Dr. William Luckey

The epistemological problems in modern and recent politics and economics

There are many reasons for the general population, and the politicians who cater to their wishes, not to accept what the scholars tell it to be true in economics and politics.

The HHS mandate and economics

Anyone who is living has heard of the dispute between the Obama administration and the Catholic Church regarding the Obamacare’s ruling that religious organizations, such as schools and hospitals, must provide contraceptive services, including sterilization and abortifacient pills.

'That's not fair!'

The above expression brings me back to my childhood on the streets of New York City where we were always playing some kind of ball game.

Some economic laws of spirituality

I cannot take any credit for this, and I am sorry that I did not think of it first.  The other day I was reading a book on spirituality and the author brought up an interesting point.  She said that Christianity conformed to economic laws such as Gresham’s law.  This law says, in its short form, that bad money drives out good.  We can understand this by looking at an economic system that has two types of currency in circulation, both legal tender.  One is a precious metal, such as gold, and the other, paper money, supposedly representing gold.  The two currencies are interchangeable, meaning that one can turn in paper certificates for the real thing, or for, say, convenience, turn in the gold for certificates representing the gold.  But when governments start printing more certificates than there is gold, like a counterfeiter, the value of those certificates begins to decline.  People then notice that the paper certificate that says 10 oz. of gold buys less than the 10 oz. of actual gold.  Noticing this, people obtain as much gold as they can and hoard it, and use the paper certificates.  Gold, because it is now more valuable, becomes an inflation hedge and people keep it against the time when the paper currency becomes valueless, then they can bring out their real gold and still be able to survive.

Introduction to economics II

In our last article, we covered the fact that people make choices based on their values. The values are subjective to them. We stressed that this is not a denial of objective values, but it is a recognition that one must accept something as his own before he chooses it. Even green vegetables fall into this category.  They are good for you, and you need their nutrients, but how many kids, turn their nose up at them? In fact, even some adults reject them despite the fact that they know that they are part of a healthful diet. So, the truth is that people make choices based on what is in their heart, and it is not the job of the economist qua economist to comment on that.

Introduction to economics

This is going to be a series of articles to help Catholics to understand economics.  Because of the serious deficit in the comprehension of economics by Catholics, this will be a daunting task, but the author will do his best. 

The parable of the new car

Once upon a time, there was a man, let us say for the sake of the story it is me (it isn’t but if I did these things, I would be in the same state as the man in the story). One day my 11-year-old Buick died.  So, I needed another car. But, instead of getting a nice used car for cheap, like the Buick I had which lasted six years, I went out and treated myself to a Ferrari. The price of this new car was over $225,000.  Now I am a man of modest salary, and I already have a mortgage on my house and am trying to pay off credit cards, which means that I do not have that much discretionary cash.  But the payment on this car (I looked this up in the amortization tables) at five percent for five years, (the most they usually allow in a new car) is $4,700 per month. Since, up to this time I had a good credit record, they actually loaned me the money.

The game is up

Did you ever wonder why tuition at most Catholic universities has skyrocketed since you went there decades ago?  Did you ever why the tuition at these schools climbed way higher than the inflation rate?

Raising the capital gains tax

As everyone knows, the government has painted itself into a corner.  More and more spending on more programs, more bureaucracies, more entitlements, and more buying of votes with these programs has gotten the federal (and some state) government into the unenviable position of reaching the end of the tolerable income tax level, beyond which the populace will revolt, and at the end of the indebtedness limit, beyond which we cannot repay all the money it borrowed in order to fund these things beyond the tolerable tax level.  Calls are being made for a hike in taxes “on the rich,” and a hike on capital gains taxes. 

Crony capitalism and its remedy

If you read my last article, “What Is a Humane Economy?,” you will notice that in there I brought up the subject of whether large corporations seek money or power. I said that if they seek power, it is only because they seek money, which is their raison d’être. Well, this article was a paper I gave at a conference of an academic society. The format of the panel I was on was that each of four participants gave their papers, then responded to questions from the panel, and then responded to questions from the attendees. Mine was the last of the four papers. The first was by a very radical distributist who, I found out later, has no graduate credentials in anything, and said he teaches theology at a good Catholic university down south. I looked at the website of this university and his name does not appear there. Be that as it may, the only “question” anyone asked from the panel was this guy asking something about my paper. I put the word question in quotation marks because he did something I have never seen at any academic conference since I have been either attending or actually giving papers in over 40 years.

