Mosaic Economics

Mosaic Economics

Thomas Allen

In Moses the Economist (1947, Editor Ben Williams, Reprinted 2009, American Christian Ministries), C.F. Parker gives his understanding of Mosaic economics as described in the Pentateuch. Some of his descriptions and my comments follow.

– Value. Parker believes that the value of the labor used to provide a product or service determines its value. (Both Adam Smith and Karl Marx held this view.) The opinion of the consumer is irrelevant. Thus, if the labor value of a product is $100 and the consumer values it at $50, the product cannot be sold for $50. To sell it for $50 would cheat the workers of their due wages and would be an ill-gotten gain for the consumer, who has cheated the workers out of part of their wages. For the product to sit on the shelf and deteriorate is better than selling it for less than $100. How the workers are better off losing $100 by the product deteriorating to worthlessness than losing $50, Parker does not explain.

Like most people, he has the cost of labor and materials determining the selling price of the product backward. The cost of labor and other inputs to produce a product does not determine the selling price of the product. The marginal consumer does. What the consumer is willing to pay for a product determines the cost of the labor and other inputs in the production of the product.

– Taxes. Farmers bear the primary burden of funding the government. They pay 10 percent of their crops and increase in herds to the government. (If their herds decrease, does this the government reimburses them for 10 percent of their loss — probably not.) However, they pay their taxes in products and livestock instead of money.

To provide additional revenue (taxes) for the government, Parker extends this principle to manufacturers. Through some convoluted reasoning, he concludes that the use of tools powered by steam or electricity produced by coal, petroleum, natural gas, uranium, water, and now wind and solar makes their products equivalent to agriculture. Consequently, manufacturers would pay the government 10 percent of what they produce. Thus, applying the agricultural equivalency, an automobile manufacturer would give the government 10 percent of the cars and trucks that he produces. A spark plug manufacturer would give the government 10 percent of the spark plugs produced. In like manner, a toy manufacturer would pay the government 10 percent of the toys that he produces. And, likewise, for other manufacturers.

However, if furniture manufacturers or seamstresses used no power tools in producing their furniture or apparel, they pay no taxes. Yet, if they use power tools, such as electric saws and drills and electric sowing machines, they pay 10 percent of their products to the government.

Providers of services are exempted from taxation. For some strange reason, Parker puts miners, who extract God-given ore from the ground, in the nontaxpaying category. Although he is unclear whether extractors of petroleum, natural gas, and coal pay taxes or not, he seems to place them in the nontaxpaying category.

Parker does not address solar and wind energy because when he wrote his book, they were not used to produce electricity, although the wind was used to grind grain, pump water, and move ships. However, based on his agricultural principle, since God provides the wind and sun, people who use them to produce electricity should give the government 10 percent of the electricity that they produce.

– Land. Parker is a proponent of the jubilee where all land returns to the original owner every 50 years. For the Western Hemisphere, this means that all land return to the Indians (who gets the land of the extinct Indian tribes?). Or, it returns to the monarchs of Spain, Portugal, Great Britain, France, the Netherlands, Denmark, and Russia. If the principle of the right of conquest, the land belongs to whoever conquers it, is applied as it is applied to the Israelite’s conquest of Canaan, then the aforementioned monarchs are the original owners since the land was conquered for them and in their name. Consequently, the Indians have no claim. (See “Jubilee” by Thomas Allen.)

– Usury, Loans, and Debt. Of course, charging interest including fees, which is interest by another name, on loans is prohibited. Moreover, all debts are canceled after seven years —not seven years from when the loan is made but a fixed calendar seven years for all loans. Thus, a loan may be canceled a year after it is made. (See “Questions for Anti-Usurers” by Thomas Allen.)

If all debt is canceled every seven years, then all paper money and its electronic equivalent including checkbook money become void every seven years. These types of money are obligations, i.e., debts. Parker seems not to recognize this cancellation of credit or representative money, which he believes is real money like full-weight gold and silver coins. His confusion about money derives from his belief that money is a mere token. (See “What Is Money?”,  "What Are the Functions of Money,” and “What Is the Difference Between Commodity and Fiat Money” by Thomas Allen)

Although Parker does not realize it, his anti-usury stance if carried to its logical conclusion forbids farmers from saving part of their crop as seed for the next season. Deciding how much to consume now and how much to save for future consumption involves interest, usury.

