Banking on Values

“A fool is someone who knows the price of everything and the value of nothing”.

Central banker Mark Carney has diagnosed a crisis in value(s). He doesn’t just mean prices being misaligned with values as in frothy asset overvaluations. That’s just a symptom of a deeper malaise. The central idea of his book, says the Toronto Star’s  Heather Scoffield, is that “… the world has devolved into a harsh, crisis-prone place by putting a monetary value or price on pretty much everything, and that erodes the societal values that hold the world together.”

“We have moved from a market economy to a market society, and this is now undermining our basic social contract of relative equality of outcomes, equality of opportunity and fairness across generations.” 

Says Carney and finds himself asking: “Can the very act of valuation shape our values and constrain our choices?” Carney  endorses Michael Sandel’s observation that commodification can corrode the value of what is being priced. Carney’s reflections chime with the Covid-induced re-appreciation of underpaid essential services, disenchantment with neoliberal marketisation and the rediscovery of the commons and the state. Like Sandel, Carney wants “moral sentiments” to reassert themselves over the invisible hand which seems to have strayed off conducting commerce into primarily pleasuring punters.  Unlike Mariana Mazzucato who first managed to float “value” into the mainstream conversation, Carney does not focus on the “unearned” earnings and extractions of financialised rentier capitalism. Mazzucato daringly suggested that, as Martin Wolf’s put it, “it is far too easy for those operating in the market economy to get rich by extracting value from those who actually create it”. Carney prefers not to re-engage with classical economics 101 : what creates value? That’s probably wise as it might have pushed him off the moral pulpit into the vacuous abyss of real existing zombie Macro.  As Doyne Farmer reminds us,

“Economists have struggled with this question (of value) for several centuries and have largely given up – most modern economists tacitly assert that price and value are the same thing, except for possible “externalities” that prevent the market system from functioning correctly.”

Mainstreamers love to laugh at Marxist abstract labour but no one has ever managed to count utils, either. Marginal utility is an operational tautology. It’s like accountants’ fairy dust to make oneself believe one has an equation involving independent variables when all one ever had was prices. But never mind. If in practice one owns the academy one has no need for theory.

Carney falls short on theory but his plethora of pragmatic proposals are well worth perusal. Especially by the powers that be, perhaps?

Just follow the money …

or dig deeper below.

ft.com 15-10-2022 Mark Carney: ‘Doubling down on inequality was a surprising choice’

bitcoinmagazine.com 11/7/2021  HOW TO RESTORE OUR “VALUE(S)”: AN OPEN LETTER TO DR. MARK CARNEY   BY BITCOINACTUARY    This letter addresses the ideas proposed by Dr. Carney in his videos, as Bitcoin represents an answer to many of the problems discussed.   

…” The economic signal to all participants for years now has been not to save, but to spend, to consume. And moreover, the message has been “Borrow to consume!” All forms of debt, be it sovereign, corporate, and private, have risen at eye-watering rates over the last decade, even before the pandemic. It is no wonder we live in an era of high time preference.

Individuals are not encouraged to save their dollars or pounds, moreover they also cannot count on them holding their value in the future if they do. George Osborne even commented as part of your lecture series “A pound is a pound.” I am not so sure. A pound is transferable by owner and is portable across distance, undoubtedly. But it is not portable over time.

Worryingly, the risk-free rate of interest signalled by sovereign debt markets forms the basis upon which ultimately all other assets are also priced. Necessary price signals to the market for pricing just about everything else are being severely manipulated and distorted. Ask yourself, “How can stock markets realistically sit higher now, than before the dawn of Covid-19?”

Economists can debate money velocity and find ways to justify the increases in M2 or other measures of money supply. They can also point to the very low levels of consumer price index (CPI) inflation (U.K. and equivalents elsewhere) over the last two decades as justification for central bank actions. I would argue this is woefully (and probably willfully) misleading as to the impacts on society of these central bank policies. The money created has resulted in inflation – asset price inflation – including real estate and equities, to name but two.

