As we saw in the previous posting on this subject, many people seem to confuse God and money, as well as religion and finance. This, in the modern age suffused with what people like Mortimer J. Adler have delicately referred to as “philosophical mistakes,” is a disaster, whether the result of Belloc’s purported accusation of “knavish imbecility,” unthinking self-interest, or deliberate and considered villainy.
What we learned, whether we’re talking about finance or religion, money or God, is (as it says somewhere in the Bible), “Great is truth and mighty above all things.” We therefore conclude if we want to be holding a strong hand when discussing money or God, or recommending some specific course of action, we should try to be truthful — which means we should conform our thought, words, and deeds to reality, for What is Truth?
With apologies to the jesting Pontius Pilate (who “would not stay for an answer” as Francis Bacon put it in his essay “On Truth”), truth is defined as conformity with reality. To lie with full deliberation, then, is to refuse to comply with reality, and to succumb to the temptation to create your own reality and impose it on others without regard to their acceptance or consensus . . . which is one or more definitions of insanity.
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| Louis O. Kelso |
That is why Louis Kelso in his collaboration with Mortimer Adler went to great lengths in the cleverly if not entirely accurately named The Capitalist Manifesto (1958) to establish the truth and reasonableness — the reality — of what we now refer to as the Just Third Way of Economic Personalism. In this context, Chapter 5 of The Capitalist Manifesto, “Economic Justice and Economic Rights,” addresses the issue of conformity with reality, although not in those words.
Instead (as we noted needs to be done when pirating the paradigm from Adler’s book, Truth in Religion) Adler (in our opinion) helped Kelso systemize his theories so they would be consistent with the Aristotelian-Thomist philosophy for which Adler was a noted proponent. Adler explained the moral basis of Kelso’s monetary theory, that is, its conformity with reality and thus with the first principle of reason.
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| Mortimer J. Adler |
Now, there are many points of departure between the theories of Kelso and those of Keynes. For example, where Kelso held capital (the non-human factor of production) is as productive and productive in the same way as human labor, Keynes declared capital is not productive at all; capital only provides the environment within which labor can be productive.
For another example, where Kelso (ably assisted by Adler) absolutely insisted on strict conformity to truth as determined by empirical evidence and logical argument (again, see Chapter 5 in The Capitalist Manifesto), Keynes just glossed over inconsistencies by asserting he was right regardless of the evidence — and even claimed that if we just lie to ourselves long enough, his system would work despite the inconsistences and paradoxes. No, really. As Keynes declared,
For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight. (John Maynard Keynes, “Economic Possibilities for Our Grandchildren” (1930), republished in his collection, Essays in Persuasion. London: Macmillan and Co., 1931.)
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| John Maynard Keynes |
This perhaps explains the extreme divergence between Kelso and Keynes in their respective definitions of money. Kelso was quite clear and straightforward while Keynes sort of dodged the whole issue . . . and then wrote a two-volume Treatise on Money about something he carefully didn’t define!
Now, let us be clear. We are not calling Keynes a pathological liar because he based his system on the claim reality does not exist. His paradigm — what we call “the Currency Principle” aggravated by the labor theory of value and rejection of the concept (and reality) of what Kelso called “future savings” (the present value of future increases in production) — absolutely required that he reject or dismiss anything that suggested or supported the validity of what we call “the Banking Principle.”
Thus, for Keynes, it would not have been lying, strictly speaking, to “pretend to ourselves and to every one that fair is foul and foul is fair” because — as Keynes put it, “for foul is useful and fair is not.” It can’t really be a lie, for it is useful, even essential to “pretend” what is evident is not truly evident, and the end justifies the means, might makes right, etc., etc., etc.
Keynes was not being dishonest, at least consciously, for his assumptions (completely mistaken in our opinion) required him to reject what the unenlightened consider “true” and “good” and go with what is “foul,” i.e., what appears to be wrong and untrue. Keynes’s faith in himself and his own system was such that he could not admit the validity of any other.
Not that Kelso was either omnipotent or omniscient; far from it. For example, he presented his definition of money as if it were self-evident . . . which it is — but if and only if you understand and accept Kelso’s principles carefully presented in The Capitalist Manifesto (1958) and The New Capitalists (1961). It is no coincidence Kelso did not present his definition of money until his third book, Two-Factor Theory (1967) co-authored with Patricia Hetter. It was becoming evident people did not grasp the essential features of Kelso’s breakthrough — not only that expanded capital ownership is essential to a free society and sound economy, but that expanded capital ownership can be achieved without having to cut consumption or redistribution.
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| Great experts Samuelson and Friedman |
Instead, the great experts trapped in the past savings paradigm (like Paul Samuelson and Milton Friedman) simply asserted it was impossible or ignored it altogether, while the lesser experts focused on Kelso’s division of the factors of production into the human (“labor”) and the non-human (“capital”), and simply ridiculed the obviousness of it (neglecting the not-so-obviousness of the fact that whether something is produced by labor or by capital it is equally production) or ignored it altogether.
Consequently, Kelso attempted to give people the reason behind the reason. Why did the great experts think expanded ownership impossible, and why did the not-so-great experts not understand what is truly productive? The answer? They were using an incomplete or inadequate understanding of money in one sense, and in another attributing to money a mystical significance of some kind. Instead, as Kelso explained,
Money is not a part of the visible sector of the economy. People do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector. (Louis O. Kelso and Patricia Hetter, Two-Factor Theory: The Economics of Reality. New York: Random House, 1967, 54-55.)
Compare this with Keynes’s definition — of a sort — in the opening passages of Volume I of his Treatise on Money:
It is a peculiar characteristic of money contracts that it is the State or Community not only which enforces delivery, but also which decides what it is that must be delivered as a lawful or customary discharge of a contract which has been concluded in terms of the money-of-account. The State, therefore, comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contract. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time — when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of money has been reached that Knapp’s Chartalism — the doctrine that money is peculiarly a creation of the State — is fully realized. (John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt, Brace and Company, 1930, 4.)
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| Georg Friedrich Knapp |
“Knapp” by the way was Georg Friedrich Knapp, a German socialist who advocated gradual implementation of socialism through government control of money and credit. His important works are Die Baurenbefreiung und der Ursprung der Landarbeiter (1887); Grundherrschaft und Rittergut (1897); and Die Staatliche Theorie des Geldes (1905). An abridged version of this last was translated into English as The State Theory of Money (London: Macmillan and Co., 1924).
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