Credit and State Theories of Money

Credit and State Theories of Money

The Contributions of A. Mitchell Innes

Edited by L. Randall Wray

In 1913 and 1914, A. Mitchell Innes published a pair of articles that stand as two of the best pieces written in the twentieth century on the nature of money. Only recently rediscovered, these articles are reprinted and analyzed here for the first time.

Chapter 7: The Emergence of Capitalist Credit Money

Geoffrey Ingham

Subjects: economics and finance, economic psychology, history of economic thought


Geoffrey Ingham INTRODUCTION: ECONOMICS AND HISTORY; MONEY AND CREDIT I N THE late nineteenth and early twentieth centuries, academic economics took on the conceptual and methodological complexion by which it is clearly recognizable today. During the famous methodological conflict (Methodenstreit) at this time, economics separated itself from other social and historical sciences and put forward its imperialist claim to provide a superior explanation of all the phenomena customarily dealt with by its academic kin (Swedberg 1987; Machlup 1978; Schumpeter 1994 [1954]; Ingham 1996a). Analytical economics claimed to be universally valid. The ‘laws’ of supply and demand, for example, were considered to be equally applicable to the ancient economies and primitive societies as they were to the modern world. Historical change in general and the advance of the ‘wealth of nations’, in particular, were seen as the result of increasing efficiency in the conduct of human economic affairs. Throughout the nineteenth century it was asserted with an increasing confidence that the twin universal processes of the division of labour and market exchange, together with an understanding and application of the laws that governed their development, had brought about these enormous transformations. The proponents of this new ‘high theory’ in economics looked upon the analytical simplicity of their models as evidence of their sophistication. The more abstractly and mathematically they expressed their theorems, the more scientifically prestigious they could claim to be. The relationship of the ‘pure’ theory of exchange to economic reality, they argued, was of exactly the same kind as...

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