BAPTIZED

INFLATION
BAPTIZED
INFLATION
A C r i t i q u e o f
C h r i s t i a n Keynesi ani sm
I a n H e d g e
I nsti tute for Chr i sti an Economi cs
Tyl er, Texas
Copyri ght 01986
I an Hedge
Pri nted i n the Uni ted States of Ameri ca
I SBN 0-930464-08-7
Li brary of Congress Catal og Card Number 86-081800
ijpesetting by Thoburn Press, 7jJ lq Texas
Publ i shed by
I nsti tute for Chri sti an Economi cs
P.O. BOX 8000
Tyl er, Texas 75711
Dedi cated to those who make l i fe del i ghtful
Jessi e,
Matthew, Rachel and Peter
TABLE OF CONTENTS
Foreword by Gary North . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..i x
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..xxvi i
I ntroducti on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1
l . Keynes, Vi ckers, and VanTi l . . . . . . . . . . . . . . . . . . . ...15
2. Nei ther Capi tal i sm Nor Soci al i sm(Maybe) . . . . . . . . ...31
3. The Harmony ofI nterests . . . . . . . . . . . . . . . . . . . . . . ...39
4. Gods Creati on and Capi tal i sm . . . . . . . . . . . . . . . . . . ...49
5. Man's Rebel l i on and Soci al i sm . . . . . . . . . . . . . . . . . . ...63
6. Anti nomi ani sm and Autonomy. . . . . . . . . . . . . . . . . . ...83
7. Economi c Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...103
8. Fi scal Pol i cy: Di sgui sed Counterfei ti ng . . . . . . . . . . ...125
9. Says Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...147
10. Soverei gnty and Money... . . . . . . . . . . . . . . . . . . . . ...161
11. Mumbl e, Mumbl e . . . . . . . . . . . . . . . . . . . . . . . . . . . ...177
12. The Great Unmenti onabl e: Unempl oyment . . . . . . ...201
13. The Margi nal Propensi ty to Confuse . . . . . . . . . . . . ...219
14, The Keynesi an Di saster. . . . . . . . . . . . . . . . . . . . . . . ...237
15. Behol d, Our Savi or! . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Concl usi on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...261
I ndex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...271
vi i
FOREWORD
by Gary North
Discretion will guard you, understanding will watch overyou, to
deliver you from the way of evil, from the man who speaks perverse
things; from those who leave the paths of uprightness, to walk in the
ways of darkness; who delight in doing evil, and who r.joice in the
jwrversi~ of evil; whose paths ar e crooked, and who ar e devious in
their ways (Proverbs 2:11-15, New American Standard Version).
Back i n 1968, economi st Dougl as Vi ckers recei ved a shock, or
so I woul d i magi ne. He di scovered that he had spent hi s enti re aca-
demi c career defendi ng the work of a homosexual pervert. The per-
verts name was John Maynard Keynes. Unti l that fateful year,
when Mi chael Hol royd publ i shed hi s two-vol ume bi ography of
Lytton Strachey, one of Keynes compani ons: the academi c worl d
had not known of Keynes sexual preferences, or at l east had no
proof. A few economi sts knew, and hi s bi ographer, Si r Roy Har-
rod, certai nl y knew. 1 But before then, hi s fri ends who knew had
remai ned di screet. However, by 1968, the worl d had thrown di s-
creti on to the wi nd. Hol royds revel ati on created a sti r, but not a
sensati on, among economi sts. (Besi des, by 1968, the Keynesi an
revol uti on was wel l on i ts way out of fashi on a fact whi ch Dr.
Vi ckers may not have been wi l l i ng to admi t then, or recogni ze even
today, but whi ch the better economi sts knew i n 1968, and vi rtual l y
al l younger economi sts have known for at l east a decade. )
I n 1985, Ri chard Deacons book appeared whi ch deal s wi th
the Cambri dge Uni versi ty secret soci ety, the Cambri dge Apos-
1. I i ntervi ewed F. A. Hayek i n Jul y of 1985, and I asked hi m about thi s. Hayek
and Keynes had been academi c ri val s i n the 1930s i n Engl and, and Hayek was
on good terms wi th Keynes soci al l y. He assured me that Harrod had known.
i x
x Bapttied Iniation
ti es.z I t reveal ed that thi s group was control l ed by homosexual s
throughout the earl y decades of the twenti eth century, and that
thei r most presti gi ous members i n thi s era John Maynard
Keynes, G. Lowes Di ckenson, G. E. Moore, and Lytton Strachey
were al l dedi cated homosexual perverts. So bl atant was thei r
publ i c commi tment to sodomy that Fabi an soci al i st Beatri ce
Webb was concerned i n 1911 when her prot6g4 Bertrand Russel l
returned to Cambri dge to teach, for he had been an Apostl e as a
student there i n 1892, and she feared that he mi ght get i nvol ved
wi th them agai n: . . . we have for a l ong ti me been aware of i ts
bad i nfl uence on our young Fabi ans .
