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https://www.lolabooks.eu/products/fiat-socialism
法定社会主義は、歴史法によって課せられた硬直性から社会主義を解放するため、柔軟な社会主義とも呼ぶことができます。この社会主義は、さまざまな場所でさまざまな形をとるだろうし、社会主義組織が間違いを犯さないわけではないことを受け入れ、さまざまなレベルの民間部門の参加や、さまざまなレベルの営業総黒字が含まれるだろう
。社会主義の目標を達成するために最善の方法で実際の資源を動員するための改善のプロセス。唯一確立されている硬直性は通貨主権です。
現代の貨幣理論は、国家が通貨の主権発行者であり、中央銀行と財務省の間に適切な調整が存在する通貨システムでのみ有効です。古代ギリシャのアルキメデスが私に支援点を与えてください、そうすれば世界を動かしますと言ったとしたら、社会主義者のアルキメデスは私に通貨主権を与えてください、そして私が社会主義を構築してあげると言うでしょう。
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ISBN: 978-3-944203-50-8
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M&C
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Fiat Socialism... The Convergence with Carlos García Hernández
Macro N Cheese
**Don’t forget to register for Macro ‘n Chill. Come listen to the episode together and discuss it on Tuesday evening at 8 pm ET/5 pm PT. This week’s registration link is at https://realprogressives.org/event/macro-n-chill-246/ Carlos García Hernández is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory. He lays out the five goals of fiat socialism: Full employmentFull and prudent use of material resourcesThe guarantee of the five essentials to every citizen: food, housing, clothing, health services, and educationSocial security at all major exposed points in the social structure (eg, old age, sickness, accident, temporary unemployment, and childbearing)Labor standards, to be assured by labor unions Carlos maintains that any society achieving these five goals at the same time and permanently should be called socialist, no matter the size of the private sector. Steve and Carlos discuss the philosophical foundations of both fiat socialism and Marxism. They also look at the role of the IMF and the possibilities for monetary sovereignty in developing nations. Carlos García Hernández is the founder and director of Lola Books, a publishing house that has introduced MMT to Spanish and German readers. He is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory. @Carlos_G_H_ on Twitter Or X
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Clara Mattei
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フィアット社会主義... カルロス・ガルシア・エルナンデスとのコンバージェンス
マクロン・チーズ
**Macro 'n Chillへの登録をお忘れなく。火曜日の夜8時（東部標準時）／5時（東部標準時）に、このエピソードを一緒に聴き、議論しましょう。今週の登録リンクは https://realprogressives.org/event/macro-n-chill-246/ カルロス・ガルシア・エルナンデスは『Fiat Socialism』の著者： Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory』の著者。彼は不換紙幣社会主義の5つの目標を示している： 完全雇用物的資源の完全かつ慎重な使用すべての国民に対する5つの必需品の保証：食料、住居、衣料、医療サービス、教育社会構造におけるすべての主要な露出点における社会保障（例えば、老齢、病気、事故、一時的失業、出産）労働組合によって保証される労働基準カルロスは、民間部門の規模にかかわらず、これら5つの目標を同時にかつ永続的に達成する社会は社会主義と呼ばれるべきだと主張する。スティーブとカルロスは、フィアット社会主義とマルクス主義の哲学的基盤について議論する。また、IMFの役割と発展途上国における通貨主権の可能性についても考察する。カルロス・ガルシア・エルナンデスは、MMTをスペインとドイツの読者に紹介した出版社ローラ・ブックスの創設者兼ディレクター。著書に『不換紙幣社会主義』： Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory』の著者。ツイッターで @Carlos_G_H_ または X
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The following is the first article in which I used the term fiat socialism. It is an article published by the newspaper Mundo Obrero1 on January 25, 2017. Although very succinctly, it outlines many of the concepts that will be used in the rest of the book. The fundamental idea of the article is that as of August 15, 1971, the austerity measures imposed by the gold standard and fixed exchange rates were no longer inevitable. The English translation below was published by The Gower Initiative2 on the first of March, 2019. FIAT SOCIALISM A fictional story August 16th, 1971. The Secretary General had cancelled all his appointments. The day before, the person in charge of economic affairs had sent him an urgent note. It was vital that they meet. Eventually, the economist entered the room. “I hope it’s important.” “It is. The money Marx talks about no longer exists.” The Secretary General went from surprised to impatient. “Would you please explain yourself?” “Previously bank deposits were backed by gold. One ounce was equivalent to 33 US dollars. The international currency exchange system was based on this equivalence. And even more important than that, the spending capacity of governments was limited to the quantity of gold available. Now it’s not like that anymore. Governments can create and spend without limit in their own currency. Money is not a commodity any longer, it has become an intangible accounting entry. This is called fiat money. This changes everything.” The face of the Secretary General revealed that he was very perplexed. He could only ask: “Since when?” “Since yesterday.” Inexplicably, this conversation is a fictional story. How can it be that such a historic event, comparable to the acceptance of the Copernican model in physics, was not analyzed by any communist party in the world? This is a mystery to me, but the truth is, that the basis on which Marx builds his whole work, namely gold standard-based money, ceased to exist on August 15th 1971, the day when fiat money was adopted. Quack remedies For Marx, money based on the gold standard is a premise. It is the starting point that he uses in order to analyze the capitalist economy in which he lived: “Throughout this work, I assume, for the sake of simplicity, gold as the money-commodity” (Marx 1887, 67). Therefore, gold, by convention, is the commodity that not only has use and exchange values, it also measures the exchange value of the rest of the commodities, which turns gold into money: “The commodity that functions as a measure of value, and […] as the medium of circulation, is money. Gold (or silver) is therefore money.” (Marx 1887, 84) This means that the accumulation of gold equals saving money, and that the value of the money the state issues varies depending on the quantity of gold it represents. That is how in the end the spending capacity of both the state and the private sector is determined by the amount of money saved, whether as paper money or as gold. If, in this gold standard-based system, private ownership of the means of production is allowed, then the capitalist form of production becomes a method to accumulate money in the hands of one social class (the one that owns the means of production) while the rest of society receives a subsistence wage in exchange for generating goods and services that allow the bourgeoisie to improve its level of savings in a kind of money that bases its value on its scarcity. This reality, in which money-gold is scarce, leads Marx to the conclusion that only the direct ownership of the means of production can decide the distribution of wealth in the economy. Either private ownership of the means of production is abolished, or the private ownership of the means of production will always tend to accumulate the money in the hands of the bourgeoisie, and to augment misery among the working class. For Marx, whose intellectual references were mainly the works of David Ricardo and Adam Smith (Georg Friedrich Knapp’s Chartalism comes after Marx), there was no other conceivable starting point than the gold standard. He branded the money theories, which were not based on the gold standard, as “quack remedies” (Marx 1887, 92).
