Assessing Modern Monetary Theory’s Peculiar Ontology of Money

Abstract

Macroeconomic traditions disagree on the policies needed for the economy to properly function and how to assess them. In this paper, we contend that these disagreements originate from the social ontological commitments of a theory. The ontology of money underlines these disagreements between Modern Monetary Theory (MMT) and mainstream economics. First, we assess MMT’s ontology of money. Next, we identify MMT’s normative commitments and classify MMT’s ontology as a taxonomic definition with thick concepts. Finally, we offer reasons why MMT's ontology of money leads to rivalries with other economic traditions. We argue disagreements on policy are expected, given the ontological differences elaborated.

Keywords

modern monetary theory social ontology money philosophy of social science

1. Introduction

Modern Monetary Theory (MMT) originated from a realist commitment to explore how federal government debt and deficits work and the policy consequences that follow. This immediately led to a second, equally integral, focus on the ontology of money. Since its formal beginning in Warren Mosler’s “Soft Currency Economics” (Mosler 1994 [2018]), MMT’s development continues emphasizing a realist approach to domestic fiscal and monetary policy with the ontology of money occupying an increasingly central role—specifically, what money is and what money can and should do. Throughout the paper we refer to the former as MMT’s descriptive ontology or descriptive ontology of money and the latter as MMT’s normative ontology or normative ontology of money. Unlike Passinsky (2020), who sees descriptive and normative conceptions of money as separate concerns, MMT necessitates the unification of the two. This is not universally acknowledged within MMT—many theorists claim MMT as a purely descriptive theory and/or one that is policy-neutral (e.g., Kelton 2021; Tymoigne 2021; Wray 2020a). Commentaries on MMT such as Smithin (2016) that acknowledge MMT’s emphasis on the ontology of money also do not recognize this tension. This paper works twofold regarding MMT and social ontology: internally, we provide the first extensive¹ study of MMT’s social ontological commitments and the internal inconsistencies over the type of theory that MMT is, while externally, we connect this ontology to the general social ontology literature in a way seldom done with MMT.²

Alexandrova (2018) bridges these two tracks via the analysis of mixed claims. As MMT’s descriptive ontology of money proposes an empirically verified connection between the state and the creation of money and this proposal leads to specific value judgments on money’s possible uses, this ontology meets the criteria for being a mixed claim (Alexandrova 2018, 424). Alexandrova (2018) explains, however, that one of the dangers associated with mixed claims is when “the scientists engaged in mixed science fail to notice the value judgements they are making” (432). MMT often fails to either fully notice the value judgments or agree upon what these judgments are, rendering an evaluation of MMT’s claims about money very difficult. From a philosophical perspective, this paper uses MMT to show how philosophers of social science consolidate a theory’s literature when that literature contains theoretical inconsistencies. From an economic and political perspective, we hope this consolidation is useful for accurately assessing MMT’s claims—something often missing from both supporting and critiquing parties.

The rest of this paper is organized as follows: Section 2 outlines MMT’s descriptive ontology of money and applies it to a well-known example in social ontology. Section 3 then focuses on MMT’s specific normative commitments. As many MMT theorists claim that the theory is purely descriptive, Section 4 provides a generalized argument in favor of MMT’s descriptive ontology necessitating normative commitments. Section 5 concludes and looks to future work.

2. MMT’s Descriptive Ontology of Money

MMT’s direct intellectual origins begin with two pairs of articles: one by Alfred Mitchell Innes in the early 1910s (Innes 1913, 1914) that outline the chartalist theory of money’s origins and one by Abba P. Lerner in the 1940s (Lerner 1943, 1947). Innes (1913) explains the chartalist position that MMT takes almost wholly unedited to this day—that money arises by the state declaring what it will accept as payment for taxes. This encompasses the creation of money according to MMT; Innes (1914) then explains the position of money in the economy to be that of debt (or credit, depending upon one’s position in the transaction). This combination of a chartalist origin story with money in the position of debt is known as neo-chartalism. The order of these is important and distinguishes MMT from Armstrong and Siddiqui (2019), who prioritize money’s manifestation as credit over the role of the state, and justifies the assertion by Cesaratto (2016) that “the state spends first” (Cesaratto 2016, 44). The descriptive aspects of MMT’s ontology of money are complete: money is what the state declares it will accept as payment for taxes and, once created, occupies the position of debt or credit in every transaction. The former part of the descriptive ontology sets out the conditions for the existence of money, whereas the latter part describes how money is used once created.

