Downward Price Flexibility and Economic Growth

Mr. North is Secretary of Chalcedon. Inc., a nonprofit Christian educational organization, and a Ph. D. candidate at the University of California, Riverside.

It would appear that the rea­sons commonly advanced as a proof that the quantity of the cir­culating medium should vary as production increases or decreases are entirely unfounded. It would appear also that the fall of prices proportionate to the increase in productivity, which necessarily follows when, the amount of money remaining the same, pro­duction increases, is not only en­tirely harmless, but in fact the only means of avoiding misdirec­tions of production. F. A. HAYEK,

Economic growth is one of the chief fetishes of modern life. Hardly anyone would challenge the contemporary commitment to the aggregate expansion of goods and services. This is true of so­cialists, interventionists, and free enterprise advocates; if it is a question of "more" as opposed to "less," the demonstrated prefer­ence of the vast bulk of humanity is in favor of the former.

To keep the idea of growth from becoming the modern equivalent of the holy grail, the supporter of the free market is forced to add certain key qualifications to the general demand for expansion. First, that all costs of the growth process be paid for by those who by virtue of their ownership of the means of production gain ac­cess to the fruits of production. This implies that society has the right to protect itself from un­wanted "spill over" effects like pollution, i.e., that the so-called social costs be converted into pri­vate costs whenever possible.¹ Sec­ond, that economic growth be in­duced by the voluntary activities of men cooperating on a private market. The state-sponsored proj­ects of "growthmanship," espe­cially growth induced through in­flationary deficit budgets, are to be avoided.2 Third, that growth not be viewed as a potentially un­limited process over time, as if resources were in unlimited sup­ply.3 In short, aggregate economic growth should be the product of the activities of individual men and firms acting in concert accord­ing to the impersonal dictates of a competitive market economy. It should be the goal of national gov­ernments only in the limited sense of policies that favor individual initiative and the smooth opera­tion of the market, such as legal guarantees supporting voluntary contracts, the prohibition of vio­lence, and so forth.

Monetary Policy

The "and so forth" is a constant source of intellectual as well as political conflict. One of the more heated areas of contention among free market economists is the issue of monetary policy. The ma­jority of those calling themselves free market economists believe that monetary policy should not be the autonomous creation of voluntary market agreements. In­stead, they favor various govern­mental or quasi-governmental poli­cies that would oversee the creation of money and credit on a national, centralized scale. Monetary policy in this perspective is an "exog­enous factor" in the marketplace—something that the market must respond to rather than an inter­nally produced, "endogenous fac­tor" that stems from the market itself. The money supply is there­fore only indirectly related to market processes; it is controlled by the central governments acting through the central bank, or else it is the automatic creation of a central bank on a fixed percentage increase per day and therefore not subject to "fine-tuning" oper­ations of the political authorities.

A smaller number of free mar­ket advocates (myself among them) are convinced that such monopoly powers of money crea­tion are going to be used. Power is never neutral; it is exercised according to the value standards of those who possess it.4 Money is power, for it enables the bearer to purchase the tools of power, whether guns or votes. Govern­ments have an almost insatiable lust for power, or at least for the right to exercise power. If they are granted the right to finance political expenditures through def­icits in the visible tax schedules, they are empowered to redistrib­ute wealth in the direction of the state through the invisible tax of inflation.5

Money, given this fear of the political monopoly of the state, should ideally be the creation of market forces. Whatever scarce economic goods that men volun­tarily use as a means of facilitat­ing market exchanges—goods that are durable, divisible, transport­able, and above all scarce—are sufficient to allow men to cooper­ate in economic production. Money came into existence this way; the state only sanctioned an already prevalent practice.° Generally, the two goods that have functioned best as money have been gold and silver: they both possess great historic value, though not intrinsic value (since no commodity possesses intrinsic value). 7

Banking, of course, also provides for the creation of new money. But as Professor Mises argues, truly competitive banking—free bank­ing—keeps the creation of new credit at a minimum, since bank­ers do not really trust each other, and they will demand payment in gold or silver from banks that are suspected of insolvency.8 Thus, the creation of new money on a free market would stem primarily from the discoveries of new ore deposits or new metallurgical tech­niques that would make available greater supplies of scarce money metals than would have been eco­nomically feasible before. It is quite possible to imagine a free market system operating in terms of nonpolitical money. The prin­ciple of voluntarism should not be excluded, a priori, from the realm of monetary policy.

