BOOK REVIEW
The Lost Science of Money : The Mythology of Money - The Story of
Power. By Stephen Zarlenga, American Monetary Institute, Valatie, NY, 2002.
ISBN 1-930748-03-05. xii + 724 pp. Selected bibliography; chapter end notes;
index, liberally illustrated. Hardbound; printed on a heavy coated paper;
strongly sewn binding; boards wrapped in what appears to be a long-wearing vinyl
material that is unlikely to shrink and warp the cover. (Pictured and described,
with instructions for ordering, at http://www.monetary.org.
) After several weeks with
The Lost Science as the main focus of my reading and writing, my copy has
been subjected to repeated flipping back and forth, making and erasing marginal
notes. The page layout and the high quality paper accommodated this aggressive
approach very well--which seems to have been anticipated by the author
=s invitation to regard the book as a work
in progress, to be not only refined but also extended. The physical durability
of the book will be appreciated by those who welcome it as a mine of supporting
anecdotes and arguments for monetary reform as well as by those who accept it as
a substantial challenge that will have to be comprehended before it can be
countered.
And comprehension is a challenge; this is not a book that is going to win
literary prizes. I have nonetheless been entertained by the chase, in the
fashion of anticipating how the clues in a mystery novel are going to add up to
the solution in the back of the book. Getting to that Aha! experience took me
many weeks of full-time effortBa
luxury that was only possible because I started reading it the day I returned
from hospital in a post-anaesthetic daze following five hours of surgery, and
then had three months of paid leave to recuperate. This is not to say that the
book is boring. Far from that; it is quite often startling. That feature drove
me into a lot of ancillary reading and re-reading to verify and to flesh out an
understanding of what I was seeing in Lost Science. I should add that I
am not a specialist in monetary theory, banking and finance, nor have I
previously immersed myself in the literature of monetary reform. This is
therefore the report of a reader who was initially interested in learning about
the origins and early manifestations of money, and who stayed to find out if the
author could bring closure on some remarkable claims and proposals.
Having made that effort, I now solicit the reactions of specialists in the
broad range of topics the author has embraced, and those of policy analysts and
advisers generally. To assist in that process, I have undertaken here to
summarize the argument and to identify a few questions that may have bearing on
the desirability of the recommendations and the plausibility of their
implementation. I hope this will encourage readers with a critical interest in
the subject matter to overlook the abundant stylistic annoyances and editorial
flaws (some of which might be excused by the announcement that much of the text
was translated from an initial version in German) and react to the message.
The essence
The author and publisher are frank in presenting this work as a political
polemic, with frequent insider rallying calls for the converted and insults for
their adversaries. A reader who approaches it primarily to become informed about
the nature and history of money will have an easier time comprehending the
abundance of interesting material assembled here if he understands in advance
the elements in the AMI campaign. I have attempted to provide that kind of
assistance. There are many themes developed in the book. An early exercise of
summarizing each of them in one or two sentences produced a whole that I found
to be quite simply outrageous. To publish such a summary as a review of the book
would turn away readers other than veteran combatants in the field of monetary
and financial reform. That would be unfortunate, for this is more than an
indignant rant. It represents a significant research effort in secondary sources
and finally succeeds in proposing a solution that brings closure to nearly all
of the issues addressed. I say finally because I remained skeptical right
up to the end of my second or third effort to get the parts to hang together,
and in spite of being sympathetic to the author=s general orientation, I was stunned by
some parts of his argument on first reading. Furthermore, while I am satisfied
that the elements hang together to make a plausible case, I cannot without
competent assistance on several of the topics make a judgment on whether or not
it is compelling.
