Dear Tom, Sept. 14, 1988 Thanks for copy of Foldvary's latest. I dont think as much of Fred's points as you do. Most are beside the point of the main issue, and the rest is mostly reiteration. His charity principle doesn't add much. He wasn't concerned about it when he was making "uncharitable" constructions of what I said. However, it seems to indicate a wish to get out without admitting anything, which I don't think he sees any reason to do. He does all his economic thinking in the conventional frame, which has been developed from, but not essentially changed from the classical frame. The old Manchester economists developed the liberal classical view, but as Tucker ET AL said of them, they were afraid to carry their own theory to its logical conclusions. My book is coming slowly. I interrupted a chapter on rent, to do this Foldvary response. But it is stimulating to interact with another mind. Regarding an objective, international value standard etc., I suggest reading Bilgram, Unit of Value, par. 31,32,111,119,321. A value standard expressed in terms of basic commodities sounds like a composite unit, which Bilgram shows is a mistake. -2- Anyhow, I don't think Borsodi's stuff will help. He never got the distinction between basis of issue and standard of value. ( T.G.: Neither, apparently, did Bilgram & Levy. ) Price is value expressed in terms of the established value unit. If the value unit is an abstraction, as the Federal pseudo-dollar is today, then the price of a commodity is equally abstract, indefinite, & indeterminate. Then if a basket of commodities is used as a composite standard, the composite value would be the sum of all the indefinite prices. Then, to use the sum of the indefinite prices as the value unit, is a circular process that has no determinate basis. If the commodity basket were used as a basi(s, it would m?)ake the value standard a denominate quantity rather than an abstract quantity. Then to keep money at par with it, the whole basket would have to be exchanged on the market as a collective unit, and money would have to be redeemed in the whole basket, if desired, or in its exchange value. If the basket is composed of staple products, I don't see how it would be more stable in value as a collective unit, than any of the staple components would be. ( J.Z.: I would stress "or in its exchange value" for even primitive negro tribes have long used an abstract food basket, called a "makuta" as a value standard for their dealings. It existed only in their heads, a common and serviceable enough notion for their goods and service exchanges. To that extent they were involved in free computer exchanges, using "biological" computers. Unfortunately, while otherwise superior to electronic ones, their memory is usually insufficient and unreliable, especially when separate and antagonistic interests are involved. - According to some detailed researches of Prof. Heinrich Rittershausen, during or shortly after W.W. I, into the compilation of the price figures used in the calculation of index figures, they prices quoted to the statistical office were highly inaccurate and depending much on chance, guesswork or arbitrary selection of some prices among a wide range, often by young and inexperienced and eveu less interested clerks, and usually not even related to the prices most commonly paid for the most commonly used items. They just filled in the bothersome questionaires as rapidly as they could and didn't give a damn about accuracy. GIGO! In Australia presently, and quite intentionally, even price-controlled items are included in the Consumer Price Index! Apart from that, different ways to arrive at price indexes do provide often quite different results and trends. Both Rittershausen and Beckerath came away from an advocacy and calculation of indexes, for currency ppurposes, to advocacy of a gold for clearing only or accounting only standard, in the framework of a free gold market, as "the least evil" and were tolerant enough to advocate at the same time free choice of value standards. ) Adam Smith said : "Labor is the real measure of the exchangeable value of all commodities." Bilgram said ( page 32 ) : "We can obtain a conception of the value of labour only by its fruit." ( J.Z.: D. placed the "only" at first correctly, according to the 1950 edition, and then placed it wrongly after "can".) "Until we learn what the values of the different products of labour are, we have no means of judging the value of the different kinds of labour that create them. And if products alone can measure the value of labour, labour -3- cannot conversely gauge products. Hence it is impossible to adopt labour as a standard with which to measure the value of things." There are two kinds of value - stresscost value and utility value. The current trade game is