3
The Apostl es was not si mpl y some undergraduate cl ub. Mem-
bers conti nued to attend meeti ngs for decades. I n Keynes fourth
year at Cambri dge, he became Secretary, yet there was onl y one
undergraduate member. * Li ke the powerful Yal e Uni versi ty secret
soci eti es, Skul l and Bones (George Bush, Wi l l i am Buckl ey, etc. )
and Scrol l and Key, membershi p was gai ned as an undergrad-
uate, but the l i nks conti nued throughout l i fe.
Deacons summary i s i mportant for what fol l ows i n thi s book:
Homosexual i ty probabl y reached i ts peak i n the Soci ety when
Strachey and Maynard Keynes formed a remarkabl e partnershi p
i n conducti ng i ts affai rs. Here were two mi nds both devoted to
achi evi ng power and i nfl uence i n thei r respecti ve ways. Keynes
hi msel f was the chi ef protagoni st of the homosexual cul t, obsessed
wi th the subject to an abnormal degree for one wi th a good i ntel -
l ect and wi de i nterests. So obsessed, i n fact, that when, years
l ater, he marri ed the Russi an bal l et dancer, Lydi a Lopokova, the
news was recei ved wi th outraged horror among such fri ends.
Some of them never forgave hi m; others mal i ci ousl y specul ated
what was the real reason for the marri age. l t sl owl y dawned on
them that thi s was al l part of Keyness power game.
The Apostl es repudi ated enti rel y customary conventi ons and
2. Ri chard Deacon, The Cambndge Apostles: A histo~ of Cambridge University klite
intellectual ~ecret socidy (London: Robert Royce Ltd., 1985).
3. I bid., p. 62.
4. ibid., p. 79.
Foreword xi
tradi ti onal wi sdom, decl ared a smug and at the same ti me del i ghted
Keynes. We were i n the stri ct sense of the term I mmoral i sts.s
Apostl es phi l osopher G. E. Moore had once announced i n a
paper read to the group: I n the begi nni ng was matter, and matter
begat the devi l , and the devi l begat God.G How terri bl y cl ever!
How reveal i ngl y perverse. He then went on to say that fi rst God
had di ed, then the devi l , and now onl y matter remai ns. 7 (That
Moore i s regarded as one of the hal f dozen major phi l osophers of
thi s century testi fi es to the patheti c moral and i ntel l ectual charac-
ter of thi s century.)
I t was wi thi n thi s moral and rel i gi ous cesspool that Keynes
emerged as co-master, al ong wi th Strachey. As i n every cesspool ,
the l arge chunks ri se to the top. Keynes was a very l arge chunk.