Modern Monetary Theory
The analysis of the change from the gold standard to fiat money has recently been made by Modern Monetary Theory (MMT). Ever since August 15th 1971, states have created money out of thin air by typing on keyboards at the Central Banks. Those keystrokes make the balance of accounts in private banks go up when a person or company receives a payment, and they make those balances go down when a person or company pays taxes to the state. Therefore, the state can’t run out of its own money and the idea of it saving its own currency becomes nonsensical. Companies and families do need to save because they are users, not issuers, of money, but the state doesn’t save in its own currency because it can always issue as much as it wants and it can never run out of it. In this way, money stops being a commodity and becomes a mere accounting entry (Wray 2012). Furthermore, the capacity of the state to spend stops being dependent on the collection of taxes or on the issuing of debt (Mosler 2010, I). However, taxes keep on being necessary, but not to finance the current spending of the state, but to accomplish a double function: they give value to money and they control aggregate demand (consumption capacity). Through the first function, they assure that state money will be accepted as a means of payment (here is a “quack remedy” that Marx overlooked), and through the second, they control inflation. To all this, we have to add that non-convertibility meant the emergence of floating exchange rates. They prevented private speculation in the international exchange markets from being able to destabilize the exchange rates of the different currencies. Therefore, fiscal measures like Lerner’s First Law that we are going to review in the next section gained an effectiveness that previously used to be counteracted by private speculation on the exchange markets. This is how the availability of real resources in the economy became the only limitation on the spending capacity of the states. In turn, public deficits generated by that spending were always sustainable, because they were generated in the currency of the state, and contrary to what happened under the gold standard they are not necessarily inflationary, they don’t make interest rates go up and they don’t impose a burden for subsequent generations (Wray 2012). Public deficits are no more than an accounting entry on the national balance sheet. They only show us the savings in the national currency which, through public spending, the government sector allowed the non-government sector (families, companies and external sector) to accumulate, because: balance of the government sector + balance of the private sector + balance of the external sector = 0. The Lerner point MMT maintains that there is a particular state in the economy that is defined by Abba Lerner’s first law of functional finance. This law states: “The first responsibility of the government (since nobody else can undertake the responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. If total spending is allowed to go above this there will be inflation, and if it is allowed to go below this there will be unemployment. The government can increase total spending by spending more itself or by reducing taxes so that taxpayers have more money left to spend. It can reduce total spending by spending less itself or by raising taxes so that taxpayers have less money left to spend. By these means total spending can be kept at the required level, where it will be enough to buy the goods that can be produced by all who want to work, and yet not enough to bring inflation by demanding (at current prices) more than can be produced […]” (quoted in Mitchell 2015). This means that a country that issues its own money in a sovereign fashion and collects taxes efficiently can bring its economy to a certain point in which public deficits (or surpluses) are those that make the unemployment rate 0% and keep the level of prices stable. I like to call this economic state ‘the Lerner point’. MMT proposes to reach this point by job guarantees or transitional jobs programs. These programs are based on the principle that everybody who can work and wants to work, but doesn’t find a job in the private sector, will receive a job in the public sector. In this job in the public sector, the worker will receive the minimum wage, which will allow him to live with dignity until he finds a job that offers better conditions in the private sector. Fiat socialism ‘Fiat socialism’ is my name for an open and prosperous society ruled by the principles of modern monetary theory and functional finance. A society without unemployment or poverty, in which everybody has a decent job (either in the private sector, or in the public sector) which allows him to fulfil all his basic needs and coordinate his working and private life because of reasonable time schedules. A society in which public services, education and health access are of the highest quality, and in which the level of prices remains stable. I use the adjective fiat in order to emphasize the differences between this kind of socialism and traditional socialism. The first meaning that the Dictionary of Royal Spanish Academy gives to the term socialism is this: m. Social and economic system based on collective or state ownership and administration of the means of production and of the means of distribution of goods. As has already been explained in the second section of this article, such direct