The Evolution of Money

by David Orrell

  45. Thomas Sargent, interview by Art Rolnick, “Interview with Thomas Sargent” (Federal Reserve Bank of Minneapolis, September 2010).

  46. Robert Lucas, “In Defence of the Dismal Science,” Economist, August 6, 2009.

  47. Cassidy, “Interview with Eugene Fama.”

  48. Ha-Joon Chang and Jonathan Aldred. “After the Crash, We Need a Revolution in the Way We Teach Economics,” Observer, May 11, 2014.

  49. Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, Mass.: Belknap Press of Harvard Unversity Press, 2014), 32.

  50. Quoted in Claire Jones, “ ‘Dismal Science’ Seeks Fresh Thinking After Failure in Crisis,” Financial Times, November 11, 2013.

  51. Alfred Marshall, Principles of Economics, 8th ed. (New York: Cosimo, 2006), xx.

  52. Peter L. Bernstein, The Power of Gold: The History of an Obsession (New York: Wiley, 2000), 357–358.

  53. Former Bank of England governor Gordon Richardson wrote, “I regret to say that I have little direct experience with economic equilibrium—indeed, so far as I am aware, none at all. I sometimes see suggestions that we shall be moving towards equilibrium next year or perhaps the year after: but somehow this equilibrium remains firmly in the offing” (“The Pursuit of Equilibrium,” Euromoney, October 1979, 28–37).

  54. Quoted in Alex Hern, “Bitcoin Hype Worse Than ‘Tulip Mania,’ Says Dutch Central Banker,” Guardian, December 4, 2013.

  55. Hyman Minsky, “Financial Instability Revisited: The Economics of Disaster,” in Reappraisal of the Federal Reserve Discount Mechanism (Washington, D.C.: Board of Governors of the Federal Reserve System, 1972), 95–136.

  56. Quoted in Stephen Mihm, “Why Capitalism Fails,” Boston Globe, September 13, 2009.

  57. Ibid.

  58. Ben Bernanke, “The Macroeconomics of the Great Depression: A Comparative Approach,” Journal of Money, Credit, and Banking 27, no. 1 (1995): 1–28.

  59. Paul Krugman, End This Depression Now! (New York: Norton, 2012), 112.

  60. The resulting dynamics can be simulated and visualized using the nonlinear dynamics program Minsky, which was originated by Steve Keen. The program is available at “Minsky: System Dynamics Program with Additional Features for Economics,” SourceForge, http://sourceforge.net/projects/minsky/files.

  61. Keen, “Will We Crash Again?”

  62. Wolfgang Munchau, “Macroeconomists Need New Tools to Challenge Consensus,” Financial Times, April 12, 2015.

  63. Jeffrey Dew, Sonya Britt, and Sandra Huston, “Examining the Relationship Between Financial Issues and Divorce,” Family Relations 61, no. 4 (2012): 615–628.

  64. Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision Under Risk,” Econometrica 47 (1979): 263–291.

  65. According to one study, we will pay on average 50 percent more for a dessert at a restaurant when we see it on a dessert cart than when we choose it from a menu. See B. Bushong et al., “Pavlovian Processes in Consumer Choice: The Physical Presence of a Good Increases Willingness-to-Pay,” American Economic Review 100 (2010): 1–18.

  66. A. R. Hirsch, “Effects of Ambient Odors on Slot-Machine Usage in a Las Vegas Casino,” Psychology & Marketing 12, no. 7 (1995): 585–594.

  67. Francis Ysidro Edgeworth, Mathematical Psychics: An Essay on the Application of Mathematics to the Moral Sciences (London: Paul, 1881).

  68. Pew Research Center, “The Happiness Trend Line: Barely a Ripple,” 2010, www.pewsocialtrends.org/2006/02/13/are-we-happy-yet/37–3.

