The word “taboo” was introduced into the English language by Captain Cook from the Tongan word meaning forbidden or forbidden, in his 1784 book A Voyage to the Pacific Ocean. He is associated with both the saint and the unclean. In his 1890 book The Golden Bough, Scottish anthropologist James George Frazer argued that taboos were a return to the age of magic. Human belief progressed in three stages: primitive magic was followed by religion, which in turn was followed by science. The taboos belonged to the first stage and could be considered as a kind of negative magic: “The purpose of positive magic or witchcraft is to produce a desired event; the purpose of negative magic or taboo is to avoid the undesirable.
So what could be called an economic taboo? Well, to start with something basic, how about the money. Economists of course use money as a measure all the time – but they have long shied away from talking about how things are actually created. In fact, as economist Richard Werner noted in 2016, the subject “has been a virtual taboo for thousands of central bank researchers around the world over the past half century.” According to economist Norbert Häring, “A summary observation suggests that the creation of credit or the creation of money are taboo words in major journals. “
Textbooks have traditionally dodged the subject, saying the process is controlled by central banks, but the reality is that the vast majority of money (around 97% in the UK) is created directly by private banks. When banks give loans such as mortgages, the money is not taken elsewhere; it is just created on the spot, as if by magic. The taboo around money creation has started to lift in recent years, starting with a Bank of England article in 2014 that admitted that the story in the Standard Handbook was wrong. But it seems strange that the misunderstanding could have lingered on for so long. Perhaps one of the reasons is that, as banks have long known, the best way to make money is to do it literally. Creating money through loans is a very good business because the bank can charge interest on all that new money. As Häring notes, this “pecuniary advantage” is not addressed in the textbooks, which again “points to a taboo imposed by the interest of a very powerful group”.
Yet other types of businesses are profitable as well – so what makes money special? The reason is linked to another taboo subject – which is the subject of power. Classical economists and thinkers such as Thomas Hobbes and Adam Smith recognized the connection between money and power – as the latter wrote: “Wealth, as Mr. Marlet. But he has since fallen out of favor. In fact, economist Blair Fix performed an analysis of the frequency of words in economics textbooks and found that “What defines greenism is that power is clearly absent.”
This reluctance to approach power is there in the very definition of the economy. English economist Lionel Robbins wrote in 1932 that “economics is a science that studies human behavior as a relationship between rare ends and means that have alternative uses” and similar definitions still appear in modern textbooks. Gregory Mankiw’s widely used textbook Principles of Economics, for example, defines economics as “the study of how society manages its scarce resources.”
The crowbar of power
But if you look at how scarce resources are actually allocated in the real world, it would be more accurate to say that what matters is power. Money is certainly a tool used by the powerful – as Nietzsche said, “money is the crowbar of power” – but other things can work too, like an army.
And if anything, it would be more accurate to say that the economy eschews the question of how we distribute resources – and indeed has long treated it as a taboo. Robbins wrote that because the subjective utility of one person cannot be measured against that of another, the whole question of equitable distribution is “entirely foreign to the assumptions of scientific economics.” Or, as Nobel Laureate Robert Lucas said in 2004, “Of all the trends that hurt a healthy economy, the most alluring, and in my opinion the most poisonous, is focusing on distribution issues. For example, one of the most obvious economic signals today is that, on average, white males earn more than others.
Yet, given the lack of interest in power relations, it is perhaps not surprising that the words “sexism” and “racism” are entirely absent from the economics corpus, according to Fix. As the New School’s Darrick Hamilton argued in a lecture, “What we need to do as economists is to better understand the roles of power and capital in our political economy.” A first step is to relax some of these economic taboos and restore money and power to their rightful place at the center of the economy.