Prime Economics: “Academics and civil society clash on money”

Geoff Tily has some interesting and balanced analysis on the academic debate around money reform, in particular the debate between Giuseppe Fontana and Malcolm Sawyer, and Positive Money, which is currently playing out in the Cambridge Journal of Economics.

Tily expresses some concern that stopping banks creating money is ‘throwing the baby out with the bathwater‘, but also highlights weaknesses in Fontana & Sawyer’s critiques:

“But while Fontana and Sawyer celebrate the positives of money, they barely touch on the negatives… [T]here is no sense of the scale of the failure of the system, and of whether there is need for fundamental reform (recognising this is only a review essay, not a statement of their perspective in full).”

While Geoff wouldn’t go as far as completely removing banks’ power to create money, he does welcome the work that organisations like Positive Money and the New Economics Foundation are doing:

“…as noted at the start, civil society organisations are raising questions in the public mind that academia has not managed to raise. Indeed they have seemingly provoked the Bank of England to publicly concede that banks create money and point out that mainstream textbooks are generally wrong on this fundamental point. This is a very non-trivial admission (the first time in history?), serving somehow to vindicate the work of all of us.”

Read the full post here.