Does Anybody Understand This Stuff?: Part 6, Classical Liberal Economics – A Thumbnail Sketch of 4,000 Years of Economics
Sourcing Wikipedia, originally, political economy meant the study of the conditions under which production or consumption within limited parameters was organized in the nation-states.
In this way, political economy expanded the emphasis of economics, which comes from the Greek oikos (meaning “home”) and nomos (meaning “law” or “order”); thus political economy was meant to express the laws of production of wealth at the state level, just as economics was the ordering of the home.
The phrase économie politique (translated in English aspolitical economy) first appeared in France in 1615 with the well-known book by Antoine de Montchrétien: Traité de l’economie politique.
Today, political economy most commonly refers to interdisciplinary studies drawing upon economics, law, and political science in explaining how political institutions, the political environment, and the economic system—capitalist, socialist, mixed—influence each other.
In a larger sense, political economy really encompasses the interrelationship of the fields of:
- Political Science
- Human Geography
- International Relations
- Cultural Studies
In our highly “division of labor and thought” world, I think it is important to stress the “connective-ness” of things in nature, meaning, how things really work, instead of the nice tidy little boxes where we put everything. Political economy is one such reminder.
Liberal (classical) Economics
This would naturally lead to the general populace having almost unlimited control of their own lives and being free to make their own mistakes, or in other words, individuals and families being responsible for themselves.
It is an economic philosophy that supports and promotes individual liberty and choice in economic matters and private property in the means of production (see recent post – The Servile State). As there are a number of contributors to the philosophic underpinnings of this economic philosophy, it is safe to say that classical economic liberalism marginally supports government economic regulation regarding monopolies and corruption, but it tends to oppose government intervention in the free market.
Today, the adherents of economic liberalism promote and oppose the following:
- Private property
- Limited social welfare programs to compensate for the market inequalities that are inevitable in a free market
- Equality of opportunity
- Individual contracts motivated by self-interest
- Patents and copyrights to encourage innovation
Classical Liberalism developed roughly through the following phases:
Phase I – Rise of Measurement
Descartes, Hobbes, Bacon and others applied mathematical and statistical functions to measure economic facts. The goal was not to predict, but only to measure.
Phase II – Locke
Locke’s contributions were plentiful:
1. He was the First person since Aristotle to vigorously promote private property as a natural and inalienable right.
2. Promoted the use of interest on market value and a strong metallic money.
3. Only demand and supply, in the free market, can adequately determine prices (because prices are determined by buyer’s perception of utility and/or value in the matrix of supply and demand).
4. The Labor theory of Value: if a person works on a piece of unimproved land (or other commodity or natural resource), and his labor makes it more valuable than if he hadn’t touched it, then it is his property. A person may also contract with an owner and labor on the same parcel of land but can only receive compensation in the form of cash or commodity or equity.
Phase III – Adam Smith
Smith added to Locke with these concepts:
1. Man is commanded by God to care for self and family, then to care for others.
2. Men naturally seek wealth because of the desire to emulate those above them.
3. Man had a natural right to property (God-given + personal labor).
4. Government must protect private property; it must do nothing else. (This idea from laissez faire school of economics).
5. The Invisible Hand. The free market harmonizes competition into cooperation. Government is needed to curb man’s desire to find “an easier way” for self at the forced expense of others (monopoly, corruption, etc).
6. The Labor theory of value (same as locke).
7. A good economy is based on self-reliance and competition.
8. By pursuing their own interests, men generally promote the interest of society.
9. Division of Labor is natural, automatic, and good.
10. The Natural Price comes automatically in a free market where demand and supply coincide.
11. Wages are simply prices paid for labor; they follow the same rules for prices of goods.
12. Interest is simply the price paid for capital. It follows the same rule as those of prices for goods.
13. The invisible hand applies to foreign trade as well as domestic.
14. If the government is fulfilling its role and doing nothing more, taxes are reasonable and right.
15. The government’s role is to protect the rights to try, buy, fail and sell. It’s role is to protect property and man’s attempt to (rightfully and justly) obtain it.
