’t understand that a technically correct definition is not the same as a relevant and useful argument.”[2] Indeed, most economists roll their eyes at MMT not because it is too extreme, but because it is too trivial, taking basic definitions to represent profound and subversive insights. By its very definition, fiat money can be created at will, which is exactly why hard money cranks like Ron Paul dislike it.

The central contention of Declarations of Dependence is that left politics can find new vigor in MMT’s discovery of a “boundless public center” at the heart of the fiat currencies that organize modern economies (hence the epithet “modern”). The first problem with this is that, as with any other promise that seems too good to be true, it is necessary to read the fine print: when pressed, even MMT concedes that governments can create money “without risking inflationary price rises, so long as public spending remains directed at real resources and unused productive capacities.”[3] Far from authorizing a boundless deployment of money, that seemingly innocuous final clause imposes a set of tight constraints that are quite difficult for policy makers to navigate. Real resources and unused productive capacities are not a minor and insignificant restriction. They are not boundless and thus the deployment of money cannot be.

At the end of the book, Ferguson writes, “Currency-issuing governments may be limited by real resources and ecological constraints, but money remains a resolutely infinite instrument” (184). Telling in this phrase is the almost total disconnect between these two facts, as if they have nothing to do with one another. According to MMT, money, no matter what happens in the real world of finite resources, remains “resolutely infinite.” By the standards of any recognizable definition of money, however, this is simply not true. Describing fiat money as infinite is a metaphor, a mere turn of phrase that MMT speciously literalizes. Many restaurants advertise an “all you can eat” buffet, but this obviously does not mean that they commit themselves to providing infinite food.

One of the central critiques Ferguson makes in his book is that orthodox economic thinking renders money finite while recuperating this sacrifice by hypostatizing a boundless and infinite aesthetic realm: money is finite so that the imagination can be infinite. Rather than undoing this dialectic between a finite monetary thing and an infinite aesthetics, however, MMT’s literalization of the monetary metaphor preserves the dialectic while recasting it, such that money now functions as a stylized aesthetic motif rather than an economic construct.

By importing the imagery of heterodox boundlessness and attempting to literalize a metaphor to create a social praxis, Ferguson both stages and exposes the errors of MMT, transforming what is essentially a minimally self-aware long con into a full-blown delusional episode. Ferguson richly and imaginatively delimits the contours of the existing Liberal consensus by constructing an encounter with its unstated assumptions. He provides a partial roadmap, albeit in distorted form, for thinking past the existing order, but at the cost of multiplying some of MMT’s economic mystifications. I very much agree with Ferguson that the left needs to engage with money. However, it is first necessary to unwind the delusion in order to access the core insight of his critique. A left engagement with money requires both more and less than MMT can provide. Ferguson is right to quote MMT economist Stephanie Kelton to the effect that “money is no object.” In this case, however, he really should literalize the metaphor: money is literally not an object at all, but rather a set of social relations that is ultimately inseparable from the finite resources and productive capacities of the economies that employ it.


The Literalization of the Fiat Metaphor: Monetary Psychosis and Contrarian Perversion

I would reconstruct the essential truth behind Ferguson’s delusion as follows: there is an extremely high social cost to the Liberal conception of money as tightly constrained; therefore, as wrong as it is to imagine it as infinite, such an image is ultimately less destructive than the alternative. When construed in this way, Ferguson’s critique is piercingly accurate. However, while infinity is a helpful platform for envisioning the harmful limits of Liberal money, it does not totally undo the dialectic between the aesthetic and the economic that exiles the ethos of care from monetary policy.

The infinity motif still segregates money from the actual practices that define monetary relations, mystifying rather than undermining the problematic dialectic Ferguson identifies. An infinite money is also a useless money, one that would no longer serve the primary monetary function of accounting for finite things. MMT simply transposes money to an aesthetic realm where it can take on an infinite existence, but at the cost of killing it: an infinite money is also a ghostly money, one that exists solely in an aestheticized afterlife. It is thus appropriate that the standard history of the Weimar hyperinflation—a period when policy makers really did pursue the goal of an infinite money—should bear the title: When Money Dies.[4] It is also not surprising that Ferguson links his critical project to supplanting a resurgent Scholastic haecceity with a neo-Thomist metaphysics of a boundless public center that features quasi-divine properties. Other than in the fever dreams of MMT’s delusions, such boundlessness usually only finds expression in the religious realm.

As noted, the basic error of MMT is ultimately rather simple: it literalizes a metaphor. The standard descriptor of fiat money as unlimited is a mere phraseology that provides a shorthand explanation for the counterintuitive creation of such money at whim, ex nihilio. Money names a set of social relations, however, not a set of actual, literal objects. Marx explicated these relations in the first chapter of Capital in his derivation of the general form of value undergirding the money form. Money is irreducible to either an electronic unit of account or paper bills and coins. To be sure, both of these employ numbers, and numbers are indeed infinite. Numbers as deployed in an accounting context are, however, finite, because there are finite things to account for, and manufacturing infinite units would defeat the purpose, as the Weimar Republic found out. Similarly, paper bills and coins are also finite, because paper and metal are finite, and they in turn also account for finite things. While Liberalism indeed artificially restricts money creation—more on this later—neither money proper, nor its paper/metal/electronic substrates, are infinite. Even Ferguson basically acknowledges this: “The only limits to state spending … are the finite persons, materials, and productive capacities” (56). These limits mean that money, in any coherent sense of the term, is also finite.