ownership of the means of production is an essential condition if we want to control the economy in a collective way inside of the gold standard. This is because in this scenario, allowing the private ownership of the means of production concentrates the spending capacity in the hands of the minority who control the means of production, while the working class can’t hope for a bigger spending capacity beyond the level of subsistence. What happened when fiat money was introduced? As we have seen, the state that issues its own money is no longer limited by any kind of financial restriction in spending its own money. In this scenario, the private sector can only save in the national currency if the state goes into public deficit, in other words, if the state decides to spend more than it collects through taxes. In this scheme, the collective or state administration of the means of production and of the distribution of goods doesn’t have to imply the direct ownership of the means of production. This could stay in private hands, because the level of accumulation of the national currency by the owners of the means of production is determined by the state through its fiscal policy. Therefore, the administration of the means of production and the distribution of goods is done by the state, but in an indirect way. This means that the owners of the means of production can only appropriate the amount of money that the state allows them through the collection of taxes, and this also means that the state can spend as much as it considers necessary, regardless of the level of money accumulation in the hands of the owners of the means of production (money is no longer a scarce commodity). At the same time, MMT shows us that when implementing full employment policies by the state we only have to worry about inflation. Therefore, the level of government spending must bring the economy to its Lerner point, but this point should not be overstepped. If we introduced fiat socialism along these lines, we could conduct the following experiment: only one person could know what the level of public deficit in the economy is. The rest, including government officials, wouldn’t know what that level is, we would only care about strengthening public services and controlling inflation. After some years have passed, the person who kept track of the public deficit would make his records public. Then we would see that sometimes (almost always) the public sector went into deficits, especially at the beginning when there still was unemployment in society, and other times it went into surpluses, especially when we approached the Lerner Point, but either way, we would see that those levels didn’t mean any problem in achieving the introduction of fiat socialism. As a consequence, a key premise for introducing fiat socialism would be the immediate exit from the eurozone and the recovery of monetary sovereignty in order to introduce the job guarantee programs that Izquierda Unida proposed before its agreement with Podemos. The euro is a currency that Spain uses, but doesn’t issue in a sovereign fashion, because Spain is subject to the Growth and Stability Pact, and according to this pact the countries of the EU cannot go into a public deficit beyond 3% of their GDP. This level of deficit is incompatible with full employment and welfare policies in Spain. Carlos García Hernández Member of Izquierda Unida – Berlin Mårslet (Denmark), Christmas 2016 ***
DEFINITION OF FIAT SOCIALISM
Fiat socialism is the achievement of the goals of socialism through modern monetary theory. The order and structure of the chapters of this book are based on this definition. Accordingly, the book devotes one chapter to the goals of socialism (chapter 2) and another to modern monetary theory (chapter 3). However, the goals of socialism and modern monetary theory do not exhaust the scope of fiat socialism. As we shall see, the goals of socialism will serve as a reference and starting point. For its part, modern monetary theory will serve as a general principle and method for achieving full employment without inflation. To these two elements we will add one more which will serve as a rule, the Kalecki profit equation (chapter 4). Chapter 5 is then devoted to Spain. This chapter will serve as a case study of fiat socialism. Subsequently, chapter 6 will be devoted to the conclusions drawn from the writing of this work and finally, chapter 7 will include most of the articles on fiat socialism that I have been publishing over time, especially in the online newspaper El Común (www.elcomun.es). Some of these articles are integrated into the main body of the book because of their special relevance. I have called this seventh and last chapter euro delendus est because I usually end my articles this way. It is a paraphrase of Cato the Elder, who ended all his speeches in the Roman Senate with the phrase Carthago delenda est (Carthage must be destroyed). In the case of fiat socialism, the enemy to be destroyed is the euro, the main impediment to any socialist transformation in the eurozone. The book is divided into three parts. The first two parts quote Marx’s eleventh thesis on Feuerbach. The first part consists of the first three chapters and I have called it “philosophers have hitherto only interpreted the world in various ways …” because it interprets reality from the perspective of modern monetary theory. As Bill Mitchell, who together with Warren Mosler and Randall Wray is the father of modern monetary theory, puts it, modern monetary theory is not a political regime, but a lens for looking at economic reality in the right way. It is only once this work of interpretation has been done that the second part can be tackled, “the point is to change it”. This second part is of a political nature and aims to propose concrete policies built on the foundations left by the first part. Fiat Socialism has largely been in the making in the form of press articles. That is why I wanted the third part (euro delendus est) to include this work. The function of this third part is to clarify the postulates of fiat socialism on the basis of current affairs articles. This part will help to better understand the first two parts, both for Spanish readers and (I hope) for readers in Latin America and the rest of the world.
“KANT IS NOT THE SOLUTION, BUT THERE IS NO SOLUTION WITHOUT KANT”
“Kant ist nicht die Lösung, aber keine Lösung ohne Kant” (Dietzsch 1978, 26). This is how Professor Steffen Dietzsch characterized Schelling’s relation to Kant’s work in the context of the analysis of the French Revolution. Fiat socialism takes the same position with respect to Kant as regards the epistemology of economic science. In order to prove the reality of the pure concepts of understanding, Kant puts forward intuitions expressed in the form of schema (Kant 1987, 225 ff). What distinguishes the pure concepts of understanding from the rest of the concepts is that the schema to which they respond are constructed by means of a priori propositions. Consequently, “we shall understand […] by knowledge a priori knowledge which is absolutely independent of all experience, and not of this or that experience only. Opposed to this is empirical knowledge, or such as is possible a posteriori only, that is, by experience” (Kant 1922, 716). This distinction between theoretical (a priori) and empirical (a posteriori) knowledge expressed by means of propositions is our starting point. Fiat socialism starts from the construction of a schema composed of propositions, as Kant put it. However, fiat socialism holds that only microeconomics constitutes a pure knowledge of the understanding, meaning that only microeconomics responds to a priori schema. On the contrary, macroeconomics constitutes empirical knowledge, based on experience, and therefore a posteriori. This is how fiat socialism takes up the idea of James K. Galbraith and other institutionalists, who were so influential to the authors of modern monetary theory, that maintains that microeconomics and macroeconomics are sciences that, although closely related, as for example chemistry and biology are, they are different sciences (see Galbraith 1996). Therefore, the principles of macroeconomics cannot be deduced from the principles of microeconomics, nor can macroeconomics be considered a higher level based on the aggregate principles of microeconomics. Understanding this fallacy of composition is fundamental, since it is at the root of what is known as neoliberalism. In Bill Mitchell’s lectures, it is not unusual to hear him say that the definition of neoliberalism is the belief that tax collection and debt issuance finance public spending. This is certainly a correct definition. In reality, what Bill Mitchell’s definition of neoliberalism is really saying is that neoliberalism has its origins in the confusion between microeconomics and macroeconomics. We, from the fiat socialism perspective, state the following: neoliberalism is the attempt to apply the a priori schema of Kant’s Critique of Pure Reason and Critique of Practical Reason to economics, understood as the science that encompasses microeconomics and macroeconomics. Fiat socialism rejects the neoliberal project and limits the application of a priori schema to microeconomics. On the contrary, fiat socialism applies a posteriori schema in the field of macroeconomics. In order to reproduce the Kantian schema I will resort to the analysis of it that Dr. Arthur F. Holmes used to make in his lectures at Wheaton College in Illinois3. Dr. Holmes explained the Kantian schema in this way: Reference → General principle → Rule → Case Fiat socialism follows this scheme as a guideline. That is why in this book we find a reference in chapter 2 with the goals of socialism, a general principle in chapter 3 with modern monetary theory, a rule in chapter 4 with Kalecki’s profit equation and a concrete case in chapter 5 with the analysis of the situation in Spain. However, this division does not correspond to Kant’s scheme of pure concepts of understanding. Fiat socialism is a reflection of a political nature on macroeconomic policies, which, as we have said, are of an empirical nature and therefore do not correspond to Kant’s a priori schema. As far as microeconomics is concerned, fiat socialism does accept the Kantian schema in its entirety, not only as an orientation. Thus, fiat socialism accepts that the principles of microeconomics are pure concepts of understanding, but denies this claim in the case of macroeconomics.
DEDUCTION AND INDUCTION
Following the path marked by Kant, Karl Popper, the only neoliberal thinker of goodwill, differentiated a priori from empirical knowledge by resorting to deduction and induction. The Dictionary of the Royal Spanish Academy provides us with these definitions: Deduction: method by which one proceeds logically from the universal to the particular. To deduce: to extract a particular truth from a general principle. Induce To move someone to something or give them reason to do so. To provoke or cause something. To extract, from particular observations or experiences, the general principle implicit in them. Popper placed economics among the empirical sciences, that is, among the sciences whose theories are refutable by experience, and completely rejects induction by saying:
“Now in my view there is no such thing as induction. Thus inference to theories, from singular statements which are ‘verified by experience’ (whatever that may mean), is logically inadmissible. Theories are, therefore, never empirically verifiable. […] We must choose a criterion which allows us to admit to the domain of empirical science even statements which cannot be verified. […] I shall certainly admit a system as empirical or scientific only if it is capable of being tested by experience. These considerations suggest that not the verifiability but the falsifiability of a system is to be taken as a criterion of demarcation” (Popper 2005, 18).
