Neo-Chartalists are not Knappians. Elements of a historical reconstruction of Georg Friedrich Knapp’s "State Theory of Money."

Jan Greitens

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This paper critically examines the relationship between Georg Friedrich Knapp's "State Theory of Money" and today's Neo-Chartalism, often associated with Modern Monetary Theory (MMT). Several contributions have questioned whether the Neo-Chartalists are right to claim Knapp as their predecessor. However, these analyses do not pay sufficient attention to the historical context in which Knapp wrote. This includes contemporary debates and the monetary history of his time. The Neo-Chartalists' reception of Knapp's ideas was almost exclusively through the 1924 translation of the "State Theory of Money". Problematically, this translation has many shortcomings, in particular a narrow focus on the legislative state. But Knapp's focus was on country-specific examples of currencies, in particular the 1892 currency reform in Austria-Hungary. There are significant differences between Knapp's published and unpublished writings. Archival findings reveal Knapp's reflections on inflation, which align him with the Real Bills Doctrine and a proto-Fiscal Theory of the Price Level. He argued that monetary state financing should be used only as a last resort. Contrary to MMT's advocacy for state-funded expenditures, Knapp supported a balanced budget, expressing concern over the impact of monetary inflation on exchange rates. Apart from fairly general principles such as the nominality of money, the similarities between Knapp and the Neo-Chartalists diminish as one critically examines Knapp's writings. Therefore, the claim that MMT is based on Knapp should be rejected.

Keywords: Neo-Chartalism; Georg Friedrich Knapp; Modern Monetary Theory (MMT); Real Bills Doctrine; Fiscal Theory of the Price Level (search for similar items in EconPapers)
JEL-codes: B31 B50 E42 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-cba, nep-hpe and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:340197

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