A product of Eton, where he di spl ayed a great contempt for hi s
exami ners even though they regarded hi m hi ghl y, he brought to
Cambri dge a hi gh degree of arrogance and asserti on of personal
superi ori ty over hi s contemporari es. Surpri si ngl y, thi s tol d i n hi s
favour rather than agai nst hi m. Just as the mi ndl ess, sadi sti c pub-
l i c [Engl i sh pri vate] school bul l y hel d sway among the hearti es, so
di d the i ntel l ectual bul l y (whi ch was what Keynes was) domi nate
when he came to Ki ngs [Col l ege, Cambri dge] .8
Keynes was an i deal partner for Strachey. The two men were
devoted to the same sexual cul t and had the same contempt for
conventi onal thought. But there was a di fference between the two
men. I n Stracheys case thi s was more a questi on of perversi ty for
i ts own sake than any careful l y thought out phi l osophy. Keynes
was reacti ng posi ti vel y agai nst the Puri tan ethi c: he hated Puri -
tani sm i n any form and not the l east i n the form i t had taken at
Cambri dge. Both men, however, regarded homosexual i ty as the
supreme state of exi stence, passi ng Chri sti an understandi ng, and
bei ng superi or to heterosexual rel ati onshi ps.g
5. I bid., p. 64.
6. I bid., p. 69.
7. I bid., p. 70.
8. I bid., p. 78.
9. I bid., p. 64.
xi i Baptized I nzation
Keynes vs. the Puri tan Ethi c
What has thi s got to do wi th Keynes i deas on economi cs? A
l ot, argues Deacon: Keyness hatred of Puri tani sm i s i mportant
i n the l i ght of hi s economi c theori es. He was to become the man
who has gone down i n hi story as the most outstandi ng economi st
and archi tect of soci al progress of the past seventy years, though
some woul d di spute such an assessment. But i t was hi s hosti l i ty to
the puri tan ethi c whi ch sti mul ated and l ay behi nd hi s economi c
theori es spend to create work, spend ones way out of depres-
si on, sti mul ate growth. I t was al so hi s hatred of Puri tani sm whi ch
caused hi m i n earl y l i fe to devote rather more ti me to pursui ng
homosexual conquests than to economi cs. More posi ti vel y, hi s
papers to the Soci ety were i n the mai n nothi ng whatsoever to do
wi th economi cs. One such paper, often ci ted, was on the subject
of Beauty. 10
Strachey wrote to Keynes: We cant be content wi th tel l i ng
the truth we must tel l the whol e truth, and the whol e truth i s the
Devi l . I ts madness of us to dream of maki ng dowagers under-
stand that feel i ngs are good, when we say i n the same breath that
the best ones are sodomi ti cal .~1
Keynes economi c pri nci pl es matched hi s moral pri nci pl es: he
di dnt bel i eve i n them. He deni ed that fi xed economi c pri nci pl es
even exi st. 12 When, i n 1930, he swi tched from hi s earl i er free
10. Zdenr.
11. I bid., p. 65.
12. Keynes announced i n testi mony before a 1930 economi c commi ssi on: Al l
the same I am afrai d of pri nci pl e. Ever si nce 1918 we, al one amongst the nati ons
of the worl d, have been the sl aves of sound general pri nci pl es regardl ess of par-
ti cul ar ci rcumstances. We have behaved as though the i ntermedi ate short per-
i ods of the economi st between our [one?] posi ti on of equi l i bri um and another
were short, whereas they can be l ong enough and have been before now to
encompass the decl i ne and downfal l of nati ons. Nearl y al l our di ffi cul ti es have
been traceabl e to an unfal teri ng servi ce to the pri nci pl es of sound fi nance whi ch
al l our nei ghbors have negl ected. . . . Wasnt i t Lord Mel bourne who sai d that
No statesman ever does anythi ng real l y fool i sh except on pri nci pl e? Ci ted by
D. E. Moggri dge, The Return to Gold, 1925: The Formation oj Economic Policy and its
Critics (Cambri dge: At the Uni versi ty Press, 1969), p. 90. See Hedges di scussi on
i n Chapter 7, Economi c Law.
Foreword
. . .
Xl l l
trade posi ti on and became a promoter of protecti ve tari ffs agai nst
forei gn i mports, he thereby adopted the anci ent, erroneous, and
l ong-refuted pol i ci es of mercanti l i sm. These were the trade pol -
i ci es founded on the pri nci pl e of beggar thy nei ghbor. But
Keynes had l ong si nce deci ded to do a l ot worse than just beggar
hi s nei ghbor.
Vi ckers Del i berate Vagueness
How much of a shock Dr. Vi ckers suffered when he found out
thi s unsavory fact about hi s hero, I cannot say. Bei ng a sel f-
professed Chri sti an, he coul d not have been pl eased to fi nd that
the founder of the economi c school of thought of whi ch he was an
obscure member, the new economi cs, or Keynesi an orthodoxy
school , had spent hi s l i fe commi tti ng thi s foul cri me agai nst God.
But Dr. Vi ckers went on bravel y, sti l l procl ai mi ng the wi sdom of
hi s i ntel l ectual master. He di d not bother to warn hi s Ghri sti an
readers about Keynes debauched l i festyl e i n hi s book-l ong
defense of Keynesi an economi cs i n the name of Jesus, Economi cs
and Man (1976). He di d feel compel l ed to admi t that I t woul d be a
theol ogi cal mi stake, of course, to i magi ne that Keyness own work
was i nfl uenced by a confessedl y Chri sti an perspecti ve. Qui te the
contrary, as we shal l see i n our bri ef comments at a l ater poi nt on
the phi l osophi cal predi l ecti ons and presupposi ti ons of certai n
famous economi sts. Phi l osophy, i ndeed! So much for the forthri ght
admi ssi ons i n Economics and Man.3
Dont mi sunderstand me. I m not sayi ng that Dougl as Vi ckers
i s a l i mp-wri st economi st. A l i mp-prose economi st, unquesti on-
abl y, but not l i mp-wri st. He just had the mi sfortune of not recog-
ni zi ng economi c perversi on earl y i n hi s career, so he found hi m-
sel f i n questi onabl e i ntel l ectual and moral company when the
worl d di scovered that Keynes was a speci al i st i n non-economi c
perversi on, too.
