Jocelyn Pixley’s and Geoffrey Colin Harcourt’s edited volume Financial Crises and the Nature of Capitalist Money brings together a collection of multidisciplinary essays building on Geoffrey Ingham’s The Nature of Money. These essays take a range of approaches on a vast array of subjects loosely related to monetary themes emerging from the 2007 financial crisis (and occasionally on other past crises). While this multifaceted approach makes for a highly engaging and informative book, it also renders my task of reviewing the content of the book more difficult.

Rather than go chapter by chapter (which would take up too much space) or exclusively focusing on just a few specific chapters (too limiting), I will instead focus on the contentions I had with six general themes throughout most of the chapters. As the essays in this book are meant to take a critical approach to money’s institutions (p. 1), I offer a critical review of the chapters in the book based on these six themes.

In full disclosure, I’m an economist, and that comes with all the biases of being an economist. However, in my defense, I am sympathetic to the project of advancing the joint endeavor of economics and sociology, and also skeptical of the methodological approach and framework of mainstream economics (Boettke, Fink, and Smith Reference Boettke, Fink and Smith2012). The editors should be applauded for their attempt to build a bridge between economics and sociology using civil, scholarly discourse (p. 2). Indeed, a common theme of this book is that money is a social phenomenon, something I heartily agree with. As Deirdre McCloskey (1990, p. 108) puts it, “markets live on the lips of men and women. Every economist knows this. Money is not a thing, it is an agreement.” Or, as Richard Dawkins (2009, p. 188) puts it, money is a “token of delayed reciprocal altruism.”

The more or less common themes throughout the book that I do take contention with are: 1) a lack of acknowledgment or engagement with the epistemic role that money plays in the form of market prices; 2) the adherence to the paradox-of-thrift model; 3) the quick dismissal of the origins of money explanation for the emergence of a medium of exchange; 4) a seemingly one-sided conception that money is socially detrimental; 5) the failure to interpret aspects of the financial crisis through a framework of public choice (and thus, I hold, falsely fault capitalism); and 6) the failure to interpret monetary policy through a framework of robust political economy (and thus not considering options such as free banking alternatives that would alleviate many of the concerns addressed throughout the volume). In the confines of my limited space I will briefly delineate my points of contention and point to the relevant literature in the hopes that the contributors of this volume will take up these challenges in their future research.

The most glaring omission from the book is an appreciation for—or at least an engagement with—the epistemic role that monetary prices play in a market economy. Monetary prices help individuals formulate and coordinate their plans for scarce resources with other individuals by providing a reliable and up-to-date flow of information, and a structure of incentives that encourages innovation, entrepreneurship, and the careful stewardship of scarce resources (Burczak Reference Burcazk2009; Pennington Reference Pennington2011, ch. 1; Sutter and Smith Reference Sutter and Smith2013). It is important to note that the profit-seeking and loss-avoidance witnessed in the market aren’t strictly monetary or market phenomena because every human action is undertaken with the attempt to maximize benefits over costs, whether in the monetary or the psychic sense (Cowan and Rizzo Reference Cowan and Rizzo1995). It is also important to note that it is a profit-and-loss system. Severing the lure of profit from the fears of losses can foster severe moral hazard. Bailout programs, which amounted to the equivalent of sending your college students to Las Vegas with the understanding that any winnings they make gambling they get to keep but you’ll cover any losses they experience, are a relevant example (Roberts Reference Roberts2010).

An example of the lack of appreciation for this function of prices is provided in L. Randall Wray’s chapter (ch. 6), in which he argues that taxes and bonds are unnecessary to finance government because government has the unlimited capacity to inflate the currency. As Richard Wagner (2012, p. 6) points out, “Taxes are necessary to ration demand for public output just as prices are necessary to ration demands for market output.” Prices provide a collective evaluation of the value of resources in their numerous productive capacities, guiding entrepreneurs (and politicians) to use those resources in a way that maximizes their value to society. This role is undermined by the printing of more money for government expenditure. Inflation is a tax—albeit a hidden one—that discourages savings. This appreciation for the knowledge conveyed by relative prices also shows why money is decidedly not neutral in the short run; as the money supply is increased, it distorts relative prices, undermining the epistemic function of prices and misdirecting investment (Garrison Reference Garrison2001).