This especially matters as the distribution of these gains is unequal and massively skewed towards the wealthy. Ask yourself, “How easily can a current house owner in the North East of England, say, trade up to purchase a house in Hampstead in London?” Asset price inflation has huge implications for social mobility and intergenerational fairness. The underlying quantitative easing has many other impacts. For example, over the last two decades the cost of securing an annuity / guaranteed income for retirement — the cost to retire — has skyrocketed well beyond life expectancy improvements.

You cite good components of any society as being fairness between generations, in the distribution of income, and of life chances. Yet can you not see how your own policies whilst governor of the Bank of England have lit a fuse under asset price inflation, exacerbated social inequality, and driven debt and consumption at all costs?

The ruptures felt from these resulting inequalities have already manifested themselves. Make no mistake, these ruptures contributed to Brexit in the U.K.; they helped lead to Trump’s presidency in the U.S. Whilst the Covid pandemic has itself vastly increased the levels of both debt and broad money supply, it is only accelerating trends started decades ago.”….

amazon blurb and reviews

‘A radical book that speaks out accessibly as to how we get everyone involved in solving our problems. And this is what we need: 50 Shades of People for 50 Shades of Green’ BONO

‘Mark Carney’s indispensable new book asks how we can go from knowing the price of everything to understanding its true value. From the Great Financial Crisis to climate change and the coronavirus pandemic, this is the essential handbook for 21st century leaders, policymakers and everyone who wants to build a fair and sustainable world’ CHRISTINE LAGARDE

‘A roadmap to a fairer and more responsible, resilient world. Carney offers trenchant insights into our relationship with money and status, imagination and responsibility critical to our world’s future. What do we invest in – profit or human potential? This book is irradiated with the inspiring and critical conviction that money can be transformed into a tool of collective good’ ANTONY GORMLEY

‘A fantastic read for anyone interested in the most pressing issues facing us. The need for a world of profit with better purpose is explained in such a clear and persuasive style. I hope it gets read by many people ‘ JIM O’NEILL

‘Thought-provoking and readable… As societies struggle to rebuild solidarity in the post-Covid world, it will be an essential guide’ RAGHU RAJAN

‘Mark Carney draws on his unique experience of running two central banks to offer original and thought provoking solutions to the world’s biggest challenges – from Covid to climate change’ GORDON BROWN

economist.com  16/4/2020   Mark Carney on how the economy must yield to human values. In recent years, the market economy has become the market society. The virus could reverse that trend

unearthed.greenpeace.org    26/2/2021    Carney’s ‘net-zero’ investment firm has billions in coal and oil sands projects  –  The UN climate finance envoy said Brookfield, which he joined last year, is net zero ‘across its portfolio’

more reviews

irishtimes.com   26/3/2021  Mark Carney:  ‘The more a country asks of its citizens, the greater their devotion to it’  –  Former governor of the Bank of England suggests how to fix financial system in new book    by Chris Johns

He wouldn’t like me saying this, but this is a 600-page manifesto in the tradition of Keynes who worried greatly about the flaws, instabilities and dark side of capitalism. Carney, like Keynes, but unlike Marx (who gets a lot of mentions, not all critical ones), wants to save the system from itself. Revolutionaries will be disappointed but shouldn’t be surprised.

It’s a big book, in all senses of the word. I enjoyed all 218,000 words of it: it’s a brilliant call to arms. How to rescue the modern – western – world from its crisis-prone nature, without falling for the thesis that it’s all so broken it needs tearing down. It’s commonplace to assert that the political centre has been eviscerated by the rise of both extreme left and right. Carney supplies a welcome antidote and makes a heroic and compelling case for the restoration of that centre.

Value(s) is part-memoir of a central banker, part-history lesson, part-economics treatise, part-checklist of the things we need to do to make things better. A key idea, referenced by that parenthetical S, is that slavish adherence to market values (prices) has changed the social contract.