I never wrote a refutati on of Vi ckers book. I was asked to. I n
13. Dougl as Vi ckers, Economics and Man (Nutl ey, New Jersey: Crai g Press,
1976), p. 39.
xi v Baptized I njation
the fi rst two years after Economics and Man was publ i shed, occasi on-
al l y very, very occasi onal l y some young man woul d wri te to
me and ask me i f I had answers to Dr. Vi ckers arguments. I
al ways assumed that I di dnt real l y need answers to those argu-
ments. Someti mes I woul d ask the i nqui rer just whi ch argument
offered by Dr. Vi ckers had i mpressed hi m, and not once di d any-
one tel l me preci sel y whi ch i dea he found thought-provoki ng.
Thi s i s understandabl e, because Dr. Vi ckers prose makes i t vi rtu-
al l y i mpossi bl e to fol l ow any of hi s arguments. Coupl e thi s wi th
the fact that Keynes General TheoV was al most equal l y i ncoherent,
and the reader has a probl em. (So di d Dr. Vi ckers publ i sher. )
I saw no reason to try to fi nd a publ i sher for a book refuti ng a
man who was academi cal l y unknown, at the end of hi s tenured-
l evel career, 1A a member of a ti ny Cal vi ni st denomi nati on, wi th no
fol l owers except for a ti ny coteri e i nsi de that denomi nati on made
up of academi c types who were fearful i n those days (and even
these days) of appeari ng conservati ve. Not that they actual l y read
Economics andMan; nobody reads i t. But they pretend to have read
i t, and they make others thi nk that they have understood i t, just to
keep up appearances. They have to: i n thi rteen years, Economics
and Man is the onl y book-l ength study publ i shed by anyone, any-
where, whi ch tri es to refute the dreaded Chri sti an reconstructi on-
i sts. The l i beral s and ful l -ti me pi eti sti c retreati sts just cannot
stand the thought of Chri sti an reconstructi on, and they feel duty-
bound to l i neup behi nd any schol ar who wi l l take us on. Sadl y for
them, the onl y soul wi l l i ng to take up the chal l enge was poor,
jargon-burdened Dougl as Vi ckers, wi th hi s tattered Keynesi an
banner fl yi ng i n the breeze. (I d l i ke to tel l you the symbol the
Keynesi ans have i nheri ted from thei r master, but thi s i s a fami l y-
ori ented book.)
I knew that Economics and Man was unl i kel y ever to go i nto a
second pri nti ng. What I never i magi ned was that a decade after
i ts publ i cati on, i t has yet to sel l out the fi rst edi ti on. I t i s one thi ng
14. He l ater recei ved a ful l professorshi p at the Uni versi ty of Massachusetts, a
taxpayer-fi nanced i nsti tuti on whose most famous former students are Dr. Bi l l
Cosby, a comedi an, and Dr. J; Jul i us Ervi ng, a famous basketbal l pl ayer.
Foreword xv
to wri te a one-pri nti ng dud, but thi s i s ri di cul ous! Maybe Baptized
I njatiorz wi l l enabl e Crai g Press to unl oad those l ast 250 copi es.
Hedge vs. Hedge Podge
I n short, i t just wasnt worth my ti me to wri te a response. So I
forgot about Economics and Man certai nl y an easy thi ng to do.
Then, i n 1985, I an Hedge sent me the manuscri pt of Baptized I n-
j?ation. I t was so del i ghtful that I coul dnt resi st publ i shi ng i t, now
that I have my own outl ets for books. Here i s a book whi ch not
onl y destroys Dr. Vi ckers arguments, but does so i n a l i vel y styl e,
wi th pl enty of documentati on, and wi th arguments so cl ear that
even a Harvard economi st can fol l ow them.