On this part of MMT’s ontology, MMT theorists are in agreement. The most complete ontological treatments of money within MMT, Semenova (2007) and Wray (2000a, 2014); books on MMT, Kelton (2021), Tcherneva (2020), and Wray (2012 [2015], 2022); and MMT’s foundational document, Mosler (1994 [2018]), are unified in this descriptive ontology of money. As a descriptive ontology, MMT—and (neo-)chartalism in general—relies on the history of money as recorded by anthropologists and historians—e.g., Graeber (2011 [2014]). Historical accounts generally support the (neo-)chartalist account of money arising from the state, whereas mainstream economics lacks historical examples but does provide a model showing that money could have arisen from the barter system instead (Kiyotaki and Wright 1993). In mainstream general equilibrium models money, as it exists, fulfills the role of the numeraire, or the measurement by which all other prices exist relative to it (Duffie 1990). The inconsistencies within the theory arise once the ontology is expanded to include normative concerns—chief among them if normative concerns factor in at all. Before we explore this in a later section, we apply the descriptive ontology above to a well-known example in social ontology due to Searle (1995) as to what counts as US dollars. This shows both how MMT’s descriptive ontology constructs money differently from other ontologies and how this ontology uniquely bridges the ground-anchor divide. Finally, the section concludes with a short clarification of one of the critiques of MMT’s descriptive ontology.

The concern in Searle (1995) regarding what counts as US dollars singularly focuses on bills issued by the Bureau of Engraving and Printing (28). MMT’s descriptive ontology confirms why those bills are counted as US dollars but why those are not the only things that count as US dollars. Those bills are US dollars according to MMT, but not because of their place of issue alone: the United States government accepting these bills as payment in taxes is as necessary as their being issued by a source that the US government regards as legitimate for these purposes. US dollars need not have a physical presence: MMT works frequently refer to the central bank’s ability to “print” more money by altering its balance sheet via its computer system. These US dollars do not enter the physical world while still meeting the same requisite criteria as bills printed by the Bureau of Engraving and Printing. Dollars-as-ephemeral-keystrokes is central to the observation by MMT that nations can always pay for their domestic government debt by “printing” more money.³ This hypothesis is one of MMT’s key claims in presenting a realist account of government debt and is evidence of the intentionality in their ontology of money that we discuss later.

This conception of money and, by extension, how it defines what a “US dollar” is, unifies the divide of grounds and anchors found in Epstein (2013). Rather than separating “the conditions an object must satisfy to be a US dollar” and “the facts that put those satisfaction conditions in place” (Epstein 2013, 4) (i.e., the grounds and anchors, respectively), the satisfaction conditions are put in place by the very definition itself. Epstein (2013) cites the statement from Searle (1995) that “[p]eople in the U.S. collectively accept” (Epstein 2013, 4) bills printed by the Bureau of Engraving and Printing as US dollars as the anchor for those bills being US dollars. With neo-chartalism and MMT’s ontology, however, the anchor is part of the definition: the United States declaring that US dollars are acceptable for paying taxes means that US dollars are money, and US dollars being money in the United States means that the United States has accepted their usage for tax payments. For social ontological phenomena that unify the ground-anchor divide, such as neo-chartalism, they require only that the organizing structure of society accepts the definition in question. Similarly, whereas Epstein (2016) describes how social facts usually have multiple sets of grounds, only one fact exists—both necessary and sufficient—to ground phenomena that unify the ground-anchor divide: that society’s organizing structure has declared it to be so.

