As we saw in yesterday’s posting, the monetary
reforms of the Just Third Way assume as a given that the purpose of production
is consumption. This is the basis of
“Say’s Law of Markets,” which both Karl Marx and John Maynard Keynes reject.
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| Another view of Jean-Baptiste Say |
Named after Jean-Bapiste Say (1767-1832), who did
not invent the law, but gave it its clearest expression, Say’s Law of Markets
is an application of the common sense principle that it is impossible to
consume what has not been produced, and thus does not exist. Further, under ordinary circumstances, only
private property gives someone the right to consume.
Including land as a form of capital (albeit one
with special considerations, which is why the classical economists separated
land from other forms of capital), there are only two ways to produce
marketable goods and services: labor and capital.
“Labor” includes all human inputs to
production. “Capital” includes all
non-human inputs to production. Owning
labor gives the owner the right to the fruits of labor. Owning capital gives the owner the right to
the fruits of capital.
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| "He who does not work shall not eat." |
In an early application of Say’s Law, St. Paul
instructed the Thessalonians, “if any man will not work, neither let him eat.”
(2 Thessalonians 3:10.) This does not mean that those who cannot
labor or own capital should not be taken care of as charity (“extreme cases”
are an exception that falls outside this discussion). It means that those who are able to gain an
adequate income through productive activity are morally required to do so.
The Role of Money
As Jean-Baptiste Say explained to the Reverend
Thomas Malthus in refutation of the latter’s “scarcity economics,” we do not
purchase what others produce with “money.”
Money is only the medium through which we exchange what we produce by
means of our labor and capital, for what others produce with their labor and
capital.
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| Louis Kelso: Money is not wealth. |
As Louis Kelso elaborated on Say’s explanation,
money is only a symbol of the marketable goods and services that are the real
matter of exchange. Money is not the
wealth itself.
“Money” is therefore anything that can be accepted
in settlement of a debt. Understood in
this way, all money is a contract, just as (in a sense) all contracts are
money.
All contracts consist of offer, acceptance, and consideration, “consideration” being the
inducement to enter into a contract, that is, the matter or thing of value
being exchanged. If any of these
elements is missing, the contract is not a true contract; the money is
counterfeit.
The Role of Currency
Currency means “current money,” that is, a uniform
and stable standard and store of value by means of which we carry out exchanges. All currency is money, although not all money
is currency.
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| Commerce and industry require standard weights and measures |
To ensure uniformity and stability of the
currency, some authority, usually government, has the responsibility for
setting the standard and enforcing compliance with the standard. For example, anyone who uses yards that are
not 36 standard inches in length in a legally enforceable contract that
specifies standard yards may be subject to prosecution.
Similarly, anyone who enters into a contract
specifying a particular currency must fulfill the terms of the contract in that
currency, or be subject to prosecution.
Uniformity and stability of the currency and all other weights and
measures is therefore of primary importance to the maintenance of a just economy.
To stress the importance of a sound, uniform
currency, CESJ is joining the Coalition for Capital Homesteading at the 10th
annual Rally at the Fed this coming Friday, April 11, 2014, at the Federal
Reserve Board of Governors Building on Constitution Avenue in Washington, DC,
from 11:00 am to 1:30 pm. Join us there
to demonstrate your support for a common sense approach to money and credit.