Carney traces a line from Aristotle, through Rousseau to Sandel, whom he quotes: “The more a country asks of its citizens, the greater their devotion to it… civic virtue is built up, not down.” JFK would have nodded. Slavish adherence to market values, in Carney’s view, risks undermining civic virtue. Unsurprisingly, Wilde’s aphorism, knowing the price of everything but the value of nothing, gets a mention.

The economics discussion is a blast from my past, an excursion into value theory embracing Greek philosophers and Classical economists like Smith, Marx and Ricardo. Critics lament that this stuff isn’t taught any more and the “mathiness” of today’s economics journals has taken the profession in a wrong direction. …

A section on money leads us into Bitcoin. He’s not a fan, but acknowledges that we are at the start of “a revolution in money”. Digitalisation is changing everything. He doesn’t like my idea whereby all of us bypass the banks and have our accounts at the central bank. “Who would do the lending?” I suggest that algorithms and AI would do a better job than banks. He isn’t convinced but admits that things are going to change. …

he suggests, is adding to pressures on governments to act.

Value(s) confronts our broken system head on and suggests ways of fixing it. If we don’t implement something like Carney’s manifesto – the centre, already wobbling, risks collapse.

Cynics will say Carney’s core values of solidarity, fairness, responsibility, resilience, sustainability, dynamism and humility look like an aspirational wish-list that any member of the global super-elite would ask the rest of us to follow.

But modern cynics don’t believe in the possibility of unselfishness, they are a far cry from the original Greek school of thought that said the purpose of life is to live in virtue. This is an important book, deserving of a wide audience. We know things need to change and that we are in big trouble if we don’t. Carney deserves to be taken seriously.

telegraph.co.uk   21/3/2021   Mark Carney’s Value(s) moans about free markets – but his Brave New World alternative is a muddled farce 2/5 – Ryan Bourne – The former Governor of the Bank of England seems frustrated that our freely made economic and political choices don’t conform to his own

economist.com     20/3/2021  Why two former central bankers are talking about trust  –  Two books by Mark Carney and Minouche Shafik consider its importance for economies and societies

After the global financial crisis, people asked whether economists had not misunderstood something important about markets. The trying experience of recent years has some figures broadening the question, to ask whether economists have not failed to grasp something crucial about people. In a new book, “Value(s)”, Mark Carney, governor of the Bank of England from 2013 to 2020, argues that within profit-obsessed market economies self-interest crowds out other motivations, making the world a more selfish place—and potentially a less resilient and prosperous one, too. The notion is disconcerting, not least because the dominance of orthodox economic thinking leaves leaders poorly equipped to assess and respond to such claims.

Parts of Mr Carney’s argument are echoed in another new book, by Minouche Shafik, director of the London School of Economics, who served as one of Mr Carney’s deputies at the Bank of England. Baroness Shafik’s book, “What We Owe Each Other”, examines the role of the social contract and considers how changes in the global economy have undermined the function of the institutions societies rely on to keep the world a reasonably just place. Fixing up and modernising the social contract is necessary, she writes, “if we are not to witness a destructive fracturing of the mutual trust on which citizenship and society is based.” People have become too disinterested in their obligations to other people and to society as a whole, Baroness Shafik says; they owe each other more.

theguardian.com  13/3/2021  ‘We are seeing a crisis in values’ – an exclusive extract from Mark Carney’s book – The former head of the Bank of England looks at the danger of putting a price on everything – Simon Hattenstone’s interview with Mark Carney – excerpts: “Whenever I could step back from what felt like daily crisis management, the same deeper issues loomed. Can the very act of valuation shape our values and constrain our choices? How do the valuations of markets affect the values of our society? … As we move from a market economy to a market society, both value and values change. Increasingly, the value of something, of some act or of someone is equated with their monetary value, a monetary value that is determined by the market. The logic of buying and selling no longer applies only to material goods, but increasingly governs the whole of life from the allocation of healthcare to education, public safety and environmental protection. … Commodification, putting a good up for sale, can corrode the value of what is being priced. As the political philosopher Michael Sandel argues, “When we decide that certain goods and services can be bought and sold, we decide, at least implicitly, that it is appropriate to treat them as commodities, as instruments of profit and use.”