Sovereignty, Efficiency, Catastrophe

There are several crucial issues involved in the theoretical dispute between those favoring centralized monetary control and free market voluntarists. First, the question of constitutional sover­eignty: which sphere, civil gov­ernment or the market, is respon­sible for the administration of money? Second, the question of economic efficiency: would the plurality of market institutions interfere with the creation of a rational monetary framework? Third, and most important for this paper, is not a fundamental requirement for the growth of economic production the creation of a money supply sufficient to keep pace, proportionately, with aggregate productivity?

The constitutional question, his­torically, is easier to answer than the other two. The Constitution says very little about the govern­ing of monetary affairs. The Con­gress is granted the authority to borrow money on the credit of the United States, a factor which has subsequently become an engine of inflation, given the legalized posi­tion of the central bank in its activity of money creation. The Congress also has the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures" (Article II, Section 8). Furthermore, the states are pro­hibited to coin money, emit bills of credit, or "make any Thing but gold and silver Coin a Tender in Payment of Debts" (Article II, Section 9).

The Constitutional Question

The interpretation of these pas­sages has become increasingly statist since the 1860′s. Gerald T. Dunne describes his book, Mone­tary Decisions of the Supreme Court, in these terms: "This work traces a series of decisions of the Supreme Court which have raised the monetary power of the United States government from relative insignificance to almost unlimited authority." He goes on to write: "… the Founding Fathers regard­ed political control of monetary in­stitutions with an abhorrence born of bitter experience, and they seri­ously considered writing a sharp limitation on such governmental activity into the Constitution it­self. Yet they did not, and by "speaking in silences" gave the government they founded the near-absolute authority over currency and coinage that has always been considered the necessary conse­quence of national sovereignty."

The great push toward centrali­zation came, understandably, with the Civil War, the first truly mod­ern total war, with its need of new taxes and new power. From that point on, there has been a continual war of the Federal gov­ernment against the limitations imposed by a full gold coin stand­ard of money." It is all too clear­ly an issue of sovereignty: the sovereignty of the political sphere against that of individuals operat­ing in terms of voluntary economic transactions.

The Matter of Efficiency

The second question is more difficult to answer. Would the plurality of monetary sovereign­ties within the over-all sovereignty of a competitive market necessari­ly be less efficient than a money system created by central political sovereignty? As a corollary, are the time, capital, and energy ex­pended in gold and silver mining worse spent than if they had gone into the production of consumer goods?

In the short run and in certain localized areas, plural monetary sovereignties might not be com­petitive. A local bank could con­ceivably flood a local region with unbacked fiat currency. But these so-called wildcat banking opera­tions, unless legally sanctioned by state fractional reserve licenses (deceptively called limitations), do not last very long. People discount the value of these fiat bills, or else make a run on the bank’s vaults. The bank is not shielded by polit­ical sovereignty against the de­mands of its creditors. In the long run it must stay competitive, earn­ing its income from services rather than the creation of fiat money. With the development of modern communications that are almost instantaneous in nature, frauds of this kind become more difficult.

The free market is astoundingly efficient in communicating knowl­edge. The activity of the stock market, for example, in response to new information about a gov­ernment policy or a new discovery, indicates the speed of the transfer of knowledge, as prices are rapid­ly raised or lowered in terms of the discounted value that is ex­pected to accrue because of the new conditions." The very flexi­bility of prices allows new infor­mation to be assimilated in an economically efficient manner. Why, then, are changes affecting the value of the various monetary units assumed to be less efficiently transmitted by the free market’s mechanism than by the political sovereign? Why is the enforced stability of fixed monetary ratios so very efficient and the enforced stability of fixed prices on any other market so embarrassingly inefficient? Why is the market incapable of arbitrating the value of gold and silver coins (domestic vs. domestic, domestic vs. for­eign), when it is thought to be so efficient at arbitrating the value of gold and silver jewelry? Why is the market incapable of reg­istering efficiently the value of gold in comparison to a currency supposedly fixed in relation to gold?