In psychoanalysis, there is a term for this conglomerate of 1.) the foreclosing of a foundational metaphor; 2.) the resultant literalization of the symbolic; 3.) an insistence on a boundless signifying plentitude beyond conventional limits; and 4.) a claim to proprietary possession of public linguistic resources. That term is “psychosis.” Freud compares psychosis to a “caricature of a philosophical system,” and that is indeed an apt descriptor of MMT.[5] It is not so much an economic school of thought as it is a strange, alternative metaphysics of money. Indeed, many of MMT’s practitioners are not trained economists at all. They are often, ironically, wealthy investors or financial advisors who have taken on a second career as gurus of MMT’s strange religion.

By refusing to acknowledge money for what it is—a foundational metaphor for scarcity—Ferguson forecloses the basic terms of the economic social links. He seeks to subvert the money metaphor by treating it in terms of its (wrongly imagined) objective proxies. To see money as totally constrained is undoubtedly an instance of economic fetishism, an investment of the money-thing with the constraints of the Liberal social order. But to treat it as infinite is an equal and opposite fetishistic disavowal: MMT knows very well that money is not infinite, but all the same.

MMT therefore simply runs Liberal money’s fetishism backward. Dwelling in the plentitude of the monetary signifier does not so much subvert the social order as refuse it. Meanwhile, the contrarian impulse that sparks this delusion does not so much surpass the horizon of the Liberal money relation as invert it, flippantly transforming boundedness into boundlessness, constraint into total freedom, and thereby preserving Liberal money as the implicit and unacknowledged horizon of MMT’s intervention: no wonder, then, that MMT’s actual program does not differ significantly from welfare state Liberalism.

Money, at least in the sense that most people understand the term, cannot be infinite because it expresses the combination of possibility and constraint that defines economic social relations. Ferguson is quite right to compare the metaphysics of boundlessness to the metaphysics of transubstantiation: both effect an immaterial reification of a social practice (money, communion) into the real presence of an infinite and omnipotent deity. The social order is flexible, organic, and capable of transformation and becoming, but like the subject it is not infinite. While the subject always yearns for connection to the social, it is first necessary to attend to finite constraints in order to do so.

At the same time, what is telling is that while MMT does claim to literalize the money metaphor, in practice its experts never quite make this leap. When pressed, MMT will become quite cagey about the prospect of actually creating endless supplies of money, and this suggests that, as with Lesko, it still retains some minimal awareness of its own duplicity. While it dangles out many enticing claims, promising additional revelations for those who buy into the system, the final moment of insight is endlessly deferred. When pressed for an explanation of its central assertion—why financing deficits by creating money is not inflationary—MMT thinkers defer explanation, pull rank, and rely on the argument from authority: “We also note that neither mainstream academic economists nor the Fed itself have a robust theory of inflation. By contrast, the academic economists who created MMT have a long history of studying inflation and formulating policy to fight it should overheating ever become a problem.”[6] The authorities referenced, in turn, offer long, desultory explanations of the theory of inflation that reference still other sources, all of which in turn also offer long-winded explanations, all while still neglecting to offer a simple explanation of why creating so much money would not cause inflation.

As with pyramid schemes and multi-level marketing, the terminal point comes not when the initiate learns the sacred mysteries and ancient rites of the faith, but rather when the initiate joins the sales team. Its real product is not the thing it appears to sell but rather the selling itself. For this reason, MMT economic policies will remain, almost by definition, untried. To the extent that they were put into practice, they would either be disastrous or their essential identity with Keynesian conventional wisdom would become manifest for all. To maintain its illusory distinctness, MMT must remain shrouded in question marks. Not all of this is due to bad faith, just as some people who sell Avon no doubt truly believe that it can change someone’s life. One of the things that makes MMT appealing is that it captures something of the wonder and the magic of modern money’s creation. No other school of thought hits on this mystery of money.

At the same time, there is still a minimal duplicity in such claims, and Ferguson’s project, I would argue, is to explode these, pushing MMT’s assertions to their logical limit and annihilating the remnants of the con job. Rather than join MMT’s sales team, Ferguson insists on true fidelity to the faith. In doing so, he repeats the psychotic’s wager: that such insanity is ultimately much saner than the insanity that passes for conventional wisdom. This gesture is also what renders the psychotic more ethical than the charlatan who supplies the template for the delusion of boundlessness: the psychotic actually takes up the insane praxis the charlatan only disingenuously espouses. In its ordinary form, the heterodox contrarianism of MMT is no threat to the existing order. Indeed, heterodoxy has become something of the modus operandi of late capitalism. Large corporations now view themselves as disruptors, innovators, and change agents whose primary function is to undermine rather than conserve the status quo. Even when these claims are not entirely disingenuous, there is always in practice a tinge of bad-faith to them. There are implicit limits to this experimentalism.

