www.ebook3000.com www.ebook3000.com The Ontology and Function of Money www.ebook3000.com Capitalist Thought: Studies in Philosophy, Politics, and Economics Series Editor: Edward W Younkins, Wheeling Jesuit University Mission Statement This book series is devoted to studying the foundations of capitalism from a number of academic disciplines including, but not limited to, philosophy, political science, economics, law, literature, and history Recognizing the expansion of the boundaries of economics, this series particularly welcomes proposals for monographs and edited collections that focus on topics from transdisciplinary, interdisciplinary, and multidisciplinary perspectives Lexington Books will consider a wide range of conceptual, empirical, and methodological submissions, Works in this series will tend to synthesize and integrate knowledge and to build bridges within and between disciplines They will be of vital concern to academicians, business people, and others in the debate about the proper role of capitalism, business, and business people in economic society Advisory Board Doug Bandow Walter Block Douglas J Den Uyl Richard M Ebeling Mimi Gladstein Samuel Gregg Stephen Hicks Steven Horwitz Stephan Kinsella Tibor R Machan Michael Novak James Otteson Douglas B Rasmussen Chris Matthew Sciabarra Aeon J Skoble C Bradley Thompson Thomas E Woods Titles in the Series Economic Morality: Ancient to Modern Readings, by Henry C Clark and Eric Allison The Ontology and Function of Money: The Philosophical Fundamentals of Monetary Institutions, by Leonidas Zelmanovitz www.ebook3000.com The Ontology and Function of Money The Philosophical Fundamentals of Monetary Institutions Leonidas Zelmanovitz LEXINGTON BOOKS Lanham • Boulder • New York • London www.ebook3000.com Published by Lexington Books An imprint of The Rowman & Littlefield Publishing Group, Inc 4501 Forbes Boulevard, Suite 200, Lanham, Maryland 20706 www.rowman.com Unit A, Whitacre Mews, 26-34 Stannary Street, London SE11 4AB Copyright © 2016 by Lexington Books All rights reserved No part of this book may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without written permission from the publisher, except by a reviewer who may quote passages in a review British Library Cataloguing in Publication Information Available Library of Congress Cataloging-in-Publication Data Zelmanovitz, Leonidas, 1961- author The ontology and function of money : the philosophical fundamentals of monetary institutions / Leonidas Zelmanovitz pages cm (Capitalist thought: studies in philosophy, politics, and economics) Includes bibliographical references and index ISBN 978-0-7391-9511-6 (cloth : alk paper) ISBN 978-0-7391-9512-3 (electronic) Money-Philosophy Financial institutions Monetary policy I Title HG220.3.Z45 2015 332.401 dc23 2015027569 TM The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI/NISO Z39.48-1992 Printed in the United States of America www.ebook3000.com This book is dedicated to Rosane, Thomas, and Alicia www.ebook3000.com www.ebook3000.com Contents List of Figures and Tables Acknowledgments Preface Brazil as a Monetary Laboratory Going Beyond Economics and Becoming Philosophical Introduction Institutions and Progress The Purpose of Good Money and Some Hindrances to Having It Notes I: Metaphysics xiii xv xvii xvii xix The Origin and Essence of Money 1.1 Introduction to the Origin and Essence of Money 1.2 Making the Historical Account Compatible 1.3 What is the Orthodoxy? 1.4 Setting the Premises 1.5 Understanding What is Money for the Catallactics 1.6 The Functionality of Money 1.7 Arguments for Conceiving Money as a Charter 1.8 Comparing the Arguments of the Two Schools Notes 9 11 12 14 18 20 26 42 48 Brief Account of the Intellectual History of Money, Starting with Aristotle 2.1 Introduction to the Philosophy of Money in Aristotle 2.2 From Aristotle to the Theory of Marginal Utility 2.3 Contemporary Schools on the Characteristics of Money Notes 55 55 65 70 93 Menger, Simmel, and Mises on Money Value 3.1 Introduction to Simmel and Mises 3.2 Value of Money for Menger 3.3 Mises’ Theory of Money Value 3.4 Simmel’s Philosophy of Money 3.5 Conclusion of Simmel and Mises on Money Notes vii www.ebook3000.com 97 97 99 100 105 113 116 viii Contents II: Epistemology 119 Comte’s Positivist Epistemology and Politics in a Comparative Analysis with the Austrian School of Economics 4.1 Introduction 4.2 Positivism as a School of Thought 4.3 Henri de Saint-Simon and Auguste Comte 4.4 Positive Epistemology 4.5 Positive Politics 4.6 The Austrian School of Economics 4.7 Conclusion Notes What is it Possible to Know about Money? 5.1 What is it Possible to Know about Money? 