  69. John Stuart Mill, “Posthumous Essay on Social Freedom,” Oxford and Cambridge Review, January 1907.

  70. L. Rainwater, “Poverty and Equivalence as Social Constructions,” Luxembourg Income Study Working Paper, no. 91 (Center for Policy Research, Maxwell School, Syracuse, N.Y., 1990).

  71. Graeme Wood, “Secret Fears of the Super-Rich,” Atlantic, February 24, 2011.

  72. Peter Singer, “Happiness, Money, and Giving It Away,” Project Syndicate, July 12, 2006, http://www.project-syndicate.org/commentary/happiness--money--and-giving-it-away.

  73. Quoted in Daniel Vasella and Clifton Leaf, “Temptation Is All Around us,” Fortune, November 18, 2002, 109. See also Sanford E. DeVoe, Jeffrey Pfeffer, and Byron Y. Lee, “When Does Money Make Money More Important? Survey and Experimental Evidence,” ILRREVIEW 66, no. 5 (2013): 1076–1094; and Eilene Zimmerman, “Research: All Money Is Not Created Equal” (Insights by Stanford Business, Stanford Graduate School of Business, January 6, 2014), www.gsb.stanford.edu/insights/research-all-money-not-created-equal.

  74. Singer, “Happiness, Money, and Giving It Away.”

  75. Brad Tuttle, “Got Stuff? Typical American Home Is Cluttered with Possessions—and Stressing Us Out,” Time, July 19, 2012.

  76. Donald Nordberg (Bournemouth University, U.K.), private conversation with Roman Chlupatý, April 2012.

  77. Ida Kubiszewski et al., “Beyond GDP: Measuring and Achieving Global Genuine Progress,” Ecological Economics 93 (2013): 57–68.

  78. K. E. Boulding, “The Economics of the Coming Spaceship Earth,” in Environmental Quality in a Growing Economy, ed. H. Jarrett (Baltimore: Johns Hopkins University Press, 1966), 3–14.

  79. According to Laura Gottesdiener, “Workers here overwhelming call this place ‘the Wild West’ ” (“What My Time in America’s New Oil Boomtown Taught Me About Our Climate Madness,” Alternet, October 12, 2014, www.alternet.org/environment/what-my-time-americas-new-oil-boomtown-taught-me-about-our-climate-madness).

  80. As Bank of Sweden Prize–winner Robert Solow once said, “If it is very easy to substitute other factors for natural resources, then there is in principle ‘no problem.’ The world can, in effect, get along without natural resources” (“The Economics of Resources or the Resources of Economics,” American Economic Review 64, no. 2 [1974]: 11).

  81. Samuel Smiles, Lives of Boulton and Watt: Principally from the Original Soho Mss. (London: Murray, 1865).

  82. Quoted in Sarah van Gelder, “Beyond Greed and Scarcity,” Yes!, June 30, 1997.

  83. For example, in Great Britain in the 1970s, people in the financial sector used to earn less than most other professionals, but now “the average London financial services salary is about £102,000 including bonuses while academics are paid about £48,000, natural scientists average about £42,000 and mechanical engineers £46,000” (Sarah Neville and Keith Fray, “The Fractured Middle: UK Salary Split Sees Übers Pull Ahead,” Financial Times, February 14, 2014).

  84. Stewart Brand, The Media Lab: Inventing the Future at MIT (New York: Viking, 1987), 202.

  85. Boston Consulting Group, “Takeoff in Robotics Will Power the Next Productivity Surge in Manufacturing,” press release, February 10, 2015.

  86. Cahal Milmo, “Robot Revolution Gathers Pace—But at What Cost to Jobs?,” Independent, February 10, 2015.

  87. Simon Kennedy, “Half of Europe’s Jobs Threatened by Machines in U.S. Echo,” Bloomberg News, www.bloomberg.com/news/articles/2014–07–22/half-of-europe-s-jobs-threatened-by-machines-in-u-s-risk-echo.

  88. Orrell, Truth or Beauty.

  89. White, “Is Monetary Policy a Science?,” 73–115.

  90. “International Student Initiative for Pluralism in Economics,” www.isipe.net/supportus.