By lost science, the author means the knowledge of how to conduct a
money supply system in the public interest. Its main principles are
Aristotle=s observations that money
exists not by nature but by law and that usury is contrary to nature. (Being an
inert substance, money cannot be expected to yield an increase--contrary to a
loan of seeds or breeding livestock.) The mythology, on the other hand,
is a welter of confusing and deceptive concepts about the nature of money and
finance that has evolved over time and been propagated by moneylenders and
financiers who use it as an instrument of power. It could be termed the Adark science@ of money. One of its elements is the
doctrine that Areal@ money is a commodity which exchanges for
other goods and services on the basis of equal values of effort required to
produce them. A labor theory of value, in other words. A frequent consequence
when this commodity theory is in application is a shortage of the means for
effecting exchange and hence a depression of commerce and production. Part of
the mythology is an insistence that excessive money supply is worse than not
enough and that governments cannot be trusted to operate an honest and effective
money system without causing destructive inflation. The story of power is
therefore an interpretation of Western history that explains its ups and downs
as a consequence of ill or well managed monetary systems, involving elements of
the Adark science@ used by its custodian-practitioners to
manipulate popular attitudes and politicians. By these means they have
controlled the issuance of money and credit, snaring governments and ambitious
entrepreneurs as well as wage slaves into their service. This has enabled them
and their courtiers and courtesans to live lavishly on exploited labor, the
natural resources of the earth and the common human heritage of
cultural/technological achievements from ages past. In Karl Marx= analysis, the source of social injustice
was the system of industrial capitalism; in the view of monetary reformers the
villainy is transposed to finance capitalists. The most damning accusation is
that the club of international bankers deliberately promote warfare to increase
their wealth and power.
The appropriate response to this situation, in the view of the American
Monetary Institute, is that management of money and credit policy should be a
fourth fundamental branch of democratic governments, on a par with the
legislative, executive and judicial functions. The existing system of central
banks and international clearing houses is a perpetuation of ancient temple
cults and medieval secret societies that have used their gold hoards plus
numerical legerdemain to mystify the populace and control governments. In our
times, their insistence on the control of inflation is an undemocratic
favoritism of plutocrats whose wealth and power are augmented many-fold by
deflation. Their argument that inflation harms mainly widows and pensioners
dependent on fixed interest incomes is dismissed by Zarlenga as a deliberate
fraud, perpetuated by a subservient class of priests who have failed
collectively to challenge the truthfulness of their indoctrination. If
economists consulted the historical evidence, he asserts, they would find that
government money systems have been successful in the past, that what they are
taught about the origins of money is false, and that contrary to the inflation
bogey, the record shows that immensely more misery has been inflicted by
deflation.
Although the argument is presented chronologically in the book, an
uninitiated reader will find it useful to start at chapter 14, read rapidly from
there through chapter 20 and then consult chapter 24 for an exposition of the
AMI policy prescriptions. These provide the context for an argument that is
anchored in U.S. issues and experience, beginning in Colonial days when policies
of the Bank of England were a major element in the impetus to Revolution.
Colonies experimented with their own money systems due to the general shortage
of the instrument. This gave them the courage to try the Continental Currency to
finance the Revolution. And it worked. A century of experiments and controversy
ensued, culminating eventually in establishment of the Federal Reserve System
just prior to the outbreak of WWI. That was not the end of controversy, however,
as the Fed has continued to draw strong criticism from some quarters, as either
incompetent (Friedman) or malevolent (AMI). The particular target of this book
is the ideological position of American Libertarians, whose foundations are the
popular individualism of Ayn Rand and the neoclassical synthesis of marginalism
with capital and interest theory by Austrian economists at the turn of the
20th century.
AMI ridicules the Libertarian position as an arm-chair deduction from
unexamined premises. The premises are easily refuted, in the author=s view, by throwing up some important
counter examples from the historical record. This casts doubt on consequences
and prescriptions inferred from those premises. It is not an approach that
flowers into a fully fleshed narrative, however. The Lost Science of
Money presents a sequence of snapshot instances of the Alost science,@ but the connective tissue is not always
persuasively transparent. Rather than primary research in document archives or
newly discovered traces, the AMI thesis is argued with the assistance of
secondary sources developed in previously published historical works. This book
contains some important elements for a monetary interpretation of history, but
the author acknowledges that it is only a beginning. This shortcoming may be
viewed as an economical approach from the AMI perspective. For if the manifestly
popular argument of their adversary is as flabby as they believe, it may be
polemically strategic to throw up some ringing refutations as a buffer behind
which to prepare the definitive historical case.
