skip to content

Faculty of Economics

Journal Cover

Lawson, T.

Money’s Relation to Debt: some problems with MMT’s conception of money

Real-World Economics Review

(89) pp. 109-128 (2019)

Abstract: According to modern monetary theory (MMT), money, when the term signifies something used in making payments, is always debt, and currency is a specifically government or state debt. The latter debt is redeemable through its use in meeting tax obligations. It is just because it is so that taxes get paid and indeed there exists a general demand for the currency.

I argue that not only is this latter reasoning not quite right, but currency, indeed money more widely, is never debt in the sense that proponents of MMT suggest, and that the debt/credit theory of money that underpins this reasoning should be abandoned. I advance instead a rather different positioning theory of money that interprets the monetary process, including the meeting of tax obligations, somewhat differently, and I think more realistically.

I am not sure that the arguments that follow in themselves necessarily undermine any MMT policy stance, at least under current conditions. But, if correct, they should help dispel some confusion regarding, or stemming from, the presuppositions upon which various MMT more substantive and policy claims rest and allow an appropriate orientation to be determined whatever the prevailing conditions.

In briefly outlining my case, I draw primarily on the core MMT text and deservedly influential book by Randall Wray (2012) titled Modern Money Theory.

Author links: Tony Lawson  

Publisher's Link:

Papers and Publications

Recent Publications

Ambrus, A. and Elliott, M. Investments in Social Ties, Risk Sharing, and Inequality Review of Economic Studies [2021]

Huffman, D., Raymond, C. and Shvets, J. Persistent Overconfidence and Biased Memory: Evidence from Managers American Economic Review [2022]

Gallo, E. and Yan, C. Efficiency and Equilibrium in Network Games: An Experiment Review of Economics and Statistics, accepted [2022]

Ascari, G. and Haber, T. Non-Linearities, State-Dependent Prices and the Transmission Mechanism of Monetary Policy The Economic Journal [2022]