Friday, May 5, 2017

Poor on Aristotle

Poor on Aristotle
Thomas Allen
    In 1877, Henry Varnum Poor (1812-1905) wrote Money and Its Laws: Embracing a History of Monetary Theories, and a History of the Currency of the United States. He was a financial analyst and founder of a company that evolved into Standard & Poor’s. Poor was a proponent of the real bills doctrine and the classical gold-coin standard and, thus, the quality theory of money. He gave little credence to the quantity theory of money — especially if credit money, such as bank notes, were convertible on demand in species. Also, he contended that the value of money depends on and is derived from the value of the material of which it is made and with paper money, its representation of such value.
    In the latter part of his book, he discusses leading monetary theorists from Aristotle (350 B.C.) to David A. Wells (1875). Most of the economists whom he discussed were proponents of the quantity theory of money. We will look at his discussion on Aristotle.
    Aristotle (384-322 B.C.) was a Greek philosopher, educator, and scientist. He is the source of the monetary theories of the ancient world and even modern times. Also, he taught the unlawfulness of usury. He had many false ideas about money that took nearly two millennia to correct. Even today some people still promote several of his false ideas.
    Poor critiques Aristotle’s exposition on money in his Politics. My comments are in brackets. Referenced page numbers enclosed in parentheses are to Poor’s book.
    Poor quotes Aristotle’s Politics where Aristotle discusses barter and money (pp. 62-65). Aristotle distinguishes between acquisition with money and acquisition by other means, e.g., natural increases of flocks and herds, and the soil and the spoils of war. Money acquisition is not natural in that it arises from some act or skill. According to Aristotle, “barter in general had its original beginning in Nature, from the fact that some men had a surplus, and others less than was necessary for them. And hence it is evident that the selling provisions for money is not naturally a part of pecuniary science; for men were obliged to use barter as far as would supply their wants” (p. 62). From barter rose the use of money. Money became necessary to import and export goods over great distances.
    Aristotle continues:
Money, then, being devised from the necessity of mutual exchange, the second species of money-getting arose, namely, by buying and selling; and this was conducted probably at first in a simple manner, but afterwards it came to employ more skill and experience as to where and how the greatest profit might be made. . . . For men oftentimes suppose wealth to consist in the quantity of money which any one possesses, as this is that medium with which trading and trafficking are concerned; others regard it as a mere trifle, as having no value by nature, but merely by arbitrary compact; so that, if those who use it should alter their sentiments, it would be worthless and unserviceable for any necessary purpose. . . . [T]he mere getting of money differs from natural wealth, and the latter is the true object of economy; while trade only procures money, not by all means, but by the exchange of it; and it seems to be chiefly employed about trading, for money is the element and the regulator of trade, nor are there any bounds to be set to the wealth which is thereby acquired. . . . [I]n the art of acquiring riches, its end has no limits, for its object is money and possessions; but economy has a boundary, though the former has not; for acquiring riches is not its real end. And for this reason it should seem that some boundary should be set to riches, though in practice we see the contrary of this taking place; for all those who get riches add to their money without end. The cause of this is the near connection of these two arts with each other, for they sometimes change employment with each other, as getting of money is their common pursuit. For they each employ the same thing, but not in the same manner; for the end of the one is something beyond itself, but the end of the other is merely to increase it; so that some persons are led to believe that this is the proper object of economy, and think that for this purpose they ought to continue to save or to hoard up money without end. . . . Such persons make every art subservient to money-getting, as if this was the only end, and to this end every thing ought to contribute (pp. 63-64).
    Aristotle adds:
[A]s to money, in some respects it is the business of the master of the family, in others not, but of the servile art. . . . [S]ince these riches may be applied . . . to two purposes, the one to make money of, the other for the service of the house; of these the one is necessary and commendable, the other, which has to do with traffic, is justly censured, for it has not its origin in Nature, but amongst ourselves; for usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it to the purpose to which it was intended. For it was devised for the sake of exchange, but usury multiplies it. . . . [U]sury is merely money born of money: so that of all means of money-making this is the most contrary to Nature (pp. 64-65).