Expansion of the thesis
The thesis and the campaign are not new, therefore, but rather the extension
of an American tradition. A strong sub-theme is that American thinkers have been
at the forefront in arguing the principle that money is a public good that
should be supplied by governments. Their adversary in colonial times was the
Bank of England, and the residue of its influence remains as the target of
Zarlenga=s reforming zeal. The
relative success of the Continental Currency was taken as evidence in favor of
government as supplier of money by some observers after the War, including
Jefferson, Tom Paine and Andrew Jackson (Franklin had already spoken in favor of
it in the courts of Europe), but the notion was denigrated by the financial
interests, personified by Alexander Hamilton. The story is therefore linked
closely to arguments over monetary and banking policy in the United States
during the 19th century, involving the 1st and
2nd Banks of the United States, the Civil War issuance of Greenbacks,
and the Populist campaign for bimetallism and free coinage of silver. The
continual churning of this issue spurred research by American scholars into the
nature and history of money and banking institutions. Notable among these was
Alexander Del Mar. Zarlenga cites no fewer than six books by Del Mar, written in
the last half of the 19th century to show that effective and
successful monetary systems were operated by governments in the general interest
from ancient times. Lost Science supplements the Del Mar thesis with
evidence from the work of modern historians that governments anciently were the
monetary supplier and regulator.
The assertion that conventional understanding about the nature and origin of
money is defective requires a persuasive explanation, for it is not believable
that a topic so central to human interests has not drawn the attention of
investigators before now. Indeed, Zarlenga has relied upon such investigations.
It is therefore necessary to explain why they have been ignored and do not
constitute a regular part of the curriculum in civics and political economy. The
loss of the Ascience of money@ seems to require either stupidity or
suppression of the truth. Either way, an angry finger points inevitably at
specialists in the broad domain of political economy as academics or advisers to
governments and interest groups. The AMI explanation suggests deliberate intent
to evoke voluntary stupidity via cupidity.
Big and powerful banking companies are portrayed here as being old, based on
secretive lore and traditions which are carried in family dynasties or
fraternities. AMI has assembled an interesting array of traces from the distant
past to show that money (in a European-Middle Eastern context) has always had a
mystique associated closely with religion, priesthoods and gold. Knowledge of
how to manipulate money and credit are ancient secrets of the temple and
protected by temple cults. The book attempts to show that this generalization
has continuous application from antiquity up to modern times. One segment of
this loosely connected story is that the Knights Templar rose to sudden wealth
and power during and after the Crusade that attacked Constantinople in 1204.
Until that time successors of the Roman Emperor had exercised significant
control over European monetary affairs through their ability to assert a
gold/silver exchange ratio that had been maintained since it was set by Julius
Caesar. The Knights obtained the secret of how this served to constantly funnel
wealth into the empire while they were also looting its treasury. After then
dominating economic and political affairs in central Europe for many decades,
the Knights were driven out but escaped with a great treasure hoard which they
took with them to Scotland, there to found Scottish banking dynasties that much
later on persuaded Adam Smith to create a fantasy doctrine which papered over
their dirty trade secrets and sent generations of economists on a wild goose
chase. (Zarlenga does not claim to have an iron-clad case for this explanation,
but has not shrunk from putting it forward as a plausible supposition.)
The author finds that the Lost Science is virtually unknown to
mainstream economic thought. Instead of exploring and explaining the nature and
proper management of money, as a public duty of their profession, Zarlenga
complains that they have instead functioned as a priesthood to protect the
machinations of the powerful clique who control money and finance, by
obfuscating simple reality with a cloak of mystery. This is not a
straightforward matter of bribery or servile status, for economists have
deceived themselves with a non-scientific approach to their subject matter. The
wrong turn in their thinking coincides roughly with the waxing influence of the
youthful Bank of England in the middle decades of the 18th century.
They then followed the lead of Adam Smith in a false notion of money=s origin and nature. This was not simply a
wrong turn, in our author=s judgment,
but rather a deliberate put-down of more enlightened views that were then
gaining currency.
The indignation of Lost Science over the role of economists is shared
by the authors of all the monetary reform literature that has come to my
attention. (But I have not made a systematic search.) Not only is the standard
approach of economists completely mistaken, reformers suspect it is even that
way by design. Regardless of intent, however, dominant economic doctrines have
been at least permissive of unfortunate myths about the nature and functions of
money. These myths have served to perpetuate unnecessary misery and injustice on
a global scale for many centuries. In the view of reformers, inadequacies in
monetary systems and popular understanding of them explain much if not most of
the infelicities suffered in the Western world since the dawn of history.
