Georg Friedrich Knapp's Legacy to Modern Monetary Theory: A Reconsideration

Abstract

This article is a reassessment of the relation between Georg Friedrich Knapp and Modern Monetary Theory, a contemporary strand of economics that, under the term chartalism coined by Knapp, is presented by its proponents as a continuation of his 1905 State Theory of Money. It shows that, contrary to Modern Monetary Theory, which proposes a policy-oriented monetary view of public deficit, Knapp's scientific aim is restricted to finding a generally valid concept of means of payments. Different meanings of the terms chartalism and money also separate the two theories. However, both share an understanding of the use of money as driven by taxes and a general concept of means of payment as a situational counterclaim over a central issuer, be it private or public. In their view, private money always holds subordinate rank inside public monetary systems because of imposed convertibility into state currency. Despite such theoretical convergence, the article shows that Knapp's chartalist theory was not rediscovered from oblivion in the mid-1990s when Modern Monetary Theory made its appearance, in which it arguably played no decisive role.