Money & Memory, Capital & Communion

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Robert Hockett–

Imagine that I incur an obligation to you – an ‘affirmative’ obligation, let’s say. Perhaps it’s through violating some ‘negative’ obligation to you, wronging you in a manner that triggers a right to redress. Perhaps it’s through promising you something. Perhaps it’s through membership in some group, the members of which are expected to ‘pay dues’ of some sort.

In virtue of this obligation, I, the ower, am now ‘liable’ on the new obligation. You, the owner, now ‘hold’ a new asset – the asset that’s my liability. Here is the start of accounting. Of shared ledgers. All accounting at bottom is obligation-accounting, justice-accounting – tracking what’s due and by whom and to whom.

Liabilities that come into existence ex nihilo – by my promising you something ‘gratuitously,’ for example – give salient rise to a two-sided danger, something a lot like the Janus-faced monetary risk of ‘inflation’ and ‘deflation.’ For one can in principle promise more than she can deliver, thereby devaluing her promises in time. Or, fearing this prospect, she can ‘not make any promises,’ thereby impoverishing her life by depriving it of the rich fabric of association and shared action that lends and brings value to life in communion with others.

Promissory inflation and deflation, through devaluation or contraction, deprive life of much of its obligatory content. And life without obligation would be life without liabilities, life without assets. It would in that sense be life without worth, without wealth, without value. It would be life without any vindicatable expectation – life without ‘rights,’ without ‘wrongs,’ without ‘right or wrong.’

How dismal that would be.

Life with real value accordingly requires, not gold (more on which below), but observance of some ‘golden mean’ – the mean between wronging and not acting, the mean between over- and under-committing. And this is as true of us in our collective capacities as it is of us in our individual capacities.

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The Green New Deal: What’s Green? What’s New? What’s the Deal?

Robert Hockett –


During their first weeks in the new U.S. Congress, U.S. Representative Alexandria Ocasio-Cortez and her colleagues already have done something no other American political figure has managed for decades. They have got the whole country, and indeed much of the world, talking about massively transformative public investment as a real prospect.

The ‘Green New Deal’ exceeds in scale and scope all major undertakings of U.S. federal, state, and local governments since both its namesake – Franklin Roosevelt’s original New Deal – and the mobilization effort for the Second World War in 1940s, respectively. And this is true irrespective of what measure of ‘size’ you might use – geographic and cross-sectoral scope, number of firms and sub-federal units of government apt to be playing a role, segments of the population who will be playing a role, dollar value of real expenditure, dollar value of expenditure as a percentage of GDP, … you name it.

Ambition on such a scale always draws carping and naysaying from the timid, the cynical, and the economically uninformed, and this time has been no exception. Predictable expressions of skepticism and incredulity, along with the usual ‘what about partisan gridlock’ and ‘how will you pay for it?’ queries, have abounded. Even some self-styled progressive politicians have hedged their bets, approving ‘the concept’ while studiously shying away from declaring on any particular instantiation.

Against such a backdrop, we do well to recognize that in the present case, ‘size matters’ – and matters in a way that the politically demoralized, the fiscally austere, and tepid allies alike seem to miss. The problems the Green New Deal addresses, in short, are problems where bigger is better, is imperative, and is, paradoxically, more politically feasible and ‘affordable’ too where responding is concerned.

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Accounting for Incorporation: Part 2

Robert Hockett —

Introduction: From ‘Accounting For’ to ‘Accountable To’    

In an earlier post I welcomed legislation recently proposed by Senator Elizabeth Warren. Her Accountable Capitalism Act, I suggested, not only bids fair in the long run to render incorporated business firms less sociopathic, but also affords in the short run a fine opportunity to recall what corporate privileges are for. The latter, I argued,


are both analytically and historically best understood as ‘publicly’ conferred advantages accorded ‘private’ entities for ‘public goods’ that they provide. This interpretation of the origin and function of the corporate form, I noted, is simply inescapable when we observe the practice of conditional corporate chartering, and the law of corporate action taken ultra vires, that predominated from the dawn of American incorporation well into the 20th century.

Unfortunately, I also noted, once the 19th century conditions of capital scarcity and unreliable public revenue that had recommended incorporation as a necessary mode of ‘outsourcing’ public functions to private entities in the first place had receded, corporate history took a darker turn. Subnational state governments that once had chartered firms conditionally to discharge public functions now began to bribe them, with a view to gleaning franchise revenue. Charters now grew unconditional and firms were treated as accountable to no one but their largest shareholders. Firms grew ever larger in this new environment, and states grew weaker and ‘divide-and-conquerable’ where holding privileged ‘private’ firms to ‘public’ account was concerned. A ‘race to the bottom’ began.

What, then, I asked, is requisite to restoration of some version of the status quo ante – the world in which the truly extraordinary privileges of perpetual existence and asset-insulation (particularly limited liability, an illuminating synonym for which would be ‘limited accountability’) were conditional upon provision of some public benefit? The answer, I suggested, would involve a number of essential measures, all of which would capitalize upon the fact that it’s our federal government now that stands to mega-firms as our state governments once stood to smaller firms. I therefore promised in a sequel post to lay those out, and then to indicate how Senator Warren’s legislation would begin to take those necessary steps.

Well then, here we go.