What is a humane economy?

When discussing economics, the layman to the field gets bogged down in all sorts of baggage about economics that clutters the view of the subject itself. He brings to the table theories that do not accord with reality; there are religious biases, meaning that because some theologian says something about economics or business, it has to be true. They come with a neo-classical bias given them by mathematical economics that obscures the philosophical and theological bases of economics; they come with schools of thought that, though they have been thoroughly discredited, still influence the thinking of many non-economists. The result of this menagerie of error has been to obscure the real nature of economics and to cause confusion in the councils of government and the realm of public discourse.

Naiveté in Catholic intellectual circles

Two recent events struck me as significant in enlightening me as to the status of Catholic thinking regarding government. The first was a seminar I conducted recently with Catholic theology graduate students on Pope Benedict’s social encyclical, Caritas in Veritate. The other was an article published in the latest edition of Markets and Morality, a scholarly journal published by the Acton Institute for the Study of Religion and Liberty.

A word you don't hear anymore

There are a number of words one does not hear anymore, most of them slang: “twenty-three skidoo,” “boss,” “square,” “daddy-o,” “hip,” and the like. But in a more serious vein, politicians no longer use the word “consensus.” Consensus means to agree together. One builds consensus by a rational process of gathering the various views on all sides, and coming up with a proposal with which almost all but the most non-compromising holders of views will agree. Of course, the readers of this column will realize that there are some things one must never compromise on, namely, those outright immoral things such as abortion and euthanasia. But politics is the “art of the possible,” and out of respect for the human dignity of the other citizens, those in office must try to get a consensus on questions placed before those officials, in questions that are not moral “yes” or “no” issues. Take a situation where most of us find ourselves at least some time in our lives. Suppose that you are head of a social club, and the club wants to go to a restaurant for dinner. Suppose that there are ten members in this club, not counting you. Suppose six of the members want to go to a steakhouse, and four want to go to an Italian restaurant. Would you, as president, say, “All right, the steakhouse has won; it’s steakhouse or stay home”? Of course not. You would try to present other choices that all, or almost all, would be satisfied with. There is Chinese, Mexican, Thai, fast food, etc. You would take suggestions from the membership, so that an alternative might come up that you have not thought of, say, bowling instead of dinner. The notion of consensus is a difficult one for experts. Take a real economist (please!). He knows what the economy needs in order to flourish, and knows what policies of government will stifle that flourishing. Nevertheless, his science and the political world are different in that unless one is a dictator, one’s science will not be implemented in its entirety, for the simple reason that not everyone is an economist, and, therefore, not everyone will see the truth about the laws of economics. In addition, many people’s minds are already poisoned to believe that the market economy is evil; among these are many Catholics. This is why the study of economics can be considered a civic duty, necessary for people to make sound decisions on the economic questions of the day. Place politicians into the mix and the model becomes complicated. Most politicians have re-election uppermost in their minds. In fact, contrary to what the Founding Fathers taught, politicians like to have a life-long career in office. Take the recent cases of Senators Teddy Kennedy and Robert Byrd, who died with their proverbial boots on. Since politicians place re-election at the top of their value structure, their positions on issues are usually not determined by the merits of the case before them, but on what will win them the most votes. For example, in a recent debate, the Republican candidate for a Federal elective position recently pointed out that the Social Security system is in trouble due to the fact that it is just about out of money. The Democrat responded by accusing his opponent of trying to scare the people, and that there is plenty of money in the Social Security Trust Fund. But the truth is that the Republican was correct. President Reagan upped the Social Security taxes in order to accumulate money in the Trust Fund for the future needs of a growing elderly population and a smaller work force (thanks to the birth control fanatics). But the Congress raided that Trust Fund and replaced the money with IOU’s. There is no money in the Trust Fund. They spent it, and they owe the fund that gigantic amount of money when the time comes due. Think about it; we have a national debt of over $13 trillion, and a large part of that is owed to Social Security. This is just fact. The only way that the government can pay it back is to raise taxes. The Democratic politician in this example was trying to create a false sense of euphoria so that he, an incumbent, will not be held accountable for this situation, and get his necessary votes to continue his career in office. Which brings us back to consensus. Any administration, even if they control Congress by overwhelming majorities, like the current one, should not just ram things through in the face of strong opposition, even if they think it is the best policy. Like in the dinner example above, a good, moral president and congressional leaders need to build consensus out of the sheer respect for those who disagree with them. Of course, this assures that no policy will be completely satisfying to all parties, but at least something is approved that everyone can live with. One of the reasons that Americans are so livid about the present political situation is that this was exactly what was not done. Of course, the founders had the right solution! Government, particularly the Federal government, has no business being involved in many of these programs. They should be left up to the states or to the people themselves (see the Tenth Amendment to the U.S. Constitution). Our Faith teaches us subsidiarity: nothing should be done by a public authority that can be done by a private one, and nothing should be done by a higher-level authority that can be done by a lower one. Coupled with the public versus private distinction is also the fact that our Faith teaches us that WE are responsible to our brothers and sisters, and our own welfare. What government has done to a great extent is to take that responsibility out of our hands—so that we don’t feel that we have any responsibility. The government will take care of it. Gee, I don’t remember St. Francis saying that!

