Monday, December 27, 2010

Four Free Books

Of late I've done a bit of intense reading, which is one reason I've been somewhat quiet. I happened on several extremely good, thought-provoking books that just happen to be freely available on Google books.

And since I've been reading so much, I'm a little short of blog discussion topics, so they'll have to do.

The Theory of Education in the United States -- Albert Jay Nock

This is a little different from my normal fare, but I've read Nock before and have spent enough time in the field of education that, even with the dry sounding title, I thought this book might have a slight chance of being interesting.

This is possibly one of the most extreme cases of exceeding expectations I have ever encountered.

Seriously, this is one of those books that leaves you astonished, your mouth hanging open with awe and completely changes the way you think forever. Well, at least if you've been in the business, and are familiar enough with the other relevant issues to know it when someone has said something unbelievably profound and exactly right. His thesis is one of those obvious things that not one person in a million thinks of on his own, but everybody should have.

Warning -- I'm about to spoil it for you. Read on at your own disappointment/peril.

If you're familiar with Nock, you'll recognize the 'training vs. education' theme which he has written about elsewhere. But this book takes it to a new level. His basic thesis is that the corruption of American ideas about equality and democracy have led to a corruption of our idea of what 'education' is supposed to mean. New notions of educational pragmatism, tied up with the general technocratic pragmatist spirit of Progressivism, led to waves of 'reform' of education around the end of the 19th century. The net result was that education was stripped of its formative content in favor of more practical training that was more widely accessible to the preponderant 'ineducable' fraction of the populace.

Basically, classical education was replaced with the modern variety to placate fashionable notions of 'democracy' which have since become virtually universal. Nowadays, he asserts, there are no 'educated' people in the old sense of the word. The educable people have all gone to waste, and there is very little modern connection with the 'Great Tradition' of the Western past. This, he says, will ultimately lead to our doom.

According to Nock, it is not the 'Great Tradition' which needs preserving, as is so commonly expressed.  It is we who are preserved by the wisdom passed on in the 'Great Tradition.'

I note that this was written in 1932.  If you've been in the education biz, you'll find that the controversies he talks about haven't changed in eighty years. It is amazing. And if you read much, I think you'll finally find the reason why the 'old stuff' is generally so much richer and fuller than modern writing, save a few notables like C. S. Lewis and Nock himself. They had classical educations and were rooted in 2500 years of Western consciousness and philosophy. Modern roots are far shallower.


The Rise and Fall of Society -- Frank Chodorov

I read this one on the recommendation that Leonidas left as a comment somewhere or others a month or so ago. Another mind buster. Thanks Leo!

This is a fantastic book. Chodorov looks at the growth and decay of society and how it is intimately tied up with the economy and the division of labor. I've never seen anything that puts the ideas and their connections together so well. Even though it is a fairly 'introductory level' read, i.e. you won't see any supply and demand graphs or theoretical crazy talk about monetary policy and the business cycle, it is nevertheless extremely insightful.

One thing I particularly liked was the way he incorporated the idea of laziness into the economic picture as 'The Law of Parsimony." It seems to me that laziness is a powerful force governing human behavior, but somehow it is rare to see it incorporated or even mentioned in most economic discussions. For Chodorov, it is an integral part.

It also takes an interesting look at why economic decline is almost always wrapped up with social and moral decline. I won't ruin that part for you, but as I said, his insights into the intimate interconnections of these forces is the particular strength of this book.

Very, very interesting book.

Economics of the Free Society -- Wilhelm Ropke

I would call this an intermediate level discussion of the broad topic of economic organization. I actually started this book awhile back, but only polished it off recently.

Ropke is a very unique economist. His writing reflects a strong emphasis on the humane side of things not usually seen in economic writings.

His criticism of John Maynard Keynes by contrasting him with Adam Smith is illustrative --
But whereas Smith left us, in addition to his magnum opus on the Wealth of Nations (1776) a book on the Theory of Moral Sentiments (1759) which exposes the full moral-philosophical foundations of his much-misconstrued economic doctrines, Keynes has left us, in addition to his economic works, a monograph on the theory of probability (A Treatise on Probability, 1921). For Smith, whose book on the Wealth of Nations was planned as a segment of a giant opus on the cultural history of mankind, economics was viewed as an organic part of the larger whole of the intellectual, moral, and historical life of society; for Keynes, economics was part of a mathematical-mechanical universe. ... The teachings of the one were a promising beginning; those of the other the end product of a process of disintegration in which the crisis of an exclusively rationalistic society finds its ultimate expression. On the lesser level of economics, the road from Adam Smith to Keynes has doubtless been one of progress in many respects; on the higher level of total intellectual and spiritual development, it is equally certain that the road has been one of reaction and regression.
He is not your standard free-marketer, or even a typical Austrian, and I found many of his statements and attitudes to be surprising after having read so much from Gary North and Murray Rothbard. He is anti-corporate, anti-monopolist, believes the division of labor has been extended too far for our own good and should be consciously curtailed, and believes in a strong, activist government, though engaged in very different activities than most activist governments. He thought that some aspects of 'capitalism' (he always used sneer quotes with the word) had over-proletarianized and degraded many aspects of society, and that corrective measures should be taken to restore our system's basic humanity. He called this "Third Way" economics, which has become something of a term for backdoor-socialism, but this book was written some time ago when I think it had not yet acquired the duplicitous connotation.