Furthermore, even the holdings of Social Security, of which Parker approves, would cease to exist every seven years because they are obligations (debts) owed to the participants.

– Money. Further, Parker has little understanding of commodity money, e.g., gold and silver, and a commodity monetary system, e.g., the gold standard. He believes that the monetary commodity has a different value, usually, a lower value, from the commodity stamped as a coin. Under a true commodity standard, the commodity has approximately the same value as an equivalent weight of the commodity when stamped as a coin. Money has value in and of itself that is independent of any image, words, or numbers stamped on it. The weight of the commodity in the coin is what gives it value and not what is stamped on it. (If the monetary value of a currency exceeds the commodity of which it is made, as with paper money, it represents real commodity money and is, therefore, an obligation to pay real commodity money, i.e., it is a debt payable in real commodity money.)

If he had looked in Genesis, he would have found the attributes of real money, which are quantity, a measure of weight, and substance. According to Genesis 23:16, Abraham bought a burial plot. He paid 400 (quantity) shekels (measurement of weight) of silver (substance). All commodity money has these three attributes, which makes money more than a mere token.

Therefore, a token even if used as a medium of exchange is not Biblical money. When used as a medium of exchange, token money represents money and passes the obligation to pay real money from one person to another. When the seven-year debt cancellation comes, token money becomes a canceled debt, and the person holding it is cheated out of whatever value it had as a medium of exchange.

Nevertheless, Parker is correct about money itself not being wealth. However, the gold in a gold coin is wealth as gold bullion. (See “What is the Gold Standard?” by Thomas Allen.)

– Banks. Banking as known today would cease to exist. People who wanted to save their money in a secured vault would have to pay someone to protect their money in a vault.

As for checking accounts, people would have to pay a depositary to hold their money against which they could write checks. They may also have to pay when a check is cashed or money is transferred from one account to another account. A return to yesteryear where bill collectors visited people’s houses or businesses to collect payment may return. Most likely, people may have to visit centralized offices to pay their bills as that would be the cheapest way of making payments.

– Wages. According to Parker, people should be paid according to their effective endeavors. Also, he seems to argue for a wage system that is akin to what progressives promote from time to time. Some governmental bureaucrats establish a relative pay scale for each type of job based on their opinion of its importance and on the labor required for that job. 

Nevertheless, he maintains that workers who work more efficiently acquire more wealth than less efficient workers. The incompetent and slackers become impoverished. He is a proponent of meritocracy in the workplace, which the free market generally provides when the government does not interfere with employment.

According to Parker’s understanding of Mosaic economics, wealth is fixed and is the aggregate of the rivers, lakes, oceans, soil, plants, animals, atmosphere, and the like. Wealth has nothing to do with human intelligence in organizing and using these resources. Thus, African countries rich in resources should be wealthier than Singapore, which is extremely poor in natural resources, but most are not.

– Stocks. Corporations with publicly traded stock would cease to exist under Parker’s Mosaic economics. Paying dividends on stock is outlawed because the owner of the stock did not earn the money. Moreover, one could never sell a stock for more than he paid for it because that is ill-gotten gain. Likewise, apparently, one could never sell a stock for less than what he paid for it because that would be an ill-gotten gain for the buyer. 

– Abundances and Scarcities. Buying items such as generators and food in a region of plenty and selling them in a region of want because of a natural disaster, war, or otherwise at a price above what existed before the disaster is forbidden. One must sell the item at the predisaster market price. (Higher prices mean stronger demand relative to the supply and are a signal for more supply. By fixing prices, Parker denies this signal. He appears to have a great deal of confidence in the integrity and the subjective opinions of governmental bureaucrats to move products from a region of abundance to a region of scarcity. He seems to want to eliminate the free market.)

