real-world economics review - issue no. 105 - History and origin of money: MMT vs Austrian Economics

Aug 26, 2026

Uploaded by Maeve

real-world economics review issue no. 105 examines the history and origin of money by comparing Modern Monetary Theory (MMT) with the Austrian School. The paper argues that “informed critique” has often been shaped by post-Keynesian and Marxist perspectives, yet it can be advanced through a contrast in methodology. It contrasts Austrian deductivism and the praxeological focus on individual agency with MMT’s state-and-Chartalist approach grounded in history, anthropology, and archaeology, emphasizing debt, units of account, and state-issued credit.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages17

Reading Time43 min

AccessFree to download

Introduction

Methodological contrast: Austrian deductivism vs MMT

The methodology of the Austrian School contrasted with that employed by Modern Monetary Theorists

Praxeology and the axiom of action

Implications for the role of history in economic theory

real-world economics review, issue no. 105 subscribe for free History and origin of money in MMT and Austrian Economics: The difference methodology makes? Phil Armstrong1 [Gower Initiative for Modern Money Studies] Copyright: Phil Armstrong , 2023 You may post comments on this paper at [http://rwer.wordpress.com/comments-on-rwer-issue-no-105/](http://rwer.wordpress.com/comments-on-rwer-issue-no-105/) 1. Introduction 7KLV DUWLFOH ZDV SURPSWHG E\ 3HU B\OXQG¶V UHFHQW FULWLTXH RI 5DQGDOO :UD\¶V DUWLFOH, ³7D[HV DUH IRU 5HGHPSWLRQ QRW 6SHQGLQJ´ (VHH B\OXQG 2022; :UD\ 2016) . IW LV, KRZHYHU, RI JHQHUDO LQWHUHVW LQVRIDU DVit provides an opportunity to address some of the typical misunderstandings of Modern Monetary Theory (007) DQG WR GR VR EDVHG RQ D FRQWUDVW ZLWK DQ AXVWULDQ 6FKRRO DSSURDFK. 7KH PDMRULW\ RI ³LQIRUPHG FULWLTXH´ KDV WHQGHG WR RULJLQDWH IURP SRVW-Keynesians and, to a lesser extent, Marxism (for discussion see AUPVWURQJ 2023) . B\OXQG¶V FULWLTXH HQFRPSDVVHV WKH VWDWH WKHRU\ RI PRQH\ ZKLFK XQGHUSLQV 007¶V DSSURDFK WR WKH RULJLQ RI PRQH\ (LWV ³ PRQH\ VWRU\´ URRWHG LQ CKDUWDOLVP) . IPSRUWDQWO\, PXFK RI WKH GLIIHUHQFH EHWZHHQ B\OXQG¶V AXVWULDQ DSSURDFK DQG 007 EHJLQV ZLth a contrasting methodology. Austrian economics is deductivist and focuses on the implications of the agency of the individual. Focusing on deductivism places less emphasis on history and more on building an axiomatic case. In combination with a focus on individual agency in market exchange it speaks to an origin of money in barter (so money is a spontaneous solution to the problem of barter and arises as a medium of exchange in market contexts) . MMT follows the state theory of money and Chartalism and begins from what history, anthropology and archaeology tell us about the origin of money. As such, its focus is the emergence of debt, of a unit of account and of the role of the state in creating the conditions in which social relations of money can emerge, not least the role of state issuance of money as a means to appropriate resources, which in turn encourages market activity in order to acquire money tokens to pay taxes (so money presupposes the development of a unit of account, takes the form of a credit-debt, and becomes a general means of payment within market exchange in response to the activity of its originators) . Arguably this latter approach makes MMT a form of retroduction within an open systems ontology. This is quite a different starting point to that presupposed by Bylund. I begin in section 2 with a brief summary of the methodological commitments of the Austrian school contrasted with my reading of MMT (which to be clear has not been explicitly acknowledged or discussed by all proponents of MMT) . In section 3 I turn to the Austrian approach to the origin of money and in section 4 to that of state theory and MMT. Against the backdrop of the cumulative argument IWXUQ LQ VHFWLRQ 5 WR B\OXQG¶V VSHFLILF FDVH DQG LQ VHFWLRQ 6 I FRQFOXGH ZLWK D EULHI UHSULVH RI NH\ SRLQWV. 1 Phil Armstrong has been an economics teacher for more than forty years. He is an Associate at the Gower [Initiative for Modern Money Studies.](Initiative for Modern Money Studies. PArmstrong@yorkcollege.ac.uk)[ ](Initiative for Modern Money Studies. PArmstrong@yorkcollege.ac.uk)[PArmstrong@yorkcollege.ac.uk](Initiative for Modern Money Studies. PArmstrong@yorkcollege.ac.uk) real-world economics review, issue no. 105 subscribe for free 2. The methodology of the Austrian School contrasted with that employed by Modern Monetary Theorists Over the course of several years I interviewed many of the best known and influential heterodox economists, published as Can Heterodox Economics make a Difference: Conversations with Key Thinkers (Armstrong 2020a) .2 Conducting these interviews confirmed that methodological perspective KDV D SURIRXQG LPSDFW RQ DQ HFRQRPLVW¶V ZRUN.3 According to Murray Rothbard at the Mises Institute, SUD[HRORJ\ LV WKH ³GLVWLQFWLYH PHWKRGRO

FAQs

How does the paper contrast Austrian economics and MMT in terms of methodology?

Austrian economics is presented as deductivist, deriving conclusions from axioms about individual action. MMT is presented as state-and-Chartalist, beginning from historical, anthropological, and archaeological accounts of money’s emergence, including debt and the unit of account.

What does the Austrian approach imply about the role of history in economic theory?

Because conclusions are derived logically from a true axiom of action, the paper argues they cannot need confirmation through historical or statistical testing. History is said to matter mainly for determining where the theoretical branch applies rather than for establishing truth.

What are MMT’s key elements in explaining the origin of money?

MMT is described as focusing on the emergence of debt, the development of a unit of account, and the state’s role in creating conditions for money relations. State-issued money is linked to acquiring resources by encouraging market activity for paying taxes.

Aug 26, 2026

Uploaded by Maeve