The Myth of Money as a Veil

This chapter focuses on the rise and fall of the twin ideas-myths of money as a veil and the invisible hand of the market. First, Middle Ages metallistic theory is considered. It is stressed that not all classical economists shared (Adam Smith’s and David Ricardo’s) “received view,” including the international trade Hume mechanism; as an example, reference is made to Antonio Serra and William Petty. The “analytical bricks” methodology of the classical economists is referred to, showing that the classical notion of money as a veil is compatible with the idea of an influence of the monetary on the real economy. The connection between the notion of money as a veil and the myth of the invisible hand of the market in neoclassical/marginalist economics is then explored. Finally, two pillars of a reconstructed modern monetary theory are considered: the Keynesian notions of uncertainty and liquidity preference and Minsky’s money manager economy. The new paradigm may be summarized in three points: money and finance cannot be kept separate and crucially affect the real economy; the Keynesian notions of uncertainty and liquidity preference constitute the foundations on which theorizing over money and finance should rely; the role of finance increases over time, with a change of regime to a “money manager capitalism.”