Moreover, in a region that has an abundance of agricultural products, he would prohibit selling the products below the pre-abundant price. To do so would cheat the farmer. Apparently, the farmer and presumably the consumer benefit more from the excess crops rotting away than from selling them at a lower price.

– Selling Used Items. Selling a used product, including antiques and old masterpiece paintings, for a profit is forbidden. One cannot sell a used product for more than what he paid for it (or the original price if the original price is lower). Consequently, if a person inherits a painting, jewelry, furniture, or anything else whose original price is unknown, he cannot sell it.

Moreover, stamp and coin collecting as an investment would cease to exist. One can never sell a stamp or coin for more than its face value.

– Insurance. Private insurance is verboten. Nevertheless, Parker accepts governmentally run Ponzi schemes like social security, which is often called insurance.

– Conclusions. If implemented, Mosaic economics, as Parker explains it, would be detrimental to today’s economy. A small minority of the country, the farmers and manufacturers, bear the tax burden; the remainder remains untaxed. This dearth of taxes does keep the government small and, therefore, limited. The government could not make up for the shortfall by deficient spending as the cancellation of debt every seven years and the illegality of charging interest would prevent most people from lending to the government.

Further, his explanation of money is flawed. Also, his requirement for governmental price fixing is highly destructive and would create continuous surplus and shortages. He asserts that the value or price of labor in producing and distributing products fixes their value or price; the subjective opinion of the consumer, i.e., what the consumer is willing to pay for the product is irrelevant in fixing its value or price. His demand to abolish interest would cause the consumption of capital until society reverts to the hunter-gatherer stage. (See “Usury” by Thomas Allen.) 

Moreover, Mosaic economics, as Parker explains it, relies heavily on the wisdom, integrity, altruism, and near omniscience of governmental bureaucrats. Although historically and biblically, governments have been much more doers of evil than doers of good, Parker displays a childlike trust and confidence in governments always being doers of good.

Parker is convinced that Mosaic economics as he understands it will eliminate poverty. However, instead of making the country prosperous as he claims, his proposals would impoverish the country.

Copyright © 2022 by Thomas Coley Allen.

More economic articles.

