The only security men can have for their political liberty, consists in keeping their money in their own pockets.
– Lysander Spooner
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Samizdata quote of the dayMarch 6th, 2010 |
 24 comments to Samizdata quote of the day |
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So if you don’t have money, but you do have a vote, then what you do is vote OTHER people’s money into your pocket and bingo! What did you lose? Nothing, because you never cared about liberty to begin with…you only cared about the politics of envy.
1808 – 1887
Actually “productive” years from 1830.
Money then was real. Today it is “credit” and nothing but credit.
The job today is to pass that credit on before it declines and to find better credit, none of which can stay “in one’s own pocket.”
My favourite Spooner quote-
RSS,
Even when money was “real,” it wasn’t real. Gold is not edible, nor (at the time) did it have industrial use.
The one advantage it has over credit is that you can take it between jurisdictions, but even that was rarely true in practice. Nobles were jealous of their power to mint coins, and would harshly punish the use of foreign coins.
Additionally, any time the government wanted to debase the currency, it would simply recall all of the existing coinage at sword-point.
The good old days were not so good.
It was not the gold in the money in the 1800s that made it stable. Rather, it was a consensus within the Bank of England that the currency needed to be stable that kept it stable. A similar consensus is at work today in the community of central banks, though the credit nature of money has made it harder to maintain stable value.
The advantage of gold as a currency lies in the fact that it is hard to find and impossible to create. Diluting it by alloying it with other metals is of course possible- but relatively easy to detect. What made it stable was the simple fact that governments could not control the overall supply of the stuff.
It was of course seriously inconvenient to use.
The advantage of Gold as a currency is that you can be confident it will still be valuable to anyone you want to trade with many years in the future.
When people trade, they exchange something they possess or control for something that is somebody else’s. But for reasons of practical efficiency, the two halves of the exchange – what I give you and what you give me – are not always done at the same time. The representation of this time gap, the value of all the trades that are currently in progress, is what money actually is.
In practice, it is implemented by ownership of some commodity that most of the people you trade with will want enough to be willing to accept in trade, and where you may be confident that they will continue to do so for as long as you expect the trade to last.
The total amount of money varies, depending not only on the amount of trade in progress, but also on the average duration of the trades. When people save more, extending the time between earning it and spending it, the demand for money increases. We can all create and destroy money, and do all the time. Don’t confuse money with cash.
Commodity-based money (like the Gold standard) is subject to the vagaries of the market in that commodity. If it’s price varies with respect to everything else, it can mess things up, and governments can buy and sell large quantities of it to manipulate its price, so it is by no means immune. From the point of view of stability it might make more sense to base a currency on a “shopping basket” of commodities, as they do with inflation indexes, but that would be pretty complicated to implement.
Governments nowadays back their currencies with remission from tax (i.e. you can pay your taxes with it), or more precisely, with the products of the labour of government employees and contractors paid for by taxes. Since taxes are one of life’s inevitabilities, and everybody has to pay them, government money is and will continue to be valuable to everyone. The backing of ‘fiat’ money is no more fictional than tax collectors are, but it is true that its value can be heavily influenced by government policy.
Given this perspective, it’s an interesting question as to what would happen to the value of money if there was a policy switch towards reducing taxes?
John W.: thanks for that one. As true today as it was then.
That is, indeed, a brilliant quote from Spooner, John W.
And, of course, that is what the powers-that-be have done.
It is no longer possible to keep your squirrelled nut store to yourself.
There are no longer any easy ways to privatise your own wealth (?!)
“Governments nowadays back their currencies with remission from tax”
Pa — Thanks for your analysis. Thought-provoking!
One other aspect that often seems to be lost — there is the real economy and then there is the money economy. The real economy is people mining minerals, manufacturing goods, growing crops, marketing goods, providing services. The real economy is what we ought to focus on. The money economy is properly the tail to the real economy’s dog. Unfortunately, sometimes the tail ends up wagging the dog.
“Governments nowadays back their currencies with remission from tax”
Pa — Thanks for your analysis. Thought-provoking!