As noted above, the political adversary of AMI is the attitude of
contemporary Libertarians, and the vitriol about economists is fairly
interpreted as frustration for their failure to provide support. While Adam
Smith provides a handy (because hoary) text for the Libertarian view, the
villainy of economists was compounded a century later by the marginalist
revolution in economic doctrine. Stanley Jevons is fingered as having
deliberately buried the dawning recognition that the true nature of money is an
institution of the law, as having laid a foundation for the fixation of monetary
policy on inflation, and as assertively presuming that monetary policy should be
in the hands of one privately controlled bank (pp. 356-9). The Austrian
contribution to the marginal revolution is also associated with suppression of
the re-emerging science of money. Carl Menger=s 1892 publication AOn the Origin of Money@ (Economic Journal) is juxtaposed
here with a book published in the same year and which Zarlenga has identified as
an important source of his information about early monetary systems: William
Ridgeway, Origin of Metallic Weights and Standards. Ridgeway was a
student of classics, judging by his publications, and Zarlenga says that because
his book Apresented a powerful
argument for an institutional origin of money, Carl Menger felt compelled@ to (re) issue his argument for a trading
origin of money. This attribution of intent is supported by no more than
co-incidence, and the timing seems strained. It would be reinforcing to see
something from Menger=s EJ
essay that mentioned Ridgeway specifically and negatively. Regardless of that
detail, however, the Austrian position became unmistakable a couple of decades
later, following an intervention from the German Historical School by Georg
Friedrich Knapp. The Lost Science celebrates Knapp=s 1905 book, The State Theory of
Money as a primary exemplar of the AMI policy position. Controversy arose
between the Knapp and Menger views, and Ludwig von Mises issued the definitive
response from the Austrian side, says Zarlenga, in his Theory of Money and
Credit, a 1912 statement that was subsequently reinforced by Friedrich
Hayek. This Austrian perspective is the principal source for the contemporary
doctrine on monetary policy that is promoted by Libertarians, according to
Zarlenga, and its polemical representation by Ayn Rand is the particular target
of AMI indignation. Even more significant, of course, is the position of her
most prominent acolyte as Chairman of the Federal Reserve Board of Governors.
The doctrines of the devil, in other words, suffuse the foundation and the
figurehead of the chief instruments of villainy, the Fed, the BIS and IMF.
Chapters 19 and 20 are the climax to the story of money, arguing that
establishment of the Federal Reserve System was a successful conspiracy fostered
by venerable European banking houses, and that the clumsy Fed then Awrecked America@ . The bankers are said to have assembled
institutions of greater power than they really knew how to handle, and neither
themselves nor economists really understood what would happen when they tried to
use these powers in their own interest. Another interpretation, which AMI
prefers, is that the Fed was the ultimate instrument of evil designBat least for the time. Not content with
that success, however, the insiders=
club went forward to even greater power with the scuttling of reserve
requirements and the pushing up of BIS and IMF. Zarlenga believes, with quite a
lot of anecdotes in support, that they are evil in their intent to foment wars,
for that is how they truly gain wealth and power. Regardless of motive, the
effects are demonstrable in hindsight, and widely acknowledged as mistakes, most
notably the Great Depression.
