The Key to Value (2.0): The Debate Over Commensurability in Neoclassical and Credit Approaches to Money

Abstract

Neoclassical and credit approaches to money represent dramatically different theories of value. Within the neoclassical tradition, the market exists as a conceptual prior, a place where independent agents compare real goods, exchanging them afterwards to accord with their preferences. That theory reflects a particular approach to value, identifying it as a pre-existing quality ranked by individual choice. To operate, the theory relies on an approach to money that is oddly self-contradictory: money as a unit of account antedates exchange while money as a medium follows from exchange.

By contrast, credit approaches suggest that markets only emerge once commensurability in value exists. To create a unit of account that enables comparison, groups restructure their internal relationships to create money. Members then use money for exchange, producing what is understood as monetary value.

That argument upends the neoclassical approach to value. First, if money creates commensurability, our preferences as expressed in the market depend on money rather than preceding it. Second, if money creates commensurability, then the nature of money – and of money as credit -- matters enormously. Credit works by representing and advancing a unit of value to some people relative to others. In that case, as a condition inherent to its construction, money carries value differentially to participants, those who are graced with credit and those who are not. According to the way money is created, definitionally we might say, individuals will not be equally situated in the process that generates prices. Decisions about value are made in the wake of that fact. The market, however emancipatory, thus trades on disparity in a group, not the autonomy of individuals, as a process.