With this paragraph he introduces what in his opinion are the two fundamental problems of epistemology, induction (which Kant calls Hume’s problem) and demarcation (which Popper calls Kant’s problem) (Popper 2005, 11). However, the author who immediately comes to mind in Popper’s words is John Maynard Keynes. Karl Popper’s political influence is enormous. The only scholar with a political influence comparable to his during the 20th century was Keynes. In my view, Popper is the nemesis of Keynes. Popper is the thinker to whom neo-liberalism resorted to counteract the epistemological revolution in economics brought about by the irruption of Keynes’ work. Keynes’ work will be analyzed in greater depth in different parts of this book. However, in this introduction we can say that Keynes’ main contribution to economic science was, together with Michal Kalecki, to introduce the concept of aggregate demand. In the Keynesian system, the State appears as the economic agent capable of generating sufficient aggregate demand to achieve full employment thanks to the monetary sovereignty conferred on it by the capacity to issue fiat money. This means that the Keynesian system is an inductive system in which the State spends all the national currency necessary to achieve a situation of full employment by means of accounting entries at the Central Bank. In other words, the State induces the emergence of a macroeconomic situation of full employment independently of the private sector’s investment decisions at the microeconomic level. This contradicts the deductive schema proposed by Kant and Popper, since it turns public spending into an ex-post variable. In other words, the State intervenes in the economic cycle in order to close the gap left by the private sector in the labor market a posteriori and bring the economy to a level of full employment. For Popper, this is unacceptable from a scientific point of view. What neoliberalism does is extrapolate the rejection of this scientific argument into a rejection in ideological terms. To explain this extrapolation we can resort to a historical example. Copernican physics replaced Ptolemaic physics and led to the invention of the astrolabe. However, the astrolabe was not the first orientation instrument. The geocentric systems of Ptolemaic physics also gave rise to fairly accurate but extraordinarily complex orientation instruments. The astrolabe revolutionized navigation because placing the sun at the center of the system made its use much easier and more accurate. For Popper, Keynesianism is to economics what the Ptolemaic System is to physics. In the Ptolemaic system, the placement of the Earth at the center of the galaxy was not a fact that could be verified by experience, but a dogma of faith based on religion. Guidance instruments were built on this dogma of faith, which could not be questioned and therefore had to be confirmed by ad hoc guidance instruments. Thus, from the particular experiences of orientation, the implicit general principle was extracted, i.e., that the Earth was at the center of the galaxy. This is an example of induction in the field of physics in which the results obtained were to confirm the method and not the other way around. In the case of the Copernican system, the particular truths are not intended to confirm any dogma of faith, but are disinterestedly drawn from a general principle that places the Sun at the center of the galaxy. Therefore, in the Copernican system, it is the method followed that confirms the results obtained and not the other way around, which conforms to the definition of deductive methodology. Of course, the flaw in Popper’s reasoning is that physics and macroeconomics are sciences of a different character. Physics is a natural science and macroeconomics is not. Macroeconomics was born out of the creation of states, which in turn led to the creation of money in the form of national currency. This birth of the states and therefore of macroeconomics reflects a human decision, the decision to abandon the tribal life of the paleolithic and adopt a form of life in society typical of the neolithic, which extends to the present day. With this, mankind decided that the advantages of living in states were greater than the advantages of living in tribes. The renunciation of tribal life, which certainly had its advantages and its pleasures, was what gave rise to the neolithic states in which writing, animal husbandry, agriculture, medicine, science, the division of labor and, indeed, the market developed. We can only imagine what the tribal life of hunter-gatherers must have been like, the pleasure of hunting in a group, the excitement and adrenaline rush of living together with nature on a daily basis, community life in its purest form. In the tribe, life was short and full of emotions. Life in the states became longer and took on a more intellectual character. Macroeconomics was born with the transition from the paleolithic to the neolithic. Physics was not born, but responds to natural laws alien to human decisions. The raison d’être of macroeconomics, the reason it was born, was to improve the living conditions of people. That was and continues to be its objective. Therefore, in the case of macroeconomics (unlike physics) it is the results that confirm the validity of the method.