[According to an old saying, a Yankee farmer ate what he could not sell; a Southern farmer sold what he could not eat. Thus, based on Aristotle’s reasoning, the Southern farmer acted more naturally than the Yankee farmer.]
    About Aristotle’s ideas on money, Poor writes:
His method of resolving all questions by verbal distinctions, by dialectics, relieved him of all necessity of investigation into, or analysis of their law. Of this, his treatment of money and of loans of it at usury affords a striking illustration. Money was an invention for the purpose of facilitating exchanges of property. To use it for any other purpose was against Nature; usury, — “money born of money,” — a crime (p. 65)!
Thus, Aristotle’s false methodology lead to false conclusions, which, unfortunately, received the status of dogma.
    According to Poor, Aristotle had “an eminently unscientific mind” (p. 65). Moreover, at the time that he wrote, “it was in the highest degree impious to question the beliefs and traditions of the past” (p. 65) on most subjects. and “[p]henomenon still stood for law” (p.65). Poor adds:
His method was necessarily deductive, from his utter ignorance of, or inability to use, the inductive; from the imperiousness and arrogance of his nature, and from the purpose he had in view, which was nothing less than to solve, in an age wholly incapable of any thing like an adequate investigation of natural law, every question coming within the range of human experience. . . . Never disturbed by a doubt as to the soundness of his premises, he assumed to dispose by a single stroke, not only of problems for which, with all the lights of the present day, ages will hardly suffice, but those which wholly transcend human capacity (p. 66).
    Poor continues, “The premises from, which he reasoned were the untrained observations of phenomena, or the extravagant fictions of an ardent and fanciful mind. The conclusions to which he came were as grotesque and fanciful as the premises themselves” (p. 67). Aristotle’s fatal fault was assuming the truth of the premises upon which his system was constructed (p. 70).
    Poor notes that theories and opinions about money and loans of money at interest, usury, during the Middle Ages and even into modern times come from Aristotle and usually without examination or reservation (pp. 72-73). [Usury, as used by Poor and during the Middle Ages, covered any kind of interest-bearing loan, not just loans with exorbitant interest rates. Some people claim that the Bible prohibits charging interest on loans, usury. They quote Deuteronomy 23:19: “Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury.” However, the Bible does not forbid usury per se. These people ignore the next verse, Deuteronomy 23:20, which reads “Unto a stranger thou mayest lend upon usury. . . .” “Stranger” means a person of a different race {v. “Stranger in the Old Testament” by Thomas Allen}. Although the Bible condemns loans at interest to a person of the lender’s race, it allows interest-bearing loans to people of other races {v. “Questions for Anti-Usurers” by Thomas Allen}.]
    Summarizing Aristotle’s views on money, Poor writes:
With him, money was invented for a specific purpose, and was entitled to no consideration, for the reason that such purposes or objects were contrary to Nature. Those that were according to Nature were war, the chase, the care of herds, and the gathering of the fruits of the fields. Such only were worthy of freemen who had a part in the administration of the government. With him, trade and the mechanical arts were contrary to Nature, were servile; and, as such, were worthy only of those who occupied an inferior political or social condition, and of slaves. Money was held in the same indifference or contempt as were those by whom it was chiefly used. It was unworthy of notice or investigation; it was base because those who used it, and the employments in which it was used, were base (p. 73).
    Summarizing Aristotle’s views on usury, Poor writes:
The views of Aristotle on the subject of usury are a necessary sequence of his views upon the subject of money. If money-getting by trade, or by exchanges in which it was used, was contrary to Nature, loans of it at usury could be no less so. They were only an aggravation of the original wrong (p. 73).
    Poor concludes his discussion on Aristotle with a quotation from William Lecky (1838-1903):
This absurdity of Aristotle and the number of centuries during which it was so incessantly asserted, without being, so far as we know, once questioned, is a curious illustration of the longevity of a sophism when expressed in a terse form and sheltered by a great name. It is enough to make one ashamed of his species to think that Bentham, so late as 1787, was the first to bring into notice the simple consideration that, if a farmer employs borrowed money in buying bulls and cows, and if these produce calves to the value of ten times the interest, the money borrowed can scarcely be said to be sterile, or the borrower to be a loser (p. 73)!

Copyright © 2016 by Thomas Coley Allen.

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