What's Up with Taxes?

I don’t know about you, but I find most of the recent debate about renewing the “Bush” tax cuts disturbing. There is a certain class of liberals out there who frame their discussion on two themes, and when someone challenges one theme, they switch to the other.  Neither themes are well thought out. But the conservative opponents of these tax-a-holics miss the point as well.

Where's the Recovery?

The other day, I was watching the news on television and the news anchor was interviewing an economist who was defending the government stimulus. The conversation was occasioned by the continued bad economic reports we have so learned to expect. The economist was explaining why the stimulus was the right way to go, and then made the following statement with positive excitement: "There is so much liquidity in the system (this means so much cash put in by Federal deficit spending and the printing of money by the Federal Reserve Bank) that the economy should be really chugging along!"

Further Theological Reflections on the Nature of Government

In the last article, I attempted to raise the thinking of the reader to the true nature of government as it really exists, using the Scriptures. I would like to continue that meditation now. There is a substantial difference in how St. Thomas and St. Augustine see government. St. Thomas is a metaphysician. And metaphysics looks “beyond the physical” to the nature of something as created by God. In essence, the nature of government is good, because some authority is necessary to organize the society, and that is put in us by God, who does not create evil. In the Garden of Eden, we would have some government, but there would be no coercion, because the ruler(s) would always be just, and all people would see the reasonableness of what they ask. Catholics, who have been educated in the thought of St. Thomas for quite some time, accept this at face value, and this, I suspect, has colored the view of Catholics, and even some official Church documents, in the direction of a kind of worship of government. (One might want to see my previous article on cosmos and taxis, and well as those on government and the economy.)  Now, St. Thomas was not some naïve college student. His fifth type of law is called “fomes,” the Latin word for tinder wood. Tinder wood is very dry wood that burns very hot and very fast. The fomes means the tendency that human beings have to let their passions and emotions get control over their reason. If one does this, one winds up with a big, out-of-control, fire (see my article “What a Character”).  Now, let us contrast this approach with that of St. Augustine, a main theological source for the thinking of Pope Benedict XVI. St. Augustine posits the existence to two cities: the City of God and the City of Man, or the earthly city. The citizens of these two cities are distinguished by the objects of their love: the citizens of the City of God love God even to the contempt of selves, and the citizens of the City of Man love themselves even to the contempt of God. But, as in the parable of wheat and the tares (Mt 13: 24-30), God allows them both to grow up together, meaning that this world is inhabited by both, and the citizens of the earthly city outnumber the citizens of the City of God.  For Augustine, the citizens of the earthly city are attracted to the power and wealth of rulership, and, indeed, usually end up as the ruling authorities. Which means, in real life, government has no interest in the common good or virtuous rule. Augustine feels that the only reason government exists is to protect the citizens of the City of God from the citizens of the City of Man. But wait, you may say, why would the earthly citizens who rule protect the Godly citizens? Simple: they do not want to be overthrown. Irritate the Godly citizens enough and they will get rid of the current rulers and get someone who can do the job. Other than that, government is seen by Augustine as a punishment for sin, just as death is. In fact, if you heard the expression, “Nothing is inevitable except death and taxes,” it, or at least the concept, probably came from St. Augustine. St. Augustine does believe that individual governments can be good. Firstly, occasionally a good person gets into rulership and for a while there is some respite from government stupidity. Unfortunately, these good rulers get killed, die of natural causes, or get exiled. Cicero comes to mind. He was a great thinker, and was called on to rule a consul of Rome twice. He was a very good ruler, and exposed a number of scandals. He ended up being killed by the Emperor and his head and his hand were nailed to the podium of the Senate. Secondly, governments can listen to the Church, and as Bishop of Hippo, he did not hesitate to tell magistrates what they should do. But I would not hold my breath waiting for that; do these names of “Catholic” legislators like Nancy Pelosi and John Kerry and “Catholic” bureaucrats like Kathleen Sebelius mean anything to you? Do they listen to the Church? How about Representative Patrick Kennedy? Did he listen to his bishop, even when his official restraint from receiving Communion became public, or even after the letter from his bishop became public? So, if St. Thomas and St. Augustine were speaking together about government, after St. Thomas said the government was in essence good, St. Augustine would probably reply: “So what?” He would point out that we do not live in a world of essences, but in a world tainted by men with original sin (the fomes). In real life, government is nothing but a great robbery, a racket. He spends many pages in The City of God showing the atrocities of Rome, which was a great empire founded on a parricide, and never stopped. He quotes a pirate (arrgh!) who was captured by Alexander the Great, who told that emperor that he had a lot of nerve calling him a thief because he stole a few ships, but for stealing whole countries, Alexander is called “emperor.” Sadly, this well-founded distrust of government does not show up often in the thinking of Catholic churchman, and even the current pontiff (see my article, “Where is Pope Benedict Coming From?”), with the exception of Centesimus Annus of John Paul II. Catholics who merely parrot what they hear and read, without looking at the actual situations, and taking advantage of the findings of such sciences as political science and economics, are doing a disservice to their fellow man, their fellow Catholics, and their country.

