Here we start with section III, the creation of debt. The focus of Commons turns to Ralph Hawtrey’s thinking in 1919 and understanding the relationship between debts and commodities. Hawtrey was a British civil servant and monetary theorist who lived from 1879-1975.
Hawtrtey wrote that money like all creations of human beings serves as a purpose, which may change over time but is artificial and not natural phenomena. For Hawtrey as with Commons, the purpose of money is not as a store of value but rather as a measure of debt release in an unequal transaction. Critically, a debt is a portion of wealth that is owed to another in exchange for a promise or obligation. Money is simply the measure we use to account for a transfer of wealth from one person to another to release the debt. Common writes that for Hawtrey, the economy is a system to produce and deliver wealth to another in the exchange process. This is a very different starting point from the individual liberty of Locke and classical economists.
Hawtrey has combined credit and production theories of the economy whereas the classical economists had separate theories for these parts of the economy. In essence, production creates a debt from one to another who must repay for that service via wealth delivery. The debt and credit are created at the same time which is not true in the classical economic system. Hawtrey’s system of debt creation can be linked to Knapps idea of a releasable and unreleased debt. Over time, changes in society occur as to what can be thought of releasable and unreleasable debt. Commons notes in a subsequent paragraph that in fact Hawtreys ideas developed in the abstract that any society must create a system of money accounts to release debt in fact coincides with the findings of anthropologists about societies across the world.
Another question arises as to how this money account will be stabilized over time to ensure that transactions can occur in stability and security between community members. In earlier societies, custom was the process by which that money account system was stabilized. In modern times, the banker system is what stabilizes that money system of account. So, at this time we see that Hawtrey has corrected or advanced on the work of both Knapp and Macleod.
Commons then summarizes the development up to this point as he moves towards his conception of futurity. Macleod expanded our understanding by writing about the fact that exchange is the core of economics and that both corporeal and incorporeal property can be transferred in an exchange or transaction. Knapp moved beyond Macleod noting that there was a pay community whereby adept could be transferred along with a commodity in a market. Hawtrey moved eve further by noting that in fact commodity and debt markets were all a part of one system and untied by the concept of price where placed a value of the transactions. Commons writes that, “Thus a debt instead of a commodity becomes the subject-matter of a science that would unite in one functional relation of mutual dependence the production of wealth, the relative scarcities of wealth and of money, and the laws of property. “ This is key statement that ends this section.
Next we move on to IV. Scarcity of Debt leading us both backwards to Hume and Turgot and forwards to Cassel, Wicksell, Mises, Hayek, Keynes, and Fisher - and we see some names that we recognize.
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