Sharpening Differences in Orthodox and Heterodox Views on Money and Banking

Abstract

We engage with David Andolfatto (2018) on the theme. The two approaches are alleged to have converged in regarding banks as creators of money in the process of initiating lending. We synthesise insights from different factions of the French camp of political economy to make the case that heterodoxy is richer than this claim. Money as an asset-liability is the wage fund in the “first moment” of the monetary circuit. The accumulation of capital is the “second moment” in the sequence, recorded in a separate account at the bank or supported by a financial institution. The “third moment” is the closing of the accounts of demands and supplies generated by the first two moments. Régulation Theory is a related internally-consistent conceptual structure which tracks modes of production as they evolve in history. We dwell on the constructive aspects of the programme as scholars stitch together elements of the present and develop an apparatus to grapple with the emerging new regime of production and distribution. The private sector and state are joined and the bank-central bank is a continuum. Finally, the class structure in the heterodox approach goes deeper than agent heterogeneity.