As with most monetary reform literature I have encountered, the primary
target of Lost Science criticism is interest and the loan pyramids that
pour a torrent of revenues into banks=
account books (the primary content of their vaults). What really inspires the
indignation of reformers is the ability of financial barons to extend their
power and to overturn every ethical principal ever raised against usury. They
lend something that doesn=t really
exist (a social faith of some kind) and charge interest on it. This argument is
developed only very slowly within The Lost Science, for the initial
chapters are all about fiat versus commodity money. That part goes down without
difficulty, but it inspires a question about the difference between money and
credit and how the author is going to bring credit in under the same rationale
that makes money supply a quintessential government function. The question was
sharpened by some ancillary reading in Henry George (The Science of Political
Economy) which makes a very interesting and persuasive case for the
likelihood that credit is a natural precursor to money. It becomes an ever more
obviously important question as the usury issue comes into focus as the main
target of AMI=s campaign. Full clarity
breaks through only in the very last chapters. Finally, however, the distinction
between money and credit is fully acknowledged: AThanks to confusion over the nature of
money, the Fed=s measurements of the
money supply are primarily measuring the credit supply. But credit and money are
two different things, and Fed Chairman Greenspan admitted in recent testimony
that he was having difficulty defining money.@ (p. 548)
The clarification that credit is different from money is followed a few pages
later (p. 571) by these words from the Archbishop of Canterbury (William Temple)
that embrace the AMI goal of making money (and credit) supply a function of
government: AThe private issue of new
credit should be regarded in the modern world in just the same way in which the
private minting of money was regarded in earlier times. The banks should be
limited in their lending power to the amount deposited by their clients, while
the issue of newer credit should be the function of public authority.@ That initiative by the Church of England
in 1942 was followed in 1946, we are told, by nationalization of the Bank of
England.
By the time I had been through six chapters of demonstration that good money
gets its value by fiat, I was salivating for an equally telling argument that
credit can be handled by fiat as well. The mood is set by the observation that
since bankers are making loans out of thin air, the business is really a public
good (air being after all the quintessential common property). An atmosphere of
suspense is created with the implicit but nagging question: Can the business of
extending credit, which seems inevitably to require a mutual assessment of
prospects by two parties to every individual loanBa borrower and a lender, actually be turned
over to a government bureau? And how can a prescription this fundamental be
reached through empirical demonstration? Once it is acknowledged that most money
is credit, how can Wm. Temple=s rule
be implemented? If every depositor account is a transfer of credit from someone
else, and most are also liabilities that the bank may be called upon to honor
without prior notice, how can the banker possibly make any loans at all? He has
nothing to lend except credit. The solution to this puzzle is revealed at the
surprise ending which, in spite of the clues that were dropped abundantly
through the text, I am chagrined to admit that I didn=t see coming.
The answer is called Athe 100%
Reserve Solution@ and is attributed to
both Frederick Soddy and Henry C. Simons. It works by printing enough government
authorized notes (legal money) to equal the total of credit money in existence.
This would be used to liquidate all existing bank loans, and new money would
henceforth be issued only by a government authority. Bankers would then be
restricted in their lending to the extent of this new paper money in their
vaults, deposited with them by customersBa modern equivalent of the goldsmiths= system but with >greenbacks= replacing gold. The issuance of new money,
restricted to a government authority, would finance meritorious public
investment projects and pay for public services, but it could also be direct
cash to consumers. The fourth fundamental branch of government implied here
would therefore have fiscal and budgetary implications; it would issue new money
not only to grease the wheels of commerce but also to supply >public goods= and possibly even a minimum income
supplement to maintain consumption standards.
In another surprising twist, given the generally venomous tone of Lost
Science toward economists, prominent members of the American Economics
Association are acknowledged to have written up this plan in 1939 and gotten it
endorsed by hundreds of their peers.
Toward an evaluation
As a mystery novel, it works. Several interesting sub-themes in the book
distracted me into ancillary literature for clarification or confirmation of
puzzling or startling assertions or innuendo. The final solution does draw
together most of these threads. But is it a sufficient solution to the problem
that inspires AMI effort? And if it is conceptually sufficient, what are the
prospects for its implementation?
It is not difficult to see that it would emasculate a lot of usurers (banking
and finance companies). Furthermore, it does so without having to perform the
anticipated trick of transferring the arguments favoring fiat money to the
credit money system (which would say in effect that new credit should be issued
only by government). And it explains an accusation repeated several times in the
book that the views of some distinguished scholars are Achildish@. In retrospect, this adjective is meant to
suggest that the requirement of intrinsic value (or gold backing) for an
acceptable money is not worthy of adults who can think abstractly. Part of the
lead-up to the policy prescription is a distinction made at several places in
the book between deposit banks and banks of issue. The 17th century Bank of
Amsterdam is cited as an example of the former, and the Bank of England of the
latter. The Bank of Amsterdam is saved from being a bad example by the fact that
it was owned by the city (government), for it did issue moneyBits own notes. But it apparently did not
issue credit money, as did the Bank of England, which was set up in cooperation
with some of the Amsterdam businessmen who wanted to escape that restriction and
make profits by financing the wars of feuding princes.