The Market Way

The answer should be obvious: it is because the market is so effi­cient at registering subtle shifts in values between scarce economic goods that the political sovereigns ban the establishment of plural monetary sovereignties. It is be­cause any disparity economically between the value of fiat currency supposedly linked to gold and the market value of gold exposes the ludicrous nature of the hypothet­ical legal connection, which in fact is a legal fiction, that the political sovereignty assumes for itself a monopoly of money creation. It is not the inefficiency of the market in registering the value of money but rather its incomparable effi­ciency that has led to its position of imposed isolation in monetary affairs. Legal fictions are far more difficult to impose on men if the absurdity of that fiction is ex­posed, hour by hour, by an auton­omous free market mechanism.

Would there not be a chaos of competing coins, weights, and fineness of monies? Perhaps, for brief periods of time and in local, semi-isolated regions. But the market has been able to produce light bulbs that fit into sockets throughout America, and plugs that fit into wall sockets, and rail­road tracks that match many com­panies’ engines and cars. To state, a priori, that the market is incap­able of regulating coins equally well is, at best, a dangerous state­ment that is protected from crit­ical examination only by the em­pirical fact of our contemporary political affairs.

Changes in the stock of gold and silver are generally slow. Changes in the "velocity of mon­ey"—the number of exchanges within a given time period—are also slow, unless the public ex­pects some drastic change, like a devaluation of the monetary unit by the political authority. These changes can be predicted within calculable limits; in short, the eco­nomic impact of such changes can be discounted. They are relatively fixed in magnitude in comparison to the flexibility provided by a government printing press or a central bank’s brand new IBM computer. The limits imposed by the costs of mining provide a con­tinuity to economic affairs com­pared to which the "rational plan­ning" of central political authori­ties is laughable.

What the costs of mining pro­duce for society is a restrained state. We expend time and capital and energy in order to dig metals out of the ground. Some of these metals can be used for ornament, or electronic circuits, or for ex­change purposes; the market tells men what each use is worth to his fellows, and the seller can respond accordingly. The existence of a free coinage restrains the capabil­ities of political authorities to redistribute wealth, through fiat money creation, in the direction of the state. That such a restraint might be available for the few mil­lions spent in mining gold and silver out of the ground represents the greatest potential economic and political bargain in the his­tory of man. To paraphrase an­other patriot: "Millions for min­ing, but not one cent in tribute."

Possibilities of Prediction

By reducing the parameters of the money supply by limiting money to those scarce economic goods accepted voluntarily in ex­change, prediction becomes a real possibility. Prices are the free-market’s greatest achievement in reducing the irrationality of hu­man affairs. They enable us to predict the future. Profits reward the successful predictors, losses greet the inefficient forecasters, thus reducing the extent of their influence. The subtle day-to-day shifts in the value of the various monies would, like the equally sub­tle day-to-day shifts in value of all other goods and services, be reflected in the various prices of monies, vis-a-vis each other. Pro­fessional speculators (predictors) could act as arbitrators between monies. The price of buying pounds sterling or silver dollars with my gold dollar would be available on request, probably published daily in the newspaper. Since any price today reflects the supply and demand of the two goods to be exchanged, and since this in turn reflects the expecta­tions of all participants of the value of the items in the future, discounted to the present, free pricing brings thousands and even millions of forecasters into the market. Every price reflects the composite of all predictors’ expec­tations. What better means could men devise to unlock the secrets of the future? Yet monetary cen­tralists would have us believe that in monetary affairs, the state’s ex­perts are the best source of eco­nomic continuity, and that they are more efficient in setting the value of currencies as they relate to each other than the market could be.

