New directions in the political economy of money

: complexity, knowledge, and institutions

Abstract

This thesis deals with the complex and epistemic role of money and its surrounding institutions. It studies the relations among money, monetary institutions, the contextualized formation of macroeconomic phenomena, and the emergence of knowledge. It makes three relevant contributions: first, it explores the analytical and methodological implications of the link between the use of money and different monetary institutions in determining the formation of knowledge. As such, it emphasizes the emergence of different macroeconomic phenomena conditioned on monetary institutions’ distinctive epistemic and incentive properties. Second, it presents a new political economy and institutionalist framework within macroeconomics to assess different monetary institutions in order to identify their: a) relative robustness and b) plausible institutional ‘inevitability’ and entangled political evolution. Third, it sheds light on the need for an orderly set of monetary relations and associated systems of neutral monetary policy and robust rules, necessary for sustaining a social order. In sum, this dissertation delineates a novel institutionalist subdiscipline of macroeconomics that recognizes and deals with emergence, complexity, entangled evolution, and the rationale for central banks.

This work is divided into three main sections, comprising six chapters: Part I examines the analytical relation between the notion of organized complexity and macroeconomics, as well as its implications for methodology and macroeconomic inquiry. It also explores the epistemic role of money as an orderly system of social relations, money’s fundamental role in generating epistemic complexity, and how its use is indivisible from a macroeconomic complex order. In Parts II and III, the complexity-based research agenda is translated into two self-standing yet interrelated research inquiries delving deeper into the political economy of money. They explore the institutional implications of money and the need for robust monetary constitutions. More specifically, Part II examines the institutional evolution of central banks and their alleged ‘institutional rationale.’ It combines a scrutiny of the theoretical justifications for central banks with a historical analysis of their entangled political evolution. Together these analyses reveal that there is no strong institutional rationale for central banks’ apparent inevitability. The framework of robust political economy is extended to monetary theory in Part III, which scrutinizes monetary alternatives that could be robust for ‘managing’ money and overcoming knowledge and incentive problems in monetary policy. It specifically undertakes institutional comparisons of diverse monetary systems, primarily central banking versus free banking. Finally, the three sections propose a heterodox institutional research agenda in macroeconomics to identify robust institutions, contrasted with the fragility and politically entangled evolution of central banks.

Date of Award	1 Jan 2021
Original language	English
Awarding Institution	King's College London
Supervisor	Mark Pennington (Supervisor)