5.2 The Positivist Methodology and Epistemological Assumption of Mainstream Economics 5.3 The General Equilibrium Theory 5.4 The Use of Knowledge in Society and Money 5.5 Socialism 5.6 Lombard Street 5.7 Implications of the GAMOE Definition 5.8 Monetary Disturbances 5.9 Rational Expectations 5.10 Subjectivism and the Understanding of Money Notes III: Ethics 121 122 124 124 125 129 134 136 138 141 141 142 146 147 149 152 153 155 156 158 159 163 The Ethic of Money 6.1 Introduction to the Ethics of Money 6.2 A Possible Classification of the Schools of Thought about Money According to their Conceptions about the Source of Money’s Value 6.3 Moral Theories 6.4 The Moral Justification of the “Fiscal Proviso” 6.5 How to Fit a Catallactic Monetary Theory into the Divide in Moral Philosophy 6.6 The Dynamic Efficiency Theory 6.7 The Theory of Dynamic Efficiency and Money 6.8 Selected Attributes of a Proper Monetary System 6.9 Conclusion Notes www.ebook3000.com 165 165 168 170 174 177 178 181 182 194 195 434 Index Jackson, Andrew, 224–225 Japan, 37 Jevons, William Stanley, 69 Joachimsthaler, 48n5 John II (king), 66 Joseph I (king), 392 just exchanges, 59–60 justice, consequentialist justification for, 170 Kant, Immanuel, 6n1, 171–173, 257n19 Kay, John, 304–305 Kaye, Joel, 94n7 Kennedy, Peter, 90 Kessler, Andy, 258n20 Keynes, John Maynard, 9, 27, 40–41, 47, 48n3, 71, 82–87, 83, 95n17, 157, 171, 172, 240, 335 See also Babylonian Madness; Chartalists; Keynesian theory; post-Keynesian theory Keynesian cross diagram, 83, 83–84 Keynesianism, 12, 271–272 Keynesians, 161n11 Keynesian theory, 82–87, 83 King of France, 50n14 Kings of Lydia, 356 Kirzner, Israel, 178, 265, 335 Klein, Peter, 94n12 Knapp, Friedrich, 99 Knapp, Georg, 9, 26–27, 31, 40, 43, 47, 51n22, 53n32, 71, 254n5 See also Chartalists; lytric knife, 21 knowledge, 141–159, 159n1, 166–168, 295n5, 296n7 Knox v Lee, 226 Koning, J P., 279n11 kosmos, 16–17, 403 Kroszner, Randall, xx, 321 Kuhn, Thomas, 144 Kumhof, Michael, 305 Kuwait, 289 labor, 92–93 See also division of labor labor theory of value, 68 Lachmann, L M., 6n3 Ladures (father), 227 Lagos, Ricardo, 331n22 Laidler, David, 88–89, 116n1, 244–245 laissez-faire, 323–324, 324 Lakatos, Imre, 144 Lange, Oskar, 159n3 languages, 17 Lassalle, Ferdinand, 389 Late Bronze age, 352n4 Late Roman Republic, 14 Latin America, 359–362 Laures, John, 51n22, 67 law, 48n1, 125–127, 131–132, 138n4 Law, John, 20, 50n14 Law, Legislation, and Liberty (Hayek), 403, 407 law of fiscal responsibility (LFR), 397 Le Banc, 51n21 Leeson, Peter, left, 312 The Legacy of Max Weber (Lachmann), 6n3 The Legal Aspect of Money (Mann), 27 legal means of payment, 30 legal positivism, 125 Legal Positivism (Coleman and Leiter), 132 legal status, 300 legal tender, 155, 224, 300, 362; definition of, 403; forced, 155, 402; foreign coins having, 233n3; governments monopolizing, 150 Legal Tender Act, 225 Lehman Brothers, 37, 52n28, 255n6, 307, 309 Leibniz, Gottfried Wilhelm, 16 Leiter, Brian, 132 lender of last resort: BoE as, 207; central banks as, 151, 206–209, 233n8–233n9, 252–253, 299; definition of, 403; fiat money needed for, 299 Lerner, Abba, 27, 28–29, 71 letter, money as, 37 leverage, 206–207, 280n12 Leviathan, 175–176 Levin, Michael, 175–176 Levisohn, Ben, 255n6 LFR See law of fiscal responsibility liabilities, of banking system, xviii Index Liberalism (Mises), 4–5 liberty, 352n3 Liberty Dollars, 322 Liggio, Leonard, 224, 234n19 Lincoln, Abraham, 158 Lipsky, Seth, 322 liquidity, 23–24, 50n19, 152–153, 238, 243, 268, 307–309; effect, 386n2; market, 18, 403 Listhaug, Ola, 384–385 Liverpool (lord), 278n1 loan certificates, 219 Locke, John, 16, 69, 94n8, 94n9 Logical Investigations (Husserl), 117n8 Logic and Scientific Method (Cohen and Nagel), 53n34 Lombard Street, 152–153 Lombard Street (Bagehot), 252, 405 London, England, 262 long-term debt, government issuing, 311 long-term financial transactions, 49n6 long-term mortgages, xviii love of money, 95n17 Lowndes, William, 94n8 Lucas, Robert, 156–157 Lucas Critique, 147 Luders, Rolf, 279n11 Lydia, 356 lytric, 31, 403 M0 See monetary base M1 See money supply M2, 154, 243, 274, 290, 316, 339, 405, 406 M3, 154, 405 Macdonald, George, 356 Mack, Eric, 178, 209–210, 211 macroprudential regulations, 312–313 Magliocca, Gerard N., 235n23 The Magna Moralia (Aristotle), 55 mainstream economics See economics mainstream economists, 160n9–160n10 Man, Economy and the State (Rothbard), 95n16, 256n10 managed money, 27 Mandeville, Bernard, 173 Mann, F A., 9, 12, 27, 51n23 See also Chartalists maquiladoras, 373, 403 435 Marbury v Madison, 235n23 marginal utility, theory of, 65–69, 70 Mariana, Juan de, 66, 67, 69, 177, 227, 335–336 Maris, Bernard, 86 marketability (absatzfähigkeit), 24, 50n18, 117n6, 195n1, 333 market liquidity, 18, 403 market money, 30 markets, 16, 17, 18–20, 74 Martin, Felix, 1, 32 Martin, Thomas, 356, 357 Martino V (pope), 177 Martins, Gaspar da Silveira, 133–134 Marx, Karl, xxi, 90–93, 112 Marxist