What we find in the price-fixing of currencies is exactly what we find in the price-fixing of all other commodities: periods of inflexible, politically imposed "stability" in­terspersed with great economic discontinuities. The old price shifts to some wholly new, wholly unpredictable, politically imposed price, for which few men have been able to take precautions. It is a rigid stability broken by radical shifts to some new rigid­ity. It has nothing to do with the fluid continuity of flexible market pricing. Discontinuous "stability" is the plaque of politically imposed prices, as devaluations come in response to some disastrous polit­ical necessity, often international­ly centered, involving the prestige of many national governments. It brings the rule of law into dis­repute, both domestically and in­ternationally. Sooner or later domestic inflation comes into con­flict with the requirements of in­ternational solvency.12

For those who prefer tidal waves to the splashing of the surf, for those who prefer earth­quakes to slowly shifting earth movements, the rationale of the political monopoly of money may appear sane. It is strange that anyone else believes in it. Instead of the localized discontinuities as­sociated with private counterfeit­ing, the state’s planners substitute complete, centralized discontinui­ties. The predictable market losses of fraud (which can be insured against for a fee) are regarded as intolerable, yet periodic na­tional monetary catastrophes like inflation, depression, and devalua­tion are accepted as the "inevit­able" costs of creative capitalism. It is a peculiar ideology.

Flexible or Inflexible Prices

The third problem seems to baffle many well-meaning free market supporters. How can a privately established monetary system linked to gold and silver expand rapidly enough to facilitate busi­ness in a modern economy? How can new gold and silver enter the market rapidly enough to "keep pace," proportionately, with an ex­panding number of free market transactions? The answer seems too obvious: the expansion of a specie-founded currency system cannot possibly grow as fast as business has grown in the last cen­tury. Since the answer is so obvi­ous, something must be wrong with the question. There is some­thing wrong; it has to do with the invariable underlying assumption of the question: today’s prices are downwardly inflexible.

It is a fact that many prices are inflexible in a downward direction, or at least very, very "sticky." For example, wages in industries covered by minimum wage legisla­tion are as downwardly inflexible as the legislatures that have set them. Furthermore, wages in industries covered by the labor union provi­sions of the Wagner Act of 1935 are downwardly inflexible, for such unions are legally permitted to exclude competing laborers who would work for lower wages. Prod­ucts that come under laws estab­lishing "fair trade" prices, or products undergirded by price floors established by law, are not responsive to economic conditions requiring a downward revision of prices. The common feature of the majority of downwardly inflexible prices is the intervention of the political sovereignty.

The logic of economic expansion should be clear enough: if it takes place within a relatively fixed mon­etary structure, either the velocity of money will increase (and there are limits here) or else prices in the aggregate will have to fall. If prices are not permitted to fall, then many factors of production will be found to be uneconomic and therefore unemployable. The evi­dence in favor of this law of eco­nomics is found every time a de­pression comes around (and they come around just as regularly as the government-sponsored mone­tary expansions that invariably precede them"). Few people in­terpret the evidence intelligently. Labor union leaders do not like unemployed members. They do not care very much about unemployed nonmembers, since these men are unemployed in order to permit the higher wages of those within the union. Business owners and man­agers do not like to see unem­ployed capital, but they want high rates of return on their capital in­vestments even if it should mean bankruptcy for competitors. So when falling prices appear neces­sary for a marginal firm to stay competitive, but when it is not ef­ficient enough to compete in terms of the new lower prices for its products, the appeal goes out to the state for "protection." Protec­tion is needed from nasty custom­ers who are going to spend their hard-earned cash or credit else­where. Each group resists lower returns on its investment—labor or financial—even in the face of the biggest risk of all: total un­employment. And if the state in­tervenes to protect these vested interests, it is forced to take steps to insure the continued operation of the firms.

It does so through the means of an expansion of the money supply. It steps in to set up price and wage floors; for example, the work of the NRA in the early years of the Roosevelt administration. Then the inflation of the money supply raises aggregate prices (or at least keeps them from falling), lowers the real income from the fixed money returns, and therefore "saves" business and labor. This was the "genius" of the Keynesian recovery, only it took the psycho­logical inducement of total war to allow the governments to inflate the currencies sufficiently to re­duce real wages sufficiently to keep all employed, while simultaneously creating an atmosphere favoring the imposition of price and wage controls in order to "repress" the visible signs of the inflation, i.e., even higher money prices. So prices no longer allocated efficient­ly; ration stamps, priority slips, and other "hunting licenses" took the place of an integrated market pricing system. So did the black market.

