YSI Plenary Budapest 2016

Germany’s finance minister Wolfgang Schäuble and the former finance minister of Greece, Yanis Varoufakis, seemed to have never really understood each others views and positions. We are convinced one important reason for this is the lack of a shared paradigm that would be powerful enough to integrate both – seemingly entirely opposite – positions on economic policy in the Eurozone that Schäuble and Varoufakis each represent.

In the pursuit of the creation of such a new paradigm with integrative power, Dr. Thomas Weiß presented his working paper “Accounting as the Link Between Legal Institutionalism and Money View” on behalf of ANEP economics to the Finance, Law and Economics Working Group of INET’s Young Scholar’s Initiative (YSI) at the Plenary “Piecing together a Paradigm”, which took place from October 19-22 at Central European University in Budapest (see video above).

Our purpose was to build on our Bristol presentation and introduce some basics of level 2 of our New European Political Economics project to the Finance, Law and Economics Working Group.  That group consists of people from different disciplines working with Legal Institutionalism, the Legal Theory of Finance and the Money View.  We were happy to have Geoff Hodgson and Perry Mehrling as guests as well.

After a short summary of the legal/institutional foundations for impersonal exchange and accounting, Thomas focuses on a distinction accountants routinely make between 2 kinds of flows of monetary wealth, receipts/payouts which affect the stock of means of payment, and revenues/expenditures, which affect the stock of net financial assets. He then introduces Stützel’s scheme for describing Micro-Macro-paradoxes and applies both to the sectoral balances approach also used in Modern Monetary Theory and Stock-Flow-Consistent Modelling. One of the advantages of Stützel’s approach is that it allows to explain the paradox of thrift which Keynes and others discovered during the great depression (as well as its dialectical opposite, the paradox of spending in inflationary situations usually overlooked by Keynesians) in precise accounting terms.

In the following discussion, Perry Mehrling instantly noticed that our explicit conceptualization of “money” (means of payment, m.o.p.) in terms of law (starting at 9:06 of the video): “credit m.o.p. are legally enforceable claims, commodity m.o.p. are legally enforceable property rights – might also an old controversy from the history of monetary thought, that between the metalists and the chartalists.  We will show this in more detail, but to state an essential point: since rights are social relations in which the rightholder’s rights correspond to duties of either one other legal person (as in the case of claims) or all other legal persons (as in the case of property rights), all means of payment – not just credit m.o.p., but also commodity m.o.p. – are indeed not “things”, but social relations: legal relations.

As Brigitte Leal pointed out to us in the discussion, this can be conceptualized even more clearly using Wesley Hohfeld’s analysis of rights.  In roman law, property rights are described as “ius in rem” – a person’s rights over things. Hohfeld demonstrates that there is no such thing as a legal relation between a person and a thing, since a legal relation always operates between two people. (…) Hohfeld replaces the concept of “right in personam” by “paucital right” and “right in rem” by a compound or aggregate of “multital rights”. Rights held by a person against one or a few definite persons are paucital (or “in personam”), and rights held by a person against a large indefinite class of people are multital (or “in rem”). A contract right is paucital (or “in personam”) because it can be enforced only against the specific parties to the contract. A property right is multital (or “in rem”) because a landowner has the right to exclude not only specific people from his land but the “whole world”.  Thus, credit m.o.p. represent paucital rights, commodity m.o.p represent multital rights.

Thomas’ paper will be available soon as well.