Phase IV – Say, Malthus, and Ricardo
Say’s Law is “Production creates demand.”
Malthus’ Law is “Gains in property made by this generation will be nullified by the increase in population.”
Ricardo made economics it’s own branch, separate from political science and philosophy. He also contributed the principle of comparative advantage.
Phase V – Bastiat
There is too much to cover regarding Bastiat here, I recommend a great read entitled, Essays on Political Economy.
Phase VI – Mill
John Stuart Mill had the same basic views as other liberal economists, plus these contributions:
1. Actions are right to the extent that they promote happiness. They are wrong to the extent that they promote misery, sadness or unhappiness.
2. Moral convictions, not material interests, must govern societies (This is because when men govern [choose] based on material interests, they will often choose immediate rewards and advantages that are detrimental to happiness in the long run. The temptation to pragmatism is so great when material is pilot and moral convictions are co-pilot that future happiness is in real jeopardy. Moral convictions are usually aligned with the most enduring happiness—more so than material.
3. Freedom is paramount. And true freedom must have some restrictions, obligations, duties, and boundaries that maintain a proper level of order so that freedom can survive, otherwise a brief period of anarchy will be followed by a power vacuum and then a dominant leader who is apt to lay moral convictions aside for material wants.
4. Government’s role is to protect the individual from others.
5. Governments may do whatever is necessary to help the most people be happy.
Number 5 got Mill off track a bit. Although the concept may be theoretically solid, the application invites interventionist policies.
The next post will discuss the great fractionalization of economics. Economic laws make sense to most people, it is the application of the laws and the interpretation of the laws that split the debates so widely.
Does Anybody Understand This Stuff?: Part 5, Mercantilism and The Physiocrats – A Thumbnail Sketch of 4,000 Years of Economics
Mercantilism and the Physiocrats (1500-1800AD)
This system dominated Western European economic thought and policies from the sixteenth to the late eighteenth centuries.
Belloc says that this is when Capitalism originated in England, not the result of the Industrial Revolution, but rather already in place to take advantage of the innovation of the age.
The goal of these policies was to achieve a “favorable” balance of trade that would bring gold and silver into the country and also to maintain domestic employment.
This economic system led to Colonial Mercantilism, an easy extension of the feudal system. A strong government would invade another country, colonize it and use its natural resources to build wealth for the mother country.
High tariffs were placed on import trade but the proceeds were funneled to the mother country, not the colony. The mother country would also force free trade policies on the colony for any trade goods passing from the colony to the mother country.
In addition to receiving the bulk of the proceeds from the excessive tariffs forced on the colonies, the mother country demanded and usually received ever increasing taxation. These colonization policies normally resulted in revolution or intense military occupation.
Physiocracy (from the Greek for “Government of Nature” – Physio = Natural – Crat = rule or Rule of Nature or Natural Law) is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of “land agriculture” or “land development.” Their theories originated in France and were most popular during the second half of the 18th century.
The movement was particularly dominated by François Quesnay and Anne-Robert-Jacques Turgot. The most significant contribution of the Physiocrats was their emphasis on productive work as the source of national wealth. This is in contrast to earlier schools, in particular mercantilism, which often focused on the ruler’s wealth, accumulation of gold, or the balance of trade.
Many of the key points of this economic philosophy seem to contradict each other, especially when applied by others and when given the force of law. Some would say that it contributed to the chaos of the French Revolution:
1. They rejected mercantilist focus on foreign trade. Focused on controlling domestic economy through farming mostly. Anything that was not domestic and /or agriculturally based was considered of secondary importance.
2. They believed that statutory laws should seek to be in line with natural laws. They took the mechanistic worldview of Isaac Newton to the study of the social production and distribution of goods and services.
3. They believed real wealth comes from agriculture. Workshops and Industrial Plants only promote wealth secondarily.
4. They were not against mercantilism per se but against the regulatory nature of mercantilistic governments. The following outline covers the basic mind set:
A.) The natural tendency of mercantilism is to produce wealth. The theory of mercantilism left to its own devices would increase the wealth of a nation. The problem lies in the excesses of government oversight.