Theological Reflections on Government

On these pages, yours truly has discussed some of the problems of government from the economist’s point of view. Now I would like to tackle the problem of government from a theological point of view, keeping in mind that, to my knowledge, nothing has been written on this subject in the way I am discussing it. In St. Matthew’s Gospel (Mt 4: 1-11), after the baptism by John, “Jesus was led by the Spirit into the wilderness to be tempted by the devil” (Mt 4: 1). There, in the midst of loneliness and extreme hunger, He was confronted by Satan. Jesus then experienced three temptations, and in homilies we have heard the priest explain them to us and their basic meaning. The first temptation was that Satan wanted Jesus to prove that He was the Son of God by turning stones into bread: “If you are the Son of God, command these stones to become loaves of bread.” The ordinary explanation is that Jesus was hungry, but He was fasting. The devil wanted Him to break His fast of forty days and nights in a prideful way to demonstrate His divinity. Jesus, of course, refuses. Then Satan takes Him up to the pinnacle of the Temple, saying: “If you are the Son of God, throw yourself down; for it is written, ‘He will give his angels charge of you,’ and ‘On their hands they will bear you up, lest you strike your foot against a stone’” (Mt 4: 5-6). Jesus responds that one must not tempt the Lord your God. This temptation is usually explained as a temptation toward pride in Jesus by Him showing that He had almighty power. Lastly, the devil took Jesus took Jesus to the top of very high mountains and “showed him all the kingdoms of the world and the glory of them . . . ” (Mt 4: 8). And the devil said to him: “All these I will give you, if you will fall down and worship me” (Mt 4: 9, my emphasis). Jesus responded, “Begone, Satan! For it is written, ‘You shall worship the Lord your God and him only shall your serve’” (Mt 4: 10). This last one is an overtly blatant temptation to power by having Jesus sell His soul. It is not for nothing that we sometimes say, usually only in a metaphorical sense, that someone sold their soul for some benefit. This means that they “sold out.” They traded their principles for some material or political benefit. The recent “Louisiana Purchase” might be an example of this phenomenon. Now let us take a deeper look at these temptations. To see these temptations in a purely individualistic manner is to miss part of the boat. The first temptation, the one to turn stones into bread, actually came up again in the feeding of the five thousand people in the desert. Here, “[w]hen the people saw the sign which he had done, they said, ‘This is indeed the prophet who is to come into the world!’ Perceiving then that they were about to come and take him by force to make him king, Jesus withdrew again to the hills by himself” (Jn 6: 14-15). Jesus “ratted out” their true motives when the people He had fed found Him on the other side of the Sea of Galilee. He told them, “Truly, truly, I say to you, you seek me, not because you saw signs, but because you ate your fill of the loaves” (Jn 6: 25-26). This reveals that the first temptation was a temptation to become a “bread king,” that is, one who will give the people food without them working to provide it. The parallels with socialism are obvious here. The difference is that the socialist leader cannot just create bread, but has to take it from those who produce more bread. This king then gets the support of the masses against the wise, disciplined, moral and productive people, who are in the minority. Meanwhile, this action provides a disincentive to the productive minority who feel that since the fruits of their labor are taken from them and given to the non-productive majority, they might as well get on the bandwagon and stop working as well. This puts the nation in a decline. The next temptation, where Jesus was supposed to throw Himself off of the pinnacle of the Temple, is not only a temptation to show His divinity by signs and wonders, but to get a following this way. In other words, Satan would not care if Jesus had political followers who were “ooh’d and ah’d” by signs, even if these signs did not feed them as in the first temptation, if only this would deflect His message, which transcended earthly things. If Jesus submitted to this temptation, people would follow Him waiting for the next “trick” but would not listen to a word he said. If you go to a circus, do you remember what the ringmaster said, or do you remember the acrobats, etc.?  This second temptation also came up again in the case of Simon the Magician (Acts: 8: 9-24). People were amazed by the magic of Simon. I doubt that his magic was the “pull the rabbit out of a hat” kind, but was of a preternatural type, done with the aid of evil spirits. Simon heard the Apostles preaching and, like so many others, came to believe in Jesus Christ, and was baptized. Later on, when he saw how the Holy Spirit came down visibly upon the people the Apostles laid hands on, he was impressed. He offered the Apostles money in exchange for this power, “saying, ‘Give me this power, that anyone on whom I lay my hands may receive the Holy Spirit” (Acts 8: 19). St. Peter was not pleased, to say the least: “Your silver perish with you, because you thought you could obtain the gift of God with money” (Acts 8: 20). Peter upbraids him, and it is clear why: Simon, the magician, wanted this power, like all of his other powers—for show. Because he already had a great reputation for this magic, this power would make him more famous. In the end, Simon repented by asking St. Peter