The variations of the unwieldy phrase “organizing structure of society” from the previous paragraph allude to the criticism of MMT’s ontology of money found in Lawson (2022). As one of the few specifically focused works on MMT’s descriptive ontology, we use this as an example of where the current inconsistencies in MMT’s presentation of its ontology arise elsewhere. An analysis of MMT’s ontology of money as understood by Lawson (2022) vis-a-vis the social positioning theory approach favored by Lawson (e.g., Lawson 2019a, 2019b, 2022) is outside the scope of this paper. What is relevant for this paper, however, is where the misinterpretation of MMT’s descriptive ontology of money exists.

Lawson (2022) specifically asserts that MMT understands the nature of money “in intrinsic properties of particular (money) items” rather than “in the organising structure of human communities” (2). We do not disagree that the former is part of MMT, but it is not part of MMT’s ontology of money—concerns over the relevant properties of money occur in MMT’s concept of currency sovereignty that follows from its ontology of money. Instead it is the latter—the centrality of government (here understood as a community’s organizational structure) to money’s nature—that is essential to MMT’s ontology of money. Some MMT works explicitly refer to the connection between government and money: “There is no ‘natural’ separation of a government from its money” (Wray 2011, 160). MMT also claims that the sovereignty of a government is based upon its ability to conduct fiscal and currency policy independently, which is only possible for a nation with its own money (Sardoni and Wray 2007). With the state’s dictate of what it will accept as payment for taxes the formative event for money in MMT, Lawson (2022) errs in identifying MMT’s descriptive ontology of money. Where Lawson (2022) is correct regards the normative component of MMT’s ontology of money. That there is a normative component, and what that component contains, is the focus of our next section.

3. MMT’s Normative Ontology of Money

The previous section illustrated MMT’s theory of what money is. For some MMT theorists, this is the culmination of the theory’s philosophical contributions: a purely descriptive ontology of money with subsequent examples to support the theory’s adherence to reality (e.g., Bell 2000, Kelton 2021, and Wray 2020a, which argue for MMT’s purpose as describing how government accounting really works). For most MMT theorists, there are policy consequences that are derived from this descriptive ontology. Mehrling (2000)’s discussion of one of the earliest MMT works observes that “[t]he point of the whole exercise [MMT’s descriptive ontology of money] seems to be to provide a theoretical framework to support a proposal that the government should act as employer of last resort” (400). Beyond this statement, we found no other explicit mentions of the relationship between the descriptive ontology collectively accepted within MMT and the policies supported by MMT theorists. Analyses from those not MMT theorists themselves usually focus on a few MMT works at most (e.g., Edwards 2019; Lawson 2019a, 2022; Mankiw 2020; Mehrling 2000; Juniper, Sharpe, and Watts 2014–15 and Kotilainen 2022 are notable exceptions to this) and MMT theorists' internal critiques do not acknowledge the theory’s disparate conclusions on it being a descriptive theory alone or one with additional normative components. This section examines the normative components in two groups: one in which MMT’s desired policies emerge from analyses based upon their descriptive ontology and one in which MMT’s descriptive ontology is, as Mehrling (2000) suggests, designed with these desired policies in mind. Prior to discussing these two groups, we first identify the important case of a policy choice that led to the development of MMT. Throughout, we emphasize how the ontological choices made in the previous section affect the normative consequences that follow.

In Mosler (1994 [2018]), MMT’s originating document, the Federal Reserve’s desire to maintain a target federal funds rate motivates many of the descriptive observations from the previous section (as well as others auxiliary to MMT’s ontology of money). Given the constraints imposed by a federal funds rate target, money exists as debt or credit depending on the which action the government takes to maintain the target (Mosler 1994 [2018], 8). Similarly, the endogeneity of money is an important consequence of MMT’s descriptive ontology, and the federal funds rate target anticipates money’s endogeneity as well: “As long as the Fed has a mandate to maintain a target fed funds rate, the size of its purchases and sales of government debt are not discretionary” (Mosler 1994 [2018], 6). In short, the rate target implies that the supply of money is not fixed by a specific entity, which is the definition of the endogeneity of money. MMT’s commitment to realism catalyzes their descriptive ontology of money by connecting their observations about the workings of government financing to the properties that money subsequently possesses.