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Accounting for Incorporation: Part 1

Robert Hockett —

Last month Senator Elizabeth Warren proposed an innovative – or better yet, restorative – new piece of legislation to the US Senate. Something like the Senator’s Accountable Capitalism Act, which would, among other things, hold corporations accountable to other stakeholders besides shareholders, is long overdue. It is in consequence much more than welcome. This owes less to the bill’s likely passage, however – it will probably die in committee this time around – than to the occasion its proposal affords us to recollect (a) what incorporation legally is and (b) what incorporation actually is for.


We seem as a society and as a legal culture to have forgotten how the corporation as a ‘publicly’ privileged mode of ‘private ordering’ came into being. Hence we have come likewise to overlook how the irreducible public/private hybridity of this now-ubiquitous institutional form gives the lie to familiar liberal and neoliberal clichés concerning a supposed fundamental divide cleaving both life in communion with others, and that life’s legal emanations, into radically distinct public and private ‘spheres.’

Senator Warren’s proposal accordingly provides not only lawyers, but also the broader public a rare opportunity to recall the true nature and purpose of incorporation – and, with those, the institutional continuum along which our contiguous public and private modes of life and collective agency are arrayed. In so doing, it also affords us an opportunity to restore to America’s productive life a critical institutional element that lay at the core of its economic ‘growth miracles’ and ‘social contracts’ alike during its most prosperous past eras.

I’d like in two posts, then, first to recall in detail what needs restoring and why, then to sketch how to restore it. In the present post I’ll stick to that what and why. In the follow-on post I’ll turn to the how – I’ll elaborate, in short, how Senator Warren’s proposal can be viewed as a sequence of first steps toward the requisite restoration.

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From Form to Reform in Law and Finance: Tammy Lothian

Robert Hockett –

As with most topics having to do with our primary modes of production and distribution – “microeconomics,” “macroeconomics,” “industrial economics,” “labor economics,” … – so with “financial economics” there is a well-entrenched orthodoxy that seems to enjoy pride of place in the academy and on the hustings. Indeed, one often hears “the financial markets” described as that site of economic activity which most closely approximates, in respect of its principal players, constitutive features, and felicitous outcomes, the received Smithian wisdom on decentralized market economies and their virtues.

Financial market participants lack market power, we are told, and the trading mechanism quickly impounds privately held value-pertinent information into publicly observable securities prices. Hence the financial markets can generally be relied upon smoothly to channel investment capital toward its “most valued uses” on a real-time basis. Continuous buying and selling produce informational efficiency, that’s to say, while informational efficiency produces allocative efficiency. Et voila, we are all of us left better off, producing more of what’s most valued and less of what’s least valued than could otherwise be reasonably expected. All thanks to our financial system – like our healthcare system, “the envy of the world.”

If there is any realm, then, in which public intervention should be “light touch” and minimal, orthodoxy tells us that it is the realm of finance. Sure, many a self-styled progressive economist will concede, there are market failures aplenty in some spheres that warrant public intervention. There is “the labor market,” for example, where monopsony power on the part of employers must be counterbalanced by state-sanctioned monopoly power on the part of employees. Or there is “the environment,” in connection with which pollution externalities are an ever-present source of inefficiency that must be made to be re-internalized. But the financial markets are one place where nature is best left to take its beneficent, Scottish Enlightenment course.

It is almost as if the vaunted “Fundamental Theorems” of welfare economics were conceived and derived with the financial markets as their “intended interpretation.”  And maybe they were: note the work done by futures markets, for example, in Hicks’s foundational Value and Capital – work of which Hicks’s intellectual descendants Ken Arrow, Gérard Debreu, and others made similar, and seminal, use later. Surely, then, the financial markets are our most market-like markets – they are markets at their just and efficient best, they are markets par excellence.

Now to anyone who has been paying attention to “real world” economic or even political developments over the past decade or so, the foregoing remarks must ring facetious. Isn’t “Wall Street” the seedbed of all that went wrong in the American and global economies during the lead-up to 2008 and its aftermath? Isn’t Wall Street itself what was accordingly “occupied” once it grew clear that neither Congress nor President Obama were going to do much beyond Dodd-Frank to put things right? And didn’t bank-bashing figure prominently, even if cynically, in certain “AstroTurfed,” pseudo-populist rightwing political movements in 2010 and 2016?

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Whatever Happened to “Just Prices?”

Robert Hockett – 

Are prices the sort of thing that can be fair or unfair? It seems to be common to assume so. Health care is said to cost too much, unhealthy foodstuffs to cost too little. Air and water, we say, should be free. Maybe college and health insurance should be as well?

Yet while we frequently hear and say such things in informal settings, many in more ‘serious’ company appear to concede that prices can no more be fair or unfair than the number seven can be yellow or green. There are only individual preferences – my wish to pay less, your willingness to pay more – and market prices that all of us ‘take’ and don’t ‘make.’ In this foundationally critical matter, so closely bound up with the way we meet needs in a market economy, it seems we are most (if not all) of us neoclassical economists now.

But do we really have to give up the idea of fair prices? In a forthcoming paper, Roy Kreitner and I say, Not so fast. We interrogate and rehabilitate the idea of fair prices in part through a critical look at its recent history, and in part through a look at the ways in which prices are actually determined in contemporary economies. We abjure, however, any attempt to link this inquiry with ‘just price’ theory of the sort that flourished, in a number of forms, before the so-called ‘marginalist revolution’ of the late 19th century – the revolution that purported to slay what we used to call ‘political economy’ and birthed ‘economics.’

In this post I aim to fill-in that gulf and trace some connecting lines. For it turns out that our attempt at a ‘just price’ revival has a venerable and unjustly forgotten pedigree in hardcore just price theory of the pre-marginalist variety.

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