to pray for him that all of the things that St. Peter predicted about him would not come to pass (Acts 8: 22-24). But it is the last of the temptations which is important for this discussion. In this one, the devil says to Our Lord: “All these [kingdoms] I will give you, if you fall down and worship me.” St. Luke’s Gospel is even more emphatic: “To you I will give all this authority and their glory; for it has been delivered to me, and I give it to whom I will” (Lk 4: 6). First of all, if God actually worshiped anyone, He and everything would go out of existence. God cannot do evil; it is against His very nature. Even worse, worshipping Satan was the devil’s desire all along. St. Michael’s name means “Who is like God?” The answer is that only God is like God. In his pride, Satan wanted to be like God, and his fallen nature is forever stuck, frozen in this desire, which he relentlessly pursues through the ages. But, what did the devil mean by “All these will I give you”? And, “[A]ll this authority and their glory; for it has been delivered to me, and I give it to whom I will.” One cannot give away what one does not own. I cannot say legitimately, “I will give you Bob’s pen.” Only Bob can give you his pen. If, on the basis of what I said, you expected to get Bob’s pen, you would be sadly disappointed when Bob says: “No, chance; you can’t have my pen.” Satan is saying that he possesses all the kingdoms of the earth! Now there are two caveats here. First, Satan is a liar, but he tells half-truths. He doesn’t tell whoppers because people would see through them (see, for example, Gen 3: 1-7). Half-truths make the lies more believable to rational but weak creatures so that they will fall for them. Now, since the other kingdoms of the earth were composed of rulers and their cronies who not only worshipped false gods, whom the Fathers of the Church considered demons, and also did whatever they could get away with, so that they were an easy prey to Satan’s influence, there is a great truth to his claim that he did own these kingdoms. But does this apply to today? Are all those people who put their faith in governments and their policies missing something? St. Thomas argued that government was good. God Himself gave us a natural need for some to organize the society. We call that government, and since God created that need, in itself, government is good. But St. Thomas is approaching it as a metaphysician. A metaphysician looks at the nature of something. The nature of all things is good, because all things are made by God. Evil does not have a nature; evil is bereft of something it should have, which is why it is an evil. Also, St. Thomas, in his naming the five types of law (eternal, natural, Divine positive, human positive), includes “fomes” as the fifth type of law. This word in Latin means tinder wood, and what does tinder wood do? It flares up very hot and very quickly when lit. The fomes is a reminder that every human being (with two notable exceptions) has a tendency, due to their fallen nature, to allow their passions to flare up, overcoming their reason. It is a major error, and a foolish one to boot, to think that once someone gets into public office, the fomes goes away. The good nature of government aside, it is populated by imperfect people, many, many of whom do not have the grace, never had the grace, or have rejected the grace, to do what is for the common good, but, on the margin, do what is good for themselves. (See my blog entry, “The Economics of Politics.”) St. Augustine understood this well. Cicero had written many years before that Rome was not a real empire because it was not just. Augustine replies that, yes, Rome was unjust, and he spends a lot of pages showing that this was so. But he says that Rome was definitely an empire, and everyone admits it. Justice cannot be expected from government. Government is run by the citizens of the Earthly City. The main job of government is to keep the citizens of that City of Man or the Earthly City from overwhelming the citizens of the City of God. Now, you may reply, why would rulers from the Earthly City want to protect the citizens of the City of God? It is in their interest to keep the two sides apart. If they do not, they might be overthrown. The rulers’ object is civil peace, not justice or goodness. Why peace and not justice or goodness? Because government attracts those who like earthly things, like power, etc. Since that is the case, how can we expect goodness or justice from people who have no intention of providing it? St. Augustine does say that once in a great while you do get a good and just ruler. History certainly bears this out. But sooner or later he dies or is killed, or retires (voluntarily or not), and it is back to the same old unjust and/or non-good rulers, who are merely interested in peace so that their money and power can keep rolling in. In my blog entry on Senator John Edwards of North Carolina, I pointed out that political power had become his god. He was willing to lie about his affairs and illegitimate child to the public, rather than give up the possibility of becoming president. Power was his real god, and that is idolatry. He is not the only one. Power tends to attract those kinds of people. While not all public officials are power-hungry idolaters, one good viewing of “Mr. Smith Goes to Washington,” staring Jimmy Stewart, which I believe reflects much of reality, should persuade you that Lord Acton’s expression that “Power tends to corrupt, and absolute power corrupts absolutely” is true. The next time you look to government to solve society’s problems, remember this blog entry, and think it out.