nationalpost.com  13/3/2021 New book by former central banker Mark Carney reveals him as a man on a mission The book is a meticulous examination of one central question: why are things that are clearly valuable, such as essential workers, undervalued by the market?  John Ivison “Value(s) is a challenge but it deserves to be read, not least because few people in the world have the breadth of Carney’s experience in trying to solve the apparently intractable problems of the financial crisis … and climate change … On markets, Carney can be forgiven for his doubts about their infallibility, having participated in the October 2008 Crash Room meeting at the U.S. Treasury with other G7 finance ministers and central bank governors. It was the meeting at which a consensus was reached to backstop the banking system with liquidity to prevent a repeat of the Great Depression. … Yet, while calling for a rebalancing in the concept of value, he still lauds the power and efficiency of the animal spirits that create wealth. “You absolutely need growth. Dynamism is one of the core values in the book – dynamism for a purpose, to deliver sustainability and a broader equality of outcomes. In terms of markets, I have worked in and around markets my whole life. I know how they work, I know what they need in order to work. You need both sides of Adam Smith – the moral sentiments and the invisible hand. He was all about exchange – exchange of goods in markets and exchange of sentiment in human relations,” he said in our interview. Carney spends a long passage in the book refuting economist Milton Friedman’s contention that the corporate duty of a corporation is to “make as much money as possible while conforming to the basic rules of society.” “Friedman only implicitly acknowledges the importance of moral sentiments,” Carney writes, claiming that rebalanced corporate purpose is the interests of society and shareholders. …

standard.co.uk 15/3/2021 Value(s):  Building a Better World for All by Mark Carney – review by Simon English

In his new book, the former rock star of the central banking world makes the case for why we need to think longer term about how we do business and why companies must have a purpose beyond money. If only he could have said it all sooner, says Simon English

Now he has written a book, Value(s), which, it says here, has won praise from  Gordon Brown,  Christine Lagarde  and  Bono. (We are quite sure they’ve read every word.)  He says the financial crisis was a result of fault lines in the system which meant warnings were ignored. Covid is the same, and worse. The three big crises of the 21st century – credit, Covid and climate – are all down to a common crisis of values. If things aren’t listed on a market somewhere, we don’t assign them worth. …  Markets, he says, are not only flawed as a mechanism for measuring value, their encroachment into our lives has changed those values in the first place. ... There is a history of the financial system and a look at where money comes from – banks invent it when they make loans, is the short version.  … Hmm, one thinks, if only Mark Carney had ever been in a position of authority where he could have influenced the banking industry…  Cheap cracks aside, this is an important book. It would be helpful if the right people read it.


value? value!  articles + videos


edge.org  2018  What is value?      J. Doyne Farmer     –    Oscar Wilde once said that “A fool is someone who knows the price of everything and the value of nothing”. Economists have struggled with this question for several centuries and have largely given up – most modern economists tacitly assert that price and value are the same thing, except for possible “externalities” that prevent the market system from functioning correctly. But many of us still believe that the value of a good poem or a comforting word may not be fully reflected in its price, and that value to society and GDP are only weakly correlated. … I think that, with functionality as the arbitrator, a mathematical framework for distinguishing good and bad designs may be an achievable goal. This has scientific importantane for engineering and economics, and profound implications for philosophy, reilgion, and even politics. In the postmodern world objectivity is out of fashion. Perhaps it is time for reality to make a comeback.


fixingtheeconomists.wordpress.com   2014   Joan Robinson’s Critique of Marginal Utility Theory