theory, 25, 90–93 Mary (queen), 51n25 Massachusetts, 217–218 material goods, 58 maturity mismatch, 280n16 Maua See Viscount of Maua Maua Railroad, 390 Maxey, Daisy, 255n6 maximum production, 179 MBS See mortgage-backed securities McCloskey, 144–145 McCulloch, J R., 279n10 McKinley Tariff Act, 227 McKinnon, Ronald, 389, 390–391, 395 Mean, Gardiner, 295n4 The Meaning of Money (Withers), means of payment, 30 measures of exchange value, 49n13 Meckling,William H., 160n10 media of exchange, 303–304, 333–334, 352n4; abstraction of, 98–99; central banks providing, 204; competition, 50n19; definition of, 403; goods and, 50n19; introduction of, 349–352; liquidity of, 50n19; money as, 14–15, 21, 23–24, 34–35, 56, 61, 61–62, 64; society and, 57, 349–352; unit of account as, 50n15, 51n21, 75 See also Generally Accepted Medium of Exchange Mediterranean, 65–66, 352n4, 358n1 Meikle, Scott, 64 Meltzer, Allan, 89, 156–157, 159n6, 161n11, 281–282, 290–291, 293, 342 436 Index men, 127–129 Menger, Carl, 4, 9, 12, 15, 21, 23–24, 29, 38–39, 39, 39–40, 43, 47, 49n13, 50n15, 69, 72–73, 94n12, 97, 117n6, 122, 142, 158, 296n10; on money value, 99–115; overview of, 99–100 See also Catallactics; economics method discussion; Generally Accepted Medium of Exchange mercenaries, 42 merchandises, 44, 73 merchants, 31, 67, 75, 217, 219, 262, 279n11, 313, 356 Merquior, José Guilherme, 298 Mesopotamia, 34, 35, 37, 41, 352n4, 355–356 metallism, 42, 43, 51n21, 56, 168, 235n20 metanormative character, of spontaneous order, 17 metaphysical stage, 138n4 metaphysics, 127–129, 145 “The Metaphysics Policy” (Comte), 127 method discussion (methodenstreit), 403 Methodenstreit der Nationalökonomie See economics method discussion “The Methodology of Positive Economics” (Friedman), 143 Mexico, 34 Meyer, Eugene, 229 microfoundations, 72 Midas (king), 58, 86 Middle Ages, 329n16 Middle East, 74, 94n11, 350 military coup, 134 military protectorates, 37 military supplies, 214, 219 Mill, John Stuart, 122, 128, 173 mind, 16 mineral wealth, 372, 382, 384, 385 Minsky, Hyman P., 35–37, 71 Mint, Lloyd, 279n11 minting, 41–42, 48n5, 65, 233n3 Mises, Ludwig von, xx, xxi, 4–5, 6n1, 9, 16, 24, 42–44, 46–47, 48n4, 49n10, 50n15, 51n21, 53n35, 56, 74, 94n10, 116n1, 117n6, 117n8, 117n9, 121–122, 158, 160n8, 166, 178, 182, 212–214, 234n14, 240, 246, 247, 258n25, 259–261, 264, 335, 337, 345n5, 349, 350, 350–351; abstract value in, 102–103; classification of, 260–261; human action and, 103–105; on money value, 97–115; objective value for, 101–102; overview of, 97–99, 113–115; regression theorem of, 322 See also Catallactics Mises Made Easier—A Glossary for Ludwig Von Mises’ Human Action (Greaves), xxi Mississippi Bubble See Cantillon effect Mississippi Company, 50n14 MMDA See Money Market Deposit Accounts MMMF See Money Market Mutual Funds modern money, 31–32 Molina, Luis de See School of Salamanca Molinaei, Caroli, 51n22 monarchies, 49n6 monarchs, 48n5 monetarism, 88 monetarist camp, xx–xxi Monetarists, 161n11 monetarist theory, 87–90 monetary aggregates, 155, 404 monetary arrangements, 369–386 Monetary Authorities, 300–301, 404 monetary base (M0), 154, 267, 315–318, 317, 404 monetary circuit approach See Theory of Monetary Circuit monetary commodity See monetary goods monetary constitution, xx, 221–225, 232n1, 257n13, 258n21 monetary discipline, 155, 404 monetary disturbances, 155–156, 295n6 monetary economy, 14–15, 74–75, 404 monetary goods, 14, 107, 117n6, 317, 405 See also marketability A Monetary History of the United States (Friedman and Schwartz), 229–230 monetary laboratory, Brazil as, xvii–xviii Index monetary merchandise See monetary goods monetary policies, xvii, xix, xx, 2, 5–6, 155, 165, 328n8, 405; inflationary, 380–381, 382; of 1920s, 290–293, 291; noninflationary, 380–381, 383; price index targeting, 295n2; Rothbard on, 291–293; since 1990, 285; US, 289–293, 291 monetary prerogatives, 32–35, 74–75, 203–232 See also monetary constitution monetary properties, 307–311, 309–313, 322, 329n17, 405 monetary reforms, xvii, 278n3 monetary regimes, 237–254, 338 monetary revolution, 69 monetary standard See standard of value monetary systems, 364–366; characteristics of, 375–376; classification of, 300–304, 375–376; of colonies, 217–219; cost of, 191–192; Dutch disease and, 371–372; elasticity of, 235n22; evolution of, 337–338; under free banking, 195n3; under laissez-faire, 323–324, 324; modern, 300–304; as proper, 182–193 monetary unit, xvii, 301–304 monetization, 36, 51n25, 76–77, 116n2, 325 money (nomisma): amount of, 247–249; availability of, 187–188; as barren, 56, 63, 64; characteristics of, 70–93; creation, 52n27; definition of, 1, 12, 30–31, 187, 296n10, 317, 333; essence of, 9–48; essential quality of, 108; evolution of, 108–109, 111, 338–344; functionality of, 20–25, 56, 64; future of, 297–327, 340–344; illusions