I find myself sympathetic to many of his 'deviations' from the worship of Efficiency as high-god of economics, though I do fear the 'strong government' side of his beliefs. It is very refreshing to read his work when so much of what is written is either high-polemics or obsession over technical mumbo-jumbo.  Usually, when such a writer tries to come off as reasonable and 'non-partisan,' he either comes off as sleazy and unprincipled or full of platitudinous nonsense.  Ropke is neither.

Ropke seems a more well rounded philosopher and writer than most other economists I encounter. The only complaint I really have is that even though most of his writing is quite as elegant as his ideas, it can be tough to follow in places. He writes in a relatively complex style, often unnecessarily so, though perhaps that is an artifact of translation from German.  Reading stuff like this has made me appreciate Orwell's notion of using simple language more and more. 

Great book, but occasionally a struggle and probably not for beginners.

The Theory of Money and Credit -- Ludwig von Mises

This is the first of the two great works of Mises, the second being Human Action. He wrote it at the ripe old age of thirty-one, which depresses me.

I'm not going to lie -- this was a tough book to read. It was long, difficult, and very confusing. Part of that is the difficulty of the ideas, but a lot of it is just the writing, which I found to be unclear and ambiguous in many places. Like Ropke's, it is occasionally needlessly complicated. (Hayek is even worse -- I've checked.) But the people with the greatest minds aren't always the most approachable writers, and you've just got to take them as they come.

I have attempted Mises several times before and found myself not up to the task. Luckily I made it this time, though I had a bit of external motivation as well. I figure I probably understood about 50% of what I read, which really means 25% understood, 25% misunderstood, and the rest completely beyond me though the words were there in black and white in front of my face.

This was my first dive into a really hard-core work on economics, and it seems I have gotten quite a lot of my theory wrong.  In particular, I seem to have messed up the theory of interest rates pretty badly.  I was surprised to find that he defines inflation and deflation in terms not only of the supply of money, but of the 'need' for money --
In theoretical investigation there is only one meaning that can rationally be attached to the expression inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange value of money must occur. Again, deflation (or restriction, or contraction) signifies a diminution of the quantity of money (in the broader sense) which is not offset by a corresponding diminution of the demand for money (in the broader sense), so that an increase in the objective exchange value of money must occur. If we so define these concepts, it follows that either inflation or deflation is constantly going on, for a situation in which the objective exchange value of money did not alter could hardly ever exist for very long.

But even on these definitions he distinguishes between 'theoretical' and other uses of the words.  Nevertheless, he focuses on the value of money in the definition, not merely the total supply in isolation.

I still wouldn't support an increasing money supply, however, and I don't think Mises would either.  Numerous times he references the fact that changes in demand for money are completely unpredictable, and probably can't be helped.  Best to leave it alone.

I have often encountered the idea that gold and silver should be used as money because the supply can be increased in response to demand.  As the value of either rises, mining becomes more profitable, and more comes out of the ground in response to keep the value more or less the same over time, so the thinking goes.

I think this represents a somewhat naive view on the matter, which is a sort of mystical faith in the law of supply and demand to always produce the 'best' outcome no matter what (and whatever 'best' means, as if everyone agreed on the matter.)  There is a very interesting illustration of this sort of faith in a century old debate between what were known as the Currency School and the Banking School on the subject of credit supply and lending.

The Banking School was the side guilty of fanciful faith.  It believed that the issue of banknotes against a fractional reserve of precious metal would not result in inflation or have any effect on interest rates because any 'excess' banknotes unneeded by the market would be returned to the bank of issue and redeemed for precious metal coins.  In other words, the banks were incapable of 'oversupplying' the markets with their own notes because of some sort of incantation of supply and demand which would automatically unwind any excessive note-issuing activities.

The Currency School thought that this was preposterous and that the issue of banknotes was having catastrophic economic effects by creating market manias and crashes.  It proposed to limit the issue of banknotes to only what could be backed 100% by precious metal reserves to keep a cap on total money supplies.  Unfortunately, the Currency School was unable to grasp the idea that bank deposits with only fractional backing by precious metals also followed the same tendencies of runaway over-issue as banknotes, and so their arguments fell flat.

To illustrate that the supply and demand argument for precious metal money is more or less bunk, imagine a continuum of possible monetary commodities.  On the far left are the precious metals, available in very strictly limited supplies simply as a matter of their occurrence in nature.  Next to these could be placed the 'hard commodities' like oil, iron, coal and other minerals which are more abundant, but still limited in nature.  Further to the right would be the 'soft commodities' like rice, corn, and other storable foods, which can increase in supply through agricultural production, then 'paper money', and finally digital book-keeping entries, which constitute most of today's money at the far right of the spectrum.

So, on the left are those substances closest to strictly fixed in supply, and moving to the right one approaches 'substances' available in potentially unlimited supply.  All of them are responsive in some degree to 'supply and demand,' but needless to say, the response 'improves' markedly as one moves to the right.  Those at the left end of the spectrum are least responsive, approaching a limit of utter unresponsiveness somewhere beyond gold.

Question:  Which of these possible forms of money has historically proven the most viable?

Supply and demand are just supply and demand.  They are elegant and powerful in their respective sphere, but they aren't all powerful magic applicable to any problem of economics any more than Newton's equally elegant equations apply to balancing your checkbook. 

Thanks to this reading, I would imagine that some important corrections of my all-too-common economic misunderstandings will manifest themselves as future posts in these pages.  Overall, this was a book well worth the effort, but I am glad that I already had a pretty good idea what it was going to say before I started, or I probably wouldn't have made it through.  It definitely isn't for everybody the way the first two books mentioned were.

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