The question has to be treated in two parts, due to a split in the way money is talked about in academic economics. She suggested that โmoney and bankingโ was treated differently from โmacroeconomicsโ. Money and banking was seen as on the fringe somewhat, โa frivolous optionโ. Keynes said, when he was writing the General Theory, that he thought that what he was writing would revolutionise the way the world thought. He had a theory where โmoney permeated the entire economyโ. In modern economics, though, the role of money is separated from the whole analysis.
She said that economics thinks of itself as uncovering universal truths rather than being based in the context of its time. For example, the quantity theory of money is based in a historical period where gold was a major factor.
When she was a student in the late 1950s, she said, it was widely understood that loans create deposits. Now students are told that deposits create loans, which is wrong.
Much of neo-classical economics โregard banks as glorified safes.โ However, โbanks do not lend moneyโ she stated. They donโt have a pot of money that they are passing on.
It is the ability of banks to create money that led Keynes to say that investment came before savings.
During the Q & A session after her presentation at the conference, Prof Chick expanded upon her main points. To a question about whether some academics were being โbought offโ, she replied that there is something that โseeps into the veins of academiaโ rather than people being deliberately โbought offโ. Although some had been โbought offโ she said, if youโve seen the film, Inside Job.
There is also social pressure to conform, she said. โYou are just not part of the gangโ if you donโt go along with the dominant ideology.