Usury

Usury

Thomas Allen

    Usury as used in this article means interest or fees charged on loans or loans on which interest or fees are charged and not just exorbitant interest or fees. Loans may be in money or other goods. Anti-usurers are opponents of usury.
    During the Middle Ages, moralists, the scholastics, claimed that charging interest on loans, usury, was immoral and, therefore, unlawful, although people devised convoluted ways to circumvent this prohibition against charging interest. Even today, some moralists maintain that charging interest on loans is immoral and should be prohibited. They based their argument against usury in part on the teachings of Aristotle and in part on the laws of Moses.
    Since the Reformation, primarily since Calvin, most moralists have ceased believing that charging interest on loans is immoral. (Some have accused Calvin of being a crypto-Jew or an agent of the Jews for justifying usury.)
    Moralists of the Middle Ages claim that if a lender charges interest on a loan, exacting hire for money lent, he is guilty of the sin of extortion. Modern moralists, as Dabney calls them, disagree. They hold that reasonable interest is as just as a reasonable hire for any work or instrument of work.
    Aristotle argued that usury was against nature, unnatural, and beneath the dignity of citizenship. To Aristotle, even the use of money, though necessary, was tainted and not worthy of study. Money, gold and silver, was sterile. (If money is sterile, why are people willing to pay to use it?) If one planted seeds in a chest of gold or silver coins, nothing would grow. (Planting seeds in a box of nebulous electronic money, which is what most of today’s money is, would prove even less fruitful. Nevertheless, if properly watered, seeds planted in a chest of coins will sprout, and these sprouts are eatable.) Moreover, a bag of coins stored for years does not increase by a single coin — thus, proving the barrenness of money. (Food stored for years will not increase in amount either, but unlike gold coins, the stored food will deteriorate and become worthless. Does this mean that food is barren?) Because the use of money was unnatural, usury was unnatural since it is an increase based on money. Only an increase in herds, farming, hunting, and war were natural. Thus, even trade and mechanical arts were unnatural. Money was something used by those involved in trade, and, therefore, its use was base and beneath the dignity of a citizen. Since trade for money was contrary to nature, so was usury on its use. To Aristotle, money was a mere medium of exchange and did not increase by passing from one person to another, so he saw no justification for interest. He never sought to discover why people paid interest and never developed a theory of interest.
    In Exodus 22:25, Moses declares, “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.” In Deuteronomy 23:19, he declares, “Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury.” Most who condemn usury today overlook Deuteronomy 23:20, which reads, “Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.” Thus, the laws of Moses allowed charging interest on loans to strangers. The scholastics interpreted “stranger” to be anyone who was not a Christian. Consequently, a Christian could not charge interest on loans to another Christian.
    As the Church forbade Christians from lending Christians money at interest, it drove borrowers to the Jews for loans. As a result, the Church gave the Jews a virtual monopoly on lending money, which largely explains why today Jews dominate banking. (Hypocrite that it was [is], while condemning usury as a venal sin, the Papacy lent and borrowed at interest, although it called the interest “fees,” “gratuities,” etc. — anything but “interest” or “usury.” By the Reformation, the Papacy was allowing charitable loans, called contracts, to pay interest while it continued its prohibition against interest-bearing business loans. Businesses often used “insurance contracts,” which guaranteed the lender a fixed rate of return, otherwise known as interest, instead of a percentage of the profit.) When Christian lending to Christians at interest became acceptable, Christians no longer had to borrow from Jews.
    As Dabney explains, the modern moralists and the Middle Ages moralists, the scholastics, do not disagree on morals, but they do disagree on a merely economic question. They disagree on money being an effective force or influence in the production or creation of new value. Whereas the modern moralists argue that money is an effective force in the production or creation of new value, the scholastics argue that it is not. To the modernists, money is an exchangeable form of capital, and capital is the agent that creates new value. Thus, charging interest is not a moral issue; it is an economic issue.
    The modern moralists and the scholastics agree on the major premise, but they disagree on the minor premise. Both agree that if a person takes something from another for nothing, he is guilty of extortion — the major premise. For the scholastics, the minor premise is that money lent yields nothing in the creation of new value. Therefore, the inference is that charging interest is extortion. For modern moralists, the minor premise is that money lent is the capital that the borrower uses to create new values. Therefore, the inference is that when the lender receives interest on the money lent, he does not extort. As shown, the disagreement between the Middle Ages moralists and the modern moralists is with the minor premise, which is an economic issue and not a moral issue. Much of the opposition to usury, then and now, comes from confusing interest with physical production and associating interest with money. Interest does not have to be in money; it can be in other goods.
    Today, nearly all monetary loans are exchanges of credit. The borrower exchanges his credit for the lender’s credit, which is usually more readily acceptable by the public than is the borrower’s credit. The borrower gives the lender a note, usually written, but occasionally oral, promising to repay the lender the money or credit borrowed. In exchange for this promise, the lender gives the borrower the lender’s credit, although occasionally the lender will give his cash, which today is another form of credit, to the borrower. Today, the credit is lent as checkable deposits where the lender promises to pay all valid checks present against these deposits. (In the past, bank notes were commonly used. The lender promised to pay his notes, which were his credit instruments, when presented for payment.) For the use of the lender’s credit or cash, the lender charged a fee called interest.
