A Handbook of Alternative Monetary Economics
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A Handbook of Alternative Monetary Economics

Edited by Philip Arestis and Malcolm Sawyer

This major Handbook consists of 29 contributions that explore the full range of exciting and interesting work on money and finance currently taking place within heterodox economics. There are many themes and facets of alternative monetary and financial economics but two major ones can be identified.
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Chapter 5: Chartalism and the Tax-Driven Approach to Money

Pavlina R. Tcherneva


Pavlina R. Tcherneva* 1. Introduction Economists, numismatists, sociologists and anthropologists alike have long probed the vexing question ‘What is money?’ And it seems Keynes’s ‘Babylonian madness’ has infected a new generation of scholars unsettled by the conventional accounts of the origins, nature and role of money.1 Among them are the advocates of a heterodox approach identified as ‘Chartalism’, ‘neo-Chartalism’, ‘tax-driven money’, ‘modern money’, or ‘money as a creature of the state’. The Chartalist contribution turns on the recognition that money cannot be appropriately studied in isolation from the powers of the state – be it modern nation-states or ancient governing bodies. It thus offers a view diametrically opposed to that of orthodox theory, where money spontaneously emerges as a medium of exchange from the attempts of enterprising individuals to minimize the transaction costs of barter. The standard story deems money to be neutral – a veil, a simple medium of exchange, which lubricates markets and derives its value from its metallic content. Chartalism, on the other hand, posits that money (broadly speaking) is a unit of account, designated by a public authority for the codification of social debt obligations. More specifically, in the modern world, this debt relation is between the population and the nation-state in the form of a tax liability. Thus money is a creature of the state and a tax credit for extinguishing this debt. If money is to be considered a veil at all, it is a veil of the historically specific...

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