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Money in the Western Legal TraditionMiddle Ages to Bretton Woods$
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David Fox and Wolfgang Ernst

Print publication date: 2016

Print ISBN-13: 9780198704744

Published to Oxford Scholarship Online: April 2016

DOI: 10.1093/acprof:oso/9780198704744.001.0001

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From the State Theory of Money to Modern Money

From the State Theory of Money to Modern Money

An Alternative to Economic Orthodoxy

(p.631) 29 From the State Theory of Money to Modern Money
Money in the Western Legal Tradition

L. Randall Wray

Oxford University Press

This chapter examines the theoretical building blocks of the Modern Money Theory (MMT), an economic theory that details the procedures and consequences of using government-issued tokens as the unit of money. In recent years, MMT has risen to prominence, especially on the internet, largely for two reasons. First, its understanding of the nature of money leads to interesting policy conclusions. Secondly, MMT provides a description of modern fiscal and policy operations that is quite different from orthodox economics. The chapter begins by contrasting the orthodox ‘metallist’ and the heterodox ‘chartalist’ approaches. The metallist approach focuses on money as a medium of exchange, which in the past derived its value through a link to precious metal. In the chartalist approach, the state, or any other authority, imposes a liability in the form of a generalized, social or legal unit of account (a money) used for measuring the obligation. It is the second approach that is more consistent with the “nominalist” and legal traditions that are represented in most of the contributions to this volume, and which forms the basis for the MMT approach.

Keywords:   Modern Money Theory, economic theory, government-issued tokens, unit of money, orthodox economics, metallist, chartalist, medium of exchange, obligation, money as a creature of the state

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