Aristophanes on Inflation

The following article was written by Clifford F. Thies and appeared on the web site of the Ludwig von Mises Institute.It used to be that every economist worth his salt knew Gresham’s Law (or, if he was Polish, Copernicus’s Law): “bad money drives out good.” Narrowly understood, this rule says that when the government requires people to accept different forms of money at an exchange rate fixed by law, the form of money that is overvalued (the “bad money”) will circulate, while the form of money that is undervalued (the “good money”) won’t.Now comes a new translation of the plays of Aristophanes by Paul Roche, among them “The Frogs,” which has the oldest known expression of this rule:You know what I often think:We treat our best menThe way we treat our mintThe silver and the goldenWe were proud to inventThese unalloyedGenuine coins, no less,Ringing true and testedBoth abroad and [in] GreeceAnd now they’re not employedAs if we were disgustedAnd want to use insteadThese shoddy coppers mintedOnly yesterdayOr the day before(as if that matters).(Aristophanes: The Complete Plays, trans. Paul Roche, New American Library, 2005, p. 573)In “The Frogs,” two citizens of Athens descend into Hades for the purpose of resurrecting two well-respected politicians of the past to save the city-state from its current, corrupt rulers. The current rulers are said to be like the base-metal coins in circulation, while the rulers of the past are like the full-bodied, precious metal coins that formerly circulated.The full-bodied coins “rang true”; that is, when flipped onto a solid wooden table, they gave out a distinctive ring. Think of Edgar Allen Poe’s “The Bells.” The heft, feel, and tone of the coins were sufficient, for most purposes, to distinguish a counterfeit from the genuine article. And these coins circulated abroad as well as at home because they had intrinsic value. In contrast, the debased coins were impossible to distinguish from any counterfeit, since they had no distinctive qualities, and were repugnant to foreigners and anyone else not compelled by law to accept them, just like current politicians.The passage doesn’t actually say how the base-metal coins came to replace the full-bodied coins. Nevertheless, we can infer that the audience knew what had happened, since the play was a comedy, not an economics lecture. From historical sources, we know that Athens had been involved in a series of wars against Sparta and other Greek city-states, and that it was threatened by Persia.The continuing expenses of these wars depleted Athens’s treasury. Even the gold and silver objects at the temple were melted and recast as money. Then the city resorted to debasement and to legal-tender laws compelling acceptance of the debased coins at the values of precious-metal coins. Soon, the coins were recast only with base metal.The story of debased coins and their connection with fiscal imbalance and corruption is perennial. The prophet Isaiah (1:22) writes “Your silver has become dross, your wine diluted with water.” Dross is base metal. The silver coins that had formerly circulated had come to be replaced by coins of base metal. The base metals might be polished so as to look like silver, as in the case of many contemporary US coins, but this only hides the corruption that would otherwise be manifest in the coins.Similarly, the Islamic scholar Ibn Taymiyyah (who can be viewed as a forerunner of Wahhabism) wrote, at a time of continuing warfare against Christians to the west and Mongols to the east, “If the ruler cancels the use of a certain coin and mints another kind of money for the people, he will spoil the riches which they possess.” Like Isaiah and Augustine, Ibn Taymiyyah wrote at a time of decline in his civilization and called for revival and separation from the world.Speaking of the Mongols, it is to the Emperor Kublai Khan that we owe the invention of paper money. Marco Polo, who brought the news of this innovation to the Europeans, wrote in his travelogue, “nor