based on utility value. Most people, who say they don't like the outcome of the present game, still think in terms of it. As Proudhon said, progress is development within a system; revolution is a shift to a new system. Most improvers are reformers; they want to improve the system - get the inquitable "bugs" out. If they succeed, they have made progress, and the system is more stablished than before. Thus reform is a conservative enterprise. You once said we need a structural change. This implies a revolutionary shift. Applied to a value standard, it implies a root shift from utility-value trade to stresscost-value trade. ( I say "stresscost: to distinguish from money cost, which usually includes utility charge - usury. ) To do so requires a stresscost unit, which is a quantity measured independent of values, which is determined by trade. While stresscost refers to the stresscost of labor, labor is not the measure, but the product of labor is. When 2 labor products are exchanged, each is the value of the other. But the value of all things varies from time to time, & when the standard product varies, its unit value varies, & the price of everything else varies concerted(ly?.) This is very undesirable. My solution is to establish the average quantity of every product as the stresscost standard. Every product has a central tendency. With that as the standard, then the average stresscost product per unit time will trade with the same of all other products. When a product varies in supply or demand, its trade value will vary, but all others will remain the same. Thus there is no system variance. This approach requires not only a structural change but an attitude change. It is the attitude change that I find missing. Amity & MOR, Don. (J.Z.: To each group of volunteers their own favourite value standard, invented by their favourite economist or reformer or revolutionary!) ================================================================================ Untitled and undated paper by Don, pages I,II,III, transcribed by J.Z., hoping to find more monetary and panarchistic freedom notions in it : Fred Foldvary's latest contribution to the discussion about usury and interest touches on several points, but misses or evades the main issue, which is, whether economic relations can be so organized as to eliminate pure interest. Foldvary said : "Werkheiser states that the freedom of money issue would reduce interest to zero. In accordance with the principle of charity, I assume he excludes both the transaction costs ( cost of doing buisness ) and all risk from interest rate, leaving 'pure interest' at zero." Well, in accordance with simple logic, since I propose that INTEREST should be eliminated, I don't propose to retain cost of risk from interest RATE. I do propose that all labor products be made eligible to be monetized. This would create virtual "perfect competition" in the issue of money, and interest charge for the use of money would be virtually inoperative. Anyone who charged pure interest would simply go out of business. Since this discussion is not a formal event, I prefer the use of fist names, Don and Fred, and hope Fred does too. Fred said it is charitable to ask for clarification when one is unclear about a statement by a co-discussant ( a term I prefer to "opponent", since I don't like discussions to degenerate into contests. I'm not in this to score points, but to clarify an issue that has been persistently ignored for more than a hundred years.) But in accordance with the charity principle, I shall assume that Fred, rather than ignoring the issue, simply doesn't perceive it, and not because he is slow to perceive, but because I have failed to adequately present it. So, in the interest II of clarity, I shall quote a passage first presented by Benjamin R. Tucker in the original LIBERTY magazine which he owned and edited, July 26, 1890. The editor of TO-DAY, a journal then current, had published an article entitled "Interest". Tucker found most of the article composed of irrelevant facts, such as 12% interest in Aristotle's time and 18% in Solon's; whether Catholics and Mohammedans were both averse to interest, and whether Jew or Christian was the greater usurer. Ignoring such irrelevancies, Tucker said : ...opponents of interest are perfectly willing to consider facts tending to refute their position, but no facts can have such a tendency unless they belong to one of two classes : first, facts showing that interest has gene- rally ( not sporadically ) existed in a community in whose economy money was as important a factor as it is with us to-day and in whose laws there was no restriction upon its issue; or, second, facts showing that interest is sustained by causes that would still be effectively, invincibly operative after the abolition of the