By David Pan TELOS
Concerns about inflation can lead us to exaggerate the role of money in the economy. In his essay on “Three Rival Versions of Monetary Enquiry,” in Telos 194, Edward Hadas argues that money is not at the center of economics. Instead, economics is fundamentally about what he calls the “Great Exchange,” in which people offer labor that changes the world and the world in return provides gifts to people in the form of goods and services. At its basis, this exchange involves the relationship between humans and nature, as well as the ways in which humans decide to manage this relationship. Though it can go on with or without money, money is very useful for managing the individual elements of the Great Exchange.
As the mediator of the details of the Great Exchange, money is in fact neutral, neither a nefarious underminer of human relations nor a key to prosperity. For Hadas, economics is not in fact a quantitative discipline. The qualitative decisions about labor and consumption are the fundamental ones, which money then mirrors in a quantitative way through wages and prices. The moral and social decisions that money mediates, not the money itself, are the fundamental determiners of our economic condition. Russia, for instance, has seen that $300 billion in foreign reserves suddenly became unusable once it invaded Ukraine, and the foreign holders of those reserves froze them due to politically and morally based decisions. The decisions are primary, and the monetary consequences are merely the implementation of those decisions. Similarly, inflation is the effect of a series of decisions that are then reflected in prices.
The refusal to import Russian oil, the decision to pay workers during the pandemic who were not working, the shortages resulting from pandemic shifts in spending habits, and the shifting of our energy sources in reaction to climate change have all contributed to inflation. In addition, asset price inflation resulted from the decision to maintain low interest rates even though borrowers during the pandemic did not have access to the labor and raw materials necessary for new investments. Rather, borrowing could only be used to purchase existing assets, increasing their monetary value without leading to increased production.
Categories: Economics/Class Relations