does anyone, at the peril of his life, refuse to accept it in payment.” During the later years of Kublai Khan’s reign, the issues of paper currency became excessive, and an inflationary cycle got underway.During the reign of his successor, the fourth Mongol emperor, the world’s first “currency reform” was undertaken, with a forced conversion of the old currency for the new at the rate of five to one. The former prosperity was also replaced by corruption and decline.Upon the overthrow of the Mongol dynasty in the 13th century, and the ascension of the Ming dynasty in China, history recorded yet another milestone in the evolution of money, the first inscription of a legal-tender law onto paper money: “This paper money shall have currency and be used in all respects as if it were copper money.” At the beginning of the Ming dynasty, 17 units of paper money were the equivalent of 15 units of copper money. By the 15th century, 5,000 units of paper money were the equivalent of 15 units of copper money. Economic conditions deteriorated, and the empire suffered incursions by the Tartars.Our own country’s experience with legal-tender laws goes back to the colonial days, when the colonies issued paper money then known as “bills of credit.” The first issue was by the Massachusetts Colony in 1690, during King William’s War, when the English colonists of Massachusetts thought to outfit an expedition to take Quebec, then a French colony. The bills were inscribed, “This indented bill of Five Shillings … shall be in value equal to Money.”Soon after this war came Queen Anne’s War and another issue of bills of credit. Then came another war whose name escapes me just now, and then yet another. Each time, more bills of credit. And, of course, accompanying all these Bills of Credit was inflation.[1]During mid-century, the English limited the ability of the American colonies to issue bills of credit, and the inflation was ended. Later in the 18th century, the American colonies chafed under the burden of this British constraint on issuing paper money. This constraint was among the grievances referred to in the Declaration of Independence. According to Benjamin Franklin, it was the primary one. And so they had a revolution.Freed of the outside constraint on issuing paper money, guess what? As is obvious to everyone who does not prostrate himself before the throne of big government, there was inflation. And to compel acceptance of the paper money, guess what? Those not accepting the paper money being issued by each of the self-proclaimed independent states or by their Continental Congress were to be treated as Loyalists and have their property seized.So, in view of the inflation that burst out during the Revolution and Confederation periods, there was called a convention for the purpose of drawing up a new agreement among the states. This agreement, among other things, limited the ability of the state governments to issue paper money and did not grant such a power to the federal government. What is remarkable about the constitution that they drew up is not that it only restrained the issue of paper money for a certain number of years (until the United States got into the cycle of war, deficit spending, inflation, corruption, and decay), but that it restrained the issue of paper money for as long as it did.So let us, with the same cruel humor, make fun of our condition as Americans the same way Aristophanes did of the condition of Athenians. Let us send a delegation to Hades to resurrect Ludwig von Mises, Thomas Jefferson, John Locke, and Aristotle to replace the corrupt, debased politicians we now have.Clifford F. Thies is the Eldon R. Lindsay Chair of Free Enterprise at Shenandoah University in Winchester, VA.Notes[1] During one of these wars (does it really matter which?) came yet another first in the history of money: the first use of a price index to try to deal with inflation. By contemporary standards, it was a crude index. Only the prices of four commodities were involved

