Toward a Feminist Expansion of Macroeconomics: Money Matters

By Jennings, Ann L. | Journal of Economic Issues, June 1994 | Go to article overview

Toward a Feminist Expansion of Macroeconomics: Money Matters


Jennings, Ann L., Journal of Economic Issues


Orthodox economics has long been confident that money is of minor importance in economic life. From Adam Smith onward, we have heard that it is real goods, not money, that determine economic well-being and that "economic scarcity" refers to scarce goods and scarce real resources. Though economic values are expressed in money terms, and money facilitates the circulation of goods, many economists continue to believe that it is both nominal and neutral in exchange relationships. In standard microeconomics, now dominated by the barter models of Walrasian general equilibrium, money plays no role whatever [Minsky 1990]. It is simply a mathematical convenience for avoiding the price permutations of barter.

In standard macroeconomics, now dominated by monetarism, the situation is largely similar. Monetarists assert either that money does not matter or that it is all that matters. This reflects the Walrasian foundations of current monetarism: under "normal" circumstances, money is irrelevant [Minsky 1990]; but, in the closed and timeless Walrasian hermeneutic, nothing ever happens except when the essentially alien force of money is interjected. Orthodox Keynesianism, now in retreat, does include exogenous money as an economic variable, but it neglects Keynes's [1936] preeminent concern with monetary factors in business cycles. Meanwhile, more recent orthodox variations, such as those of the New Keynesians, further discount money in attempts to render Keynes compatible with microeconomic barter [DeMartino 1993].

Outside orthodoxy, the situation is quite different. For Marxists, Post Keynesians, and institutionalists alike, money is central to macroeconomic arguments; orthodox barter models are replaced with some form of "monetary theory of production." That is, a necessary connection between money and profit-seeking behavior is recognized [Wray 1990], and money is a real determinant of economic well-being.

Minsky's Monetary Theory of Production

For most heterodox economists, capitalist profits must be realizable in money form. Keynes used Marx's M-C-M' formulation in his lectures [Dillard 1987], while Veblen [1919] saw the production of goods as only a necessary inconvenience for those intent on pecuniary aggrandizement. Money is the end-in-view of production, not a "convenience," whereas production appears as a relatively convenient vehicle for acquiring money.

The money profits that capitalists desire require someone else to accept the goods that capitalists call forth to yield profits but do not themselves want. Minsky [1986, 151] presents the situation as one in which

[Pi]* = I + Df - BTDF + c[Pi]* - sW*.

After-tax profits are equal to business investment, plus government deficits, minus trade deficits (plus trade surpluses), plus consumption out of profits, minus savings out of wages (plus consumer borrowing). Minsky's equation, which can also be used to show how prices bear profits, has a mercantilist cast. Capitalists accumulate money profits--or, surplus claims on goods--when other units incur deficits in money claims on goods. If capitalists consume or invest with money profits, money deficits and surpluses are not needed. But if capitalists are wary of goods and insist on money, investment falters; deficits are then required for satisfactory profit and production levels.

Contrary to Smithian accounts, money is the form of wealth that matters in capitalism. The employment of resources and the output of real goods will languish if investment, capitalist consumption, and money deficits do not sum to the necessary level of profit. In capitalism, money wags the tail of goods; capitalism is not a monetized form of barter, nor have economies organized primarily by barter ever existed [Wray 1990].

Some Feminist Issues

Two questions are now posed. First, what legitimates the peculiar prominence of money in capitalism? As bell hooks [1990, 40] asks, quoting Mama from A Raisin in the Sun, "'Since when did money become life? …

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