B.) The natural tendency of merchants is to serve their self-interest, and in pursuing their self-interest everyone benefits from the excess wealth they create.
C.) Mercantilism naturally results in increasing the productivity of labor.
D.) Government interference in mercantilism—through taxes, regulations, price controls—hinders the activities of merchants and so prevents these natural laws of economics to take place.
E.) The benefits—increased wealth, increased productivity—will rarely be realized if government regulation is allowed. They saw the application of mercantilism in their time as manufacturing (secondary), International (non-domestic and so, secondary) and fraught with government regulations that slowed the natural process of the market.
6. They introduced the scientific method to economics (created a study of the flow of labor and wealth and the regularities of the market—and in so doing really helped to set the stage and vocabulary for Adam Smith).
7. They promoted:
- Government use of subsidies and tariffs to stimulate manufacturing at home.
- Government price setting to keep product prices from going too high.
- Government setting the value of money.
- Private property ownership (when the focus was domestic agriculture and manufacturing).
- The concept of “let the people make as much as they can.” Inequality is natural and good.
- Easy capital and interest for domestic farmers and manufacturing.
- An absolute monarch and divine right of kings.
- Laissez-faire economics.
On the face of it, many of the ideas and concepts of the Physiocrats had great merit. But their application was very contradictory and inconsistent. They wanted to combine absolute monarch, private property, protectionism, and laissez faire. And force it all to work with government intervention.
The French Revolution of 1789-94 was at least partly a result of these policies which sounded to good to be true (which means they are almost always not true), but actually backfired because of a lack of proper governmental protection for the masses and because of corruption in the government and the moneyed aristocracy.
Next……Classical Liberal Economics.
Does Anybody Understand This Stuff?: Part 4, Medieval Economics – A Thumbnail Sketch of 4,000 Years of Economics
Medieval Economics (500-1200 A.D.)
Medieval European economics are generally divided into 4 parts:
- Early Medieval Economics
- The Influence of Aquinas
- Late Medieval Economics
- The Influence of Bodin
Early Medieval Economics
There are five major expressions of Early Medieval economics:
1. Feudal System*
2. Guild System
3. The power struggle between the church and state
4. The power struggle between the aristocracy and the serfs
5. The early emergence of the merchant class
During the latter period of the Roman Republic, the dominant senatorial class was not allowed to engage in banking or commerce but relied on their latifundia, large plantations, for income. They circumvented this rule through freedmen proxies who sold surplus agricultural goods.
After the decline of the Roman Empire, de-urbanization led to commerce and trade ceasing to exist throughout most of western Europe. Economies became centered around agricultural manors where warrior-landlords, the Medieval nobility, collected rent from their serfs in the form of their produce. Over time this lead to what Belloc terms the Distributive State. This was the dominant economic system until trade began to return in the Late Middle Ages leading to the rise of the merchant class, mercantilism and then capitalism.
The Influence of Aquinas
Thomas Aquinas is credited with influencing medieval economics by the return of or at least the serious consideration of three economic keys that seemed to be lost or little used during the end of the Roman Empire and the beginning of the medieval period:
1. Private Property
Aquinas stated that the concept of private property was biblical and a part of the law of nature. Then he qualified this concept with the philosophy that owners had an obligation to share their possessions with others, while still retains ownership.
He also suggested the propriety of private property being regulated by the government. And finally, he declared that communal property was reserved for those who wanted to live the life of perfection (clerical or monastery life).
2. He taught that merchants should never charge more than a just price for goods and that a just price was determined by the application of the golden rule.
3. Aquinas believed and promoted the biblical principle that the exercise of usury was a sin.
There Are Six Characteristics of Late Medieval Economics
2. The decline of charity
3. The maturing of guilds and co-operatives
4. The dominance of the doctrine of predestination (as a way to justify leadership which was heretofore unquestioned)
5. The printing press and the revolution of ideas
6. The growth of the merchant class
It is always important to remember the tight relationship between government and money or the economy. Bastiat taught that all humanity is driven by the same two things: 1) to increase and expand, to gain wealth and 2) to do it at the expense of someone else.