One Major Source of Our Problems

An economist friend of mine, who is a Salesian Brother, recently gave a lecture at Oxford University reminding us of one major problem that is neglected by many economists and by papal writings on economic things. Yet this just might be the biggest problem that we are facing. All attacks on the free market by Catholics saying that it fosters greed, etc., have been shown to be nonsense, and that greed resides in the human heart. I learned this many years ago in the philosophy courses I took at a good Catholic university as an undergraduate. You would think that our clergy would also have learned it as well. Both the rich and the poor can be just as greedy.  But the “morality” industry, that is, those who make their living, so to speak, arguing that the cause of our financial problems is the lack of morality inherent in the free market, have missed the major point made by my Brother colleague: the problem of “rent seeking.” Famous economists Robert B. Ekelund and Robert D. Tollison define rent seeking as: “The behavior associated with the use of scarce resources in the pursuit of monopoly profits created by government action; the process of using scarce resources in an effort to obtain rents or a transfer of wealth.”[1] A rent is the payment to a factor of production such as land, labor, capital and/or entrepreneur skill in excess of its opportunity costs.[2] Basically a rent is profit. What the lay person calls rent, as in apartment rent paid to a landlord, is just one type of rent. And the rent paid becomes a rent only when the money paid for the apartment exceeds the cost of maintaining it and repaying the money loaned to build it. (This is one of the problems of rent control—government rent ceilings are usually too low to maintain the building so the owner has to abandon it and chalk it up a loss. The result is a slum.)Notice that the definition given above includes government. How this works is that in exchange for financial and other support in future elections,[3] government leaders have an open door for those in business or unions who seek monopoly privileges. The privileges must be licensed by government, or the goods or services of the rent-seeking company will be open to competition, which will allow competition to drive down the prices charged for a similar product or force the rent-seeking company to improve the quality. Take the example of General Electric, oddly the company for which Ronald Reagan used to be a spokesman. GE is a failing company, but it also owns NBC. It appears that GE president Jeffrey Immelt got a lump of money from the government TARP funds, which was only intended to go to banks. It was given to GE’s financial arm, but since GE is not a bank, none of the strings attached to the TARP money banks received were applied to General Electric. GE CEO Jeffrey Immelt is a frequent visitor to the White House, and I am sure they have a coffee cup with his name on it. You can see the rent seeking here as NBC and MSNBC, owned by GE, were almost news outlets for the Obama campaign and now for his administration, bitterly attacking Obama’s critics. In addition, GE is a big supporter of the cap in trade (cap and tax) bill. One of the reasons behind its support is that it would stand to manage billions of in cap and trade contracts if the deal goes through. Not coincidently, Mr. Immelt is on the Board of Directors of the New York Federal Reserve Bank, which is the most powerful of the Fed banks.I am not picking on GE, but I am attacking the notion that the government has a role in managing the economy, because this opens the door to groups and companies looking to get a hand on government monopoly privileges and your tax money, instead of earning it the hard way. Take the current “Jobs Summit” now being held in the White House. All of the Obama cronies are there: big unions, some big corporations, all looking for handouts or privileges. Noticeably missing was the US Chamber of Commerce, a public critic of Obama’s economic policies, and other representatives of small business owners—small business which employs most American workers. It was reported that when one person at the conference told the President that if he wants to help the growth of jobs, do not pass the health care plan, Obama replied that “we” are going to pass it whether you like it or not.All this is rent seeking, and government is the middleman in the process. If the government were strictly prohibited for touching business or labor in the country, these folks could not get anything from it. Sadly, Catholics are among the biggest supporters of government’s running of the economy; therefore, Catholics are big supporters of rent seeking to the detriment of the economy and the common good.

Where is Pope Benedict coming from?