Genuine faith in these promises is indeed a kind of subversive position, one that highlights the bad faith of the existing symbolic order while also refusing heterodoxy’s own latent machinations. Ferguson is akin to the true believer who recognizes that the refusal of the existing expert consensus is the core ethical insight of heterodox wisdom, and who insists on following its logic right off the cliff. Freud famously quipped in a letter to Jung that “The wonderful Schreber ought to have been made a professor of psychiatry and director of a mental hospital.” Ferguson, too, would be a much better choice to run a central bank than most supposed experts, including the gurus of MMT. The truth he bears witness to is that thinking about a resolutely social and political instrument—money—has been warped by the Liberal consensus in a way that limits the scope of the aspirations that instrument can express. In this sense, I would argue that Ferguson’s book both exposes MMT’s duplicity even as it uses this as a platform to wage war on the deadlock of the Liberal money form.

However, such true belief is not without its costs. MMT remains the fabric of the delusion, and this causes Ferguson to double-down on the strategy of recasting money as a metaphysical construct rather than a set of social relationships, and eventually leads him all the way back to Aquinas as a new foundation for a contemporary monetary ethics. In this respect, the psychotic’s wager is indeed subversive, but the consequence of this variety of rebellion is a form of self-imposed exile from symbolic interchange. The problem, of course, is that it is impossible to address the symbolic register from outside it. If you render the signifier boundless and unlimited, you’re gonna have a bad time.

One might object that the poetics of boundlessness has a certain charm that could have value as political rhetoric. There are reasons to doubt even this modest claim. Due to the paradox of choice, in which more options create a paralyzing anxiety, the image of boundlessness is not even necessarily liberating: since anything is possible, in practice any given action is never sufficient, never capturing the full and true essence of the mystery of the monetary thing-in-itself. Slaying the old deities of economic orthodoxy seems hardly a liberating move. As Lacan famously put it, if there is no god, nothing is permitted.


The Left’s Money Problem: Fetishism and its Vicissitudes

That MMT is such a terrible analytical framework for a new engagement with money is particularly sad in the current context, because Ferguson is absolutely right that the left badly needs to retool its relationship to money. Many on the left seem to apply to money Audre Lorde’s famous dictum that the master’s tools will never dismantle the master’s house. They see money as one of these key tools. Ferguson’s book raises the question: why dismantle the master’s house, however, when you can expropriate both it and his tools? Money is neither a metaphysical essence, nor is it an inherently exploitative device of the ruling class. It is a tool that the left can make work in its favor.

That the left has a money problem became quite clear in the wake of the 2008 financial crisis. In its aftermath, a curious state of affairs took shape: fairly orthodox policy makers like Ben Bernanke were arguing for the kind of aggressive monetary stimulus that MMT would seem to advocate, but many on the left, offering few compelling reasons, opposed such measures. When the hapless Matthew Yglesias, a favorite whipping boy of the left, came out in support of more aggressive monetary policy during the Great Recession—the very sort of creation of money ex nihilio that MMT supposedly extols—a gang of internet leftists banded together to deride him, declaring monetary stimulus a reactionary trojan horse policy, a neoliberal ploy to prevent more radical action from getting traction. Wielding a hard money machismo usually associated with the right, this cadre affected a populist skepticism toward Yglesias’s effete policy wonkery, scorning his preference for high finance and the technocrat’s elite jargon over sound yeoman commonsense. Feigning virtuous ignorance, they declared themselves unable to understand how monetary policy could possibly create jobs: “Given the obvious benefits of a jobs program, and the fact that Yglesias’ proposal seemed to have so little to recommend it as a jobs program […] I was moved to speculate on the ideological dimensions—‘the Reaganite temper’—of Yglesias’ thinking on these matters.”[7]

This was all quite unfortunate, in no small part because these leftists were channeling a deeply troubling American strain of populism with a dubious pedigree, traceable, as Yglesias pointed out, to Jefferson’s opposition to Hamilton. It also reflected a profound amnesia about the left’s own history: far from monetary stimulus demonstrating a Reaganite temper, it was a central component of Roosevelt’s response to the Great Depression. The internet left was simply wrong: Roosevelt employed a form of monetary stimulus very similar to Yglesias’s proposal. Quick recovery was not simply beneficial in its own right, however: it also helped the New Deal policies gain the political support they needed. Indeed, Christina Romer, one of Obama’s key economic advisors, authored a famous paper arguing that monetary stimulus was key to the nation’s recovery from the Great Depression.[8]

During the Depression, Roosevelt took direct control over monetary policy by taking the country off the tightly-restrictive Gold Standard, politicizing it rather than consigning it to expert management. He directly attacked the metaphysics of haecceity Ferguson critiques. Indeed, gold was such a dangerous symbol of the strictures of the Liberal money form—one of the strongest features of Ferguson’s book is offering a genealogical critique of this perspective—that owning more than a small amount was made illegal. On most of these questions, Roosevelt overruled the thinking of the majority of his cabinet, preferring the advice of a heterodox economist named George Warren (a Monetarist hero, incidentally). Warren was an agricultural economist who met FDR not in government circles, but when FDR sought Warren’s assistance with some trees.[9] While Warren’s thinking in 1933 was decidedly heterodox, by 2008 it was very mainstream, with orthodox figures like Christina Romer offering Obama the same advice Warren offered FDR in 1933.

