In case it is not obvious by now, I have a very strong interest in the legal underpinnings of our monetary system. I find it to be of fundamental relevance to almost every discussion we have in law school, since the default assumption (in certain Torts classes more than others, perhaps) tends to assume the neutrality of money itself, or at the very best make very vague assertions about how it functions. These implicit assumptions are then used to justify the exclusion of certain avenues of enquiry, to present contingent phenomena as axiomatic laws of nature, and to obfuscate issues from their true bases.

While my own journey down the rabbit-hole that is money originated in the distinct but related field of economics, I recently discovered - to my delight - that there is an active body of critical legal scholarship addressing similar issues.

The most interesting paper I have read in this body so far is this one by Christine Desan, a Harvard Law Professor and legal historian operating in the critical legal studies/realist vein. I highly recommend it to anyone interested in economics, issues relating to common law liability and the formative history of the U.S. Constitution (which forms a large part of the paper's focus).

I'd also be interested in discussing the paper's arguments and their contemporary implications further with anyone who is willing.

-- RohanGrey - 09 Jul 2012

Very good paper Rohan. I think Desan makes an interesting approach (but a different story then I would tell) to the naturalistic narrative of money. She says there has always been such a narrative (the inherent value of gold), which is by all accounts false, but persists through our discourse despite the imposition of fiat money (paper money with no other backing then mutual agreement). But do we really believe that money is anything more than mutual agreement as the persistence of the naturalistic narrative suggests? I think that nowadays our use of a naturalistic discourse when speaking about money stems from a great discomfort from what money really is. We need something more "solid" to anchor our discourse about money. I also think that the fetishism of money has a great deal to do with it, and that interestingly, the immateriality of money really underscores this fetishism.

I what I mean is, in the digital age, where money is made valuable not by the fiat of actually printing money but by certain computers inputting digits, does anyone really believe that money is anything more than mutual agreement? The hard question now is mutual agreement on what? Before it was that possession of certain bills, papers, documents could by exchanged for certain other bills, papers, documents (namely the definition of trade but with all trade processed through certain papers like cash or check). Nowadays with everything controlled by machines (other people's machines), I think the issue of possession becomes more precarious. I like to think of my money as having some sort of tangible value because I don't like the idea that all my money can be erased with a swipe of a key stroke. I just feel like people today don't actually think that money is imbued with special characteristics or that its value is divinely preordained like the ancients who really thought some materials were inherently valuable. I think it would be pretty crazy to think that digits in our banks computer really had inherent value.

But maybe the "inherent" value in money lies in its fetishization, which happens when we're unable to strike a balance between knowing that money is just mutual agreement and wanting it to be something more. Today, however, this fetishization is particularly perverse. It is unlike Marx's caveman who fetishizes fire because at least fire is something in the world. Money nowadays is completely digital and so abstracted that you really have to try very hard to fetishize it into something with an independent existence. Or maybe not so hard because a lot of important things may just be fetishizations of a mutual understanding. Grades are an example. Like money, they're just characters on certain computers whose integrity is based on a certain mutual understanding. Unlike paper money, however, we'll probably only use your transcripts once or twice in our lives.

-- AlexWang - 10 Jul 2012

Hi Alex, thanks for your response - really interesting observations, and I love your analogy with grades - so true! Why is there an artificial scarcity of As when they can be printed at will if more than 10% of the class happen to produce excellent work according to the professor's standards?

I agree that many important things are fetishizations of a mutual understanding, but few (with the exception of law itself, perhaps) have such strong potential for both good and harm as money, from my perspective.

I think you're also probably right that the average person doesn't think money represents a bar of gold somewhere under Wall Street, yet refuses to really question the implications of this observation. This is particularly true for most students of mainstream economics, who (like law students perhaps) appear to spend a large amount of their macro education deliberately forgetting commonsense insights like "it's all just numbers on a screen," to the point where the Chairman of the Federal Reserve can't even give a clear answer to how money is created and injected into the economy.

The typical response I hear is "yes, of course it's all digital, but we can't just print money, that would obviously be hyperinflationary - look at Weimar and Zimbabwe!" and then the student goes back to modelling along the lines of a gold-standard world that ignores balance sheet accounting and the non-neutrality of money. This type of handwaving is quite common in professional economic circles, and perhaps even more so in financial journalism, to the point that "re-learning" the truth is often perceived as world-view altering.

I suppose my perspective on this issue (and why I find Desan's narrative compelling) is targeted towards the thought-leaders who continue to reinforce these incoherent narratives rather than the average people that accept them for psychological reasons. I find psychology an unconvincing explanation for why Presidents choose to tell the country that it's "broke," Law School Deans choose to devote entire papers to the "harms" of budget deficits, and 90% of the economics profession choose to generate models for predicting economic performance that treat the government's balance sheet as identical to a private actor. There is probably some truth to it, as well as the cynical arguments relating to politics and discursive capture by the financial elite, but I think academic inertia and genuine ignorance play a large part as well. Perhaps it's my naive faith in the genuine curiosity of people, but I trace a large part of the problem to a system where people learn from ignorant professors with bad text books, graduate and read the wrong academic journals and newspapers, before becoming teachers themselves and starting the cycle all over again.

Luckily, thanks to the GFC and the internet, we are in living a generation where the ideologically dogmatic ivory-tower of the orthodox economics discipline no longer enjoys a monopoly over either economic authority or the means of disseminating economic ideas. More enlightened thinkers, long suppressed in their fields, are finally gaining the popular support required to launch a genuine attack on the citadel. It's an exciting time for those who seek to build a new economy.