Through these ontological choices, MMT adheres to the observation from Ludwig (2016) that when scientists choose from different ontologies, these choices assume different entities like money—i.e., one ontology’s money differs from another (1257). From the money resulting from MMT’s descriptive ontology comes specific understandings of economic concepts. These specific understandings lead to particular policy recommendations for addressing them.

Wray (2000b) exemplifies this in its MMT-centric evaluation of inflation. For Wray (2000b), money’s endogeneity is essential to how inflation happens according to Post Keynesian theory⁴ (13). In combating inflation, MMT recommends the implementation of a buffer stock of labor. Ensuring the constant existence of the buffer stock of labor is one of the main virtues of the job guarantee policy proposal that is the centerpiece of MMT policy programs. Without the descriptive ontology that implies the endogeneity of money, inflation would not be guaranteed to be conceived in a way that leads to MMT’s desired policy as its solution.

While Mosler (1994 [2018]) identifies a policy that predates MMT which inspired many of the descriptive components of its ontology and Wray (2000b) explains the causation of inflation partially via a consequence of MMT’s descriptive ontology, MMT’s descriptive ontology is itself constructed toward the normative ends of the theory—specifically, the implementation of a job guarantee. MMT developed in part to refute the mainstream economic tenet of the incompatibility of full employment and price stability,⁵ with the job guarantee identified as the optimal policy to achieve this.

Not all MMT works equate the policy’s optimality for the task and its feasibility due to the descriptive ontological properties of money with a moral necessity to implement it: “There may be reasons we want to leave millions of workers unemployed ... but lack of funding cannot be one of them” (Wray 2012 [2015], 8). Alternatively, Kelton (2021) makes a powerful argument throughout the book that the job guarantee solves myriad problems beyond ensuring full employment and price stability and because of that the moral imperative to implement it is inexorably heightened. In both of these cases, Wray (2012 [2015]) and Kelton (2021) exhibit what Alexandrova (2018) refers to as the “fail[ure] to make explicit the normative assumptions on which these findings depend” (433). In the former, Wray (2012 [2015]) alludes to competing moral values in selecting our desired state of the world, and in the latter Kelton (2021) hews closer to Alexandrova (2018)’s observation that economists sometimes fail to justify why something is indicative of well-being—in Kelton (2021)’s case, solving the problems the job guarantee is claimed to and increasing well-being seem tautological, but the hesitation in Wray (2012 [2015]) and the greater policy agnosticism throughout MMT mean that specific policy advocacy requires explicit normative arguments when using the MMT framework.

With the policy that MMT uniformly acknowledges as the ideal solution for ensuring full employment with price stability encountering some hesitation throughout the literature, it is unsurprising that ensuring currency sovereignty, the other major development of MMT, is similarly ambiguous in its urgency. Currency sovereignty is measured by the domestic policy space available to a given nation and is determined by how a nation’s money, referred to as its “sovereign currency,” fulfills certain criteria. The exact conditions that allow for a nation to have full currency sovereignty differ across the MMT literature, but the most frequent combination of criteria is from Sardoni and Wray (2007), where currency sovereignty is defined as having a domestically issued noncontrovertible currency with a floating exchange rate—though they include the addendum “although there are other aspects to sovereignty that we do not consider here” (13). These other aspects contribute to the different possible degrees of currency sovereignty, with Tcherneva (2016) explaining that the maximum policy space results from a nation having a fully⁶ sovereign currency.