Many of Roosevelt’s advisors were scandalized by his moves. Dean Acheson, a later architect of Cold War policy, resigned from Roosevelt’s cabinet due to the decision to leave the Gold Standard. The reason for such violent insistence on the hard-money Liberal paradigm—including its most prominent symbol, the Gold Standard—is because of the ease with which monetary policy can be politicized, which in turn opens up a slippery slope to a larger politicization of economic life. This is precisely what Roosevelt did: he went from tinkering with the Gold Standard to a larger retooling of the fundamental features of the economy. Denying monetary flexibility is a way of disavowing this political element.

During the Great Recession, however, most mainstream macroeconomists, from Keynesians on the left to the Monetarists on the right, agreed with Warren, and believed that fiat money was superior to the tightly constrained money of the Gold Standard. Ben Bernanke himself supported such views, and he would likely have implemented more aggressive stimulus but for the opposition of left and right. The problem at that time was not with the world of ideas, but rather with the world of politics, and many very mainstream economists acknowledged this fact during the Great Recession. For years, mainstream figures like Paul Krugman shouted that it was bad politics, not economic scarcity, that was hampering recovery. Despite having a Fed Chair with the ideal intellectual background to cope with a serious recession, the wider field of expert managers refused to listen to those who actually had the most knowledge and experience. Neoliberal technocracy is, ironically, a political ideology, not an actual managerial strategy.

MMT, unfortunately, was not any better at getting monetary policy right during the Great Recession. This is not surprising, because its proponents’ main commitment is not to engaging with money as such, but to their proprietary metaphysics of money, complete with its own creation mythology. Indeed, during the Great Recession many sympathetic to MMT opposed the Federal Reserve’s monetary stimulus.[10] Only monetary ecumenism—the refusal of all dyspeptic, axe-grinding theoretical egoism and a ruthlessly instrumental attitude—not MMT’s heterodoxy, can address the left’s money problem.


Orthodox Radicalism v. Heterodox Reaction

There is an alternative to the delusional approach. The psychotic correctly diagnoses the bad faith of the symbolic as the essential sickness of things as they are. The psychotic does this by latching onto a narrative that, through its richly imagined symbolism, helps illuminate those places where that disingenuousness holds greatest sway. Monetary policy is, undoubtedly, one such place, and what is needed is to strip away those deceptions.

To do this, the left should not endorse MMT’s apparent unmasking of the arcane mystery of the monetary thing-in-itself. Rather, it should emphasize that its political imperatives are much more faithful to economic orthodoxy than those of mainstream adherents to the Liberal economic consensus. There is something deeply untimely about Declarations of Dependence, in that it cuts against, even attempting to undermine, the recent tendency on the left toward a renewed Marxist orthodoxy. Like Lacan’s return to Freud, there has been a general “return to Marx” in the years since the Great Recession. Interest in the Soviet Union and really existing socialism is resurgent. Even figures like Mao and Stalin have found a new generation of followers, and such interest, however wrongheaded, is in turn symptomatic of a renewed commitment to pragmatic orthodoxy over speculative dreaming.

MMT is out-of-step with all of these tendencies, and not just due to the fact that it provides an off-kilter analysis of contemporary economic problems. The central insight of the divergent strands of this return to Marx is a desire to combat the neoliberal tendency to treat fundamentally political questions as if they were non-political questions reserved for the domain of expert management. One of the great strengths of Declarations of Dependence is that it recognizes that monetary policy, which has been the purview of expert management essentially since the Great Depression, is fundamentally political.

More than politicizing money, however, MMT seems most interested in changing the expert paradigm that governs its management. Its counterintuitive claims and penchant for the dark monetary arts of the printing press further alienate it from the mass movements that could best utilize its political insights. In this way, one might even say that there is something neoliberal about MMT, for it repeats the basic gesture of treating political issues as non-political questions reserved for expert managers. That its heterodoxy has served reactionary purposes, undermining support for economic stimulus, is also in keeping with neoliberalism’s framing of its reactionary aims using the tropes of subversion and rebellion.

Money can indeed mobilize idle workers and idle wealth, but this is not because it is unlimited and boundless. Rather, it is because it names a set of flexible social relations that are themselves always already political, and that are therefore responsive to political interventions. To combat the strictures of the Liberal money form, what is needed is not a “counter-rationality,” as Ferguson calls it, but rather a different kind of common sense, a focus on the productive capacity of the people that emerges from the Marxist tradition. Money is a tool. To imply that it has some metaphysical essence, whether magical or malicious, is whimsical at best, deluded at worst. It is a construct designed to keep track of scarce resources, full stop. Money without the concept of scarcity is akin to a schedule without time limits. Without constraints, money is not possible.