Since all governments consist of people, it’s a good chance these most basic human passions influence government.
Bodin was a minor philosopher during the historical era that saw the last impulses of the medieval period and the dawn of the Reformation. He is attributed with introducing two basic concepts:
1. The quantity theory of money (money depreciates when it becomes too abundant)
2. Progressivism (everything tends toward progress)
*Manorialism, otherwise known as the Manorial System, is the political, economic, and social system by which peasants of medieval Europe were made dependent on their land and on their lord derived from the word ‘manor.’ This is also considered the precursor to local mercantilism, national mercantilism and colonial mercantilism.
U.S. Congressman Paul Gosar, D.D.S. (AZ-01) said it this way, “Today, I voted against H.R. 1540, the National Defense Authorization Act of 2012 because I firmly believe federal government’s constitutional duty to provide for the common defense is not mutually exclusive to upholding civil rights granted to American citizens via the U.S. Bill of Rights.
“Under Article I, Section 8 of the United States Constitution, the defense of the American people is one of the federal government’s the primary constitutional functions. The national security of the United States is of utmost importance to me; however this vital work should not be done at the expense of the civil rights of American citizens.”
This is not a partisan issue, this is a fundamental stripping of American sacred rights under the pretense of national security. In fact, based on the interpretation of this proposed law by 150 national legislators and many law experts, I am risking my liberty by even speaking out about this travesty.
On the face of it, if not vetoed, this measure will end American Liberty as we know it. As it appears that President Obama will not likely veto this law (short of a miraculously politically motivated re-election move), 6:58 PM ET on December 14, 2011 will go down in history as the day America died.
I am not trying to be dramatic, but the implications are enormous. Consider this: prior to 1861, no one could have guessed that a portion of the United States would be under martial law from 1865 to 1877 with the military governing the former confederate states.
As a matter of fact, following Lincoln’s assassination in April 1865, president Andrew Johnson tried to follow Lincoln’s policies and appointed new governors in the summer of 1865. Johnson quickly declared that the war goals of national unity and the ending of slavery had been achieved, so that reconstruction was completed.
Republicans in Congress refused to accept Johnson’s terms, rejected the new members of Congress elected by the South, and in 1865–66 broke with the president.
A sweeping Republican victory in the 1866 Congressional elections in the North gave the Radical Republicans enough control of Congress that they overrode Johnson’s vetoes and began what is called “Radical Reconstruction” in 1867. Congress removed the civilian governments in the South in 1867 and put the former Confederacy under the rule of the U.S. Army.
This was an embarrassing and shameful time of retaliation, national humiliation, and exhibition of tyrannical powers against millions of Americans. Think twice if you think it can’t happen again.
In addition to the civilian voices warning against the adoption of this law, others warn of the potencial catastrophe that awaits including the Secretary of Defense, Director of National Intelligence, and both directors of the FBI and the CIA.
I have included the voting records of both houses as a reality check and so you can put this in your journals and show it to your children as the event that crossed the line from liberty to tyranny.
There is a line, it seems, that all governments eventually cross. It is a line that marks the point of no possible return to how things used to be. It is a line that once crossed, the new policies and positions must be “seen through to the end” to justify taking the bold step to begin with.
It is the line that Hitler crossed, the line that Lenin crossed and the line that Moa crossed. When it gets to this point, it is more about governmental self-preservation than protection of citizen-rights.
All I can do is hope that I am over reacting. But it may be that we have crossed the line and have completely entered the Twilight Zone, time will tell……very soon.