The policy orientation of the new monetary authority would be to assure an
ample money supply, in contrast to the generally deflationary preference of
private financiers. Creditors win in a money crunch, and monetary reformers
(borrowers) traditionally prefer inflation for the mirror opposite reason.
Zarlenga argues that a managed (government) money system need not succumb to
inflationary temptations, and in principle that may be true. Nevertheless, in
pointing to experience with Continentals, Greenbacks, and the German
hyperinflation, he does acknowledge that counterfeiting was a major contributing
factor in the loss of value suffered by these fiat money systems. This may be
due to an operational problem that occurs to me: The 100% reserves solution
seems to entail an awful lot of paper and printing, and trucks to carry it
around. The weight and bulk can be reduced, of course, by printing a large share
of it in very large denominations. But would that create problems of
divisibility when a banker wanted to make a modest sized loan and didn=t have a sufficient supply of notes in
convenient denominations? Are bulk reduction and divisibility an inescapable
dilemma in such a system? The very high denominations required for bulk
reduction would certainly be a tempting invitation to counterfeiters. Unemployed
bankers could become printers and engravers. Unless technical solutions are
found for this problem, the system does seem vulnerable to a particular type of
inflation.
A major implication of the solution is that the proposed fourth branch of
government would be much more than the instrument of monetary policy. It seems
inevitably to be the major, if not the only, instrument of fiscal and budgetary
policy as well. Since money would enter the economy via government spending, the
fourth branch would require the power to over-ride the spending and cost-cutting
aspirations of the legislature and executive branches. Thus its implementation
does entail profoundly revolutionary change to systems of governance. It implies
tight integration of monetary with budgeting, spending and taxation policies.
Before committing themselves to a revolutionary aspiration of this magnitude
I should think that reformers would want to do some strategic thinking about
their prospects for success. An effective and sufficient strategy should include
answers to the following questions:
- Is the goal accurately and adequately specified?
- Is the conceptual solution one that will achieve the goal?
- How large is the potential revolutionary constituency?
- Is the propaganda campaign adequately conceived and specified?
- Have the adversaries of reform been accurately and adequately
identified?
- If the goal is achieved, will it satisfy the underlying values that drive
reformers?
Popular understanding and attitudes are obviously critical to the success of
such a revolutionary undertaking. Are citizens of democracies sufficiently
indignant to throw the bastards out? And which bastards? (AWhen the mob goes in search of food its
first action is to wreck the bakeries.@ At the height of civil rights agitation in
the late1960s, the mob in Detroit burned down their own homes.) Extreme
concentration of wealth and power is much in the news these days, and fraud in
corporate executive offices has victimized many small savers who believed they
could make up in capital gains what they were lacking in wages and salaries. But
does this distress translate easily to a focus on money and banking policy? Can
bankers be fingered as the chief villains in the spectacular stories of
executive suite embezzlement and Wall Street fraud? The chief accomplices of CEO
thuggery seem to be accountants--and lawyers always, of course. Banks were
definitely involved (the second largest Canadian bank recently agreed to pay a
fine of almost $100 million to the SEC for its part in the ENRON scam, and now
international banks are embroiled in the Parmalat fraud), but does that mean
that usury is the source of all the evil? Would the 100% solution have prevented
this?
The enduring dilemma for reformers is the passivity of what should be a mob.
Why do citizens in a democracy not get rid of their oppressors? Ferdinand
Lundberg explored the phenomenon in the mid-sixties in The Rich and the
Super-Rich, at a time when the question was why the rich (e.g. Goldwater)
did not rise up against the super-rich (Rockefeller). His answer was that the
merely rich didn=t want to foreclose
on opportunities to become super-rich themselves. The American dream fizzled out
in the 1970s and after a period of dithering and unease reasserted itself as
denial, via technological and military imperialism. Now it is not the
comfortably rich whose motives arouse the curiosity of thinkers and writers, but
rather the struggling representatives of the diminishing middle class. Michael
Moore has captured this phenomenon in his 21st century advice on
Ahow to talk to your conservative
brother-in-law@ about his illusion
that the powerful thugs who are stealing the American birthright are actually on
our side.