about, 24–25; intellectual history of, 55–93; justifications, 297–299; main characteristics of, 14–15; misconceptions about, 24–25; moral views about, 56; origin of, 2, 9–48, 56, 94n12, 99–100; orthodoxy, 12–14; overview of, 333–344; possession of, 329n12; in present, 338–340; 437 spontaneous origin of, 29–30, 94n12; thesis, 5–6; time line, 352n2; trends toward, 5; triumph of, 110–111; understanding of, 158–159 See also money value; state origin of money Money & Capital in Economic Development (McKinnon), 390–391 money-change monopoly, 59 money creation, of banks, 265, 265–268, 266, 267 The Money Illusion (Fisher), 296n12 money lending, interest charged on, 56, 69 money-making, 58–59 money market, 37, 405 money market deposit accounts (MMDA), 404 money market mutual funds (MMMF), 37, 243, 255n6, 256n11–256n12, 258n20; definition of, 404; monetary properties lost by, 307–311, 309–313, 329n17; nationalization of, 310; time-deposits monetized through, 325; trust commanded by, 329n17 moneyness, 153, 159n1, 182 money of zero maturity (MZM), 154, 405 money substitutes See quasi-money money supply (M1), 5, 148–149, 206, 228, 241–242, 267, 278n8, 325–327; definition of, 154, 239, 405; monopoly of, 254n3; overview of, 239 See also monetary aggregates Money: The Unauthorized Biography (Martin, F.), 1, 32 money value, 97–115, 168–169, 186, 195n2, 286–288 Mongol Empire, 278n2 monopolies, 59, 254n3, 296n13 moral hazards, FRB and, 272–273, 277 moral knowledge, moral philosophy, 177–178 moral theories, 170–174 Moreno-Villalaz, Juan Luis, 192–193 Morgenstern, Oskar, 144, 295n4 Morris, Robert, 219–220, 220, 221 mortgage-backed securities (MBS), 329n17 mortgages, long-term, xviii 438 Index Mueller, Antony, 123, 133 mutual funds, 274 Myanmar, 299 MZM See money of zero maturity Nagel, Ernest, 53n34 NAICS See North American Industry Classification System Nambikwara, 39 narrow banking (NB), 275–278, 278n3, 304–314 Narveson, Jan, 176 Nation, State, and Economy (Mises), 212–214 National Bank Act, 235n21 national debt, 35, 148–149 nationalization, 310 naturalist, 257n19 naturalistic fallacy, 2, 22–23, 50n16, 50n17 natural law, 48n1, 131, 132, 138n4 natural rents, 407 natural rights, human nature and, 180 natural wealth, 56–57, 59 nature of money, 1–2, 165–166, 211–212 Navarro, Martin Azpilcueta See School of Salamanca NB See narrow banking Neal, Larry, 51n25 near money See quasi-money Neary, J Peter, 386n2, 387n5 Needs of Trade Doctrine, 279n9 neo-Aristotelianism, 177, 335 Neo-Chartalists, 71–72, 76–77 neoclassical consensus, 245 neoclassical models, for demand, 244, 244–247, 246 neoclassical price theory, 159n3 neoclassical synthesis, 87–90 Neolithic, 350, 352 Netherlands, 386n3 network externality, 257n15 New Deal, 257n18, 261 New England, 218 New Monetary Economics (NME), 321 New World conquest, 52n26 new world order, 289 New York City, 225, 227 The Nicomachean Ethics (Aristotle), 55, 59–60, 64 Nixon, Richard, 282 Nixon administration, 35, 115, 282, 286, 371 NME See New Monetary Economics No Legal Tender system, 300 nominalism, 99–100, 101, 254n5, 405 nominal unit, 44 nomisma See money noninflationary monetary policy, 380–381, 383 nonperfectionist politics, 174 nonpolitical money, 216 no-perfectionist policies, 177 normal anchor, 284 normative economics, 70 normative ethics, central questions of, 50n17 Norms of Liberty (Den Uyl and Rasmussen), 174 North, Douglass C., 18, 51n25, 408 North American Industry Classification System (NAICS), 404 Norway, 384–385 notes of credit See bill of exchange Nozick, Robert, 175, 175–176 Oakeshott, Michael, 234n13 objective value, 101–102, 105, 118n11, 168 Objectivists, 168 objectivist theorists, 169 obligation, money as, 37 O’Driscoll, Gerald, Jr., 195n2 “Odysseus”, 52n30 Odyssey (Homer), 52n30 Oeconomica (Aristotle), 55, 59 “Of the Balance of Trade” (Hume), 272, 291, 387n8 oil, 289, 383–385, 387n10, 387n11 Old Greece, 37 olives, 59 100% Money, 304 100% reserve requirements, 259–278, 328n7, 339, 340, 342, 345n6 “On History” (Oakeshott), 234n13 ON RRP See Overnight Reverse Repurchase Facility Index On the Accuracy of Economic Observation (Morganstern), 144 On the Economic Theory of Socialism (Lange), 159n3 “On the Establishment of a Mint” (Hamilton, A.), 205 open market window, 78 opportunity cost analysis, 196n7 Oregon, 226 Oresme, Nicolas, 42, 65, 66, 66–67, 335–336 orthodox economists, 73–74 Overnight Reverse Repurchase Facility (ON RRP), 258n20 Oxford Companion to Philosophy (Honderich), 53n34 paleoanthropology, 349–350 Panama, 192, 302, 360, 360–361, 377 PAP See political action programs Papal Revolution, 66 paper money, 217–219, 226, 278n2, 296n13 Pareto, Vilfredo, 179 Pareto improvements, 179 Pareto Optimal, 179 Parguez, Alain, 80, 82 Patrimonialismo e a Realidade Latinoamericana (Velez Rodriguez), 392 Patterson, Dennis, 132 Pax