Repressed Depression

Postwar inflationary pressures have prevented us from falling into reality. Citizens will not face the possibility that the depression of the 1930′s is being repressed through the expansion of the mon­ey supply, an expansion which is now threatening to become ex­ponential." No, we seem to prefer the blight of inflation to the neces­sity of an orderly, generally pre­dictable downward drift of ag­gregate prices.

Most people resist change. That, in spite of the hopes and foot­noted articles by liberal sociolo­gists who enjoy the security of tenure. Those people who do wel­come change have in mind familiar change, potentially controllable change, change that does not rush in with destruction. Stability, law, order: these are the catchwords even in our own culture, a culture that has thrived on change so ex­tensive that nothing in the history of man can compare with it. It should not be surprising that the siren’s slogan of "a stable price level" should have lured so many into the rocks of economic inflexi­bility and monetary inflation.

Yet a stable price level requires, logically, stable conditions: static tastes, static technology, static re­sources, static population. In short, stable prices demand the end of history. The same people who de­mand stable prices, whether so­cialist, interventionist, or mone­tarist, simultaneously call for in­creased economic production. What they want is the fulfillment of that vision restricted to the drunken of the Old Testament: "… tomorrow shall be as this day, and much more abundant" (Isaiah 56:12). The fantasy is still fantasy; to­morrow will not be as today, and neither will tomorrow’s price structure.

Fantasy in economic affairs can lead to present euphoria and ulti­mate miscalculation. Prices change. Tastes change. Productivity chang­es. To interfere with those chang­es is to reduce the efficiency of the market; only if your goal is to reduce market efficiency would the imposition of controls be rational. To argue that upward prices, downward prices, or stable prices should be the proper arrangement for any industry over time is to argue nonsense. An official price can be imposed for a time, of course, but the result is the mis­allocation of scarce resources, a misallocation that is mitigated only by the creation of a black market.

Stable Prices

There is one sense in which the concept of stable prices has valid­ity. Prices on a free market ought to change in a stable, generally predictable, continuous manner. Price (or quality) changes should be continual (since economic con­ditions change) and hopefully con-annoys (as distinguished from dis­continuous, radical) in nature. Only if some exogenous catas­trophe strikes the society should the market display radical shifts in pricing. Monetary policy, ideally, should contribute no discontinu­ities of its own—no disastrous, aggregate unpredictabilities. This is the only social stability worth preserving in life: the stability of reasonably predictable change.

The free market, by decentraliz­ing the decision-making process, by rewarding the successful pre­dictors and eliminating (or at least restricting the economic power of) the inefficient forecasters, and by providing a whole complex of mar­kets, including specialized markets of valuable information of many kinds, is perhaps the greatest en­gine of economic continuity ever developed by men. That continuity is its genius. It is a continuity based, ultimately, on its flexibility in pricing its scarce economic re­sources. To destroy that flexibility is to invite disaster.

The myth of the stable price level has captured the minds of the inflationists, who seek to impose price and wage controls in order to reduce the visibility of the ef­fects of monetary expansion. On the other hand, stable prices have appeared as economic nirvana to conservatives who have thought it important to oppose price inflation. They have mistaken a tac­tical slogan—stable prices—for the strategic goal. They have lost sight of the true requirement of a free market, namely, flexible prices. They have joined forces with Keynesians and neo-Keynesians; they all want to enforce stability on the "bad" increasing prices (labor costs if you’re a conserva­tive, consumer prices if you’re a liberal), and they want few re­straints on the "good" upward prices (welfare benefits if you’re a liberal, the Dow Jones average if you’re a conservative). Everyone is willing to call in the assistance of the state’s authorities in order to guarantee these effects. The au­thorities respond.

What we see is the "ratchet ef­fect." A wage or price once at­tained for any length of time suf­ficient to convince the beneficiaries that such a return is "normal" cannot, by agreed definition, be lowered again. The price cannot slip back. It must be defended. It must be supported. It becomes an ethical imperative. Then it be­comes the object of a political campaign. At that point the mar­ket is threatened.