Here are the voting results for the National Defense Authorization Act from the Senate and the House of Representatives*:
HR 1540 – Voting Record
Yea: 86 Nay: 13
Conference Report Adopted (Senate)
FINAL VOTE RESULTS FOR ROLL CALL 932
(Republicans in roman; Democrats in italic; Independents underlined)
H R 1540 RECORDED VOTE 14-Dec-2011 6:58 PM
QUESTION: On Agreeing to the Conference Report
BILL TITLE: To authorize appropriations for fiscal year 2012 for military activities of the Department of Defense, for military construction, and for defense activities of the Department of Energy, to prescribe military personnel strengths for such fiscal year, and for other purposes
—- AYES 283 —
|GaramendiGardnerGerlachGibbsGibsonGingrey (GA)GohmertGonzalezGrangerGraves (MO)Green, AlGreen, GeneGriffin (AR)
Jackson Lee (TX)
Lungren, Daniel E.
Sánchez, Linda T.
—- NOES 136 —
|AmashBaldwinBass (CA)BecerraBlumenauerBraley (IA)BucshonBurgessBurton (IN)CampbellCapuanoCarson (IN)Chaffetz
|Griffith (VA)GrijalvaHahnHarrisHastings (FL)HeinrichHincheyHinojosaHoltHondaHuelskampHuizenga (MI)Hurt
|PaynePencePetersPingree (ME)PolisPoseyPrice (NC)QuigleyRangelRibbleRichmondRoe (TN)Rohrabacher
—- NOT VOTING 14 —
|BachmannCobleDiaz-BalartFilnerGiffords||GutierrezJohnson, E. B.LaTouretteLynchMyrick||PaulPittsSanchez, LorettaYoung (FL)|
* This is all happening quickly, forgive me if my statistics are less that error free.
“. . . If we do not restore the Institution of Property, we cannot escape restoring the Institution of Slavery; there is no third course.” Hilaire Belloc – 1912
When I say “private,” I mean a personal residence or land that is controlled by a person or family to which the general public has no open or invited access.
I understand that companies who own their buildings and the land upon which they sit can be private as well, but I am only referring to “non-public-none-of-your-business-what-I-build-or-what -I-do-on-my own-property,” private property.
This post is a simple but compelling introduction to one of the most private property-oriented writers of the 19th and 20th centuries, Hilaire Belloc.
Belloc has some very revealing things to say about property and the means of production. I have only included a selection from Section One, but it should be enough to arouse your concern if you will but compare what he says, to our current status as the dying bred called “property owners.”
Man, like every other organism, can only live by the transformation of his environment to his own use. He must transform his environment from a condition where it is less to a condition where it is more subservient to his needs.
That special, conscious, and intelligent transformation of his environment, which is peculiar to the peculiar intelligence and creative faculty of man, we call the Production of Wealth.
Wealth is matter, which has been consciously and intelligently transformed from a condition in which it is less to a condition in which it is more serviceable to a human need.
Without Wealth man cannot exist. The production of it is a necessity to him, and though it proceeds from the more to the less necessary, and even to those forms of production which we call luxuries, yet in any given human society there is a certain kind and a certain amount of wealth without which human life can not be lived: as, for instance, in England today, certain forms of cooked and elaborately prepared food, clothing, warmth, and habitation.
Therefore, to control the production of wealth is to control human life itself. To refuse man the opportunity for the production of wealth is to refuse him the opportunity for life; and, in general, the way in which the production of wealth is by law permitted is the only way in which the citizens can legally exist.
Wealth can only be produced by the application of human energy, mental and physical, to the forces of nature around us, and to the material, which those forces inform.
As for that material and those natural forces, we will call them for the sake of shortness, by the narrow, but conventionally accepted, term Land.
It would seem, therefore, that all problems connected with the production of wealth, and all discussions thereupon, involve but two principal original factors, to wit, Labour and Land.
But it so happens that the conscious, artificial, and intelligent action of man upon nature, corresponding to his peculiar character compared with other created beings, introduces a third factor of the utmost importance.
Man proceeds to create wealth by ingenious methods of varying and often increasing complexities, and aids himself by the construction of implements. These soon become in each new department of the production as truly necessary to that production as Labour and Land. Further, any process of production takes a certain time; during that time the producer must be fed, and clothed, and housed, and the rest of it.
