By Rohan Grey and Raúl Carrillo
Orthodox economists are often inclined to think of law as an external force that ‘intervenes’ to regulate otherwise naturally occurring economic phenomena. In contrast, Modern Monetary Theory and its antecedent intellectual traditions have long recognized that law in fact constitutes and shapes modern economies and the monetary regimes that underpin them. For example, Knapp argued explicitly that money was a “creature of law.” Similarly, Keynes, in A Treatise on Money, stated:
“The State…comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contracts. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time-when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern states and has been so claimed for some four thousand years at least.”
Today, many of the core propositions of MMT can be understood as essentially legal arguments. Here are a few examples:
At the same time, the dialogue between MMT and the law is a two-way street. Indeed, modern money theorists have historically found mainstream lawyers far more eager to grasp and grapple with the radical political implications of their insights than mainstream economists. For example, Innes, who, according to Randy Wray, wrote “two of the best pieces written in the 20th Century on the nature of money,” chose to publish his ideas in the Banking Law Journal. Similarly, Beardsley Ruml, President of the New York Federal Reserve and author of the excellent proto-MMT Taxes for Revenue are Obsolete, first presented his argument to the American Bar Association.
In 2012, in recognition of this natural pairing between MMT and certain kinds of legal thinking, several of us formed the Modern Money Network (MMN), a non-profit, educational organization dedicated to promoting public understanding of money and finance. From our initial beginnings as a student group at Columbia Law School in New York City, we have grown into an international organization with affiliates and supporters in Europe, Australia, and elsewhere.
In recent years, many progressive and radical lawyers and legal academics have embraced MMT’s core ideas and arguments. For some, this is a result of direct engagement with MMN and/or the broader MMT community. Others have arrived here on their own, using independent thinking to reach similar technical and normative conclusions. For example, as University of Maryland Law Professor Frank Pasquale observed in 2014:
“[A] renewed emphasis on a key legal insight (the government cannot default on debt it issues in its own currency) can lead to an adjustment to economic theory (MMT), which in turn informs a new legal proposal to get past the current, futile […] debate. It’s a movement from legal insight to economic insight back to legal insight, or L – E – L. … The legal foundations of MMT make it both scientifically, and normatively, a better theory of our economic system than the dominant paradigms of monetary policy.”
Similarly, University at Buffalo Law Professor Martha McCluskey noted in 2016:
“Modern money theory explains that political and legal systems for creating, regulating, and distributing money are fundamental to economic prosperity and stability, necessarily shaping (not “distorting”) and facilitating private exchanges of goods and services. … the economic costs and benefits of public money creation depend on the contingent, complex value-laden questions of how that money is spent and invested and how effectively taxes and other forms of regulation help steer economic and political activity toward the productivity, stability, and legitimacy that will help maintain currency value.”
Developments like these have been both validating and deeply encouraging. At the same time, MMN continues to relentlessly promote MMT in the legal world, through organizing widely attended educational events, and bringing economists and lawyers together with the explicit purpose of building a truly transdisciplinary theoretical and policy framework for achieving social and economic justice. Some MMN highlights during this period include:
And these are just the tip of the iceberg. For anyone, regardless of experience or background, who is interested in learning more about MMN’s forays in the legal world, please join us and the rest of the MMT community at the historic 1st International MMT Congress at the University of Missouri-Kansas City in September. To borrow a phrase, we believe that anyone can create law, the only challenge is to get it accepted. We look forward to rising to that challenge with you all, together.
See you there!