The state theory of money

L. Randall Wray ()

Chapter 4 in Understanding Modern Money Theory, 2025, pp 66-93 from Edward Elgar Publishing

Abstract: This chapter focuses on contributions to the State (or Chartalist) Money Theory made by Adam Smith, G.F. Knapp, and J.M. Keynes, as well as by a few more contributors, including H.P. Minsky, Abba Lerner, and Charles Goodhart. In this approach, money is a creature of the state as the state chooses the money of account, issues currency denominated in that unit, and chooses what it will accept in payment (of taxes, fees, fines, or tithes). We reconcile this view with the historical record presented in Chapter 3. While authorities have chosen the money of account since Babylonian times, generally only strong states could issue currency and impose obligations sufficient to meet their financial and real resource needs. Often the state had to rely on private finance—such as the Italian bankers that financed English crowns, or precious metal coins—but in the modern money system, the state's fiat money dominates.

Keywords: State theory of money; Chartalism; Fiat money; MMT; Credit theory of money; G; F; Knapp; A; Mitchell Innes; Chartalist vs Metalist (search for similar items in EconPapers)
Date: 2025
ISBN: 9781800375147
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