Hello and welcome to Beautiful Losers episode 5! Some housekeeping items:

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As promised, we have a very special episode today, featuring an interview with Zachary D. Carter, author of The Price Of Peace: Money, Democracy, and the Life of John Maynard Keynes.

Zach was a joy and a delight to put up with our barrage of questions about Keynes’ idealized economic and social vision: Bloomsbury for all. Our excitement to engage with a writer like Zach is palpable on the episode, we may have even startled him with our enthusiasm (to misquote Cpt. James T. Kirk: Overthinking is our business).

Afterwards we recorded a little post-interview reflection and worked out some of our own ideas about Keynes and contemporary notions of political and fiscal power.

Keynes was many things to many people, but Zach’s book presents him in a particularly modernist frame. Like the rest of his modernist cohort in Bloomsbury, Keynes was broken by WWI. He, thanks to his role in the treasury ministry, saw the breaks at all levels of government and society. In matters of politics and public engagement he maintained his optimism and continued to push for economic reforms to grow welfare for all. His positive program was not only an economic policy, but a personal virtue. He maintained a deep respect for human dignity and intellect, even with his critics and economic rivals.

Besides presenting a case for Keynes as the last philosopher of the enlightenment; a thinker who did for economics what Wittgenstein did for philosophy, Keynes is also written under the sign of Saturn: he is a person of deep melancholy. He was a Cassandra. Fated to know the future, but powerless to bring about the vision of public-investment and monetary policy that could dial the clock back to 1913; to his idyllic days of salons with Virginia Woolf, Ludwig Wittgenstein, Bertrand Russel, and Duncan Grant. 

Zach’s book is an instant classic, surely and one that demands serious engagement and careful consideration. It is also a page-turner, with moments of great drama, personality, character. Never did we think we would sympathize with someone like Friedrich von Hayek (founder of the modern conservative movement), yet under Zach’s careful hand even those who inspired your ideological opposites are drawn with compassion and care.

While we loved every moment that we had with Zach, we regret that we didn’t get to ALL of our questions. Further examination about the role of the military and force as a tool that works with state power (and money) to maintain international trade and increase of wealth is a complex issue that deserves its own conversation. What would a program of public-investment look like today? Does MMT break with foundational tenets of Keynes, or does it make a 21st century case for his theory? And the questions could go on and on and on….

After the interview your Beautiful Losers made some additional observations about the importance of Keynes and why we think it’s time, a hundred years later, to seriously engage with his ideas. 

Keynes’ theory of money and his engagement with Wittgenstein’s landmark Tractatus Logico-Philisophicus strikes us as a particularly “systems-theory” approach to thinking about the money system. By systems-theory we’re referring to the interdisciplinary intellectual movement in the postwar period that sought to provide a meta analysis of how all systems work (biological, ecological, social, physical, etc). A key distinction that systems theory makes is to understand the limit or boundary of a system. In systems theory, this distinction is presented as the system vs the environment (the inside vs the outside). The system determines for itself what counts as information (your thermostat is designed to recognize the information of temperature; it does not recognize the information of music that may be playing in the background). Importantly, the system emerges as (or is designed with) its own rule-set for what qualifies as information. 

This simple distinction has massive consequences for how we think about the purview of different social systems. When we consider Keynes’ engagement with Wittgenstein, it seems to us that Keynes begins to make a similar distinction with how he thinks about the system of money and the system of politics.

Zach frames the import of the Tractatus nicely:

In Wittgenstein’s view, there are some truths that can be investigated, discussed, and debated meaningfully—things that can be “said” intelligibly. That realm is essentially the world of facts which can be uncovered by empirical science. But nearly everything that philosophers concern themselves with — the good, rationality, logic—is outside the territory of meaningful linguistic expression. Even logic is part of the internal architecture of language itself. No one can speak meaningfully about anything without logic, but there is nothing meaningful that philosophers can say about how logic itself works; that is ultimately mystical.

Zach notes that Keynes major work at this time was A Treatise on Probability was reconciling GE Moore’s Principa Ethica. Zach positions Keynes’ work between Moore and Wittgenstein:

At its heart, A Treatise on Probability was an attempt to apply the scientific rationalism of the Enlightenment to probability and uncertainty, hoping to reveal deep truths about rationality itself. Wittgenstein, by contrast, argued that this entire enterprise was nonsense—literally non-sense—an effort to express something with words that language could not in fact express. Keynes, according to Wittgenstein was attempting to provide rigor and precision to realms that were fundamentally mystical. “Whereof one cannot steak,” Wittgenstein wrote, “thereof one must be silent.” Keynes could examine patterns of human behavior and study trends in the way people actually made decisions; that was science, a subject of meaningful inquiry. But he could not investigate rationality itself. Rationality simply was—or was not. (116)

Although Keynes didn’t achieve his objective with Probability, his engagement with Wittgenstein’s arguments set him on a path that would eventually lead him to consider a foundational question of economics: what is money?