One other aspect that often seems to be lost — there is the real economy and then there is the money economy. The real economy is people mining minerals, manufacturing goods, growing crops, marketing goods, providing services. The real economy is what we ought to focus on. The money economy is properly the tail to the real economy’s dog. Unfortunately, sometimes the tail ends up wagging the dog.
My apologies for the double post there. The new anti-spam procedure apparently helped me generate spam.
There’s probably a lesson for Big Government in there somewhere.
All –
In using the term real money, I intended to convey the understanding of a standard (norm) of value for puposes of use in exchanges and as unit of account.
There is no denying the utility of credit in commerce. See, Ferguson, The Ascent of Money.
Nevertheless, use of credits does not provide a standard of value in the same way, for the same essntial purposes as real money.
The recent disruptions of the credit “systems” have pretty well demonstrated that lack of norm and shown that credit values are only comparative to one another, as has been demonstrated by the evolution of credit default swaps (CDS), so that at least the bases of comparisons have begun to establish some standards, however imperfect or abused.
The value of sovereign credits (government promises) is no longer less “volitile” or more “stable” despite having (in theory) the power to plunder the productive activities of various kinds of populations. Those geese who lay the golden eggs of productivity are not only squawking louder at being plucked, they are becoming constipated.
“In using the term real money, I intended to convey the understanding of a standard (norm) of value for puposes of use in exchanges and as unit of account.”
It doesn’t really affect your argument, but be careful about using the idea of a “standard of value”. There’s no such thing, because value is subjective.
In any trade, each participant swaps something they value less than the thing they’re swapping it for (else they would not swap). Each participant makes a net gain, and the total value of the goods (as judged by its owners) increases. It’s how trade creates wealth.
In trying to set an objective standard of value, you are trying to find a standard for a situation where A is greater than B, and B is greater than A, both at the same time. It can’t work. At best you can get something that fits approximately.
It was Karl Marx’s blunder, too, to decide that the market equilibrium constituted the unique and objective value of a product, and therefore when a merchant bought it from the worker at one price, and sold it to the market at a higher one, that this was theft of part of the product’s value from the worker, and that this continual leakage of value from the economy would eventually destroy it. Marx founded his theory of value on the labour that went into making the product (following earlier thinkers). Those who did no labour added no value. But labour is only one particular commodity, and the “labour theory of value” is only a special case of the commodity theory of value: the idea that economic value is an objective function of the amount of some fixed commodity, that all people can/should effectively hold to be the same.
It’s a special case of social choice theory, and strange paradoxes like Arrow’s impossibility theorem apply, so in trying to aggregate the preference of individuals into a collective valuation one is faced with a task at least extremely difficult, if not totally doomed.
We know well enough what you mean, but the concept of ‘money’ is inevitably somewhat fuzzy, so the distinction you’re trying to make perhaps isn’t as clear as one would like it to be. The ‘reality’ of money is perhaps on a spectrum.
I keep meaning to write something a bit longer about this, but it’s a very hard topic to explain clearly. I don’t know if I can do it.
While waiting to be unsmitten (ahem…), I thought it might be worth also recalling the question of electronic cash and private currencies.
Now to some degree private currencies are not so easily controlled by governments – anonymous and untraceable, it becomes impossible to track wealth and transactions, or to prevent people from making as much or as little of it as they want. But it is still subject to government influence, because like anybody else, it can participate in the private currencies and ‘print money’ like anybody else.
The government’s power to influence the economy is not determined by its special privilege in being allowed to print cash, but simply by the huge proportion of the nation’s wealth it can control.
Pa –
Going by a number of your other posts, you really should write that “bit more.”
As to the use of “standard” to differentiate credits which today serve the functions of money (especially practically all forms of currency) from “real” money, that’s probably pretty legitimate, given how standards are established.
Pat –
There is also the intriguing analysis of the “old timer” in The Treasure of Sierra Madre who held that the value of gold represented all the man hours that go into finding, recovering and bringing it out, since so much labor to that end yields naught. Thus; what does come out has to match in value all that other effort.
Spooner’s partial thoughts on sound currency.