THE ACCEPTANCE OF STATEMENTS THAT ARE NOT VERIFIABLE IN MACROECONOMICS
The epistemological role played by Kant is much more important for economics than it might seem. Kant never applied his a priori schema to economics, nor did he consider economics as a theoretical science. These considerations are the work of neoliberalism and from them derive neoliberalism’s originality. Kant applied his aprioristic schemes to the natural sciences and to morality, where the pure concepts of understanding are found, “these are the concepts of nature and the concept of freedom” (Kant 1987, 9). However, Kant did study money, especially in his writings about the philosophy of law. An excellent analysis of Kant’s reflections on money can be found in the research article Kant on the intellectual concept of money and the task of the philosophy of economics (Hoffmann 2014). There, Hoffmann rightly says: “Kant assumes that in general terms the institution of money in no way expresses only an empirical history - which, by the way, is by no means to be denied, but an a priori constant that in a certain way belongs to a sociality configured in general in juridical form”. That is to say, for Kant the use of money by human beings does not only reflect an exchange of commodities, the existence of an issuing entity or a means of carrying out contractual relations, but a prior rational behavior that leads to the natural appearance of money as a means of payment. Consequently, the intellectual concept of money is for Kant prior to the appearance of states. It is this conception of money that, as Hoffmann points out, later gave rise to the idea of homo oeconomicus4. In addition, Hoffmann quotes these words of Kant: “the thing that is to be called ‘money’ […] [must] itself have cost so much labor to produce […] that this labor must equal that for which the commodity […] had to be acquired” (in Hoffmann 2014). Therefore, Kant’s idea of money corresponds to commodity-money. This is how we find in Kant’s work two of the fundamental pillars of neoliberalism: homo oeconomicus and commodity-money. Thus, neoliberalism picks up the gauntlet left by Kant to build its project. Fiat socialism denies these two pillars. Chapter 6, devoted to the conclusions of this work, contains the article “Baseline Communism”. It analyzes David Graeber’s contributions to economic history. These contributions disprove both the preeminence of commodity-money and the existence of money before the emergence of states. As Graeber points out, the historical record shows that money arose after the creation of states, not before, and that tribal forms of organization prior to states were not based on any form of commodity-money. Therefore, the existence of homo oeconomicus as accepted by neoliberalism is ruled out from the field of anthropology and history. This error of neoliberalism makes it impossible to apply the Kantian a priori schema in macroeconomics, as well as any transcendental knowledge in the field of macroeconomics, since there is no subject that rises above a given nature, alien to it, which cannot be known in itself, but which can be reduced to a priori schema that make it predictable. According to fiat socialism, in economics all transcendental knowledge is reduced to the field of microeconomics. The process is as follows: First, the human being creates a surrogate domicilium (Kant 1987, 13), an artificial nature, a sort of proxy for nature (a game, if you want to call it that), which is called macroeconomy. Such an artificial nature gives rise to a ditio (Kant 1987, 13) that contains its own rules and laws, just as in the natural sciences, but they are rules and laws dictated by the human being, who in turn has the power to change them at any time. It is only when this proxy of nature called macroeconomics has been created by states (sovereign issuers of money) that the territorium (Kant 1987, 13) of markets and microeconomics is created. In this schema, microeconomics uses macroeconomics in a similar way as the natural sciences use nature, and this is what allows microeconomics to apply deductive a priori schema in the form of theories. However, regarding what we have mentioned above, there is a criticism from the ranks of neo-liberalism that must be taken as valid. This criticism, expressed by both Karl Popper and Hayek, argues that the Keynesian system cannot be considered as a theory, and that therefore we cannot speak of The General Theory of Employment, Interest and Money as described by Keynes in his work, since it responds to an inductive and a posteriori schema of macroeconomics. I believe this criticism is fair. Theories can only respond to deductive schema created from a priori propositions, and this is neither the case of Keynesianism, nor of modern monetary theory, nor of any kind of macroeconomics in general. That is why Popper stubbornly refuses to use the term macroeconomics in The Open Society and its Enemies and instead uses the term sociology, and that is also why he relegates Keynesianism to the field of statistics in his Logic of Scientific Discovery. He is right. Simply put, macroeconomics (a term coined by Keynes) is not a theoretical science, but an empirical one, and the correct thing to do would have been to avoid the term theory in modern monetary theory. It would have been sufficient to use the term system and opt for the formulation modern monetary system (MMS), since it is indeed a system, specifically an empirical, inductive and a posteriori system. However, this criticism does not detract in any way from the moral and scientific legitimacy of Keynesianism or modern monetary theory, which in my opinion are valid macroeconomic models. It is simply a terminological criticism that must be accepted because it is of no great significance. Popper’s words should be countered by saying that what is “logically inadmissible” is his neoliberal pretension to extend the aprioristic schema of microeconomics to the field of macroeconomics, since such a thing is impossible, as we shall see when in chapter 3 we will explain the descriptive principles of modern monetary theory (which are no more than the descriptive principles of macroeconomics in general). As Warren Mosler explains in his lectures5, all macroeconomics is based on a central power with the ability to tax the citizens. These citizens automatically become unemployed in search of an occupation that allows them to pay the tax debt. The central power then spends the fiat money it creates out of thin air to buy the labor force of the unemployed population in order to become self-sufficient, and thus the unemployed population becomes employed. This process is necessarily inductive. It is the need to pay a tax that it has not chosen that induces the population to seek employment, to create companies and to produce goods and services in exchange for the fiat currency of a central power. Without this inductive need to pay taxes, the population would neither create companies, nor would it be