Instead of the monetary poetics of MMT, we should adopt the outlook of central planners—whether they be Marxist-Leninists, Keynesians, or Monetarists (and the latter two very much represent forms of central planning, as their critics often note, as macroeconomics is really a polite term for central planning)—and focus on the productive capacity of the people and the efficient distribution of this productive capacity. When Keynesians argue that fiscal stimulus to put unemployed people to work is affordable because it will increase economic activity, they are acting like central planners, albeit ones working within a market economy paradigm. When Monetarists argue that a failure of monetary policy is causing unemployment and a drop in productive output, they are also acting as central planners within a market economy framework.[11] They are making decisions about the most efficient distribution of the economy’s overall resources.

Perversely, to say that there exists a boundless monetary center would seem to suggest that the economy can afford dirty energy. Indeed, the attitude of many techno-utopian Silicon Valley types is that climate change is nothing to worry about, because the boundless possibilities of innovation will find ways to reverse climate change even if it occurs. It is because this boundless center does not exist that it is imperative to fight climate change. It is a grievous error to say that an economy as a whole can never afford to employ its workers, heal the sick, or prevent economic catastrophes. It is an equal and opposite error to say these are affordable because of a boundless monetary center.


Flexible Privation: Repoliticizing Money

Refusing money’s real limits is not only politically dangerous, but ironically it also obscures the scandalous revelation at the heart of modern money. In a telling phrase, Ferguson notes that MMT “refuses the originary privation” (50). In doing so, it attempts to historicize castration, transforming it into a concrete, alienable thisness that, when reified, can be refused. Rather than treating money as an alienable thisness like the Liberal monetary paradigm, MMT treats privation, the foundational principle of the economic, as an alienable thisness. The result is that MMT misses the true subversive insight that fiat money discloses: while privation may be unavoidable, it is also flexible. There is no way outside or beyond it, but there is also no single, natural way of experiencing subjection to it. We can choose our own castration, as it were.

Employing idle workers during an economic downturn does not violate the law of castration. Indeed, some schools of economic thought claim—with a straight face—that economic downturns represent a mass decision by workers to take extended vacations. In recessions, however, most would be glad to exchange this extended vacation for gainful employ. Monetary stimulus does not combat privation: it simply trades one, inefficient use of time and resources—idleness—for another—employment. This is what so discomfits the hard money crackpots like Ron Paul: if it is possible to alter the conditions of privation, it is possible to change who experiences it and how they experience it.

In order to unleash this power, however, it is necessary to confront money for what it is: a foundational metaphor for finitude and privation. Perhaps Heidegger recoiled from the economic because of its uncanny proximity to his notion of care: he casts money out of care and finitude, whereas Ferguson casts finitude out of care and money. To simply deny the problem of finitude is to deny the problem of the economic itself, the fundamental paradox that we are both nothing more than, but irreducible to, our limited physical bodies and our finite lives.

What is needed is not to theorize away this problem, but rather to think through it, to reinvent a new foundation for it. This would require a true marriage of the aesthetic and economic and a renewed political imagination that grapples with scarcity. For Freud, aesthetics was always already economic from the start. He saw economy, in the sense of the saving of scarce labor and affect, as the shared principle of the aesthetic and the economic: the spark of aesthetic creativity emerges from the economic principle that a commitment to a set of specific and finite choices can produce a sense of liberation and relief.[12] The richness of the work of art or literature, as well as the spiraling productivity and prosperity of technological breakthrough, promise a bounty that greatly (though not infinitely) exceeds its costs. Its reality, however, stems from an unflinching confrontation with the constraints of finitude, subverting it from within.

What is needed, perhaps, is an image of economic creativity that is not exhausted by the figure of the entrepreneur. Economic creativity, above all else, redefines possibilities for the care of the self. There is no need to look to heterodox thinking to find new ways of doing this. Consider Simon Grant and John Quiggin.[13] In a fairly mainstream economic analysis, they come to a surprising conclusion: nationalization, far from being opposed to market efficiency, can help correct a market failure while producing windfall profits for the public. The interest rate on government debt (Treasury bonds) tends to be lower than it should be according to standard pricing models for securities. This suggests that there is, in fact, not enough of this scarce resource to go around, and that it is therefore a perpetual seller’s market. Any private entity would take advantage of the fact that they could borrow money at below-market rates.

The government, far from having no business intervening in the private economy, is therefore in an unusually strong position to purchase business assets (that is, to own the means of production), and any private entity would do just this in its place. Regulation, in this case the customary prohibition on the government owning the means of production, is creating a market failure. The government could theoretically issue enough debt to purchase a large share of the economy, or at least enough debt to take full advantage of the low interest rates that are its exclusive privilege. Such investments could prove extremely profitable, and could fund new programs like Medicare for all, a Universal Basic Income, free college, a Jobs Guarantee, and so on.

These programs are valuable not because they enact and enable a boundless monetary center, thereby appeasing the omnipotent money-god of MMT’s Schreberian delusion. They are valuable for just the opposite reason: they are more efficient means of managing scare resources. Neither are these programs heterodox: they represent the radical implications of the reigning orthodoxy’s logic that, for political reasons, remain unthinkable, cast outside the bounds of political possibility. Indeed, one implication of Grant and Quiggin’s analysis is that a strong market incentive exists for the government to nationalize the means of production.