The AMI response to this dilemma is to put the blame on economists
(especially the resurgence of neoclassicism against the Keynesian heresy), Ayn
Rand and Bible-reading by the masses. This seems a bit misplaced when the most
obvious malefactors have credentials as accountants and MBAs. But that would be
to put the blame on technology and invite the defence that Aguns don=t kill people@. It is really the attitudes of the
malefactors that motivate and permit their bad behavior, and the sources of
contemporary morality identified in Lost Science cannot be easily
dismissed. The main issue raised by Lost Science is therefore the role of
economistic reasoning in the creation of modern moral sensitivities. Is it
responsible for Amarket populism@ and Amarket fundamentalism@?
Identifying economics as the adversary doesn=t open up an obvious strategy, however. The
first difficulty is that there are Agood@ as well as Abad@ economists. Those who proposed and
endorsed the A100% solution@ have to be acknowledged as acceptable and
even admirable. How did they come up with a sane and desirable policy in spite
of their presumed grounding in economic theory? Zarlenga says that a new breed
of money managers must be developed, and that persons with specialized training
in economics must be excluded as having lost the necessary elasticity to learn
something that conflicts with their indoctrination in orthodoxy. Hmmm. Does he
risk throwing out the baby with the bathwater? It has been done before, as when
Renaissance thinkers and early moderns rejected the system of their scholastic
masters. As a graduate of the Hutchins program in reading and critical thought
at the University of Chicago, Zarlenga is probably familiar with Mortimer
Adler=s criticism that many of the
problems in modern policy analysis are due to philosophical mistakes by those
impatient movers and shakers--which could have been avoided if they had paid
closer attention to Aquinas and Aristotle. He in fact takes a similar stance:
That the scholastics were right in their criticism of usury, and that virtually
all of economic theory is a mistaken moral philosophy based on rejection of the
medieval structure that had been painstakingly erected from an Aristotelian
base. That still leaves the nagging problem of how to account for the Agood@ economists. Zarlenga provides an answer
for that question too, personified as Georg Friedrich Knapp, whose empirical
(historical) approach is contrasted to the armchair seductions of the moral
adversary, represented by Menger and Jevons. Zarlenga can therefore claim to be
working with purely empirical methods and come up with a policy recommendation
without imposing his own value judgments. The moral teaching was there all the
time, in the work of Aquinas. The perverse moral science of economics was
erected under the influence of rash radicals who flouted the authority and
wisdom of scholastic tradition, curried favor with the rising merchant (and
money-lending) classes and encouraged the masses to believe that by being able
to read the Bible they were also competent to think for themselves.
The potential efficacy and economic wisdom of the solution I leave to the
evaluation of others more competent than me. Based on my own experience with the
story, however, I am skeptical of its immediate effectiveness as a political
instrument. The novelty of the whole and of many individual parts lead me to
doubt that there is a mass audience ready to pounce upon it as Athat=s it! This is the answer I=ve been groping toward!@ Virtually everyone has some complaint
about Athe economy@, but it seems to be mainly non-economists
who believe they have the Aready and
easy way@. Monetary reformers are no
exception. But how many potential voters are agitated over the specific issue of
monetary reform and believe it is the strategic first or next step to restoring
or establishing democracy? Maybe more than I suspect. But if the masses are not
ready for the manual of revolutionary warfare, education and infiltrating the
academy may prove ultimately to be the best strategy. To that end, AMI=s priority should be publication and
discussion of the 1939 petition by members of the American Economics
Association.
I have been moving and re-shelving books recently, and was struck by a sense
of the absurd in looking over dozens of titles addressing the task of economic
development under the presupposition of rational, civilized and systematic
progress toward shared goals. How naive and futile in these days of daily
documented proof that it is raw force, technological power and gross political
corruption that determines the pace and destination of Adevelopment@! The strategic immediate choice for people
in almost every nation seems to be a focus on whatever it takes to motivate
eligible voters in the United States to evict the buccaneers who have assumed
imperial power for themselves. __ Keith Wilde
By request of Rich
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