Thinking of Spooner is inspiring and depressing at the same time. It’s nice to know that people have been thinking in a libertarian vein for generations, and that we aren’t the tin-foil hat wearing contrarians the Statist lemmings portray us as, but it’s depressing to see that we have come so far down the Statist road regardless of the Bastiats and the Spooners on up to the Nocks etc etc.
Thank you Brad – it is useful to be reminded that even the great names could be in error (and that stuff about money by Spooner is error – with “invested Dollar” and other such tripe).
Switzerland was the last major nation where the currnecy had any link at all with something other than government edicts (written or computer credit). And even the Swiss link with gold has been gone some years now.
The central problem is this notion of “backed” and “standards” this is where the errors start to creep it.
If two people choose a certain commodity (even land and houses if they want to please Spooner) as money that is fine. If they choose gold they need to say how much gold (and what level of purity) is to be provided in return for the car (or whatever) – and if they choose to use silver (or whatever) ditto.
However, as soon as “standards” and “backing” come in this all starts to fall apart – people start to use special names for the money (“Dollars”, “Pounds” whatever) and soon the special names are treated as MAGIC CHARMS (as if they was some magical power in the name – as opposed to the commodity it represents).
Sound money should be a matter of voluntary contract – a matter of an agreed commodity or an agreed level of purity.
PERIOD.
As for government taxation – YES.
The problem is the government SPENDING.
It is pointless (indeed wors than pointless) to demand government spending (on various so called “Public Goods” – by the way the list now seems to have extended to internet access, the BBC was busy announcing that most people now regard this as yet another “fundemental right”, this would be people who can not tell the difference between a “right” such as freedom of speech, from a “good” such as bread ) and then denounce taxation.
And NO, there is no clever way out via “single taxes” or “debt free money” or some other dodge.
If you want government to do stuff they are going to drain society paying for it.
And, sooner or later, even the people who get the government money are going to suffer as civil society starts to break down.
By the way – it is “sooner” now. It is later than most people think.
“and if they choose to use silver (or whatever) ditto.”
So when applying the labour theory of value, you’d use man-hours?
http://www.telegraph.co.uk/news/newstopics/politics/7391864/Samantha-Cameron-could-vote-for-Gordon-Brown-senior-Conservative-claims.html
How fuckin useless does a Party have to be to let a story like the above get out folks?
My only choices are spoil my ballot or stay home this time.
RAB,
Are you suggesting that a party should stop stories getting out? What methods would you suggest?
Or for that matter, that it should be able to control the political affiliations and votes of all the friends and family of party members? Seemed a bit of a non-story to me.
Pa Annoyed – if someone offered me “man hours” in return for some good or service he wanted to buy from me I would say “no”.
I would like gold (if a private mint was turning them into reliable coins – as they did before Congress made that illegal) all the better – however, if he offered a certain job (say some garden work in return for a book review) I would consider it.
But actually the last thing I would want is “man hours” – I want people working here for the shortest time possible (not the longest time). I want the job done as fast as is compatible with doing it well.
Pa Annoyed – you misunderstand the S. Cameron story.
Please let me explain.
S. Cameron is the wife of David Cameron the leader of the Conservative party.
And the story is based on the fact that no one would be surprised if this (very rich but also “Progressive” – indeed classic Cameron “A list” type, i.e. the candidates he has forced many local Conservative Associations to accept against the will of their members) was a Labour supporter.
Indeed the story is really saying – “what is the difference between the Cameron types and the New Labour Blair types”, of course there is no real difference, that is the problem.
Contrary to what some people think Mr Brown (like Mr Blair) is a Progressive – and so is David Cameron.
Paul,
I knew that Samantha was David’s wife. But why should that be relevant to Samantha’s politics?
There is no law against labour and conservative supporters marrying one another. They’re different and independent people, so even if the story was true, and Samantha did support labour, or the Libertarian Party, or the BNP – so what?
A story that David Cameron once voted labour, yes I could see that being interesting. But to be told that his wife might have is no more significant than his window cleaner or garage mechanic supporting labour. They’re different people.
I think the real story in this case was that a politician used irony in front of a journalist ill-equipped to detect it.