A Reviewer's Notebook - 1978/8

S. Herbert Frankel’s book, Two Philosophies of Money: The Conflict of Trust and Authority (St. Martin’s Press, 175 Fifth Avenue, New York, N.Y., 10010, 164 pp., $14.95), tells it all in the subtitle. It sounds simple, but the "all" it tells about involves nothing less than the whole subject of what is and what is not inaliena­ble about individual human rights. This means that Professor Frankel is forced, willy nilly, into transcend­ing ordinary economic categories. He deals with money as a symbol of deeper psychological and social at­titudes. The nature of money is de­pendent on the nature of man, and at a time when men, over most of the earth’s surface, aren’t sure they have any rights of ownership at all, it is hardly cause for wonder that money, as a medium of facilitating exchanges of ownership, is subject to the most cavalier whims of politi­cians on the make.

Professor Frankel, in his intro­duction, quotes Henry Simons, who wrote some forty years ago that "we cannot get along . . . without some moral sanctions and mandates which politicians must obey in mat­ters of finance." Since Simons’ time the "moral sanctions and mandates" that were once taken for granted throughout Christendom have, along with the gold standard, been lightly tossed aside. But the attitude of the politicians toward money has been merely symptomatic of the change in the relationship of west­ern peoples to government itself. If people really held to what Leonard Read calls the "freedom philosophy" (private property, free trade and carefully limited government) our money troubles would be largely confined to the difficulty of earning it, not with its integrity as a com­mercial lubricant and dependable store of value.

Our nineteenth century forebears might have indulged in arguments about the relative value of gold and silver as backing for the printed forms of money, but they were gen­erally agreed on the proposition that something hard, tangible and desir­able in itself should be available to people if they were to transcend the awkward limitations of a barter economy. Remembering the days of Victorian stability, it is easy to say that we should go back to a metallic standard. So we should, but it is Professor Frankel’s point that, even in the days of gold, there was a whole world of trust in which the metallic standard operated.

An Orderly Universe

Our nineteenth century ancestors held predominantly to Lockean be­liefs. They held that rights came from God as part of the natural order. The right to life presupposed the right to own property as a base for the cultivation of life sustaining skills and for the provision for sup­port in one’s old age. And, in turn, the right to property involved the idea of contract, by which trading from a base, both for the short and the long term, could be made safe. Naturally the right to property ex­tended to disposal and acquisition rights. Money was needed to intro­duce mobility into the Lockean sys­tem, and, for the sake of consistency, it was naturally assumed that money should be as subject to con­tractual stability as anything else.

The Lockean world involved trust in an order, with Ten Command­ments morality taken for granted. Money was part of that order. When the order fell apart, money fell apart with it. Gold was repudiated only after men had ceased to believe in their Lockean rights.

Professor Frankel has discovered a far seeking student of the moral basis of monetary order in the ne­glected figure of Georg Simmel, a German philosopher and sociologist whose Die Philosophie Des Geldes, or Philosophy of Money, appeared at the turn of the century. Simmel held that it was an illusion to suppose that money could stand outside the activities of people in "an empire of its own." It was nothing "outside the objects, services or rights to which it gives access." It had the power of being "incorporated in any future use that its possessor may desire to put it," but the "future use" presup­posed the continuation of the moral order in which both the money and its contract writing owner existed.

Simmel, one gathers from Profes­sor Frankel’s exposition of some concepts that are cloudy in their Hegelian formulations, believed in the liberation that came with the Lockean order. Men’s possessions involved an extension of their indi­viduality. Since money is "the most mobile of all kinds of properties," there is "a close interrelationship between the development of a money economy and the growth of the role of the individual and recog­nition which is given to him."

An Expression of Trust

As the guarantor of mobility and freedom, money, in its gold form, could hardly be called "barren." It was an expression of a society that held the individual in a certain re­gard. The individual, as a member of a society based on trust, was entitled to keep government, as his agent, at some distance. The distinction be­tween society and the State, in the days which Simmel celebrated, was clear. The State did not create money, it merely functioned as the policeman who guaranteed that the people’s gold or silver coins were of a certain weight and fineness. Money was a social product, dug in the original instance by individuals who got together to do the prospecting and to work the mines. The credit reared on the metallic base was a social expression of trust in people’s promises to perform services, or to settle at agreed upon moments in cash if that was desirable.

The Keynesians, with their flat belief that money is a creation of the State, have misread history. Unfor­tunately, they have succeeded in selling their fallacious idea to politi­cal majorities all through the west­ern world. The majorities supinely accept the idea that money is simply a government created tool of State action. This is a complete negation of the older idea, expressed by Sim­mel, that money is a symbol of social trust. "The two conceptions," says Professor Frankel, "are incompati­ble."

The Keynesian conception makes money the "capricious and uncer­tain . . . prey to conflicting and varying political objectives." There can be no "social trust" when the money supply is subject to the com­mandments of politicians seeking to further pet projects at the expense of wildly unbalanced budgets. Such budgets result in pyramids of unbacked government debt tokens that, in turn, are "monetized" to the detriment of price levels throughout the economy.

The sour joke, is, of course, on the Keynesians. When price and wage controls come, the politicos may think they can force their ideas of value on people. But, short of bayonets on every street corner and spies in every shop, this is impossi­ble. The State’s fiat can only go so far—even the circulation of inflated paper money depends on some rem­nant of Lockean trust. When the last remnants of trust are withheld, the Keynesians depart. Then the Leninists take over, money is abolished save as tokens of accoun­tancy in State rationing, and the mobile society of the Lockeans gives way to the serfdoms that already encumber most of the world.




Tom Rose

(Mott Media, Box 236, Milford,

Michigan 48042, 1977)

380 pages $9.95

Reviewed by Brian Summers

THIS is an introductory text in eco­nomics written from a fundamen­talist Christian point of view. The style is very readable, as the author explains basic economic concepts and uses them to defend the free market profit and loss system.

If there is a criticism to be made of Professor Rose’s book, it is his ten­dency to view economics as an em­pirical science—despite his refer­ences to Ludwig von Mises. He also relies somewhat on mathematical demonstrations, of the sort cur­rently favored in academic circles. This is particularly evident in his chapter on competition, which he views in terms of market structure, rather than as a process taking place over time.

On balance, however, this book has much to offer, especially to those involved in Christian schools.