Carter charts the geopolitical forces and attendant central bank actions that lead to outlier events like hyperinflation. Keynes is constantly wrestled with the problem that money, as a symbolic object tied to a certain commodity price (gold) is also subject to forces that are untethered to the material world (central banks can print more of it, and also set interest rates for it). 

It wasn’t until after the great depression that Keynes begins to fundamentally rethink money. And it’s thanks to his study of Babylonian currency that he does so:

Keynes has discovered an ancient history that upended some basic tenets of economics going back to Adam Smith and undermined nearly three centuries of Enlightenment political theory. Ever since Thomas Hobbes ad published Leviathan in 1651, most European philosophers had imagined government as an artificial imposition on what Hobbes called “the state of nature.” For Hobbes, the state of nature was a nightmare of violent disorder where life was “nasty, brutish and short,” making government—specifically monarchy—a source of human salvation. Even thinkers who rejected Hobbes’ politics accepted his history. In The Wealth of Nations, Smith had presented markets for trade as a primordial force that came into being long before the development of the political state. Commercial life had started with people bartering goods, trading goats for wheat or cloth for buttons. They eventually adopted money as a medium of exchange, since passing tokens to each other proved to be more convenient that toting wagonloads of cumbersome goods. All of this activity had taken place among free individuals undisturbed by the machinations of capricious, meddling sovereigns, who entered the scene much later. The market was natural, why the state was a relatively recent artifice that intervened in or distorted the indie-dented rhythms of trade.

Studying Athens, Babylon, Assyria, Persia, and Rome, Keynes concluded that this history was all wrong. Capitalism itself was an ancient creation of government, dating back at least as far as the Babylonian Empire of the third millennium B.C.” (187-8)

Keynes flips the received history on its head. There is no “natural” market state, rather markets are a function of political decision making. Markets are a system that have always been the product of  This inversion of Smith’s argument, which supported with historical evidence rather than fiat, and his rejection of a Hobbesian worldview that makes a distinction between nature and culture represents a fundamental break in economic theory. 

Smith and other thinkers had been led astray by confusing the development of coinage with the invention of money. Coinage, according to Keynes, was “just a piece of bold vanity…with no far-reaching importance”; money had existed in “representative” form much longer. Its real significance was as a “unit of account” —the demarcation of best and “the legal discharge of obligations,” with governments had been maintaining in legerbooks, scrolls, or clay tablets for millennia. Powerful, economically sophisticated empires had developed without using coinage at all.” (188)

Money, he argued, was an inherently political tool. It was the state that determined what substance—gold, paper, whatever—actually counted as money—what “thing” people and the government would accept as valid payment.” (189)

Carter continues to trace how Keynes’ thesis about money as a political tool has survived further historical scrutiny. Even anti-keynsian economic historians accept this fundamental relationship between state and money.

Keynes’ thesis owes much to his historical research of ancient currency, but it also owes something with Wittgenstein’s work on logic. Rather than prop up ideas like “nature,” which inform metaphysical notions like the invisible hand or justify a laissez-faire approach to monetary policy, Keynes demystifies money into what it really is: a tool of the state to manage debtor/creditor obligations. Think of it like other state-managed resources: military, water, electricity, oil.

The choice is not between a regulating philosophy and a deregulating philosophy, but rather because money is always a tool of the state, how should we best manage it? Advocates for light regulation often refer to an Adam Smith/Thomas Hobbes informed theory of “nature.” Phrases like let “the market decide outcomes” rely on a notion of an ahistorical force called “money” and an ahistorical system of natural exchange called “the market.” Neither of these assumptions are true. Arguments for laissez-faire approaches to monetary policy are not based on philosophic belief, they are based on the pragmatic and beneficial outcomes to those that make the argument. The metaphysical claims are nothing more than an effective rhetorical tool.

Why is this important today? We are seeing unprecedented action from the Federal Reserve. We are seeing politicians debating and passing legislation that is pumping in trillions of dollars to help stabilize the economy. Government is making choices about how to manage this resource, and we fool ourselves if we rely on premodern notions of money and value and the metaphysics of “the market.”

Government actions are important, but they do not serve an abstract end, they serve very real and tangible political and social ends. The best way to serve your interests is to understand what these new policies do and how they work. Like Keynes, the path forward must be first grounded in understanding and analysis, and then followed by a positive program of reform that builds toward the vision of society that you want.

The deployment of arguments like “how are you going to pay for it,” knowingly or unknowingly fail to account for Keynes’ discovery about the relationships between money, state power, and financial policy. Such questions draw a person into an argument about balance-sheets and tax policy, instead of pressing what the terms of the debate really are: money is a tool of government, how are we going to use this tool to maximize benefit across the entire social sphere?

This is the debate we should be having. There are compelling arguments across a wide spectrum of policy choices and political outcomes. Scarcity is not the force that is driving our monetary policy, thanks in part to the wealth of American resources and the rich history of our industrial expansion; the program of management, public-investment, and the question of how to best use the tool of money given our wealth is the real issue. 

We hope this small engagement with Keynes and Zach Carter’s book is enough to get you to go out and grab a copy. If you take issue with the above, we would love to hear your case in the comments below.

Stay Beautiful,

Your Losers

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