unemployed, nor would it create goods and services in exchange for money. The homo oeconomicus does not exist and has never existed; it is a neoliberal myth, whether the venerable (and undoubtedly brilliant) Professor Popper likes it or not. What is fundamental is not to accept the introduction of unverifiable statements in macroeconomics. In other words, since macroeconomics is an inductive science, all decisions taken in the field of macroeconomics are verifiable, i.e., they are correct or erroneous according to the results they produce. To maintain the contrary is to fall into neoliberal magical thinking, as for example occurs with the absurd Say’s law, defended by neoliberalism, which holds that supply creates its own demand. The opposite is true. If no one demands a good, no one creates it, since “no one can sell unless some one else purchases” (Marx 1887, 77). That is why “capitalist production is not merely the production of commodities, it is essentially the production of surplus-value” (Marx 1887, 357). This aspect (not accepting the introduction of unverifiable statements in macroeconomics) makes modern monetary theory and neoliberalism irreconcilable schools of thought. Therefore, in the chapter on modern monetary theory we will see how the only way for a monetary sovereign state to put a permanent end to unemployment is to prohibit it. In other words, modern monetary theory considers unemployment as a political problem, since every monetary sovereign state decides its level of unemployment through its spending policy. If a sovereign state decides that its level of unemployment must be zero, all it has to do is to hire all unemployed workers at a wage paid in national currency, since the state cannot run out of its own currency. Modern monetary theory calls this the job guarantee. Neoliberalism, for its part, opts for the magical thinking that believes that full employment and the elimination of public deficits are compatible. This is why it sustains irrational macroeconomic policies which, in the face of rising unemployment, promote public deficit reductions. That’s why “The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie” (Marx/Engels 1969, 15). Once again commodity-money and homo oeconomicus make their appearance. According to neoliberalism, the state cannot carry out the job guarantee because in order to be able to spend, it must collect taxes. In the chapter on modern monetary theory, we will see how this type of neoliberal postulate is an aberration.
THE MICROECONOMICS VS. MACROECONOMICS FRAMEWORK
Let us exemplify the opposition between the a priori schema of microeconomics and the a posteriori schema of macroeconomics. Let us take as a microeconomic example the law of diminishing marginal utility. This microeconomic law “states that the consumption of a good provides less additional utility the more it is consumed (holding the consumption of other goods constant). There is a decreasing valuation of a good as a new unit of that good is consumed” (Unigal.mx). Thanks to this law, companies can, among other things, determine their optimal level of hiring before any hiring takes place, i.e., a priori. Let’s see then how to express this law in the Kantian schema Reference → General principle → Rule → Case In this example, the reference would be the maximization of corporate profit through the correct number of workers hired. This is the objective to be achieved and the starting point. The general principle would be expressed by the law itself, i.e.: “the consumption of a good provides less additional utility the more it is consumed (holding the consumption of other goods constant). There is a decreasing valuation of a good as a new unit of that good is consumed”. The rule would be expressed by the mathematical quantification of the general principle. In this case, we find this formula: “Umx = DUtx/DQx Umx: marginal utility of the item. DUtx: increase in total utility of the items. DQx: increase in item units.” (EAE Business School). Finally, to find the correct number of hired workers, the data of the company in question should be entered in the formula:
In this simple way, a Kantian deductive and a priori schema can be applied to microeconomics, in which starting from a general reference and principle one can direct the understanding to particular cases. Thus, the correct number of workers is deduced from a general principle independent of concrete experience. The problem arises when neoliberalism tries to equate the state with a private company, that is when neoliberalism confuses microeconomics with macroeconomics. To do so, it has to introduce false variables and consider the state as a mere user of the national currency, when the reality is that the state is not only a user of the national currency, but also its issuer. In order to eliminate the issuing character of the state, neoliberalism advocates the elimination of public deficits and erroneously maintains that public deficits are, like private deficits, unsustainable over time. The consequence is that at the macroeconomic level, neoliberalism only produces mass unemployment and misery. Fiat socialism accepts the Kantian schema in the field of microeconomics, but does not extend it to the macroeconomy, since, following modern monetary theory, fiat socialism does consider the state as the issuer of the national currency. Therefore, the state can sustain public deficits indefinitely, since it is not restricted in its level of expenditure by its level of income. In other words: fiat socialism, following modern monetary theory, decouples tax collection from the spending capacity of the state. Therefore, for macroeconomics, fiat socialism constructs a second schema independent of the microeconomic schema that takes this aspect. Reference → General principle → Rule → Case The goals of socialism → Modern monetary theory → Kalecki’s profit equation → Macroeconomic policies of the state In this second schema, we eschew the deduction of the microeconomic schema and resort to an inductive and a posteriori schema. In this way, two principles expounded by Kant are preserved. First, that the reference from which one starts is a goal in itself. That is to say, one starts with the goals one wishes to achieve. These goals are not the historical result of any predetermined process, but are the starting point of all our rational activity. And second, our scientific activity is expressed at all times by means of concrete propositions. It is there, in the field of propositions, where the game is played, not in the field of ineffable concepts. Outside of the propositions, there are only vacuous plodding and pseudo-religious concepts, as in the case of Hegelianism. Consequently, the extension of the Kantian aprioristic schema to the field of macroeconomics is rejected and it is accepted without hesitation that macroeconomics and microeconomics are different sciences, the former subject to an inductive schema and the latter subject to a deductive schema.