Whether it be the making of an instrument or tool, or the setting aside of a store of provisions, labour applied to land for either purpose is not producing wealth for immediate consumption.
It is setting aside and reserving somewhat, and that somewhat is always necessary in varying proportions according to the simplicity or complexity of the economic society to the production of wealth.
To such wealth reserved and set aside for the purposes of future production, and not for immediate consumption, whether it be in the form of instruments and tools, or in the form of stores for the maintenance of labour during the process of production, we give the name of Capital.
There are thus three factors in the production of all human wealth, which we may conventionally term Land, Capital, and Labour.
When we talk of the means production we signify land and capital combined. Thus, when we say that a man is “dispossessed of the means of production,” or cannot produce wealth save by the leave of another who “possesses the means of production,” we mean that he is the master only of his labour and has no control, in any useful amount, over either capital, or land, or both combined.
A man politically free, that is, one who enjoys the right before the law to exercise his energies when he pleases (or not at all if he does not so please), but not possessed by legal right of control over any useful amount of the means of production, we call proletarian, and any considerable class composed of such men we call a proletariat.
Property is a term used for that arrangement in society whereby the control of land and of wealth made from land, including therefore all the means of production, is vested in some person or corporation.
Thus we may say of a building, including the land upon which it stands, that is the “property” of such and such a citizen, or family, or college, or of the state, meaning that those who “own” such property are guaranteed by the laws in the right to use it or withhold it from use.
Private property signifies such wealth (including the means of production) as may, by the arrangements of society, be in the control of persons or corporations other than the political bodies of which these persons or corporations are in another aspect members.
What distinguishes private property is not that the possessor thereof is less than the State, or is only a part of the State (for were that so we should talk of municipal property as private property), but rather that the owner may exercise his control over it to his own advantage, and not as a trustee for society, nor in the hierarchy of political institutions.
Thus Mr. Jones is a citizen of Manchester, but he does not own his private property as a citizen of Manchester, he owns it as Mr. Jones, whereas, if the house next to his own be owned by the Manchester municipality, they own it only because they are a political body standing for the whole community of the town. Mr. Jones might move to Glasgow and still own his property in Manchester, but the municipality of Manchester can only own its property in connection with the corporate political life of the town.
An ideal society in which the means of production should be in the hands of the political officers of the community we call Collectivist, or more generally Socialist.
A society in which private property in land and capital, that is, the ownership and therefore the control of the means of production, is confined to some number of free citizens not large enough to determine the social mass of the State, while the rest have not such property and are therefore proletarian, we call Capitalist; and the method by which wealth is produced in such a society can only be the application of labour, the determining mass of which must necessarily be proletarian, to land and capital, in such fashion that, of the total wealth produced, the Proletariat which labours shall only receive a portion.
The two marks, then, defining the Capitalist State are: (1) That the citizens thereof are politically free: i.e. can use or withhold at will their possessions or their labour, but are also (2) divided into capitalist and proletarian in such proportions that the State as a whole is not characterised by the institution of ownership among free citizens, but by the restriction of ownership to a section markedly less than the whole, or even to a small minority.
Such a Capitalist State is essentially divided into two classes of free citizens, the one capitalist or owning, the other property-less or proletarian.
My last definition concerns the Servile State itself, and since the idea is both somewhat novel and also the subject of this book, I will not only establish but expand its definition. The definition of the Servile State is as follows: “That arrangement of society in which so considerable a number of the families and individuals are constrained by positive law to labour for the advantage of other families and individuals as to stamp the whole community with the mark of such labour we call THE SERVILE STATE.”
[When he says “labor for the advantage of other families and persons,” he means being an employee. In other words, when the vast majority of the population works for someone else, that he is calling a “Servile State.” This is a topic of huge discussion at Monticello College and has a lot to do with our unique campus environment.]
Does Anybody Understand This Stuff?: Part 3, Greek and Roman Economics – A Thumbnail Sketch of 4,000 Years of Economics
Greek and Roman Economics (700B.C.-400A.D.)