Conclusion

The defense of the free market must be in terms of its capacity to expand the range of choices open to free men. It is an ethical de­fense. Economic growth that does not expand the range of men’s choices is a false hope. The goal is not simply the expansion of the aggregate number of goods and services. It is no doubt true that the free market is the best means of expanding output and increas­ing efficiency, but it is change that is constant in human life, not ex­pansion or linear development. There are limits on secular expansion.15

Still, it is reasonable to expect that the growth in the number of goods and services in a free mar­ket will exceed the number of new gold and silver discoveries. If so, then it is equally reasonable to ex­pect to see prices in the aggregate in a slow decline. In fact, by call­ing for increased production, we are calling for lower prices, if the market is to clear itself of all goods and services offered for sale. Falling prices are no less desirable in the aggregate than increasing aggregate productivity. They are economic complements.

Businessmen are frequently heard to say that their employees are incapable of understanding that money wages are not the im­portant thing, but real income is. Yet these same employers seem incapable of comprehending that profits are not dependent upon an increasing aggregate price level. It does not matter for aggregate profits whether the price level is falling, rising, or stable. What does matter is the entrepreneur’s ability to forecast future economic conditions, including the direction of prices relevant to his business. Every price today includes a com­ponent based on the forecast of buyer and seller concerning the state of conditions in the future. If a man on a fixed income wants to buy a product, and he expects the price to rise tomorrow, he logically should buy today; if he expects the price to fall, he should wait. Thus, the key to economic success is the accuracy of one’s discounting, for every price re­flects in part the future price, dis­counted to the present. The ag­gregate level of prices is irrele­vant; what is relevant is one’s ability to forecast particular prices.

It is quite likely that a falling price level (due to increased pro­duction of non-monetary goods and services) would require more monetary units of a smaller de­nomination. But this is not the same as an increase of the aggre­gate money supply. It is not monetary inflation. Four quarters can be added to the money supply without inflation so long as a paper one dollar bill is destroyed. The effects are not the same as a simple addition of the four quarters to the money supply. The first example conveys no increase of purchasing power to anyone; the second does. In the first ex­ample, no one on a fixed income has to face an increased price level or an empty space on a store’s shelf due to someone else’s pur­chase. The second example forces a redistribution of wealth, from the man who did not have access to the four new quarters into the possession of the man who did. The first example does not set up a boom-bust cycle; the second does."

Prices Would Not Fall to Zero

Prices in the aggregate can fall to zero only if scarcity is entirely eliminated from the world, i.e., if all demand can be met for all goods and services at zero price. That is not our world. Thus, we can safely assume that prices will not fall to zero. We can also as­sume that there are limits on pro­duction. The same set of facts assures both results: scarcity guarantees a limit on falling prices and a limit on aggregate production. But there is nothing incompatible between economic growth and falling prices. Far from being incompatible, they are complementary. There should be no need to call for an expansion of the money supply "at a rate propor­tional to increasing productivity."

It is a good thing that such an expansion is not necessary, since it would be impossible to measure such proportional rates. It would require whole armies of govern­ment-paid statisticians to con­struct an infinite number of price indexes. If this were possible, then socialism would be as effi­cient as the free market.17 Infinite knowledge is not given to men, not even to government statistical boards. Even Arthur Ross, the Department of Labor’s commis­sioner of labor statistics, and a man who thinks the index number is a usable device, has to admit that it is an inexact science at best.18 Government statistical in­dexes are used, in the last analy­sis, to expand the government’s control of economic affairs. That is why the government needs so many statistics.19

State Control of Money a Major Cause of Instability

The quest for the neutral mone­tary system, the commodity dol­lar, price index money, and all other variations on this theme has been as fruitless a quest as social­ists, Keynesians, social credit ad­vocates, and government statisti­cians have ever embarked on. It presupposes a sovereign political state with a monopoly of money creation. It presupposes an omni­science on the part of the state and its functionaries that is utopi­an. It has awarded to the state, by default, the right to control the central mechanism of all modern market transactions, the money supply. It has led to the night­mare of inflation that has plagued the modern world, just as this same sovereignty plagued Rome in its declining years. But at least in the case of Rome it was a reasonable claim, given the theo­logical presupposition of the an­cient world (excluding the He­brews and the Christians) that the state is divine, either in and of itself or as a function of the divinity of the ruler. Rulers were theoretically omniscient in those days. Even with omniscience, their monetary systems were sub­ject to ruinous collapse. Odd that men would expect a better show­ing from an officially secular state that recognizes no divinity over it or under it. Then again, per­haps a state like this assumes the function of the older, theocratic state. It recognizes no sovereignty apart from itself. And like the ancient kingdoms, the sign of sovereignty is exhibited in the monopoly over money.²º