  91. “Pour un enseignement pluraliste de l’économie au Québec,” May 13, 2014, Economie Autrement, http://economieautrement.org/pour-un-enseignement-pluraliste-de-leconomie-au-quebec.

  92. James Trimarco, “Students for Economic Pluralism, Unite!,” Yes!, February 20, 2015, www.yesmagazine.org/new-economy/students-for-economic-pluralism-unite-keith-harrington. See also Tomáš Sedláček, David Orrell, and Roman Chlupatý, Soumrak Homo Economicus (Prague: 65.pole, 2012); the title of the German version translates to Humility: For a New Economy.

  93. Orrell, Economyths.

  94. According to White,

  Perhaps the best candidate to replace extant theories would be models that recognize
the importance of fiat credit in influencing economic decisions (to both spend and to produce), the importance of stocks (in particular stocks of debt) and the endogeneity of risk in the financial system. These models can produce highly non-linear results similar to those observed in real life crises. This approach has similarities with some pre-War business cycle models. As well, insights can also be gained from the new, and rapidly developing, study of complexity economics. This approach is at the other end of the stability spectrum from DSGE models in that complexity economics assumes many agents (no representative agent), each acting according to local rules (no concept of rational expectations), and it eschews all concepts of equilibrium. There are many parallels in this regard with evolutionary biology. (“Is Monetary Policy a Science?,” 86)

  95. Commonly attributed quotes are that quantum mechanics is “fundamentally incomprehensible” (Niels Bohr); “If you think you understand quantum mechanics, you don’t understand quantum mechanics” (Richard Feynman); “You don’t understand quantum mechanics, you just get used to it” (John von Neumann).

  96. Abbot Gilles li Muisis of Tournai, quoted in Bernstein, Power of Gold, 103.

  97. For a discussion of economic decision making, see Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011).

  98. Quoted in Mark Buchanan, “Quantum Minds: Why We Think Like Quarks,” New Scientist, September 5, 2011.

  99. Stephen Cecchetti, M. S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Working Paper No. 352 (Bank for International Settlements, Basel, 2011).

  100. For our own experience of this, see David Orrell, “Book Burning Economists,” World Finance, July 1, 2015.

  8. New Money

  1. Ed Conway, “Basle’s Secretive Bankers Have All the Power,” Times (London), January 20, 2015.

  2. Michael Romancov, “Dolar není mrtev, přežil i své kritiky. Jaké jsou vyhlídky americké měny?” [Dollar is not dead, it outlived even its critics. What are the prospects of the American currency?], Ekonom, November 9, 2014. This is an interview with Jan Jedlička, Erste Group’s EU office manager.

  3. Derek Hum and Wayne Simpson, “A Guaranteed Annual Income? From Mincome to the Millennium,” Policy Options, January–February 2001, 78–82.

  4. Paul Slade, “Money: Are You Ready to Rock ’n’ Dole?” Independent, June 23, 1998.

  5. Geoff Dyer, “Gissa Job! Writers on the Dole,” Guardian, August 1, 2015.

  6. For basic income in Utrecht, see Louis Doré, “Dutch City of Utrecht to Experiment with a Universal, Unconditional ‘Basic Income,’ ” Independent, June 26, 2015. For Alberta, see Joseph Brean, “Old Anti-poverty Idea—Guaranteed Minimum Income—Getting New Life in Alberta,” National Post, June 8, 2015.

  7. Clifford Hugh Douglas, “Address at the Melbourne Town Hall, Australia,” January 22, 1934.

  8. Marshall McLuhan, Quentin Fiore, and Jerome Agel, The Medium Is the Massage: An Inventory of Effects (Corte Madera, Calif: Gingko, 2001), 9.