Americana, 367n3 peace of god, 66 Peace of Westphalia, 32 Peacock, Mark, 12 peasant, 355 Peel, Robert, xxi Peel’s Act, 152, 252, 296n13, 328n7, 366n1; definition of, 405; Marx on, xxi Peg, 303 Peloponnesian war, 3–4 pennies, 51n21 perfect competition, 146, 159n3 perfect information, 146, 147 perfectionism, 50n17 perfectionist ethics, 174, 177, 335 perfect money, 111 perpetual change, xx Perry v United States, 235n23 439 Persia, 339 Persian Gulf, 289 Persians, 3–4 Peru, 34 peso, 196n9 Philip II (king), 32, 34, 306 Philip IV (king), 94n7 Philip VI (king), 66 Philosophie des Geldes (Simmel), 101, 103 Two Philosophies of Money (Frankel), xx philosophy, xix–xxi, 3, 70; of Aristotle, 55–93; debate about, 9–12; divide in, 177–178; in Greece, 124; moral, 177–178; of Simmel, 105–113 See also Catallactics; Chartalist The Philosophy of Money (Simmel), 97, 98, 105–113 phronesis See practical wisdom Plague, 188 Plato, 21, 124, 170, 177 policy ineffectiveness proposition, 157 political action programs (PAP), 138n3 political economy, 2–3 political entrepreneur, 297, 406 political organization, 127–129 Politics (Aristotle), 51n20, 55, 56–57, 66 polity, Comte on, 130–131 Polo, Marco, 278n2 Pombal, Marques de, 392 Popper, Karl, 154 Porto Alegre, Brazil, 138n5 Portuguese, 391, 393–395 positive economics, 70 positive epistemology, 125–129 Positive Philosophy of Auguste Comte (Comte), 127, 130–131, 132 positive politics, 129–134 positive science, 143 positivism, 70; Brazil influenced by, 133–134, 138n5–138n6; of Comte, 121–138; dictatorship foundation of, 133; in economics, 121–122, 142–145; epistemology, 121–138; epoch, 121–122; legal, 125; natural law rejected by, 132; political consequences of, 133; primordial debt theory’s association with, 41; on rights, 132; as school of thought, 124; source of, 124 440 Index Positivist Catechism (Comte), 130 possibility curve, 276 Postali, Fernando, 369, 383–384 post-Keynesian theory, 82–87, 83 pound, 51n21 pound tale, 51n21 pound weight, 51n21 PPC See production possibilities curve PPF See production possibilities frontiers PPM See purchasing power of money PPP See Purchasing Power Parity practical wisdom (phronesis), 170 Prates, Marcelo, 313 praxeology, 3, 39–40, 46–47, 260 precious metals, 106, 188, 352, 352n4, 358n2, 406 predictability, 182 pretence of exact knowledge, 158 pre-urban societies, 350–352 price indexes, xviii, 157, 229–230, 285, 295n2, 295n5 price level, 167, 284 price of money, 167 prices, 49n6, 103, 148 price stability, 293 price system, 406 Priddat, Birger P., 68, 69 primitive societies, 39, 48n4, 352n1, 352n4 primordial debt theory, 41 Principle of Declining Marginal Utility, 50n18 principles, 249–251, 257n19 Principles of Economics (Menger), 49n13, 97, 104 private capital formation, xviii private credit money, 31–32, 35–36 private debt, state as guardian of, 41 private monetary instruments, 37 private property, 38, 63, 66, 209–211, 235n23 production, 71–72, 179 production possibilities curve (PPC), 179 production possibilities frontiers (PPF), 179 productive investments, value’s relation with, 82 productivity norm, 183, 330n19 professional armies, 41–42 profit motivation, of bankers, 280n16 profit-seeking, 58 progress, 3–4 Progressive Era, 228 progressivism, 228 proper monetary system, 182–193 proper money, 75, 78, 79, 318 property, 76–79, 131, 132 See also private property property premium, 78 proportion in trade, 60–61 proto-currency school, 67–68 prudence, 170, 249–252, 312–313, 327n2 Prudentissimus, Julius Paulus, 65 pseudoscience, 144–145 PSFN See public sector financial needs psyche, 260 psychoanalysis, 85–87 psychoanalytic interpretations, 25 Public Choice Theory, 384–385 public debt, 33–34, 37, 212–214, 396–397 public sector financial needs (PSFN), 396–397 Pufendorf, Samuel von, 68 purchasing power, 102 purchasing power of money (PPM), 166–167, 182–184, 188–189, 254n2 Purchasing Power Parity (PPP), 261, 387n6, 406 pure credit economy, 321–322 pyramids, 49n9 Pythagoreans, 60 QE See quantitative easing quality, 116n4, 307 quantitative easing (QE), 243, 258n20 quantitative theory of money, 160n7, 166, 246, 282 quasi-money, 153, 154, 296n10, 307–308, 406 See also M2 Quebec, Canada, 217–218 Quiggin, Hingston, 350, 352n4 Quint, Thomas, 51n24, 52n27, 161n12, 344n2, 345n5 Index Rand, Ayn, 168, 169, 177, 257n17, 336, 344n3 Rappleye, Charles, 220 Rasmussen, Douglas, 22–23, 50n16, 50n17, 174, 177, 257n19 rational economic actor, 161n12 rational expectations, 156–158, 161n13 Rational Expectations-Real Business Cycle theorists, 161n11 Real Bills Doctrine (RBD), 81, 233n9, 272, 279n11, 296n12, 306, 331n24 realism, of assumptions, 159n2 realpolitik, 336 real value of money, 31 reciprocity, 60 Reconstruction Finance Corporation, 229 redeemability, PPM, 188–189 redemption in specie, 185 Reden, Sitta von, 52n30 reflux