Tuesday, April 03, 2012

Speculation On Why Monetary Cranks Exist

I think many people, without too much thought, naturally intuit:
  • The system under which they live works fairly well.
  • Somehow, they are being exploited.
The first idea might come partly from modifying your ideas to fit your constraints. You aren't likely to drastically change the world, so you might as well accept it as it is. Another source of the first idea is the ruling ideas of society, which as the man said, are the ideas of the ruling class. Maybe the second idea comes partly from how your success isn't as much as that of others around you.

I suggest a third element, other than the above two contradictory ideas, contributes to the formation of monetary cranks. That is a surprising revelation about some details about how some institution that you interact with every day actually works. What do you mean that banks don't have money for my deposit immediately on hand? Doesn't this paper, accepted as money, represent a quantity of gold that the government is obligated to pay out? People naturally look for a concrete foundation for their practices and are left in the air when it isn't to be found.

I suggest some combine some such mishmash of ideas to conclude that the system can be set right if one particular thing is changed. And something about money is often taken to be the thing to be changed. Others might look at rent on land. I find it suggestive that Henry George's popularity is almost contemporary with closing of the American frontier.

For purposes of this discussion, I deliberately do not identify which ideas are crankish, whether it be advocacy for stamped money, social credit, or a belief that interest rates reflect the interaction of supply and demand for loanable funds. Nor, of course, does labeling an idea with an insult show why it is wrong, if it is.


Naked Keynes said...

In several cases cranks were people with first hand knowledge of the functioning of the monetary system. Gesell lived through the Argentine crisis of 1890, for example. I think also, that the people that have been often labeled as cranks, tended to favor a more lax use of money supply (favor paper money for example) and believed that money did affect real variables. In that sense, they tended to be more heterodox, and hence my general sympathy for the cranks.

Anonymous said...

Here are some thoughts from an old trot about Douglas and social credit, worth your time.



And this book is an excellent survey of "cranks":



Blissex said...

«conclude that the system can be set right if one particular thing is changed.»

It is part of the general delusion that the working of a system can be fully automated, if only the right rules are found and followed.

What usually works instead in business and in national policy instead is vigilance and calls of judgement and betting on odds and adapting to change.

But the dream of finding the perfect rules is very strong, and not at all limited to cranks, even if these tend to be particularly vocal.