In general, MMT argues in favor of every nation having their own fully sovereign currency. That this is not the case—and the justifications MMT uses when those cases arise—exemplify the modified notion of objective measurements of well-being proposed by Alexandrova (2018). Liu and Wray (2016), for instance, claim that China’s domestic policy space is comparable to two of the canonical MMT examples of a fully sovereign currency, the United States and Japan, but China lacks a fully sovereign currency due to its currency not being free-floating. For the fully sovereign currency advocates within MMT, this situation should catalyze advocacy for China’s adopting a fully sovereign currency as soon as possible. Instead, for the issues facing China’s economy that Liu and Wray (2016) identify, the MMT-endorsed solutions are doable with the current exchange rate regime. This is a primary example of Alexandrova (2018)’s conception of objective measurements of well-being which “encompass[es] value-based decisions, such as which measures of well-being to adopt and when” (441). MMT’s normative arguments in favor of adopting a fully sovereign currency exist in the context of providing the full slate of policy options to address full employment and price stability, so when a sufficient number of policies are available to a nation to solve their issues regarding these concepts despite not having a fully sovereign currency, MMT finds the degree of currency sovereignty an unnecessary measure of a nation’s macroeconomic well-being.

Conversely, Tymoigne and Wray (2013) present the case in which a fully sovereign currency is the priority given that it remedies any issue arising from a specific economic condition. Regarding the value assigned to a nation’s fiscal balance—i.e., if the country has a deficit or a surplus—, Tymoigne and Wray (2013) write that “MMT is agnostic regarding the fiscal position of a monetarily sovereign government per se” (19). As MMT has an overarching goal regarding ensuring full employment and price stability, the theory vacillates between adopting values that emphasize the availability of specific policies and those that emphasize possessing specific ontological features of the economy like the type of money being used. In this way, MMT is an excellent theory-level exemplification of Alexandrova (2018)’s proposal in a specifically social science context.

Though MMT eschews value neutrality with regards to specific policies and the goals of the theory, MMT maintains a stance of political neutrality—or, more accurately, compatibility with numerous political projects. By this measure, MMT meets some, but not all, of the criteria Risjord (2014) sets out for being a program of emancipatory social science. MMT begins, as Risjord (2014) writes that most emancipatory social science programs do, with an ideological critique. Here, that ideology is the pairing common in mainstream economics that money exists as a solution to the double coincidence of wants problem—that a medium of exchange is necessary if two parties in a bartering economy do not each have an item that the other is willing to exchange for—and that government finances follow the same constraints as households. Uncoincidentally, these are the first two challenges to mainstream economics that Wray (2012 [2015]) indicates MMT is designed to address. In comparison to the theory-wide opposition to the monetary framework of mainstream economics, MMT theorists write frequently and explicitly about how this alternative framework is not tied to a specific political project.

The emphasis here is that MMT is a framework, rather than a policy agenda.⁷ As a framework with ostensibly no policy commitments, MMT advocates point to its political adaptability—“While many MMT proponents are progressive, the understanding that MMT brings to the discussion about sovereign currency can be used by centrists and conservatives” (Wray 2022, 148). Wray (2012 [2015]) furthers this belief in political neutrality by devoting a section to the job guarantee’s compatibility with the goals of libertarians and Austrian School economists. Specific policy choices, however, rarely factor in the possible adoptions of an MMT framework for nonprogressive economic theories. Instead, for these theories, MMT economists singularly emphasize their policy-neutrality and primary desire to implement a more realist understanding of the economy.

MMT in this way advertises itself in emancipatory terms, though this regards shifting the way people think about the possibilities afforded by money as a concept instead of proselytizing for a given political project. Kelton (2021) explicitly states this: “MMT clarifies what is economically possible and thus shifts the terrain of policy debates that get hamstrung over questions of financial feasibility” (3). What citizens and governments choose with this newfound terrain largely falls to them. The political aims of MMT align with Risjord (2014)’s explanation that an emancipatory social science “make[s] the value-orientation of all social science explicit so that the values can be criticized” (26). The mainstream value that deficits matter and are inherently harmful is the centerpiece of MMT’s contrasting itself with the foundation upon which most economic and political policy debates rest. Thus, normative values exist in MMT at the policy level regarding what policies MMT theorists themselves prefer. Their greatest normative commitment, however, is the conviction that we should think about the limitations (or lack thereof) of the government’s financial position on its domestic policy capabilities quite differently.