“I think Robinson is correct. Marginalist doctrines fit market socialist or market communist societies better than they do capitalist ones. That today’s marginalist economists think otherwise is merely indicative of their extreme lack of imagination: there are no Marshalls or Wicksells among today’s oh-so vapid marginalists.  For this reason Robinson’s criticisms of marginalism should not be read as being politically motivated. Indeed, criticisms of marginalism should be insulated from all politics. The simple fact is that marginalism is wrong not because it leads to right-wing politics — this simply isn’t true — but because it is a logical mess. This is where Robinson’s more technical criticisms come into play.   First she lays of what the term ‘utility’ means to marginalists. In doing so she quotes Marshall once again. …” 


“In their book Modern Political Economics: Making Sense of the Post-2008 World, the authors … discuss what effect the discovery of marginalism’s inherent uselessness had on the Austrians:

Faced with the impossibility of mathematically deriving prices and quantities on the one hand and a metric of social welfare on the other, some Marginalists understood the limitations of their utility calculus. Mainly of an Austrian persuasion (most notably Ludwig von Mises, Friedrich von Hayek and Joseph Schumpeter), they even gallantly tried to use this failure to the advantage of their claims on behalf of untrammelled markets and against the encroachments of collective agencies, trade unions, governments etc.

This was a clever move. While the neoclassicals tinkered with their silly toy-models, trying to show how prices are determined through a sort of grand marginal calculus, the Austrians shrugged their shoulders as to how such a Divine Event could occur. Instead they began to think of price as a sort of Miracle that proved the divinity of the Market mechanism. They then went on deploy this argument to show that anything that encroached upon this Divine Being’s presence was inherently Evil:

If no degree of mathematical sophistication can pin down the ‘right’ prices and quantities, how can a government or any other form of collective agency work them out? How could a socialist economy, or even a national health service, ever price things? Thus, the market mechanism is indispensible because of the radical indeterminacy of prices.

Note what is happening here. The Austrians, like their marginalist brothers and sisters, thought that in marginal utility theory they had found the source from which ‘value’ truly flowed. They never for one moment questioned that. Even when they came to conclude that marginalist analysis could never definitively show anything useful about price determination, they remained confident – indeed, they became even more confident – that such an analysis was Truth.

In short, they postulated a theory and then when confronted with the inconsistencies of the theory when it was applied to any practical ventures they simply threw up their arms and claimed that such inconsistency showed just how true theory was and how much we should respect it.  …                                        read whole article


Mariana Mazzucato on values 

  What is economic value, and who creates it?   Mariana Mazzucato


  Rethinking Value   Mariana Mazzucato


David Harvey on Mazzucato

  David Harvey on Mazzucato’s ‘The Value of Everything’  2019


Journal of Critical Globalisation Studies  2011  Value and CrisisBichler_and_Nitzan_versus_Marx – by Andrew Kliman

