Legal Perspectives on Money: Developing MMT for Law and Law for MMT

1. Legal Perspectives on Money: Developing MMT for Law and Law for MMT Martha McCluskey, State University of New York at Buffalo mcclusk@buffalo.edu 3rd. International Modern Monetary Theory Conference Stony Brook University Sept. 29, 2019

2. Bringing MMT to Legal Academia: • www.modernmoneynetwork.org • www.politicaleconomylaw.org • www.classcrits.org

3. U.S. Legal Academia is a Major Producer of Economic Ideology & Policy • “Law and Economics” movement as successful 30+ year “investment” • $68 million from Olin Foundation, mid 1970s-2005 (Miller 2006) inspired by Olin’s outrage at Cornell student protests demanding African-American studies • Many other millions: Searle, Kauffman, Microsoft, Bradley, Koch (McCluskey 2012) • Funded major centers in most law schools; faculty support, scholarship for hire, student fellowships, workshops (Teles 2008) • Judge Richard Posner: “absurd” to attribute L&E influence to funding rather than intellectual merit (2011)

4. From Politico (Jan. 23, 2019): • Federalist Society: 2016 Revenue of $26.7 million • funders have included Koch, Scaife, Mercers, Google, Chevron • Law student chapters, faculty & attorney membership, major role in judicial appointments, law faculty career pipeline • Fall 2019 “free film” for law student groups argues climate change is a problem of excessive business regulation, to be solved by innovative carbon-sucking plastic trees • MMT: solve the legal left’s “money problem” with big ideas about money? (but with much less money)

5. George Mason University Law and Economics Centers & Professional Training • “To date, over 5,000 federal and state judges from all 50 states and the District of Columbia, including three current U.S. Supreme Court Justices, have participated in at least one of the LEC’s judicial education programs.” (GM LEC website Sept. 2019) • Summer Institute for Law Professors (34th year in 2019): • 850 law professors worldwide have attended • Event listing for Oct.- Nov. 2019 alone: • 10 conferences for judges or lawyers: intro to economics, consumer protection, fintech, labor, business law • 2019 Offering law schools “free” online “law and economics” courses

6. Develop MMT Guerrilla Guide to George Mason Law and Economics De-Education Programs? • Textbook used for judicial education programs: • “Just as a physicist must take into account the effects of gravity, so too must a lawyer understand the effects of economic forces. In a very real sense, economic forces are the gravity of the social world—often invisible, but omnipresent.” • (p. 3 Economic Analysis for Lawyers, Butler, Drahozal, Shephard, 3rd. Ed. 2014). • First, economics is not simply about money— it is about how incentives influence behavior… • Second, economics is concerned with more than just economy-wide, macroeconomic phenomena… It also includes microeconomics, which uses individual decision-makers and individual markets as the basic units of analysis. (p. 3) • Economists mostly agree about microeconomics, but not macroeconomics.

7. Orthodox Law and Economics Teachings: • Economics is about individual behavioral incentives driven by naturalized scarcity • Opportunity costs mean inevitable tradeoffs. • “TANSTAAFL.” “There ain’t no such thing as a free lunch” (Butler et al. p.5) • Essence of human power and freedom is individually deciding what to sacrifice. • If law tries to reduce human suffering by changing economic power, we will make that suffering worse. • Economic actors will naturally react to counter any legal change • Result: harmful “unintended consequences”from incentives governed by “economic laws” • Not from intended fraud, predation, and lawlessness, enabled by inadequate justice. • Therefore solve inequality and social & economic problems with fiscal policy, not law. • But fiscal policy involves tough tradeoffs driven by special interests, so constrain spending. • Sum: Law should be guided by efficiency, not justice (or planetary survival): • Maximizing, not re-dividing, an “economic pie” of formal monetized gain.

8. Bringing more law to MMT: Legal Construction of Microeconomics • Why “invest” especially in judges & law faculty who apply & develop basic “private law” rules of contract, property, tort, civil procedure, corporations? • Because • “Private law” rules constitute & justify the imagined “Economic Pie” of aggregate private monetized gain. • These rules form the Code of Capital – Katharina Pistor(2019). • These rules regulate the distribution and power of money • -- Christine Desan (2015) • Private law rules distribute liquidity which shapes market prices. • These rules mask unjust public power as private free choice.

9. MMT Beyond Monetary & Fiscal Policy: States depend on private economic actors to exercise power over money – how to democratize this power? • Currency-issuing governments never hold fully sovereign power. • States & law operate in layers of interdependency -- Scott Ferguson (2018) • Degree of monetary “sovereignty” depends on political and legal governance structures as one factor -- Fadhel Kaboub • Christine Desan: constitutional theory of money • JameeMoudud: legal capacity is crucial factor in creating and sustaining democratic political economic power

10. Code of Capital: How the Law Creates Wealth and Inequality – Katharina Pistor(2019) • Taxation cannot be the main strategy against economy designed for inequality, instability & extraction. • “Private” law rules create capital through unequal substantive rights • to impose non-reciprocal costs on others (creating bad “choices”) • to evade, resist, and change existing law (including taxation, financial regulation, and criminal law!) • Economic power is “coded” through liberal “rule of law”: basic principles of contract and property • Creating & distributing wealth through legal qualities of durability, universality, convertibility (into money) & priority (over competing rights) • Fashioned into legal institutions like corporations, bankruptcy, trusts, collateral • Then further protected by international law, e.g. ISDS • Developed in decentralized incremental private law process: lawyers hired as“masters of the code,” enforced by judges, and later adopted in public policy

11. Privatized Governance of Money: Basic Legal Rules of Liberal Market • MMT challenge: public power over money must include re-claiming and investing in public power over decentralized development of legal rules. • requires major public investment in creative independent legal power for the public interest • Nonprofit legal services, public regulatory enforcement, legal academia, private rights of action for regulatory enforcement, access to public courts

12. “Private” law rules as non-fiscal pay-fors? • Tort law and criminal law: punishing & deterring, not compensating, extractive gain • Democratizing decentralized governance of liquidity: e.g. land & climate trusts, cooperative firms • Equality– not as “redistribution” but as bottom-up democratic power to resist bad microeconomic choices: • insecurity from lack of wealth & liquidity induces predation (“low handing fruit” : Phishing for Phools, Akerloff & Shiller 2015)

13. Also: Govern & democratize money’s “outside” : non-monetized currencies of micro exchange? • Law and economics message: • Give people money not legal rights! Anti-paternalist, flexible, cheaper • Use money to compare & quantify competing public goals (cost benefit analysis)! • But money itself does not fully determine or measure microeconomic power • “market” transactions involve “currencies” like racial & gender status (Lua Kamal Yuille) • Value of your money depends on access to legal enforcement & protection of contracts, property rights, and interdependent assets • Money’s legal nature means it is not a fungible, standardized unit of account • Money buys power “outside” of money to limit the value of others’ money e.g. arbitration, debt & bankruptcy, data mining used for price discrimination and extortion • Transactions require personal and political servitude, in effect?