mechanism, 272, 279n10 rehypothecation, 258n20 Reisman, George, 346n10 REMM See Resourceful, Evaluative, and Maximizing Man rentier effect, 385 rentier state, 370, 386n1, 407 rents, 372, 385–386, 407 rent-seeking, resource curse and, 382–385 “Report on a National Bank” (Hamilton, A.), 222, 230 “Report on Public Credit” (Morris), 220 Report on the Subject of a Mint (Hamilton, A.), 327n1 The Republic (Plato), 170, 177 Republican Party, 227 Reserve Bank of New Zealand, 167, 282, 283–284 Reserve Bank of New Zealand Act, 285 Reserve Fund, 309 Reserve Primary Fund (RPF), 52n28 reserves: banking system and, 223, 329n14; fractional, 402; gold, 196n8, 262–263, 279n10; as high-powered money, 223; monetary unit influenced by, 303; 100% requirements, 259–278, 328n7, 339, 340, 342, 345n6 441 resource curse, 369, 382, 383, 384–385, 386n1 resource effect, 370 Resourceful, Evaluative, and Maximizing Man (REMM), 160n10 retail, 64 Reti, Steven P., 345n9 reverse repos, 258n20 Revolutionary War See American Revolutionary War RFC See Reconstruction Finance Corporation Rhadamanthus, 60 Ricardo, David, 43, 68, 345n5, 407 Ricardo effect, 237, 382, 407 Riegel, E C., 216 Right of Free Inquiry, 127 rights, 131–132, 170, 180 See also private property Rio de Janeiro, Brazil, 138n5 Rio de la Plata, 393–395 Rio Grande Sul, Brazil, 133–134, 138n5 The Road to Serfdom (Hayek), 136 Rodrigues, Nelson, 24–25 Rogers, Colin, 84 Rogge, Ben, 23 Rogoff, Kenneth, 323 Rolnick, A J., 193 Roman Empire, 14, 47, 65–66, 74–75, 116n4, 336–337, 367n3 Roman institutions, 49n6 Roman Republic, 14, 65 Rome, 325 Roosevelt, Franklin D., 235n23, 257n18, 292 Röpke, Wilhelm, 251 Ross, Michael, 371, 385, 386n1 Ross, W D., 64 Rostovtzeff, M., 49n6 Rothbard, Murray, 60, 63, 93n2, 94n4, 94n6, 95n16, 178, 214, 217, 218–219, 219, 220–221, 222, 223–224, 224, 227, 228, 229, 230, 234n14, 234n18, 240–241, 256n10, 281–282, 292, 294, 366n2, 407; on monetary policy, 291–293; on war finance, 222–223 Rousseau, Jean-Jacques, 37–38 Rowe, Nicholas, 116n1 442 Index RPF See Reserve Primary Fund Rudd, David, 386n3 Rule of Law, 375 rules, discretion vs., 284–285 rule-utilitarianism, 6n1, 335 run-free banking, 305–311 Rymes, T K., 84 Saint-Simon, Henri de, 124–125 salability See marketability Salamanca School, 66, 67–68, 68–69 Salerno, Joseph, 104, 183, 234n14, 317 sales tax, 214 salt, 351–352 Samuelson, Paul, 159n2 Sargent, Thomas, 156 Sarjanovic, Ivo, 145 savings, 273, 327n3 savings and investments-demand for money (IS-LM) model, 245, 246 Say, Jean-Baptiste, 46, 68 scarcity, 4–5, 106 Schaps, David, 41–42 Schila, 93 Schlesinger, Arthur, Jr., 234n19 Schmoller, Gustav von, 116n1 See also economics method discussion School of Salamanca, 66–68, 68–69 schools, 70–93, 124, 166, 168–169 Schubik, Martin, 51n24, 52n27, 161n12, 344n2, 345n5 Schuler, Kurt, 300, 327n4, 365 Schumpeter, Joseph, 2, 32–33, 56, 73, 160n8, 268–271 Schutz, Alfred, 117n8 Schwartz, Anna Jacobson, 230, 278n8 scientific dictatorship, 133, 134 scientific inquiry, 16 scientific research programs (SRP), 138n3 Scotland, 191, 195n4, 279n10, 366n1 SEC See Securities and Exchange Commission Seccareccia, Mario, 80, 82 secondary depression, 251 Second Bank of the United States, 223–224 securities, liquidity represented by, 307–309 Securities and Exchange Commission (SEC), 256n11, 407 securitization, 36–37 seigniorage, 44, 192, 407 selective realism, 144 self-interest, 42 self-love, 42 Selgin, George, 94n12, 175, 183, 186, 257n15 Seltman, Charles, 352n4 Seven Years War, 218, 218–219 Severus, Alexander, 49n6 “Shaping the US Financial System, 1690-1913” (Sylla), 215 Sherman Silver Purchase Act, 227, 228 shilling, 51n21 A Short History of Money (Winder), 358n2 Should Developing Countries Have Central Banks? (Schuler), 327n4, 365 The Significance and Basic Postulates of Economic Theory (Hutchison), 121 silent trade, 350 silver, 33–34, 51n21, 69, 94n8–94n9, 226–227 Simmel, Georg, xx, 9, 47, 48n2, 73, 79–80, 116n1, 116n2, 116n5, 117n6, 117n8, 117n9, 118n10, 318, 337; on abstraction, 111; on abstract money, 112; abstract value for, 109–110; on alienation, 112–113; on capriciousness, 105–106; on economic value, 106–107; on essential quality, 108; on evaluations, 105–106; on evolution, 108–109, 111; on fiat money, 111–112; on goals, 112; on ideal money, 112; on intersubjectivity, 107, 113–114; on money value, 97–115; objective value used by, 105, 118n11; overview of, 97–99, 105–115; philosophy of, 105–113; on reality, 111; on scarcity, 106; on stability, 107–108, 117n7; on subjectivity, 105–106; on triumph, 110–111; on utility, 106 Simpson, Brian P., 161n13, 266–267, 278n3, 323–324, 346n10 Sixtus V (pope), 177 Index Slochteren gas fields, 386n3 Smith, Adam, 12–14, 15–16, 39, 40, 42, 43, 53n32, 68, 68–69, 279n11, 407 Smith, Barry, 6n1 Smith, Vera, 204, 235n21 Smithin, John, 1–2, 81 Smithsonian