Crime Against Humanity: Pensée Unique in Economics, 34

Werner informs us how “most leading university−level textbooks on monetary economics offer no proper answer”, for starters, and quotes some of them: “theoretical models of monetary economies often provide little guidance to how the quantity of money appearing in the theory should be related to empirical measures of the money supply”; “an empirical answer to the definition of the money stock is much more eclectic than its theoretical counterpart”; “money is difficult to define and measure” and “divergences in views about what constitutes money are likely to widen with time”.
The economists first tried the formula with the most deductivist, restricted – and unreal – among those various Ms, such as cash or the money issued by the formal rightful (let us use these adjectives, even though ridicolous here, for sake of clarity) holder of monetary sovereignty. But as these account for just the scraps of all transactions, that was an untenable position.
So they delved into the deep uncharted sea of those various Ms, and finally resurfaced from it with their solution: the “money multiplier”: they chiselled brave new formulas whose appeal lies in their increased complexity, but whose net result is, once again, postulating that the amount of all that uncharted sea of money is simply proportional to that of the money discernible on their deductivist seashore.
Indeed it has been said that all the answers are basically simple, and there’s nothing like its opposite to – hopefully – realise it. On the strategic usefulness of complexity, Werner again: “As the reader will readily discern, there are limitless ways in which this expression can be rendered more complex, without adding any information value, and this is what has actually been done. This rather convoluted way of looking at the ratio between a broader money supply measure … and a more narrow one … has also encouraged researchers to postulate (without empirical evidence) that broad measures of money are in some stable relationship to narrow ones,” – after which he gves us a clue – “and that bank deposits are merely an extension of narrow money measures. Consequently, for decades little need was felt to study the origin and role of deposits further, the actual functioning and economic role of banks or other institutional realities that could yield important insights into how the economy works. The deductivists could stay within their axiomatic models and did not have to venture into the vagaries of reality.”