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Functional Finance: What, Why, and How?


  • Stephanie Bell


The purpose of this paper is threefold. First, the theory of functional finance, as explicated by its originator, Abba P. Lerner, is put forward. Second, the reader is introduced to the use, standard in money and banking texts, of T-account balance sheet entries. Although no important conclusions will rest solely on the reader's ability to cope with these entries, comfort with their use will ease the exposition. An appendix therefore is provided to assist those not yet exposed to this method of recording balance sheet changes and for those who merely wish to refresh themselves. The third purpose of the paper is to demonstrate the need for policies governed by the principles of functional finance.

Suggested Citation

  • Stephanie Bell, 1999. "Functional Finance: What, Why, and How?," Economics Working Paper Archive wp_287, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_287

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    References listed on IDEAS

    1. Smith, Bruce D. & Villamil, Anne P., 1998. "Government borrowing using bonds with randomly determined returns: Welfare improving randomization in the context of deficit finance," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 351-370, April.
    2. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, July.
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    Cited by:

    1. Pavlina R. Tcherneva, 2008. "The Return of Fiscal Policy: Can the New Developments in the New Economic Consensus Be Reconciled with the Post-Keynesian View?," Economics Working Paper Archive wp_539, Levy Economics Institute.

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