Agreement, 288 social compatibilism, 95n15 social construct, 73–74 social coordination, 15–16 socialism, 141–142, 149–150, 159n3 Socialismo, Cálculo Económico y Función Empresarial (Huerta de Soto), 149, 149–150 The Social Life of Money (Dodd), social order, 49n11 social physics, 94n10, 122, 123 social sciences, 134–135 social surplus, 151 societies, 56; Comte on, 132; media of exchange and, 57, 349–352; organization of, 132; origin of, 53n35; as primitive, 39, 48n4, 352n1, 352n4; qualitative difference, 298–299; quantitative difference, 298–299; unit of account in, 349–352, 356–358 sociological theory of money, 72–75 Socrates, 170 Soldier’s War, 212 solidus, 51n21 Solvay, 95n15 sound money, 74 South Africa, 188 South Korea, 299 sovereign state See state Spanish empire, 67, 393–395 Spanish Scholastics, 42, 46, 67 specie, 188, 190–191, 217–218, 223; definition of, 27, 407; external drain of, 291; redemption in, 185 specific currencies contracts, 226 speculation See arbitrage spending effect, 370 Spinoza, Baruch, 174 spontaneous explanation, 345n9 spontaneous order, 16–17 spread, 50n18 SRP See scientific research programs 443 stability: of banking system, 312–314; constitutional rule achieving, 185; currency, 186; instruments for reaching, 184; of money value, 107–108, 186, 195n2; of PPM, 182–184, 188–189; price, 293; of proper monetary system, 182–184; redemption in specie achieving, 185; Simmel on, 107–108, 117n7; of value, 182–184 Stabilizing the Dollar (Fisher), 296n12 stable money, 407 stableness, of goods, 12 standard of value, 51n20, 303–304, 307, 407 state, 27–29, 32–35, 40, 41, 44–45 See also governments; monetary prerogatives; state origin of money The State, the Financial System, and Economic Modernization (Sylla, Tilly, R., and Tortella), 215 state of war, 16 state origin of money, 1, 6, 12–14, 166; as cursed, 40; Graeber restatement of, 37–42; Mann on, 51n23; Mises on, 44; overview of, 26–42, 71–72 State Theory of Money (Knapp, G.), 26–27 state violence, 35, 37 static equilibrium, cash balances under, 181 statism, 169 Steiger, Otto, 76, 77, 78, 79, 80 Steiner, Hillel, 12 Stephen (Count), 48n5 stock of value, 407 Strange, Susan, 35–37 Strange Money, 37 Strong, Benjamin, 229, 292, 293 structure of production, xix, 279n9 Studies in the Quantity Theory of Money (Friedman), 88 Subercaseaux, Guillermo, 235n22 subjective value, 49n13, 100–101, 168 subjectivism, 67–68, 158–159 subjectivist theorists, 168, 169 subjectivist theory of value, 59–61 subjectivity, 105–106, 134–135 suboptimum money, 48 444 Index subordinated central bank, 301 substantive value of money, 31 substitution, 302, 360–361, 365 sufficiency, 144 Suffolk Bank, 225 Sullivan, Louis, 23 supply of gold, 342–343 supply of money See money supply supranational currency See euro-like currencies Supreme Court, US, 226 Swiss Central Bank, 282 Sylla, Richard, 215 symbolic money, Marxist theory of, 90 symbolism, 110 Synthetic commodity money, 322–323 Taiwan, 37, 299 tariffs, 227 Tavares de Araujo, José, Jr., 397 taxation, 209–211, 234n11 taxes, production for, 71–72 taxis, 16–17, 17, 407 Taylor, John, 89, 295n1 Taylor Rule, 89 Teoría Económica de las Crisis Monetarias y Financieras y de los Controles de Capital (Alonso Neira), 328n8 Teresa (mother), 16 Thales the Milesian, 59 “The Theory of Imaginary Money from Charlemagne to the French Revolution” (Einaudi), 51n21 Theory of Monetary Circuit (TMC), 79–82 The Theory of Money and Credit (Mises), 42, 44, 97, 103, 117n9, 155–156, 260–261 Theory of Moral Sentiments (Smith, A.), 42 third party enforcement, 12–14 Thomsen, Christian Jürgensen, 352 Thrasymachus, 170, 177 three age system, 352 three states, theory of, 126–127 TIAA-CREF, 255n6 Tilly, Charles, 313 Tilly, Richard, 215 Timberlake, Richard, 281–282, 292, 293, 296n9 time-deposits, monetization of, 325 time mismatches, 206–207, 233n9 TMC See Theory of Monetary Circuit TMS See true money supply tokens, 53n36, 73 Tortella, Gabriel, 215 Total Dollar Claims, 291–292 Total War, 212 Totem und Tabu (Freud), 352n1 “Toward a run-free financial system” (Cochrane), 305–311 A Tract on Monetary Reform (Keynes), 84 trade, 57, 60–61, 69, 358n1, 363, 371 trade deficit, US, 167 tragedy of commons, 385 The Tragedy of the Euro (Bagus), 367n3 transaction costs, 18–20, 38, 408 treasure tables, 339 Treasuries, 305 Treasury, US, 183, 220, 296n9 Treasury Bonds, xviii A Treatise on Money (Keynes), 84–85 tribes, 408 tributes, 37 true money supply (TMS), 317, 407 Turgot, Anne-Robert-Jacques, 46, 49n13, 68 Turner, John, 312 2008 financial crisis See financial crisis UCC See Uniform Commercial Code UCLA See University of California, Los Angeles ultimate good, 50n17 Uluburun shipwreck, 358n1 uncertainty, 93n3 Uniform Commercial Code (UCC), 12, 51n23 United Kingdom (UK), 27, 53n36, 229, 278n1, 279n9, 345n9, 360; Freudian ideas