Money and Freedom

Economics cannot by itself establish an ethical system, although it provides a great deal of data for anyone constructing such a system—and everyone, in a sense, does so in deciding upon policy. Economists therefore have a responsibility, when advocating policy, to apprise the reader or listener of their ethical position. I do not hesitate to say that my own policy goal is the establishment of the free market, of what used to be called laissez faire, as broadly and as purely as possible. For this, I have many reasons, both economic and non-economic, which I obviously cannot develop here. But I think it important to emphasize that one great desideratum in framing a monetary policy is to find one that is truly compatible with the free market in its widest and fullest sense. This is not only an ethical but also an economic tenet; for, at the very least, the economist who sees the free market working splendidly in all other fields should hesitate for a longtime before dismissing it in the sphere of money.

I realize that this is not a popular position to take, even in the most conservative economic circles. Thus, in almost its first sentence, the United States Chamber of Commerce’s pamphlet series on “The American Competitive Enterprise Economy” announced: “Money is what the government says it is.”[5] It is almost universally believed that money, at least, cannot be free; that it must be controlled, regulated, manipulated, and created by government. Aside from the more strictly economic criticisms that I will have of this view, we should keep in mind that money, in any market economy advanced beyond the stage of primitive barter, is the nerve center of the economic system. If, therefore, the state is able to gain unquestioned control over the unit of all accounts, the state will then be in a position to dominate the entire economic system, and the whole society. It will also be able to add quietly and effectively to its own wealth and to the wealth of its favorite groups, and without incurring the wrath that taxes often invoke. The state has understood this lesson since the kings of old began repeatedly to debase the coinage.