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.

-- RohanGrey - 10 Jul 2012

Interesting discussion! Speaking of building a new economy, just wanted to pose a quick hypothetical:

As I was playing God on my morning commute today, I was just thinking... this is probably a dumb idea, but... there's an oversupply of young, hireable lawyers, right? And according to anecdote, there are too many young associates working too many hours for too much pay and too little real satisfaction in life.

I know it's just one piece of the massive jenga house that is the legal profession, but here's this: What if big firms hired twice as many kids at EIP, and started paying their newbies half the normal starting salary for doing half the work? If there's that much work, and plenty of bright kids right now who want to do it, why not split up the jobs? And the benefits? And schools can help with loan repayment for kids who take this route? Wouldn't that be a better across-the-board solution? And once you've got a hang of the half-as-many-hours thing, you could transition up to "normal" starting associate's pay and hours?

There are a million and one institutional and psychological barriers to this ever happening, but imagine for a second that in some alternate reality, you have a real choice here. If it came right down to a clear choice between money or health/family/free time/sanity, I know what I hope I'd pick. And it's not money.

If there were a feasible way of implementing a scheme like this, would we go for it?

I'll have more time later on to chip in on the article you posted, Rohan, but I just wondered if anyone had thoughts or gut reactions - about how the normal narrative of 'necessary' money determines decisions - whether it's even possible to retell the narrative, individually or societally?

-- JenniferDoxey - 10 Jul 2012

Hi Jennifer,

You should probably factor into account the various additional nominal and real costs of hiring new people beyond the cost of salary itself, and also remember there is no reason to expect law firms to risk their prestige value of exclusive hiring out of concern for unemployed law graduates, but I get your point. In fact, we could extend it further - around the world millions of laborers work harder than ever while millions of others sit around and do nothing because humanity as a whole apparently "can't afford" to find some way for them to contribute productively. Why couldn't we just double the minimum wage and allow twice as many unskilled workers to get paid to work half as much? Private employers will probably cry fowl and allege that such improvements in labor standards are prohibitive to their existing business model, but hey - Capital has been grumbling about labor regulation since we stopped them from employing 12 year olds in sweat shops (and before). Even if they're right, society could always just employ them itself.

To go back to lawyers and your question of implementation, while I doubt you'd make much headway convincing for-profit private companies to adopt such a practice, it's less fanciful in the public and non-profit sectors - you could conceivably establish a network of non-profit teaching law firms (comprised of a mosaic of local, state, national, industry-specific firms) that paid a basic salary to any law graduate willing to provide legal assistance to the community as necessary. As Jared pointed out in another thread, a similar model is already starting to emerge from some law schools.

I'm a little confused about what 'necessary money' means - can you clarify?