The paradox of thrift—the Keynesian belief that saving is a leakage from the economy, causing thrift to be a private virtue but a public vice—is another common theme throughout the book that I take contention with. As L. Randall Wray claims, “Financial saving cannot transfer aggregate purchasing power from the present to the future. The financial ‘sinking fund’ can actually make it more difficult to provision in the future, by depressing demand and thus investment in capacity today” (p. 89). Even modern Keynesian economists now recognize that savings drive investment and economic growth, and thus aren’t just a lost leakage from consumption (Thies Reference Thies1996; Murphy Reference Murphy2009). Resources can be either directed towards current consumption or allocated to produce future goods through long-term investment. Consumption necessarily destroys (consumes) resources, while refraining from consumption—saving—is the only way to invest to sustainably grow the economy (Garrison Reference Garrison2001).

Several authors throughout the book dismissed Carl Menger’s origins of money account. ^{Footnote 1} I believe they were too quick to dismiss the theory and that they placed too much weight on their quick dismissal. The quick descriptions of Menger’s (Reference Menger, Dignwall and Hoselitz1994) theory offered in this book tend to miss out on the richness of his theory and the empirical support in his Principles of Economics, especially in his supporting appendices. ^{Footnote 2} More importantly, in the light of modern theory and evidence, it seems clear that a more synthetic view is necessary, rather than a strict state or non-state theory of the origins of money (Salter and Luther Reference Salter and Luther2014).

One major oversight in this state-origins-of-money narrative is the acknowledgment that history is necessarily state-centric because it is governments that left the surviving paper accounts. Thus, historians tend to attribute a larger role to government in history than it deserves (Scott Reference Scott2009; Hayek Reference Hayek1988, p. 44). It should not come as a surprise that common folks who could not read or write left no account of their trading of goods towards goods with higher degrees of marketability in order to facilitate exchange. It is also hard to deny that clearly there is a natural tendency for people in a diverse array of contexts to trade towards goods with more marketability to facilitate exchange. Whether it be prisoner of war camps (Radford Reference Radford1945), the use of Tide detergent to facilitate drug transactions (Paynter Reference Paynter2013), cigarettes or even stamps being used as currency in California prison systems (Skarbek Reference Skarbek2014, p. 22), sports managers trading athletes for more marketable athletes in order to exchange for the athlete they truly want (Lewis Reference Lewis2004, ch. 9), the spontaneous emergence of currencies in online environments (Slater and Stein 2014, Reference Salter and Stein2016), or college students trading candy in an economics course candy-trading game, there is natural tendency towards a more marketable medium of exchange. Monetary exchange is only a step removed from barter exchange.

If there was one commonly shared sentiment conveyed throughout the book by most of the authors, it was the theme that money tends to be coercive to individual moral agency and tends to overpower social relationships (ch. 3). I take contention with both views. While certainly these are concerns that need to be explored, a scholar must also be willing to explore ways in which money may possibly liberate moral agency and foster social relations.

A barter economy would strictly curtail the options for exchange (due to the double coincidence of wants problem) and the extent of the division of labor. Without money, goods that are perishable, aren’t easily transportable, aren’t easily evaluated, or are desired by only a small segment of the population, would not be widely exchanged. Thus, without money our division of labor would be strictly curtailed, limiting the occupational and consumptive choices of individuals and denying moral agency in two of the most important aspects of our lives (Smith Reference Smith2014). Individuals have an endlessly surprising variety of abilities (and, concomitantly, things they are unable to do) that, within a market context with a medium of exchange, they can use to specialize in an occupation of their choice and trade for what they need to consume. Limiting occupational choice would deny many people from using their unique talents and abilities to contribute to society in their chosen capacities. It would also curtail the ability of people with limiting diseases or handicaps to contribute to society in unique roles. Also, strictly limited barter markets would also limit the rich diversity of goods. Without an extended market, many people with rare interests or needs (i.e., medicine for rare diseases) would not have access to the goods they need. Thus, the adoption of money can liberate moral agency in some important capacities.