Thi s book i s si mi l ar to Davi d Chi l tons cri ti que of Ronal d
Si der, Productive Christians i n an Age of Guilt-Man@lators. I t i s not
onl y a cri ti que, but a posi ti ve statement of just what bi bl i cal free
market economi cs i s al l about. I t does l i ttl e good to publ i sh cri ti -
ques of obscure, unreadabl e books, unl ess the cri ti que provi des
i nsi ghts i nto what i s ri ght. There i s so much error i n thi s worl d,
especi al l y i n the Ph.D.-hol di ng, sel f-certi fyi ng, ri sk-free, tax-
supported academi c worl d, that the onl y excuse for respondi ng to
any segment of i t i s that out of the refutati on wi l l come posi ti ve
knowl edge of the truth. That i s what the reader wi l l get when he
reads Baptized I njation.
Hedge answers al l of the Keynesi ans favori te myths: that the
free market cannot cl ear i tsel f of unsol d goods; that monetary i n-
fl ati on i s a posi ti ve benefi t to soci ety; that the gol d standard i s a
barbarous rel i c; that Keynes somehow refuted Says Law; that
monetary demand creates economi c producti on; that savi ng i snt
necessari l y a producti ve thi ng; that we can spend oursel ves ri ch;
that the free market needs a vi si bl e hand of a central pl anni ng
bureaucracy to make i t fai r, effi ci ent, and Chri sti an; that
defi ci ts dont matter; that the free market i s i nherentl y unstabl e
(random); that the free market i s al so i nherentl y stabl e (wi th si g-
ni fi cant unempl oyment); and on and on.
The book al so makes pl ai n Dr. Vi ckers real concern: that
Chri sti ans mi ght begi n to take seri ousl y the Bi bl e, especi al l y bi b-
xvi Baptized I njlation
l i cal l aw, and use the pl ai n teachi ngs of the Bi bl e to reconstruct
the fi el d of economi cs. That woul d be terri bl e, Dr. Vi ckers assures
us i n Economics and Man. Better to use the teachi ngs of a God-
hati ng, pri nci pl e-hati ng, State-l ovi ng homosexual pervert as our
gui de to economi c wi sdom, Dr. Vi ckers procl ai ms. He staked hi s
career on that premi se, and l ost. I an Hedge shows just how badl y
he l ost.
Hedges book i s uncompromi si ng. I t pul l s no punches. I t does
not profess to be a gentl emanl y exchange of opi ni ons . I t recog-
ni zes that Dr. Vi ckers has procl ai med fal sehood i n the name of
truth, economi c perversi on i n the name of academi c schol arshi p,
and anti nomi ani sm i n the name of bi bl i cal pri nci pl e. Dr. Vi ckers
Economics and Man is a defense of the recei ved wi sdom of the
Keynesi an revol uti on an academi c revol uti on whi ch has l ed the
whol e worl d to the bri nk of economi c catastrophe: an i nterna-
ti onal orgy of debt, i nfl ati on, and broken promi ses by the State.
Hedge al so real i zes that the fate of ci vi l i zati on hangs i n the
bal ance i n our day, and that Dr. Vi ckers has hi s thumb on the
scal es on the si de of evi l . Hedge recogni zes that the economi c
recommendati ons made by Dr. Vi ckers and hi s far more i nfl uen-
ti al Keynesi an academi c peers have pushed the worl d i nto evi l ,
and therefore toward Gods ri ghteous judgment. Li ke an Ol d Tes-
tament prophet confronti ng a fourth-l evel fal se prophet of some
rebel l i ous ki ng of I srael , I an Hedge poi nts the fi nger at Dougl as
Vi ckers and warns hi m: Thus sai th the Lord!
I wonder i f Dr. Vi ckers wi l l l i sten. Fal se prophets never di d i n
the Ol d Testament.
Dr. Vi ckers i snt used to such undi gni fi ed di scussi ons. Tough
provi dence for hi m. He has become an evangel i st for a pervert, a
defender of l i es, and a scoffer at bi bl i cal l aw, al l i n the name of
Jesus. He deserves everythi ng thi s book gi ves hi m.
Now, a word of warni ng to the reader. Thi s book bogs down i n
several secti ons, not because Hedge cant wri te cl earl y, but be-
cause he quotes Dr. Vi ckers verbati m. You wi l l not bel i eve just
how bad publ i shed wri ti ng can be unti l you struggl e wi th a para-
graph or two from Economics and Man. Li ke any sane person, you
Foreword xvi i
wi l l be tempted to qui t. I dont have to put up wi th thi s; l i fe i s too
short, you may thi nk to yoursel f. But Hedge had no choi ce: i f he
had just summari zed what Dr. Vi ckers actual l y teaches, no one
woul d bel i eve hi m. Readers woul d concl ude that nobody coul d
hol d such preposterous vi ews. So Hedge fel t compel l ed to quote
Dr. Vi ckers verbati m, just to prove that the man real l y does teach
utter nonsense. Thi s makes Hedges book rough goi ng i n pl aces.