This section explored the specific normative commitments made by MMT which result from their descriptive ontology. While we alluded throughout to the tension between those who view MMT as a purely descriptive theory and those who view it as necessarily featuring normative tenets, we did so largely within the literature of MMT itself. The next section expands this analysis to address why MMT is not a purely descriptive theory by appealing to MMT’s conception of money as a taxonomic definition and that their ontology is laden with thick concepts.

4. Is MMT a Descriptive Theory?

The last two sections provided specific examples of MMT theorists arguing in favor of the theory being either purely descriptive and policy-agnostic or having explicit normative aims. This section clarifies the inconsistencies seen throughout individual examples with an examination of MMT theory in practice as a social science. Specifically, MMT’s ontology of money exhibits features that could be thought of as both a taxonomic definition and as a thick concept. The taxonomic approach is found to have certain attractive features, but does not give a complete picture. MMT’s ontology of money is better thought of as a thick concept, as we show below.

4.1. Taxonomic Definitions

Against the purely descriptive view, MMT’s conception of money could be thought of as a taxonomic definition as developed in the work of Geoffrey Hodgson (Hodgson 2019). This is a helpful way of thinking about MMT, especially given its institutional orientation and the general thrust of its project. The key features of a taxonomic definition are as follows: they are nominal, not completely intensional, can be extensional; to a large degree lexical and have some degree of stipulation attached to them (Hodgson 2019). The purpose of a taxonomic definition is to “establish shared meaning, so that a class of entity can be investigated by a scientific community” with “[s]ome consensus on taxonomic classification ... prior to such investigations ...” (Hodgson 2019, 213). We argue that MMT’s social ontology of money displays some of the relevant features of taxonomic definitions, but not all of them.

The obvious feature of MMT’s social ontology of money is its lexical nature where lexical refers to the historical and present usage/meaning of a term. As stated above, MMT’s adoption of the unified credit and state theory of money purports to give a historically accurate account of where money originated as well as how money was used through time, and the way it is used in the present by modern states. In this sense, MMT’s ontology of money is attempting to capture the lexical meaning of money throughout recorded history, from the perspective of the state. MMT therefore in the pursuit of a historically accurate notion of money is less stipulative than money in competing schools of thought. In contrast to the lexical content, the stipulative characteristic of taxonomic definitions refers to a definition that is posited or assumed for the sake of a theory (Hodgson 2019). From the viewpoint of MMT, neoclassical definitions of money are almost purely stipulative—the ontology of money they use is a myth, created for the sake of a preexisting economic theory and modeling. Adam Smith’s support for the myth of barter account of the origins of money is a prime example of a stipulated ontological claim about how money was invented, as a veil over barter (Smith 1776 [1991]). When modern neo-classical economists treat money as a numeraire⁸ and nothing else for the sake of modeling monetary interactions within the economy, we see an example of a purely stipulative definition of money. For MMT, this represents a loss of realism in favor of instrumental model building, which is insufficient for economic assessment and policy advocacy.

As mentioned above, taxonomic definitions also capture the shared meaning that the credit/state ontology of money gives to MMT theorists. Their collective scientific practice is organized around elaborating analyses that stem from the implications of the credit-state money theories and the policies that can be developed as a result. This ontology also sets up the institutional framework for MMT’s economic analysis: understanding monetary dynamics is a matter of studying state and credit dynamics within the economy, not individual actors.⁹ Additionally, when MMT theorists advocate for policies in the public sphere, the appeal to historical accuracy and realism about the present monetary system adds rhetorical power to their policy arguments (e.g., Kelton 2021). However, though the taxonomic definition captures certain features of MMT’s ontology of money and what it does for their scientific practice, it does not give a complete picture of the nature of MMT’s ontology of money. In part, MMT’s ontology of money is intensional. The credit and state theories of money adopted by MMT provide an intensional definition of money. The combined theories provide the necessary and sufficient conditions for money to be money. MMT theorists also try to capture all instances of money within their definition of money, which gives extensional characteristics to their ontology of money. Where taxonomic definitions provide some clarity about the nature of MMT’s ontology of money is because of the pragmatic focus of taxonomic definitions, i.e., a shared meaning and the coordination of scientific practice. Each tradition of macro-economic thought has its unique taxonomic definitions and MMT is no different. In order to do work within the MMT tradition, an economist will accept that prior to doing their scientific work, adopting the credit and state theories of money is the proper course of action for guiding their work.¹⁰ Hence, to fully explain MMT’s status as a theory with normative components, we highlight how MMT’s ontology contains features of thick concepts.