Although modern economics are generally discussed from four polarizing positions; Radical, Keynesian, Neo-Liberal, and Austrian (all of which we will cover later), virtually all aspects of our modern discussion of economics were first articulated by the Greeks, including the following concepts:
1. Rights are tied to duties. The wealthy had particular duties to society. (Solon)
2. A successful society needs division of labor. (Plato)
This concept was championed by Adam Smith in his Wealth of Nations (1776).
3. Private property is bad; communal property is the goal/ideal. (Plato)
This concept was exploited by Marx, Lenin, Stalin, Moa and others during the 20th century.
4. Likewise, the economy should be managed rather than have a free market because the people (masses) are not capable of managing their own affairs as well as the Philosopher-kings (leaders) can (See the Republic). (Plato)
5. People should be kept basically equal in their possessions or else they will have pretensions to leadership, and as they are not capable of making qualified decisions, disorder will ensue. (Plato)
This concept is expressed mostly in 19th and 20th century economic and philosophic egalitarianism.
7. Human decisions revolve around scarcity and man’s limitless wants. (Aristotle)
8. There are primary and secondary goods. Primary goods are for their own sake, secondary are means used for primary goods. (Aristotle)
9. The free market is better than the managed economy since philosopher-kings are rarely in power and even they cannot understand the depths of man’s myriad wants. (Aristotle)
10. Money is only good if it is a commodity. (Aristotle)
Money is only a medium of exchange. What we are really exchanging is human energy. Money helps us place a value on that energy or our physical/mental exertion or personal will.
This means that the thing being used for money must have intrinsic value. The object is valuable outside of its use for trade. An example of this is gold or salt or wheat. These items all have internal value in and of themselves. They can also be used as currency although most, not very effectively.
1. Whatever commodity is used for money, it must have intrinsic value and be somewhat rare.
2. It must have the following qualities: durability, portability, divisibility, homogeneity (uniformity in quality) and uniformity in value. These qualities seem to exist in gold and silver to a greater extent than in any other two metals or in any other commodities.
3. A legitimate and functional Metallic Money System (bimetallic in our case), will issue currency (paper) to represent the real money (gold and silver) for the convenience of use.
4. Banks or nations when issuing paper currency were to have no more currency in circulation than they had precious metal to redeem it. To maintain the stability of a currency, countries would limit by law the amount of precious metal that was mined.
11. Private property is a natural right and must be vigorously protected. (Aristotle)
John Locke is a great proponent of this concept in his discussion of the theory of value and property.
12. Communal property must be kept at a bare minimum. (Aristotle)
Should there be common-use city parks and ball fields? Yes, but it should be kept at a minimum according to Aristotle.
13. Private property promotes charity. Communal property promotes greed and laziness. (Aristotle)
This is a great point with which to engage in a debate with friends and family.
Have you ever gone to a “buffet” restaurant? All-you-can-eat for one price, right? A great deal especially if you eat three plates of food. However, the management understands the Law of Diminishing Marginal Utility.
They know that each additional plate of food provides less utility (satisfaction) than the one before.
And despite the enticement of “all-you-can-eat,” most people will eat only until the utility they derive from additional food is slightly lower than the original. That mathematically leads to a higher profit margin for the restaurant.
15. Man’s law must be based on natural law if it is to be effective and good. (Aristotle)
Dr. Skousen quotes Cicero on this topic in principle #1 of the 5,000 Year Leap.
16. Happiness is based on what/who you are, not what things you have. (Epicurus)
Other Greeks who contributed to modern economics philosophy are:
Roman contributions to modern economics are limited to the concepts of widespread trade and coinage systems and the use of long-term contracts. While massive empire builders, the Romans were very practical administrators and tended to used with great efficiency the philosophies, arts, etc. of other civilizations.
* A more current use of this mindset was the philosophy of Divine Right of Kings, which was put down by the American Revolution on our continent. Unfortunately, a revival of this philosophy is making its way back into American society.
CONTINUED IN PART 4……..