MACROECONOMICS IS NOT A UNIQUE CASE
To conclude this introduction, I think it is important to point out that macroeconomics is not the only science that resorts to inductive schema. Both medicine and engineering have had no qualms since their origins in resorting to inductive methods when necessary. However, I believe that the clearest example of inductive science, together with macroeconomics, can be found in artificial intelligence. This field aims at creating human-level intelligence in non-biological substrate machines. However, this science starts with a very difficult question to answer. That question is what is consciousness? There is no way to measure the level of consciousness of an entity. Consciousness is not the secretion of a substance. No apparatus can measure the existence of consciousness. All we can say is that, properly ordered, a mass of 1.5 kg that performs 1016 calculations per second (i.e. our brain) possesses consciousness because it behaves consciously. This is purely inductive reasoning. When is an entity considered to possess consciousness? When it behaves consciously. This is the basis of the famous Turing test. This test establishes that a machine will have reached a human level of consciousness when it interacts with humans in a manner indistinguishable from that of other humans, that is, when it behaves like a human being and therefore induces us to consider beyond any doubt that we are dealing with a conscious being. Therefore, one does not have to go back to Ptolemaic physics to find examples of induction in science. The exciting field of artificial intelligence is based on inductive models. The American engineer Ray Kurzweil studies this aspect of artificial intelligence in his book How to Create a Mind (Kurzweil 2012) and argues that the Turing test will be successfully passed by a machine in 2029. Therefore, macroeconomics is not alone in its recourse to inductive schema, nor should macroeconomics be considered as a science inferior to others. Again, everything boils down to the introduction of unverifiable statements. Macroeconomics falls into the group of sciences in which it is not admissible to introduce unverifiable statements. We have just seen the case of artificial intelligence, but above we have also mentioned medicine and engineering. In the case of medicine, patients either die or do not die, are cured or are not cured. This is the standard by which medicine is governed, and this standard is always verifiable. In medicine, treatments that kill the patient are not admissible, but only treatments that make the patient’s health verifiably better, despite the fact that a medicine may be bitter or traumatic. Treatments that end the patient’s life are always rejected. The same is true of engineering works. Bridges verifiably fall down or do not fall down. The pyramids of Egypt or skyscrapers collapse or do not collapse. If bridges do not fall down and buildings do not collapse, they are well made. If they do not stand, they are poorly made. The same is true of macroeconomics. The austerity measures in public spending that neoliberalism promulgates and that worsen people’s living conditions must be rejected, since they verifiably prevent the objective of macroeconomics, which is none other than to improve the living conditions of the population, from being achieved. This reasoning is independent of the reasons why the statements may or may not be verified. That is a later question. The engineers who built the pyramids of Egypt did not know modern physics, and yet they were able to accomplish their task in a verifiable way, which is the most important thing. Likewise, the physicians of antiquity could prescribe remedies that could cure their patients without the knowledge of pharmacology and surgery that we have today. Nevertheless, their patients were cured, which was the important thing. A healthy and efficient microeconomic system extending from family economies to the economies of large companies can certainly have positive effects at the macroeconomic level, but when it comes to making macroeconomic decisions, it is always essential that the quality of life of the population as a whole improves in a verifiable way.
1 The article is available online at https://www.mundoobrero.es/2017/01/25/socialismo-fiduciario/.
2 The article is available online at https://gimms.org.uk/2019/03/01/fiat-socialism/.
3 Dr. Arthur Holmes’ lectures are available online at https://www.youtube.com/playlist?list=PL9GwT4_YRZdBf9nIUHs0zjrnUVl-KBNSM. They are a real gem. The outline of the four stages of the Kantian system corresponds to lecture number 55 https://www.youtube.com/watch?v=rR-syCO7kCU&list=FL3zv_KwzcHcX77POb8pxfjw&index=11&t=3001s.
4 The first to use this expression was John Stuart Mill in the 19th century. However, Mill introduced the term influenced by the work of Adam Smith, who in turn was a contemporary and connoisseur of Kant’s writings, from which he drew his inspiration.
5 An example of a lecture in which Mosler explains the inductive character of macroeconomics is this one: Conferencia de Warren Mosler – Teoría Monetaria Moderna https://youtu.be/bZ4NWp0C3CA.
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