4.2. Thick Concepts

Though taxonomic definitions provide some insight into “translation problems” by highlighting some rhetorical and pragmatic—i.e., scientific practice—concerns, it does not completely resolve the question of whether or not MMT is a purely descriptive theory. We argue that MMT’s ontology of money has features of both taxonomic definitions and thick concepts. Specifically, MMT’s ontology of money has many of the features of what Roberts (2013) calls nonreducible thick concepts. Thick concepts are those which have both evaluative and descriptive content. Our position is that to the MMT theorist working within the tradition, the ontology of money that they adopt operates as a thick concept for their scientific practice. Additionally, it is our contention that MMT’s ontology of money is of the nonreductive type, i.e., the evaluative and nonevaluative content of MMT’s ontology cannot be disentangled. MMT theorists take their ontology of money to be both universalizable and codifiable (Roberts 2013). The state/credit theory of money has the characteristics of a “finite and usable general principle” (Roberts 2013, 680). As described above, the state/credit theory of money provides the MMT theorist with the necessary evaluative content to provide descriptions of money creation and monetary policy within national economies and vice versa. MMT’s ontology is also universalizable, i.e., it can be applied to any context where money is being theorized, or MMT theorists purport that it can be used to assess any economy.

To refer to an earlier example, neoclassical approaches that treat money as a numeraire or as exogenously created are, for the MMT theorist, untenable for economic analysis. Numeraire accounts of money or exogenous accounts of money creation (modeling money as if it is added to an economy from an outside source) for that matter, even if they allow for tractability in modeling of the economy, are fundamentally incorrect, i.e., this does not describe money. Though one could model monetary operations within the economy in this way, an economist in the MMT tradition ought not do this given that it is a myth and useless for policy considerations, the ultimate goal of a macroeconomic theory. Money for MMT is to be understood through the lens of the state/credit theory of money, and any attempt to understand money that does not use said theory is not fundamentally talking about money.

In addition to the thick concepts of money in general, MMT’s treatment of sovereign currency—their preferred form of money—could be thought of as a thick concept. MMT theorists describe the conditions that are necessary and sufficient for obtaining a sovereign currency; however, embedded in their conception of currency sovereignty is the evaluative judgment that countries should want a sovereign currency, or, at the very least, having a sovereign currency is optimal. This is because having a sovereign currency maximizes policy space. Obtaining the maximum policy space is the desired goal for a country because it is the precondition for the remaining policy prescriptions that MMT advocates for in addition to being the standard by which MMT theorists measure economic policy at the national level. Here we have two types of normative content present: evaluative standards for measuring economic performance and evaluative standards for assessing what the salient aspects of the economy are for study. Both stem from the adoption of MMT’s unified theory of money. To reiterate, the evaluative components of MMT are not separable from the purely descriptive components and, given this observation, MMT theorists can be rightly described as engaging in providing thick concepts for use in analyzing an economy. Further evidence that MMT theorists are engaging in thick concepts is apparent in the language they use when talking about their preferences with respect to various states of the economy. An example of thick concepts that MMT theorists engage in is the following from Wray (2020b): “What Mosler introduced was the idea that we should view treasury bond sales as part of the monetary policy, that is, as a reserve drain instead of a borrowing operation. MMT argues that all treasury spending takes the form of a credit to bank reserves ...” (15).

