Geoffrey Ingham has made important contributions bringing a sociologist’s interest in the ontology of money to reexamine the nature of money. Like Goodhart (1998), he contrasts the neoclassical commodity money approach with the heterodox State money approach. He has also linked the evolution of credit money to the development of capitalism. This section will briefly outline these two topics.
As Ingham argues, orthodoxy has little interest in the ontology of money, taking a “money is what money does” stance, focusing on its three or four main functions. He insists, however, that
money should not be seen simply as a useful instrument; it has a dual nature. Money does not merely have “functions” – that is to say, beneficial consequences for individuals and the social and economic system. In Mann’s terminology, money is not only “infrastructural” power, it is also “despotic” power (Mann 1986). Money expands human society’s capacity to get things done, as Keynesian economics emphasizes; but this power can be appropriated by particular interests. (Ingham 2004a, p. 20)
Here, he’s not merely referring to the obvious fact that holding money gives one economic power, but “the actual process of the production of money in its different forms is inherently a source of power. For example, modern capitalist money is bank credit-money that is produced on the basis of credit ratings that reinforce and increase existing levels of inequality by imposing differential interest rates…. money is a weapon in the struggle for economic existence.” (Ibid.)
Following Keynes, Ingham claims that:
an abstract money of account is logically anterior to money’s forms and functions; it provides all the most important advantages that are attributed to money in general and a medium of exchange in particular. Money of account makes possible prices and debt contracts, which are all that are required for extensive multilateral exchange to take place. Money accounting, with or without an actual “money stuff,” is the means by which modern market exchange is made possible – that is, of producing action at both spatial and temporal distance. In this conception money is abstract – but an abstraction from what? (Ingham 2004a, pp. 21-22)
He goes on to argue that the orthodox answer to that question is doubly paradoxical. Since it adopts a commodity money view, it wants to argue that money’s value is determined in the usual neoclassical way: scarce supply meets the demand for money determined by subjective preferences. Yet, because modern orthodoxy recognizes that money actually consists of some scarce commodity with an intrinsic exchange value, the scarcity of supply must be imposed— generally through control by authorities. At the same time, money is supposed to be neutral (aside from some short term non-neutralities resulting from imperfections), determining only irrelevant nominal prices and not the all-important relative prices that come out of the higgling and haggling of the market. It is for that reason that many rigorous neoclassical models simply leave money out of the analysis altogether.
Again, Ingham follows the heterodox approach, where money’s value is always abstract and nominal: