Sunday 23 February 2020

Tony Lawson vs John Searle on Money: Why Lawson is Right - Money is "Positioned Bank Debt"

Tony Lawson has presented a fascinating argument that money is symbolically codified central bank "debt" in a paper from a couple of years ago (see https://academic.oup.com/cje/article-abstract/42/4/1165/5054022) John Searle, who had a significant intellectual engagement with Lawson prior to his dismissal from Berkeley for sexual harassment (see https://www.dailycal.org/2019/07/02/former-professor-john-searle-loses-emeritus-status-over-violation-of-sexual-harassment-retaliation-policies/), objected to Lawson's theory as being "incredulous", arguing that his own theory of "status functions" with regard to money was correct. Money is real, according to Searle, because a community upholds (trusts) the "status function declaration" that "I promise to pay the bearer" which is made by a central bank. So when the banks lends me money, the obligation is on me to pay back the "debt" to the bank. And of course, that is how we are all taught to think about money.

Lawson makes a radical proposal based on a historical analysis of money. The money that the bank lends is effectively an IOU from the bank to us. Now how could that be? It goes back, according to Lawson, to the goldsmith's issue of receipts for deposited gold in the 17th century. Basically, the goldsmiths offered a depository service where merchants could deposit their gold, and the goldsmiths would issue a receipt for that gold. The receipt was effectively a certificate of debt to the merchant. These receipts became symbolically codified as representing the deposited gold with the goldsmith, and soon the actual presence of the deposited gold was assumed to the extent that it was the receipts that were exchanged without needing to check on the actual gold that was deposited.

It wasn't long after this that the goldsmiths realised that since it was the receipts that had exchange value, they could issue receipts guaranteed by gold that wasn't deposited. Providing not everybody demanded their gold back at the same time, the goldsmiths could honour the value of the receipts that they issued. The receipts remained symbolic tokens of debt by the goldsmith, and complex social relations between bankers, lawyers, borrowers, government, central and commercial banks emerged.

Interestingly, Lawson describes the difference between cash and the electronic representations of money that we are all so used to. He points out that it would be very unlikely for today's multi-millionaires to demand being paid in cash. Cash is the symbolic codification of central bank debt, while commercial banks generate IOUs to the public in the form of electronic records. When somebody withdraws cash they are converting the electronic IOUs from the commercial bank into IOUs to the public from the central bank.

Lawson argues that this is an incredible story (so at least on this point, Searle is right), but it is nevertheless true, and it is so because money is effectively a kind of "technology" which acquires its own perverse logic over history. He cites the development of the QWERTY keyboard as another example - what technology theorists might call "lock-in".

There are far deeper implications for Lawson's theory. What he is basically arguing is that the nature of the social world, including the nature of money, cannot be separated from history. Historical processes are woven into social ontology in the way that cellular evolution absorbs previous levels of evolution (at least according to endosymbiotic theory). There is deception all along the way (Lawson calls it "fraud") - but in the natural world it is the same. mimicry, camouflage, etc all create deceptions which steer the course of evolutionary history.

This also highlights what is wrong with Searle's position. I met Searle twice and found him highly charismatic but somewhat cruel. While not wanting to infer any ad-hominem assault on his intellectual position (which I have gained a lot from and written about here: https://jime.open.ac.uk/articles/10.5334/jime.398/), there was something missing (which I wrote about here: https://dailyimprovisation.blogspot.com/2014/05/pianos-consciousness-and-john-searles.html and https://dailyimprovisation.blogspot.com/2015/06/why-dont-dogs-have-universities-searles.html). Searle's ontology of status functions is fascinating and flat. It is basically a cybernetic theory where what exists in the world exists through the interactions of actors (rather like Pask's theory - see https://dailyimprovisation.blogspot.com/2016/11/conversation-and-contingency-some.html).

I originally thought that Searle was positivist in asserting that status functions assert the existence of things. It seemed to be that they were better thought of as characterising the scarcity of things. It was the other side of the distinction that mattered. Now I would say that the process of maintaining the distinction about the scarcity or presence of anything must account for its own history and its future. That is to say, no stable distinction can be created without an anticipatory system capable or refining the social positions, speech acts, institutional structures, technological resources, etc, in order to survive in an ever-changing environment. Lawson doesn't quite put it like this, but I think it's what he means. Searle, by contrast, has no history and no future. It suffers exactly the same problems as the two-dimensional information view that has led us to Dominic Cummings (see https://dailyimprovisation.blogspot.com/2020/02/from-radical-constructivism-to-dominic.html). It is not the status or even the scarcity of money that is constructed; it is Nothing.

History and the future are the third dimension in the game of establishing trust, and that in turn contributes to the process of constructing nothing which makes possible anticipation. Only with a third dimension is it even possible to create trust and to anticipate a future. The "positions" that Lawson talks about are really multiple levels of anticipation, each with its own history, and built up over a period of time.

What this begins to look like is an evolutionary biological approach where emergence is seen as a fractal process of interconnected anticipations. It's very similar to John Torday's cellular communication theory (see https://www.thethirdwayofevolution.com/people/view/john-s.-torday), and it has many similarities to theories of technology by Simondon, Stiegler, Yuk Hui, Erich Horl,  and others.

There's more to it, but getting money "right" is an essential element in the process of seeing education right.  

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