MMT’s poetics of plentitude has potential value as political rhetoric in certain situations, but even still it is important to remember that it reifies social solidarity, basing the possibility of political action on the substrate of the monetary signifier, wrongly construed as infinite. Money is flexible, organic, and, as Ferguson notes, capable of facilitating social solidarity and an overarching politics of care; it is not endless, though, precisely because the behaviors it enables are not endless, unlimited, nor impervious to finitude. The magic of economic creativity is that abundance and plenty comes from a close attention to scarcity, economy, and efficiency. Roosevelt’s decision to leave the Gold Standard represented a political commitment to a specific plan that was deeply incompatible with other, competing visions, of how to appropriate scarce resources. Such creative action seems to transcend the ordinary world and the limits of the self while never leaving their finite bounds. I wholeheartedly agree with Ferguson’s critique of Liberalism’s monetary metaphysics of haecceity, and of the left’s failure to engage with money. Indeed, without his articulation of the metaphysical commitments of MMT, it would be impossible to analyze why MMT is unworthy of his project of engaging with money on the left.



[1] See Lange, “On the Economic Theory of Socialism,” Readings in Welfare Economics, ed. MJ Farrel (London: Palgrave, 1973). Lange was a prominent advocate for market socialism, which argues that the use of money can help to efficiently allocate resources in a socialist economy. Rather than disavowing markets, he suggested, it was possible to socialize them and reinvent them on a new foundation. Mises formulated the so-called “calculation problem,” which suggested that socialist economies could never allocate resources efficiently, and Lange is suggesting that, in doing so, Mises helped the Eastern Bloc develop more efficient means of production using markets and money as a heuristic tool.

[2] “The Trouble with Modern Monetary Theory,” Business Insider, 19 Dec. 2010.

[3] Scott Ferguson, Declarations of Dependence: Money, Aesthetics, and the Politics of Care (Lincoln: University of Nebraska Press, 2018), 2-3 (emphasis added). All further page references will be given parenthetically in the text.

[4] See Adam Ferguson, When Money Dies (New York: Public Affairs, 2010). One of the strangest features of the Weimar hyperinflation was a sense that, even as money was being printed as fast as it could be printed, there was never enough of it. Even operating at maximum capacity, the government could not keep up with the demand of the public. There were “far too many yet far too few” notes in circulation, suggesting that even endless printing alone can never satisfy the perceived monetary shortage MMT highlights (173). This episode was thus a particularly cruel and ironic reminder of money’s ineluctable finiteness.

[5] “It might be maintained that a case of hysteria is a caricature of a work of art, that an obsessional neurosis is a caricature of religion, and that a paranoiac delusion is a caricature of a philosophical system” (Sigmund Freud, Totem and Taboo [New York: Norton, 1989], 92.

[6] Stephanie Kelton and Randall Wray, “Answers from the MMTers,” New Economic Perspectives, January, 10 2018;; accessed December 2018.

[7] Corey Robin, “The Way We Weren’t: My Response to Yglesias’ Response to My Response to His Response to My Response,”, July 17, 2016;; accessed December 2018.

[8] See Christina Romer, “What Ended the Great Depression,” The Journal of Economic History 52.4 (December 1992), 757-784. Romer concludes that monetary stimulus had the greatest impact on the recovery from the Depression.

[9] For more background, see Liaquat Ahamed, Lords of Finance: The Bankers Who Broke the World (London: Penguin, 2009).

[10] See MMT proponent Michael Hudson on Democracy Now!, July 22, 2011;; accessed December 2018.

[11] This is why Austrians economists will sometimes claim that Milton Friedman, creator of monetarism, supported socialistic policies. See for example, Stephanie Kinsella, “Friedman and Socialism,” Mises Wire, June 10, 2015;; accessed December 2018.

[12] See Freud, Jokes and their Relation to the Unconscious (New York: Norton, 1963),

[13] Simon Grant and John Quiggin, “Public Investment and the Risk Premium for Equity,” Economica 70 (2003): 1-18.

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  1. Shane Herron appears not to have read much of the MMT literature by Bill Mitchell, Warren Mosler, Randall Wray, Stephanie Kelton, Pavlina Tcherneva, Eric Tymoigne, Scott Fullwiler, and Mathew Forstater, among others. Consequently, he has very little understanding of the nature of public debt, the nature of money, the distinction between a currency issuer and a currency user, and how government spending works when the government issues its own currency and does not promise to convert its currency into something that it could run out of (such as gold or another country’s currency). So instead of expecting Shane to actually do the job of a reviewer and gain a competent understanding of the material before making tendentious statements about it, I will share a summary of what I have learned from my wide and deep reading of macroeconomics:

    What is “public debt”?

    The $21 trillion so-called “public debt” is not a debt in the conventional sense of the word. It is not a burden on American taxpayers or on the US Government.

    The $21 trillion is just money that the US Government has spent into existence and not taxed away yet.