Editors’ Note: In this article, Andrew Kliman responds to Bichler and Nitzan’s recent paper on ‘Systemic Fear, Modern Finance and the Future of Capitalism’ (2010). He then goes on to raise a series of issues concerning the critique of Marxian value theory which these authors put forward in their book Capital as Power (Nitzan and Bichler, 2009). It is followed by a rejoinder from Bichler and Nitzan. Introduction: Shimshon Bichler and Jonathan Nitzan’s (B&N) ‘Systemic Fear, Modern Finance and the Future of Capitalism’ (Bichler and Nitzan, 2010) argues that ‘systemic fear’ – fear of the death of the capitalism – has gripped capitalists during the last decade, as it did during the Great Depression. Their evidence for this claim consists of the alleged fact that these two periods of crisis were the only periods since World War I in which equity (stock) prices and current profits were strongly correlated. Employing the same methods and data as B&N, Part I of this response shows that equity prices and current profits were also strongly correlated during the so-called golden age of capitalism! This should cause us to doubt B&N’s claim that systemic fear has prevailed in recent years. I then argue that flaws in their reasoning should also cause us to doubt their claim that capitalists are normally convinced that capitalism is eternal, as well as their claim that this conviction is crucial to its continued existence. But if the future of capitalism doesn’t hinge on the conviction that the system is eternal, it also doesn’t much matter whether capitalists have recently been gripped by systemic fear in B&N’s sense. Good old regular fear, “the dread and apprehension that regularly puncture [capitalists’] habitual greed” (Bichler and Nitzan, 2010, p. 18), is another matter. There can be little doubt that good old regular fear was intense at the start of the last decade, and even more intense at the end. Journal of Critical I believe that this good old regular fear was justified and that it remains so. The underlying long-run economic problems that led to the recent Great Recession, and to the weakness of the subsequent recovery, have not been resolved. Slow growth of employment relative to investment during the last six decades has led to a persistent fall in the rate of profit; the fall in the rate of profit has caused capital accumulation and economic growth to be sluggish for decades; and this sluggishness has led to mounting debt burdens (see Kliman, 2011). I doubt that the fall in the rate of profit can be reversed or that the debt problem can be solved without much more destruction of capital value – i.e. falling prices of real estate, securities, and means of production, as well as physical destruction – than has taken place to date. And if these problems remain unresolved, the economy will continue to be relatively stagnant and prone to crisis. But it is difficult to discuss these ideas with B&N, or at all, because they and others like them contend that the theory on which the ideas are based, Marx’s value theory, is internally inconsistent and circular. An internally inconsistent theory cannot possibly be correct. All ideas resting upon such a foundation can thus be disqualified at the starting gate, without further ado. In order to clear the ground for a genuine discussion – one in which B&N’s approach to questions of crisis and the future of capitalism is compared with and contrasted to something rather than nothing – Part II of this paper responds to the main criticisms of Marx’s value theory contained in their recent book, Capital as Power (Nitzan and Bichler, 2009). In the course of that response, I will discuss inter alia how Marx’s value theory helps to illuminate the long-term difficulties that led to the Great Recession and its “new normal” aftermath. Part III concludes.                                                     read or download article here


A CasP model of the stock market  2016  Shimshon Bichler and Jonathan Nitzan

Abstract : “Most explanations of stock market booms and busts are based on contrasting the underlying ‘fundamental’ logic of the economy with the exogenous, non-economic factors that presumably distort it. Our paper offers a radically different model, examining the stock market not from the mechanical viewpoint of a distorted economy, but from the dialectical perspective of capitalized power. The model demonstrates that (1) the valuation of equities represents capitalized power; (2) capitalized power is dialectically intertwined with systemic fear; and (3) systemic fear and capitalized power are mediated through strategic sabotage. This triangular model, we posit, can offer a basis for examining the asymptotes, or limits, of capitalized power and the ways in which these asymptotes relate to the historical and ongoing transformation of the capitalist mode of power.” Introduction : “The purpose of this paper is to outline a capital-as-power, or CasP, model of the stock market. There are two reasons why such a model is needed: first, the stock market has become the main compass of the capitalist mode of power; and, second, so far, we have not developed a CasP theory to describe it. Surprising as it may sound, all long-term modeling of the stock market derives from a single meta-dogma that we have previously dubbed the ‘mismatch thesis’ (Bichler and Nitzan 2009, 2015a). The basic premise of this dogma is the general bifurcation between economics and politics (a shorthand for all non-economic realms of society) and the further division, within economics, between the so-called ‘real’ and ‘nominal’ spheres. Finance in this dogma is a symbolic nominal mirror that reflects the underlying real economy, but that reflection – and this is the key point here – is imperfect. Financial magnitudes tend to mismatch reality, and the purpose of the model is to explain this mismatch and predict its consequences.3 Our CasP model begins not by negating these conventional findings and predictions, but by giving them a totally different interpretation. … ”          read or download article here       

2016 David Harvey lectures on value

2016 David Harvey Lecture 1 – Capital as Value in Motion

2016 David Harvey Lecture 2 – Value and Anti-Value