    Meyer defines interest “as the price paid for the use of loanable funds. Loanable funds may be used either for purchase of consumer goods or as capital in the process of production.” Mund defines interest as “the price paid for the use of loanable funds (money or credit) which are to be repaid at a later date.”
    According to Menger, interest is the payment for “the exchange of one economic good (the use of capital) for another (money, for instance).” By opposing the charging of interest, anti-usurers hold that money either is not an economic good or, if it is, not worthy of payment. As interest is the payment for the use of capital, the opponents of usury must assume that the use of capital has no value. If it does have value, then why is paying for this value immoral? If it does have value, then the anti-usurers believe that the user of capital is entitled to steal that value. Why is not such theft immoral?
    According to Ely, “[i]nterest represents the difference in value between present and future goods.”  In effect, people who oppose usury claim that the future value of a good is the same as its present value. However, by charging interest, the claim is that a good today is worth more than the same good in the future. That is, an ounce of gold or a loaf of bread is worth more to its holder today than it will be ten years later. Interest represents that difference in value. According to the anti-usurers, an ounce of gold or a loaf of bread ten years from now is worth the same to the holder as it is today. Usury assumes risk over time; zero interest assumes no risk over time. Usury assumes that present enjoyment and satisfaction are greater than future enjoyment and satisfaction; zero interest assumes that future enjoyment and satisfaction are greater in the future than they are in the present. That is, usury assumes that most people prefer to have an automobile today than ten years later. However, anti-usurers believe that people have no time preference and have no more desire for an automobile today than ten years later. If they do and are willing to pay a premium, interest, for an automobile today rather than waiting ten years, they are sinning — just as viewers of pornography are as guilty, as the producers and dealers are, of sin. Likewise, anti-usurers believe that given a choice between receiving $100 today and $100 a year later, people will be indifferent to when they receive the $100. (Most people would probably prefer the $100 today to $101 a year later. However, a majority probably would prefer $200 a year later than $100 today. The $1 and $100 are interest paid for delayed satisfaction.) To the anti-usurers, present value and future value are equal, and, therefore, interest is not only immoral, it is not even needed.
    According, to Alchian and Allen, “Interest is the price of earlier availability, rather than later availability, of rights to use goods.” Whenever people evaluate and exchange present goods or money for future goods or money, interest is involved whether they realize it or not. Moreover, contrary to the implied, if not expressly stated, claim of the anti-usurers, present goods or money are more valuable than the same goods or money in the future. Interest represents the difference in the present and future value.
    Interest is merely a result of people preferring something sooner rather than later. Why is paying for the expression and consideration of this preference a sin? It must be a sin because the moralist anti-usurers want to prohibit usury in the name of morality.
    Rothbard states that “present money is worth more than present expectation of the same amount of future money” — the law of time preference. That is, the future always exchanges at a discount to the present. This discount is the interest that bridges the time preference. Anti-usurers reject the law of time preference, and if it does exist, it is a sin.
    North gives a similar definition: Interest “is the discount we apply to future goods as against present goods.” Moreover, “[i]t is not a uniquely monetary phenomenon.”
    Anti-usurers argue that the future and future goods do not need to be discounted. Thus, they imply that the future is known; people do not live in an uncertain world. Furthermore, they assume that all people will live long enough to enjoy the future; therefore, people do not have to discount the future, i.e., charge interest.
    As interest gives time economic value, the anti-usurers must maintain that time has, or should have, no economic value. An item will have the same value a year or a century from now as it has today. In spite of the assertions of the anti-usurers, time is a scarce economic resource that needs to be economized. (People are not God, who exists outside time; they are prisoners of time.)
    As North notes, “Time is mankind’s only absolutely irreplaceable environmental resource.” Time is the foundation of all economic planning, and interest is the expression of this foundation. Anti-usurers must maintain that either time is irrelevant to economic planning or, if it is relevant, it has no value.
    In the name of morality, anti-usurers would deny compensation, interest, to anyone who saves his money, a present good, and makes it available to entrepreneurs to produce future goods. According to the anti-usurers, this service of capital, saving, to provide an advance in time, as Rothbard calls it, should be without charge; it should be free. To charge for this service is extortion.
    Usury rewards the farsighted and prudent — people who anticipate their future wants and needs and save for them. Anti-usurers want to reward the spendthrift — the impulsive who must have immediate gratification. The anti-usurers would have the prudent to lend to the spendthrift at no charge.
    Interest is payment for the use of capital. Anti-usurers have no problem with paying wages to managers and workers for their labor. Most would not deprive the entrepreneur or owner of his profit for organizing and superintending, either directly or indirectly through managers, the operation of his business. However, they would deprive the capitalist, who may even be a lowly worker via his meager savings or retirement account, of any return on the use of his capital. Thus, the entrepreneur deserves a return on his entrepreneurship; the manager deserves a return on his management; the worker deserves a return on his labor; yet the capitalist does not deserve a return on his capital.