    The $21 trillion is the accumulated net spending that the US Government has injected into the non-government sector since the US Government’s inception in 1789.

    The $21 trillion is the net financial wealth of the non-government sector.

    If you advocate “paying off” this so-called “debt”, you are really advocating destruction of non-government financial wealth.

    The main point to make in response to this question is that a nation that issues its own currency and does not promise to convert its currency into something it could run out of cannot go insolvent in its own currency.

    A monetarily sovereign government is not financially constrained when it makes payments in its own currency.

    Such a government spends by using keystrokes to write up numbers in bank accounts.

    Such a government taxes by using keystrokes to write down numbers in bank accounts.

    Such a government is constrained by the availability of real resources that are for sale in its currency.

    If the government or the non-government sector of the nation’s economy spends in excess of this real resource limit, the result is inflation. That is, the purchasing power of each unit of the currency diminishes.

    The United States Government is monetarily sovereign i.e. it issues its own currency and does not promise to convert it into something else such as gold or another country’s currency.

    The US Government does not need to borrow its own currency. It does not need to issue Treasury Securities at all.

    What we call the USA’s “public debt” is not debt in the conventional meaning of the term.

    The issuance of Treasury Securities is unnecessary and should be scrapped.

    The securities are really just tradeable term deposits at the Federal Reserve.

    They should be scrapped because 1. the interest income from Treasury Securities disproportionately benefits wealthy people, making “public debt” a form of welfare for the wealthy; 2. the issuance of Treasury Securities obscures how the federal government spends and confuses people; 3. monetary policy (interest rate adjustments) is not an effective way of influencing the economy.

    The purpose of issuing Treasury Securities is not to finance the federal government. The federal government finances itself by being the monopoly issuer of US Government currency (the monetary instrument that is needed to extinguish taxes, fines, and fees that are owed to the US Government).

    The purpose of issuing Treasury Securities is to set the interbank interest rate in the US financial system.

    However, the issuance of Treasury Securities is not necessary to achieve this goal.

    The Fed could simply pay interest on excess reserve balances in transaction accounts at the Fed.

    Or the Fed could allow the interbank interest rate to fall to zero and focus on deciding and enforcing appropriate underwriting standards and macroprudential rules for Authorized Deposit-Taking Institutions (such as commercial banks). Deficit spending by the government could simply show up as excess reserve balances at the Fed. If the federal government wanted the non-government sector to have access to a risk-free interest-bearing asset, it could make term deposits available to investors. There is no need for deficit spending show up in the form of securities (debt instruments) as is the case today.

    Fiscal policy (government spending and taxation) is a much more powerful and precise policy tool than monetary policy for influencing employment, output, income, and inflation.

    Fiscal policy can be targeted by geographic location, by occupation, by industry, by income group, by wealth group, by household type… by any attribute that can be verified.

    Monetary policy, by contrast, is a blunt and imprecise tool that does not work very well. The optimal interbank interest rate is zero.

    “But what about Greece?” I hear you ask.

    The member nations of the Eurozone have effectively adopted a foreign currency.

    Therefore they are financially constrained when they spend Euros.

    They are not monetarily sovereign. They are like state governments in the United States in that sense.

    Nevertheless, the European Central Bank (the issuer of the Euro) has been buying the bonds of member nations to prevent nations from becoming insolvent in Euros. This is technically against the EU’s own rules but those rules are misguided.

    The Eurozone itself is a misguided concept. Economic conditions across the Eurozone vary markedly. It would be much better for the member nations to leave the Eurozone and resume issuing their own currencies (without promising to convert the currency into something else).

    Then those governments would be monetarily sovereign again and would have complete control to adapt their fiscal policies (i.e. spending and taxing) to the economic conditions of their jurisdictions.

    What are taxes for?

    It is federal taxes that generate demand for the US Government’s currency. Millions of households and firms need to work or sell goods and services in order to obtain the currency that they need to pay their federal taxes and avoid the penalties for non-compliance. This widespread demand for the currency is what makes the currency valuable.

    The government supplies its currency to the private sector. It does this by writing up numbers in bank accounts.

    The private sector supplies real goods and services to the government.

    That is the exchange that takes place between the currency issuing government and the non-government sector of the economy.

    The government’s currency is the government’s IOU.

    When the government spends its currency into existence (using keystrokes on computers at the central bank), it is saying to the private sector, “I owe you extinguishment of tax liabilities, fines, and fees that I impose on you if you present this currency back to me.”

    The currency is the government’s tax credit. The currency is a token that the government promises to redeem if you use it to pay the taxes, fees, and fines that the government imposes on you.

    Taxation is the mechanism that the government uses to transfer some real goods and services from the private domain to the government domain.

    Taxation is how the government gets the private sector to do the work and supply the real goods and services that are needed for the government to be able to fulfil the functions of a government.

    How could the government organise public services and public infrastructure if it could not command any real goods and services?

    The biggest misconception about money is that it is a scarce commodity like diamonds or gold.

    Currency is just a tax credit that we in the private sector have to do something useful to get our hands on so that we can pay our taxes and avoid being penalised.