in, 85; value theory developed in, 68–69 See also England United States (US), xx, 17, 27, 149, 154, 185, 367n3; banks in, 235n21; constitution, 221; deflation, 188; foreign coins in, 233n3; GDP, 340, Index 345n8; gold standard in, 227–228; inflation targeting of, 289–290; military protectorates, 37; monetary constitution of, 221–225, 258n21; monetary history of, 216–232; monetary policy, 289–293, 291; money supply, 278n8; national debt, 35; trade deficit, 167; war finance, 216–232; during WWI, 229–230 See also bond vigilantes; Bretton Woods Treaty; dollar; dollarization United States (US) government, public debt, 37 unit of account, 14–15, 18, 34–35, 352n4; bill of exchange influenced by, 75; introduction of, 349–352, 356–358; as medium of exchange, 50n15, 51n21, 75; money as, 61, 61–62; in societies, 349–352, 356–358 unit of exchange See standard of value universal equivalent, 90, 90–91 Universal Republic, 172 University of California, Los Angeles (UCLA), xx–xxi unlimited warfare, 212 unnatural wealth, 56, 57, 58–59 Uruguay, 362, 393–395 “The Use of Knowledge in Society” (Hayek), 135–136, 147–149 use-value school (Gebrauchtwertschule), 68–69 usury, 59, 64, 67 utility, 40, 61–62, 106 valor en cambio See value in exchange valor en uso See value in use value in exchange (valor en cambio), 58 value in use (valor en uso), 58 The Value of Money (Anderson), 117n9 values: in Austrian economics, 49n13; creating, 180; of currencies, 169; of dollar, 318–319; economic, 106–107; from exchange, 105–106; of fiat money, 327n2, 376; of labor, 92–93; of monetary unit, 301–304; productive investments’ relation with, 82; of proper monetary system, 182–184; scarcity as source of, 106; stability of, 182–184; state 445 creating, 44–45; as subjective, 49n13, 100–101, 168; subjectivist theory of, 59–61; in unpredictable environment, 180; utility as source of, 106 See also abstract value; money value value scales, 30 value theory, UK development of, 68–69 Velez Rodriguez, Ricardo, 392 velocity of circulation, 154, 159n5 violence, 35, 37, 38 Virginia, 218 virtue, 251–252 Viscount of Maua, 389–397 Vitoria, Francisco de, 67 See also School of Salamanca Volcker, Paul, 283, 288 Von Hagen, Jürgen, 176, 338–339 vote with feet, 345n4 Wabash College, 23 Wagner, Adolph, 69 Walras, Léon, 69, 146 warehouse warrants, 185 war finance, 209–232, 213 War Finance Corporation (WFC), 229 War of Independence See American Revolutionary War War of 1812, 222–223 wars, 41–42 wealth, 56–57, 58–59, 86 Wealth of Nations (Smith, A.), 12–14, 15–16, 42, 68 Weber, Max, 30–31, 85–86, 116n2, 392 Weber, W E., 193 Weingast, Barry, 51n25 Welker, Michael, 88, 176, 338–339 Western Europe, 66, 367n3 “The Westfailure System” (Strange), 37 WFC See War Finance Corporation What Has Government Done to our Money? (Rothbard), 366n2 “What Is Seen and What is Not Seen” (Bastiat), 161n14 White, Larry, 175, 186, 190, 193, 195n4, 258n22, 272, 279n10–279n11, 315, 320, 330n18, 365, 387n8 wholesale price index, 229–230 446 Wicksell, Knut, 95n15, 268, 321–322, 329n14 Wieser, Friedrich von, 117n9 Wikipedia, xxi William (king), 51n25 will of strongest party, 170 Winder, George, 262, 356, 358n2 wise person (Homo sapiens), 349–350 witch doctors, 350 Withers, Hartley, Witherspoon, John, 221 Wittfogel, Karl August, 393 Wittich, Claus See lytric working capital, 18–20, 408 World Bank, 146 World Central Bank, 366n2 Index World Gold Council, 199n23 World Trade Organization (WTO), 289 World War I (WWI), 227–230, 258n21 Wray, L Randall, 28, 46, 53n32, 53n33 WTO See World Trade Organization Xenophon, 179 Yeager, Leland, 76, 99, 167, 183, 195n5, 249, 255n6, 257n15, 295n2, 307, 329n10, 341, 344 See also Black Fama Hall system Younkins, Edward, 168, 177 Zarlenga, Stephen, About the Author Leonidas Zelmanovitz has been a Liberty Fund fellow in Indianapolis, Indiana, since January 2006; before that he was a businessman in Brazil Dr Zelmanovitz has a law degree from the Federal University in Porto Alegre, Brazil, a master’s degree in Austrian economics from the Universidad Rey Juan Carlos in Madrid, Spain, and a PhD in applied economics from the same university He was born in Brazil in 1961; he is married and has a son and a daughter 447 ... Function of Money: The Philosophical Fundamentals of Monetary Institutions, by Leonidas Zelmanovitz www.ebook3000.com The Ontology and Function of Money The Philosophical Fundamentals of Monetary Institutions. .. part of the second, the fourth part of the first, and the fifth and seventh part of the sixth So the classical list of The Origin and Essence of Money 21 functions of money? ??that is, standard of value,... 1.6 THE FUNCTIONALITY OF MONEY 1.6.1 The Functions of Money According to Benjamin M Anderson, Jr (Anderson, 1917: 374), the functions of money can be described as: Common measure of values (standard