banking monopoly. I do not find any such facts among those cited by TO-DAY... "The editor of TO-DAY seems to show unfamiliarity with the position of the opponents of interest. It is true that what men really with so get is capi- tal, - the agencies of production. And it is precisely because money is 'a means for the transfer of these' that the ability to issue money secured by their own property, would make it unnecessary for them to borrow these agen- cies by enabling them to buy them. ( Note by J.Z. : To borrow FROM these agencies? Why buy them, when those wanting notes could issue their own money without them, anyhow? I believe that Tuckers text got here somehow messed up in printing, away from his usual clarity of expression. ) This raises a question which I have asked hundreds of times of defenders of interest and which has invariably proved a 'poser'. I will now put it to the editor of TO-DAY. A is a farmer owning a farm. He mortgages his farm to a bank for $ 1,000, giving the bank a mortgage note for that sum and recei- ving in exchange the bank's notes for the same sum, which are secured by the mortgage. With the bank notes A buys farming tools of B. The next day, B. uses the notes to buy of C the materials used in the manufacture of tools. The day after, C in turn pays them to D in exchange for something that he needs. At the end of a year, after a constnt succession of exchan- ges, the notes are in the hands of Z, a dealer in farm produce. He pays them to A, who gives in return $ 1,000 worth of farm products which he has raised during the year. Then A carries the notes to the bank, receives in exchange for them his mortgage note, and the bank cancels the mortgage. Now, in this whole circle of transactions, has there been any lending of capital? If so, who was the lender? ( Marginal notes. presumably by D.: NO & NO ONE.) If not, who is entitled to any interest? I call upon the editor of TO-DAY to answer this question. It is needless to assure him that it is vital. (J.Z.: I hold that OTHERS had to provide capital in form of shop foundation for these notes in order to give them circulation at par for a whole year. If they and the bank are willing to make this service available free of all charges, that would be up to them. I doubt, though, that a mortgage letter would be acceptable for one whole year and at par if it did not pay any interest to the holder. Thus, in practice, this mortgage would be discounted, with the discount constituting the interest rate. However, D.W. and others ought to be free to try to provide such services free of charge. The working capital in real form, provided for one year to A., for shorter periods by those involved in the exchanges, would consist in the traded stocks of the exchangers. They would be willing to provide it without interest surcharges, being glad of the additional turnovers and profits obtained. If the borrower of the bank's notes is not prepared to pay any service charge for them, then he must believe that he is not getting any service or that he himself could provide the same service free of charge to himself and by himself, issuing his own mortgage-secured notes. He should be free to try to do this, anyhow, or to look around for others to provide him with this service free of charge. ) In accordance with the principle of charity, I shall presume Fred will answer this directly and to the point. If more clarification is needed, it -III- should be pursued outside the pages of Green Revolution. I suggest the following sources : INSTEAD OF A BOOK, by Benjamin R. Tucker, Haskell House, 1969. THE CAUSE OF BUSINESS DEPRESSION, Hugo Bilgram and Louis E. Levy, Libertarian Book House, Bombay, 1950. Originally by J.B. Lippincott, 1914. PROUDHON'S SOLUTION of the Social Problem, P.J. Proudhon, edited by Henry Cohen, Vanguard Press, N.Y., 1927. FREEDOM IN MONEY, William B. Greene, in LIBERTY AND THE GREAT LIBERTARIANS, Charles T. Sprading, Arno Press and the New York Times, 1872, pp. 382-397. BENJAMIN R. TUCKER : CHAMPION OF FREE MONEY, Don Werkheiser in BENJAMIN R. TUCKER AND THE CHAMPIONS OF LIBERTY, A Centenary Anthology, edited by Michael E. Coughlin, Charles H. Hamilton, and Mark A. Sullivan. Michael E. Coughlin and Mark Sullivan Publishers, St. Pau. and New York, pp 212-221. ( J.Z.: All but the 2nd. and last titles are available on microfiche, from me, at $ 1 per microfiche. ) In closing I would say that repetitious disputation such as this is adversarial and not satisfactory unless one enjoys contests. I prefer incremental building. Instead of the method of disagreement as evinced in this controversy, I prefer the method of agreement. Start with basics, discuss until agreement is reached, and then build on that. ========================================================================================