FOOT NOTES

1 Cf. R. H. Coase, "The Problem of So­cial Cost," The Journal of Law and Eco­nomics, III (Oct., 1960). pp. 1-44; C. R. Batten, "The Tragedy of the Commons," THE FREEMAN (Oct., 1970).

2 Colin Clark," `Growthsmanship’: Fact and Fallacy," The Intercollegiate Review (Jan., 1965), and published in booklet form by the National Association of Man­ufacturers. On the dangers of govern­ment-sponsored growth, see also Murray N. Rothbard, Man, Economy and State (Princeton: Van Nostrand, 1962), II, pp. 837 ff.

3 Gary North, "The Theology of the Exponential Curve," THE FREEMAN (May, 1970).

4 F. A. Hayek, The Road to Serfdom (University of Chicago, 1944), is by far the best treatment of the unneutral na­ture of state planning boards.

5 Murray N. Rothbard, "Money, the State, and Modern Mercantilism," in Hel­mut Schoeck and James Wiggens (eds.), Central Planning and Neomercantilism (Princeton: Van Nostrand, 1964), pp. 140-43.

6 Ludwig von Mises, The Theory of Money and Credit (New Haven, Conn.: Yale University Press, 1953; reprinted 1971 by the Foundation for Economic Education), pp. 97-123.

7 Gary North, "The Fallacy of ‘Intrin­sic Value’," THE FREEMAN (June, 1969).

8 Ludwig von Mises, Human Action (New Haven, Conn.: Yale University Press, 1949), pp. 440-45.

9 Gerald T. Dunne, Monetary Decisions of the Supreme Court (New Brunswick, N. J.: Rutgers University Press, 1960), preface.

10 Paul Bakewell, a lawyer who has specialized in the history of monetary law in the United States, has chronicled this warfare in What Are We Using for Money? (Princeton: Van Nostrand, 1952) and 13 Curious Errors About Money (Caldwell, Idaho: Caxton, 1962).

11 The best book on the free market and knowledge transmission is Henry G. Manne, Insider Trading and the Stock Market (New York: Free Press, 1966). Cf. Manne, "Insider Trading and the Law Professors,"Vanderbilt Law Review, XXIII (1970), pp. 547-630.

12 Gary North, "Domestic Inflation versus International Solvency," THE FREEMAN (Feb., 1967).

13 Mises, Human Action, ch. 20. For a survey of the literature generated by Mises’ theory, see Gary North, "Re­pressed Depression,"THE FREEMAN (April, 1969).

14 North, "Theology," op. cit.

15 P. T. Bauer, Economic Analysis and Policy in Underdeveloped Countries (Cambridge and Duke University Press­es, 1957), p. 113.

16 North, "Repressed Depression," op. cit.

17 F. A. Hayek (ed.), Collectivist Eco­nomic Planning (London: Routledge & Keg-an Paul, 1935). This line of reasoning was first introduced to a wide audience by Mises. Cf. Mises, Socialism (New Haven, Conn.: Yale University Press, 1951), pt. II, sect. I. For a survey of this literature, see Gary North, Marx’s Re­ligion of Revolution (Nutley, N. J.: Craig Press, 1968), pp. 173-94.

18 Arthur M. Ross, "Measuring Prices: An Inexact Science." The Wall Street Journal (Feb. 10, 1966). Cf. Melchior Palyi, An Inflation Primer (Chicago: Regnery, 1962), p. 4.

19 Murray N. Rothbard, "Statistics: Achilles’ Heel of Government," THE FREE­MAN (June 1961).

20 On the use of the coinage by the Roman emperors to announce their own divine apotheoses, see Ethelbert Stauff­er, Christ and the Caesars (Philadelphia: Westminster Press, 1955).