The above is a statement of a key moment in the foundational thinking of MMT—namely, how to conceive of the relationship between the monetary policy of a state and the operations of bond markets and money markets in the broader economy. The normative standard stated above, i.e., how treasury bonds should be viewed, is entangled with the descriptive content. It is not just that there is a connection between government bonds and monetary policy, it is that one ought to see government bonds not just as an investment instrument, or a way of raising revenue for a government, but as a key mechanism in the creation of money, and that this is a proper function of government with respect to money, as postulated by the state/credit theory of money. Crucially, adopting the state/credit theory of money points the economist in the direction of evaluating government bonds as a part of the money creation process. In adopting this evaluation, the description of government bonds as “a drain on reserves” as opposed to simply an investment instrument, or a revenue generating instrument, is then available to the theorist working in the MMT tradition.

Given the thick nature of the theory and its relation to how MMT theorists construct their policies stemming from social ontological commitments, translation problems will occur when MMT engages with any economic theory/theorist that has the following features: 1) The school of thought that the theorist identifies with has different ontological and normative commitments, especially in the form of thick concepts, 2) The theorist is unaware of how the normative and descriptive components of their theory interact, and finally, 3) The competing theorist claims that their own theory is purely descriptive. This kind of disagreement is present in assessments of MMT such as Mankiw (2020), where the puzzle is why should anyone consider MMT’s theories salient at all for the assessment of the economy. Mankiw (2020) adopts a veil over barter view of money, and, as an outsider, i.e., one who does not accept the extension of the thick concept of state/credit money (Roberts 2013), cannot grasp what MMT theorists are arguing for about monetary policy. This impasse arises from a clash of thick concepts. By presenting a unified view of MMT’s ontology of money and its subsequent normative commitments, we allow for translation problems with MMT to be fully explored with respect to other theories with unified ontologies and normative commitments.

5. Conclusion

The need for concept clarification and identifying foundational problems of social ontology that economic theories pose seems to be best handled by employing some form of social ontological assessment. Our hope is that in doing so, conflicts such as translation problems might be resolved or, at the very least, the main contentions can be clearly identified. It is often the case that economists are not fully aware of how the social ontological commitments that are at the foundation of their science or embedded in their particular school of thought clash with competing schools of thought. MMT theorists in particular are guilty of taking their theories to be purely descriptive, claiming to extract their ontology of money from an historical account of money throughout human history. An ontological analysis, of the kind done in this paper, helps to locate points of tension in debates between MMT and other traditions of economic thought. Throughout the paper, we account for how MMT’s foundational commitments conflict with the commitments present in competing schools of economic thought and why disagreements between MMT and mainstream economic theorists persist. We first establish the social ontological foundations of MMT and how these lead to a unique ontology of money. Though these foundations are purported to be largely of a descriptive nature, we show that MMT’s ontology of money entails normative commitments that its theorists often overlook to their detriment. This internal conflict over the categorization of MMT as a theory is resolved by defining MMT as making use of taxonomic definitions and thick concepts. Taxonomic definitions help to show that the ontology of money adopted by MMT provides coordination for scientific work, a unifying ontology from which to begin monetary analysis. Additionally, arguing that MMT theorists are using thick concepts, specifically, nonreductive thick concepts show that MMT is not a purely descriptive theory, especially the ontology of money they prescribe. In part the translation problems are a result of this self-deception—MMT theorists take themselves to be doing purely descriptive theory. A further exploration of currency sovereignty, which we argue is also a thick concept, and the translation problem it poses to MMT, is the subject of subsequent papers.

Footnotes

Acknowledgements

Thanks to Kareem Khalifa and the participants at the 2023 Philosophy of Social Science Roundtable for helpful comments. Additional thanks to Kevin Zollman for the helpful discussions on social ontology that inspired this project.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

Author Biographies

Brian Duricy is an independent scholar with research interests in social choice theory, experimental economics, and philosophy of economics.

Maxwell G. Poitier Jr. is a recent graduate of Carnegie Mellon University Department of Philosophy with an interest in the philosophy of economics, social ontology, and the philosophy of social science.

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