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
Re: Social Credito
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