    Besides covering the cost of time preference, part of the interest covers the cost of administrative expenses of transferring money from one person to another. Opponents of usury assume that this cost is either negligible or at least not worthy of compensation. Another part of the interest covers the cost of risk. Most anti-usurers assume that all loans are risk-free. The few who realize that loans do involve risk to the lender believe that such risk should not be compensated. Why would anyone want to risk his money at no cost, zero interest, and give up the present enjoyment and satisfaction that it can bring so that another can satisfy his desires, either in consumption or production, today?
    As Mises notes, when the natural or ordinary interest is zero, no consumption occurs even into eternity. High-interest rates show that people want to consume in the present and near term. Low-interest rates show that people are willing to wait longer to enjoy consumption. At zero interest, which is what the anti-usurers demand, present consumption ceases, and everyone’s labor and resources go toward future consumption. Thus, people would starve as they invest all their labor and resources in capital goods. Do anti-usurers expect lenders to be so future-oriented that they will choose death over usury?
    Hunger prevents the natural rate of interest from becoming zero. If food is available, people will eventually eat it before they starve. Thus, the present value of food will eventually exceed its future value, which means people start applying an interest rate to saving their food for future use, and consuming it in the present.
    Therefore, anti-usurers have to resort to the coercive power of the government to suppress interest to zero. As contradictory as it seems, if the government forces interest to zero, as the anti-usurers want it to do, people will consume their capital. As a result, future goods will become more scarce and eventually cease to exist. Again, people will starve because they have consumed their “seed corn.” The few who survive would return to the hunter-gatherer stage of humanity. Thus, when the government outlaws usury, it forces people to become extremely present-oriented.
    Is starvation what the anti-usurers want? If they succeed in outlawing all interest, starvation is what they will get.
     High interest rates occur when people are present-oriented; they have a high time preference. Low interest rates occur when people are future-oriented; they have a low time preference. Future-oriented people value future income and satisfaction more than present-oriented people value them. Generally, future-oriented people and societies are much wealthier and more advanced than are present-oriented people and societies. The burden of time is much higher for present-oriented people and societies than it is for future-oriented people and societies.
    Anti-usurers seem to prefer present orientation to future orientation. They seem to prefer people consuming everything as quickly as possible to prevent delaying satisfaction, for that implies interest. However, as they demand zero interest, they seem to want to convert everyone to an extremely future-oriented person, who consumes nothing in the present.
    Everything, and every action, carries an interest rate whether noticed or not. Interest guides people in their consumption. Even the farmer uses interest when he decides how much of his crop to consume now and how much to save for planting next season.
    Likewise, when a shipwrecked sailor rations his water consumption, he is employing time preference, interest. By weighing immediately quenching his thirst against quenching his thirst in the future, he is employing time preference, which interest represents.
    Today, many opponents of usury oppose charging interest on loans for immoral reasons rather than moral reasons. They merely want to use other people’s capital, money, to satisfy immediately their consumptive desires without any cost to themselves. With a forced zero-interest loan, the borrower is taking something, the use of another’s capital to save time, from another, the lender, for nothing, which the moralists consider extortion.
    Morally, one may be obliged to lend to a destitute Christian in dire need of the necessities of life at no interest (Exodus 22:25) and perhaps without the thought of repayment. (Actually, today with governments stealing the wealth of the productive and giving it to the poor to provide not only the necessities of life but also many luxuries, no need really exists to lend to the poor and needy.) However, he should ensure that money lent goes for necessities and not for frivolous consumption or pleasure. (Perhaps a better solution is to give the person in need the necessities needed and allow the recipient to pay for them later when he can. [One should never lend any more money to any friend, relative, or acquaintance than he is willing to give them as a gift because he is not likely to be repaid.]) Nevertheless, no one is morally obliged to lend money interest-free to invest in a business, to speculate, or to satisfy consumptive desires.
    Likewise, loans to Christian churches, Christian schools, and Christian charities should be interest-free. But, then, why not just donate the funds?
    In a highly Christianized society, interest rates will be low, but not zero. They are low because Christians are, or should be, future-oriented. As noted above, future orientation causes interest rates to be low.
    Anti-usurers need to decide if they want a future-oriented society in which the wealth of mankind will continue to climb or a present-oriented society in which wealth declines toward the hunter-gatherer level. If they want a future-oriented society with increasing wealth, they need to cease insisting on zero interest, outlawing usury. If they insist on zero interest, outlawing usury, they will create a present-oriented society with declining wealth for all. As Christianity is future-oriented and outlawing usury is present-oriented, the anti-usurers are promoting an unchristian society.
    As the above discussion shows, usury, the payment for time, is essential to life. Without usury, civilization would not and could not exist. Without usury, mankind would only exist in a hunter-gatherer society. Moreover, anti-usurers promote a highly contradictory and impossible society: They want people to be extremely present-oriented, have a high time preference, and extremely future-oriented, have a low time preference, simultaneously. Anti-usurers are nothing more than promoters of “something for nothing.” In short, anti-usurers prefer lower-class living, present orientation, to higher-class living, future orientation.

