Introduction: the importance of credit and money in understanding crises

Abstract

Over a century ago, in an aptly-titled article, Innes (1913) asked what we believe is one of the most important questions in monetary theory: ‘What is money?’ – a question Smithin (1999) would later revisit. While on the surface this question may appear to be simple enough, the answer, however, is far from simple. Indeed, many answers have been provided, from a number of perspectives and disciplines. Money can mean something very different to different scholars, and the answers provided often reflect the focus of one’s research, thereby leading to different aspects of the same issue or question being explored in various degrees of detailed analysis. Indeed, money has many dimensions. The study of money has certainly perplexed economists for decades, if not centuries, with no consensus in sight. However, two general approaches can be identified, which, following Schumpeter (1954/1994, p. 277), can be labelled real and monetary analyses respectively (see also Rogers, 1989, Ch. 1) – although other labels can also be used: orthodox versus heterodox, exogenous versus endogenous. Rochon and Rossi (2013) have further identified two distinct approaches to endogenous money within postKeynesian theory, referring to what they call the ‘evolutionary’ (Chick, 1986) and ‘revolutionary’ (Lavoie, 1992, 2014; Rochon, 1999) approaches to endogenous money. Moreover, in the last few decades, many economists in the mainstream have come to accept some version of the endogeneity of money, as reflected for instance in the use of Taylor Rules, as in the New Consensus, or the Woodford (2003) model, although whether this can be considered endogenous has been questioned (see Monvoisin and Rochon, 2006). In this sense, some have argued that the lines between post-Keynesians and the mainstream appear somewhat blurred, and the endogeneity/exogeneity of money is no longer a distinguishable characteristic between the two approaches. For instance, according to Lavoie (2020), ‘propounding a theory based on the endogeneity of money is insufficient to break away