    Taxation is a more civilised way for the government to compel people to supply useful output that the government needs. More civilised than slavery. More civilised than holding people at gun point and telling them to produce things.

    So federal taxation is extremely important. Taxation does not finance the government. But it’s how the government gets the private sector to supply real goods and services to the government.

    Without the power to impose and enforce taxes, the government would not be able to provision itself with the real output that it needs to function on a day to day basis and to provide the complex services and infrastructure that we expect the government to organise.

    Most people don’t know what currency is and how federal government spending works.

    Most people don’t grasp the crucial distinction between a currency issuer and a currency user.

    A currency issuer such as the United States Government cannot run out of its own currency.

    A currency issuer is not financially or revenue constrained when it makes payments in its currency.

    A society can hit the limits of its real resources and its know-how. If the government or the non-government sector spends the currency in excess of these limits, the result is inflation. The purchasing power of a unit of currency diminishes.

    A currency user, on the other hand, can run out currency. A currency user is financially constrained.

    Currency users include households, firms, state governments, local governments, and foreign governments.

    Foreign governments can issue their own currencies but they are mere users of our government’s currency. Therefore they can run out of it.

    In what sense is the government’s currency the government’s IOU?

    If you present a dollar bill to the US Government, the US Government owes you one dollar’s worth of extinguishment of any tax, fine, or fee liabilities that you owe to the US Government.

    That is the value of the dollar bill.

    The fact that millions of households and firms owe liabilities to the US Government make the US Government’s currency very valuable.

    The US Government’s currency is essentially a tax credit.

    The US Government’s currency is a token that the government will redeem if you present it back to the government in payment of taxes, fees, or fines.

  2. Please see my follow-up blog post for more on this question:

    Let’s also take a step back and reframe the debate to focus on all the ways in which MMT and others on the left already agree. We all agree, I think, that money is a fundamentally political construct, though certainly the Marxists are more skeptical of money than others. We also agree that the things that are said to be unaffordable—all those things that constitute what Ferguson calls “the politics of care”—are quite affordable. It is simply a matter of developing the political will to enact them. To the extent that there are costs associated with these things, they are well worth it. I think most of us also agree—at least I agree—with MMT’s claim that, in a fiat currency regime, taxes and bond sales are really just secondary modes of financing. The first mode of financing is direct money spending, and only secondarily do taxes and bond sales come in to the equation, as a matter of managing the trade-off between employment, inflation, and interest rates. Many of us also agree that fears of inflation have been wildly overblown in recent years. Most importantly, we all agree that the common-sense austerity thinking of mainstream liberals is perhaps the most damaging ideology of all, ultimately more damaging than conservatism.

    There are of course still some important disagreements. I will only speak for myself here, but I certainly do not agree with the endogenous theory of money. As I noted in the above follow-up blog post, I don’t agree that central bank interventions are largely ineffective, and that net financial assets (NFA) are the most important metric for judging the simulative impact of policy. Although I agree that the government does not technically need to use taxes or bonds to pay for things, I don’t agree that sustained use of money financing—also called “functional finance,” or “overt monetary financing,” or “people’s QE”—is a very sustainable way to run budget deficits. Nor do I think that it is more politically expedient than debt-financing. If anything, I think the latter has been the modus operandi of most governments in the modern era precisely because it is, in fact, the more politically expedient option: it actually limits the costs that taxpayers and currency users see in the present much more so than either taxation or money-financing. Functional finance might work for a bit in the short or even the medium term, but it is not a sustainable long-term solution. It is workable for small periods of time during economic depressions, but if it used for much longer it will introduce substantial inflation. That is why it is best to let central banks—governed of course by those who prioritize full employment over managing inflation—remain in charge of it. (For more on all these ideas, see the post).

    I think the first paragraph above should be relatively clear even to those not familiar with MMT. No doubt those not familiar with the nitty-gritty of MMT lingo felt their eyes glaze over when they read the second paragraph. And this is precisely my point. The disagreements in the second paragraph are ultimately small-ball stuff. They focus on technical debates that MMT has with other schools of economic thought, including others on the left. All the substantive criticisms in my piece, in particular those focused on the insular and self-referential nature of MMT, have to do with the ideas in the second paragraph. The most charged terms, such as “psychosis” and “perversion,” also apply to these issues and the ways in which MMT discusses them when it engages with those outside its purview. I deployed these terms, however, in a narrow and technical sense, not in the broader and more combative sense that would attach to them in plain language debates.

    Was my piece deliberately provocative? Of course—this is a journal called Provocations after all. But there was method to my madness. I wanted to highlight that if we focus on the specific economics of MMT, it is likely to sow division. They have a very particular view of the world, one that is instructive in its own right, but which others are unlikely to adopt in large measure. However, as I may not have stated clearly enough in the piece, my ultimate take-away from reading Declarations of Dependence is that it represents an exciting new trend on the left toward engaging with money—something that has been a personal hobby-horse of mine since the Great Recession, and which has been woefully absent on the left for far too long. In this regard, I would restate something that, unfortunately, I ended up cutting from my original intervention: this book should be required reading for anyone on the left who wants to engage with monetary or economic policy.

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