References
Alchian, Armen A. and William R. Allen. University Economics: Elements of Inquiry. 3rd edition. Belmont, California: Wadsworth Publishing Co., Inc., 1972.

Allen, Thomas. “Questions for the Anti-Usurers.” Franklinton, North Carolina: TC Allen Company, 2010.

Dabney, R.L. The Practical Philosophy. Harrisonburg, Virginia: Sprinkle Publications, 1897.

Elliott, Calvin. Usury: A Scriptural, Ethical and Economic View. Frankston, Texas: TGS Publishers, 1902, 2008.

Ely, Richard T. An Introduction to Political Economy. New and revised edition. New York, New York: Eaton & Mains, 1901.

Jordan, James B. The Law of the Covenant: An Exposition of Exodus 21-23. Tyler, Texas: Institute for Christian Economics, 1984.

Laughlin, J. Laurence. The Elements of Political Economy. New York, New York: American Book Co., 1882.

Menger, Carl. Principles of Economics. Translators James Dingwall and Bert F. Hoselitz. New York, New York: New York University Press, 1976.

Meyers, Albert L. Elements of Modern Economics. 4th edition. Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1956.

Mises, Ludwig von. Human Action: A Treatise on Economics. 3rd revised edition. Chicago, Illinois: Henry Regnery Co., 1963.

Mund, Earl E. “Interest.” In Economic Principles and Problems. Editor Walter E. Spahr. Fourth edition. Vol. II. New York, New York: Rinehart & Co., Inc.: 1940.

Nicholson, J. Shield. “Usury.” Encyclopedia Britannica. 9th edition. The R. S. Peale Reprint. Chicago, Illinois: R.S. Peale & Co. XXIV, 17-19.

North, Gary. The Dominion Covenant: Genesis. An Economic Commentary on the Bible. Volume 1. Tyler, Texas: Institute for Christian Economics, 1982.

North, Gary. Moses and Pharaoh: Dominion Religion Versus Power Religion. Tyler, Texas: Institute for Christian Economics, 1985.

North, Gary. Tools of Dominion: The Case Laws of Exodus. Tyler, Texas: Institute for Christian Economics, 1990.

Polleit, Thorsten. “The ‘Natural Interest Rate’ Is Always Positive and Cannot Be Negative.” March 21, 2015. https://mises.org/library/natural-interest-rate-always-positive-and-cannot-be-negative. May 14, 2017,

Poor, Henry Varnum. Money and Its Laws: Embracing a History of Monetary Theories, and a History of the Currencies of the United States. Reprint. New York, New York: H.V. and H.W. Poor, 1877.

Rothbard, Murray N. Man, Economy and State: A Treatise on Economic Principles. 2 volumes. Los Angeles, California: Nash Publishing, 1970.

Tenebrarum, Pater. “The Consequences of Imposing Negative Interest Rates.” November 21, 2014. http://www.acting-man.com/?p=34365.  May 14, 2017.

Copyright © 2017 by Thomas Coley Allen.

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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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