  9. Adair Turner, “Printing Money to Fund Deficit Is the Fastest Way to Raise Rates,” Financial Times, November 10, 2014.

  10. In 1998, Hans Tietmeyer, then governor of the Deutsche Bundesbank, praised national governments for preferring “the permanent plebiscite of global markets” to the “plebiscite of the ballot box” (quoted in Slavoj Žižek, “How Capital Captured Politics,” Guardian, July 13, 2014).

  11. “The preferences of the average American appear to have only a miniscule, near-zero, statistically non-significant impact upon public policy” (Martin Gilens and Benjamin I. Page, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens,” Perspectives on Politics 12, no. 3 [2014]: 575).

  12. Frank Knight, “Money,” Saturday Review of Literature, April 16, 1927, 732.

  13. Irving Fisher, 100% Money (New York: Adelphi, 1936). For a more recent analysis, see Jaromir Benes and Michael Kumhof, “The Chicago Plan Revisited,” Working Paper (International Monetary Fund, 2013).

  14. Martin Wolf, “Strip Private Banks of Their Power to Create Money,” Financial Times, April 24, 2014.

  15. Frosti Sigurjónsson, “Monetary Reform—A Better Monetary System for Iceland” (Reykjavik, 2015).

  16. Bernard Lietaer, Robert E. Ulanowicz, Sally J. Goerner, and Nadia McLaren, “Is Our Monetary Structure a Systemic Cause for Financial Instability? Evidence and Remedies from Nature,” Journal of Futures Studies, April 2010, 1–21.

  17. For a discussion from a biology perspective, see Marie E. Csete, and John C. Doyle, “Reverse Engineering of Biological Complexity,” Science 295 (2002): 1664–1669.

  18. Parag Khanna (global strategist, author), private conversation with Roman Chlupatý, April 2010.

  19. Wojtek Kalinowski, “Currency Pluralism and Economic Stability: The Swiss Experience” (Veblen Institute for Economic Reforms, Paris), October 2011, www.veblen-institute.org/IMG/pdf/currency_pluralism_​and_economic_stability_eng_oct_2011_.pdf.

  20. James Stodder, “Complementary Credit Networks and Macroeconomic Stability: Switzerland’s Wirtschaftsring,” Journal of Economic Behavior & Organization 72, no. 1 (2009): 79–95.

  21. Irving Fisher, Hans R. L. Cohrssen, and Herbert W. Fisher, Stamp Scrip (New York: Adelphi, 1933).

  22. Bernard Lietaer, The Future of Money: Creating New Wealth, Work and a Wiser World (London: Century, 2001), 151–155.

  23. Helena Smith, “Euros Discarded as Impoverished Greeks Resort to Bartering,” Guardian, January 2, 2013.

  24. Alternatives Credit Union, “Ithaca Hours,” www.alternatives.org/ithacahours.html.

  25. Jana Fortier, “Underthrowing the System: How Low Finance Undermines Corporate Culture,” Journal of Ecology and Healthy Living 9, no. 5 (1996): 61–63.

  26. Such “fiscal localism,” according to the San Francisco Chronicle, is the answer to “big-box stores, online shopping, and globalization” (Carolyn Said, Communities Issue Currency, Promote Local Spending,” San Francisco Chronicle, July 6, 2011, www.sfgate.com/bayarea/article/Communities-issue-currency-promote-local-spending-2355723.php).

  27. Quoted in John Murray Brown, “Bristol Pound Counts in Local Economy,” Financial Times, July 27, 2015. See also Judith Evans, “British City Goes Rogue with Own Currency,” AFP, August 16, 2012.

  28. Hélène Joachain and Frédéric Klopfert, “Emerging Trend of Complementary Currencies Systems as Policy Instruments for Environmental Purposes: Changes Ahead?” International Journal of Community Currency Research 16, no. D (2012): 156–168.

  29. Blake Ellis, “Funny Money? 11 Local Currencies,” CNN, January 27, 2012, http://money.cnn.com/galleries/2012/pf/1201/gallery.community-currencies/index.html.

