Modern Money Theory: sociology and economics

The revival of the sociology of money in the late twentieth century coincided with the emergence of Modern Money Theory (MMT). Both rejected the theories of money in neoclassical and mainstream economics and had a shared focus on the ‘state’ and ‘credit’ theories of money. Modern money can only be understood in terms of the historical evolution of the institutional structure by which it is constituted as an ‘ensemble’ of credit-debt relations. A sociological perspective lends support to MMT’s contentious analytical ‘consolidation’ of central bank and treasury. For example, ‘friendly’ Keynesian critiques have implicitly, but mistakenly, seen this strategy as a distortion of the functionally necessary ‘fiscal’ ‘monetary’ distinction. It is also mistaken to believe that an optimum monetary policy can be ‘read off’ from MMT analysis. Rather, in true Keynesian tradition, MMT analysis shows that monetary policy is a matter of the politics of ‘constrained options’ and institutional alternatives.