Rather than overpowering or conquering social relations, money can also preserve and even extend social relations (Storr Reference Storr2008, Reference Storr2009, and 2010; Smith Reference Smith2014). Through its unparalleled wealth generation, market exchange, facilitated by money, can free intimate social relations from economic and material concerns, decommodifying personal relations. Rather than marrying for strategic or economic reasons, as was common throughout most of history, people today have the wealth to get married for love (Horwitz Reference Horwtiz2015). Each market exchange also provides the opportunity for a new social relation by creating shared social space with a diverse array of people who would not otherwise not interact.

While the origins of the financial crisis are certainly still open to debate, the general agreement of the authors of this volume that capitalism was the primary cause, with little or no debate, strikes me as one-sided. Too much emphasis is placed on the role of financial deregulation (ch. 12). An analysis of the total amount spent by financial regulators and the number of personnel employed at financial regulatory agencies actually grew leading up the financial crisis (de Rugy and Warren Reference de Rugy and Warren2009). In addition, the total number of pages of regulations and the costs of bank compliance increased leading up to the financial crisis (Allison Reference Allison2013, ch. 13). In fact, for every one instance of deregulation between 1980 and 2009, there were four cases of new regulation (Boettke and Horwitz Reference Boettke and Horwitz2009). Blaming new financial innovations also seems unwarranted, as the entire purpose of collateralized debt obligations, derivatives, collateralized default swaps, and interest rate swaps is to reduce systematic risk.

Government’s systematic role in causing the financial crisis by undermining markets is left unaddressed or unacknowledged. This includes the role of the Federal Reserve (Taylor Reference Taylor2009), Fannie Mae and Freddie Mac and other housing policies (Boettke and Horwitz Reference Boettke and Horwitz2009; Boettke, Smith, and Snow Reference Boettke, Smith, Snow and Kates2011), risk-weighted capital measures (Hogan, Meredith, and Pan Reference Hogan, Meredith and Pan2013; Levine Reference Levine2010b), the mortgage interest deduction (Gjerstad and Smith Reference Gjerstad and Smith2009), the established bailout policies (Roberts Reference Roberts2010), labor market policies (Mulligan Reference Mulligan2012), and the government-imposed cartel in the credit rating agencies (White Reference White2009).

Finally, several chapters touched directly or indirectly on the role of central banks in monetary policy. When examining a monetary regime, such as a central bank, one must take a perspective of robust political economy. What this means is that the design of a central bank should not rely on an unrealistic assumption of omniscience and benevolence on the part of central bankers. Monetary authorities have a severe lack of the knowledge required to properly conduct monetary policy. They also often lack the incentives to carry out monetary policy without political influence (Boettke and Smith Reference Boettke and Smith2014; Smith and Boettke Reference Smith and Boettke2015). Thus, it is no surprise that the Fed has failed to improve economic performance (Hogan Reference Hogan2015; Selgin, Lastrapes, and White Reference Selgin, Lastrapes and White2012). Free banking, which takes away government’s monopoly on note issuance, may offer an alternative that alleviates many of the concerns voiced in this volume (Selgin and White 1995; Hogan Reference Hogan2012).

Overall, despite my deep-seated contentions with several of the general themes of the book, the edited volume is a serious attempt at building a bridge between economists and sociologists on the nature and role of money. It is to be hoped that this book is a start of a serious, scholarly conversation.