  30. Rui Izumi, “The Wat System, an Exchange Based on Mutual Appreciation” (Gesell Research Society, Japan, 2001), www.watsystems.net/watsystems-translation/english.html.

  31. Gerald Wheatley, “Complementary Currency and Quality of Life: Social and Economic Capital Effects on Subjective Well-Being” (Ph.D. diss., University of Calgary, 2006).

  32. Tyler Durden, “The Most Rapidly Depreciating Currency in the World,” Zero Hedge, November 27, 2013, www.zerohedge.com/news/2013–11–27/most-rapidly-depreciating-currency-world.

  33. Jay Sorensen and Eric Lucas. “Loyalty by the Billions” (Loyalty Marketing Report Series for 2011, IdeaWorks, Shorewood, Wis., 2011).

  34. Wheatley, “Complementary Currency and Quality of Life”; Canadian Tire, “Canadian Tire ‘Money,’ ” 2007, www2.canadiantire.ca/CTenglish/ctmoney.html.

  35. Unnamed source, private conversation with Roman Chlupatý, November 2014.

  36. Marcus Wohlsen, “The Next Big Thing You Missed: How Starbucks Could Replace Your Bank,” Wired, March 4, 2014.

  37. Wayne Busch and Juan Pedro Moreno, “Banks’ New Competitors: Starbucks, Google, and Alibaba,” Harvard Business Review, February 20, 2014.

  38. Jack C. Liu, “Bitcoin Backed Corporate Currencies Are Coming,” November 9, 2014, http://ja
ckcliu.com/post/102166140017/bitcoin-backed-corporate-currencies-are-coming.

  39. Nathan Lewis, “Bitcoin Ignites Ron Paul’s Parallel Currency Revolution,” Forbes, January 1, 2014.

  40. Bernard Lietaer, “Why This Crisis? And What to Do About It?” TEDxBerlin, November 30, 2009, YouTube, www.youtube.com/watch?v=nORI8r3JIyw.

  41. Steve Keen has suggested a “modern Jubilee,” with money earmarked for paying off existing debts, though this would be a one-off payment rather than a basic income, in “The Debtwatch Manifesto,” January 1, 2012, http://keenomics.s3.amazonaws.com/debtdeflation_media/2012/01/​TheDebtwatchManifesto.pdf.

  9. Changing the Dominant Monetary Regime, Bit by Bitcoin

  1. Satosh Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” November 1, 2008, https://bitcoin.org/bitcoin.pdf.

  2. Paul Vigna and Michael J. Casey, The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order (New York: St. Martin’s Press, 2015), 44–49.

  3. United States District Court, Southern District of New York, Sealed Complaint in the Case of USA v. Ross Ulbricht, 2013, www.cs.columbia.edu/~smb/UlbrichtCriminalComplaint.pdf.

  4. “Blockchain Size,” https://blockchain.info/charts/blocks-size.

  5. Total consumption so far has been more than 150,000 mWh; for comparison, an average American uses about 10 mWh per year. See Jason Clenfield and Pavel Alpeyev, “The Other Bitcoin Power Struggle,” Bloomberg Business, April 24, 2014, www.bloomberg.com/bw/articles/2014-04-24/bitcoin-miners-seek-cheap-electricity-to-eke-out-a-profit..

  6. Kerem Kaskaloglu, “Near Zero Bitcoin Transaction Fees Cannot Last Forever,” in The International Conference on Digital Security and Forensics (DigitalSec2014) (Ostrava, Czech Republic, 2014), 91–99.

  7. Michael Hiltzik, “Bye-Bye, Bitcoin? The Crypto-Currency’s Price Agonies Intensify,” Los Angeles Times, October 6, 2014.

  8. Girish Gupta, “Venezuelans Turn to Bitcoins to Bypass Socialist Currency Controls,” Reuters, October 8, 2014, www.reuters.com/article/2014/10/08/us-venezuela-bitcoin-idUSKCN0HX11O20141008.