But be pati ent; once he has quoted Dr. Vi ckers, he then proceeds
to di sembowel hi m. I t i s a del i ght to read. I f you enjoyed Davi d
Chi l tons crushi ng of Ronal d Si ders head, and Greg Bahnsens
humi l i ati ng of Dr. Vi ckers fri end Meredi th Kl i ne, youl l enjoy
Hedges di ssecti on of Dougl as Vi ckers Chri sti an economi cs.
Shoul d I be so hard on Dr. Vi ckers? Shoul d Hodge? I f we
were not i n a war for the mi nds of the Chri sti an communi ty, and
i f the stakes were not the survi val of Western ci vi l i zati on, i t
woul dnt be worth the troubl e. But I bel i eve that Hedges book
can serve as a warni ng to younger schol ars not to sel l thei r i ntel -
l ectual bi rthri ghts as Chri sti ans for a mess of humani st academi c
pottage. To pul l any punches when the stakes are thi s hi gh woul d
be tantamount to pul l i ng out of the fi ght a fi ght whi ch Dr. Vi ck-
ers started i n 1976 when he went i nto pri nt to tel l Chri sti an peopl e
not to take seri ousl y the reveal ed economi cs of the Bi bl e. Thi s book
i s hi s reward.
Epi stemol ogi cal Chi l d Mol esters
I have al ready recei ved the standard response from the stand-
ard professor at what i s a standard Chri sti an col l ege. I n a l etter
wri tten on col l ege stati onery, he tel l s me to apol ogi ze to Dr. Vi ck-
ers for what I regard as a rather mi l d and semi -humorous remark
I made about Dr. Vi ckers economi c thought. What I sai d i n an
adverti sement was that wi th the publ i cati on of thi s book, Dr.
Vi ckers woul d be dead meat.
Thi s jui cy phrase was made by a character i n a popul ar fi l m,
Rocky I I I . The heavy of the movi e was a boxer, pl ayed by a
feroci ous-l ooki ng bl ack actor named Mr. T; who was the chal -
l enger to the heavywei ght champi on, Rocky, i n the fi ght for the
. . .
Xvl l l Baptized I nJ ation
champi onshi p. To unnerve Rocky before the fi ght, the Mr. T
character says that once he gets i nto the ri ng wi th Rocky, Rocky
wi l l be dead meat. Rocky had trai ned i n the fi rst movi e by punch-
i ng frozen si des of beef i nsi de a commerci al freezer-l ocker. The
chal l enger was referri ng back to what Rocky had done to the beef
punched i t sensel ess. I t had been dead meat; now i t woul d be
Rockys turn.
The phrase dead meat became i nstantl y popul ar to descri be
someone who i s compl etel y outcl assed i n any form of competi ti on.
I n the academi c worl d, thi s means someone who i s exposed i n
pri nt for hi s i gnorance, i ncompetence, or even i ntel l ectual di shon-
esty. I thi nk thi s descri bes qui te wel l what I an Hedge does to
Dougl as Vi ckers i n thi s book.
The concerned l etter-wri ter says that I owe Dr. Vi ckers an
apol ogy for such a crude descri pti on. Judge for yoursel f the ac-
curacy of thi s descri pti on after you read what i t i s that Dr. Vi ckers
has taught students for four decades, and what he has taught
Chri sti ans for a decade i n the name of Jesus. Judge for yoursel f
the coherence of hi s wri ti ng and the nature of hi s concl usi ons. Pay
cl ose attenti on to Hedges arguments. I read and reread the man-
uscri pt. Dead meat descri bes Dr. Vi ckers condi ti on descri bes
i t to a T.
The l etter-wri ter i s a fri end of Vi ckers, whi ch may expl ai n
some of hi s concern. Most of al l , however, he i s a professor at a
neo-evangel i cal (read: spi ri tual l y compromi sed) col l ege. He re-
sents al l thi s nasti ness. He wants pol i te di scussi ons. We must not
be overl y cri ti cal . We must not use ri di cul e. We must not be l i ke
Luther i n hi s battl es wi th the Pope, or Augusti ne i n hi s battl es
wi th Pel agi us. No, we must al l be good sports. More than that:
Christian good sports.
I wi l l be far more i mpressed wi th thi s sort of nonsense when
Chri sti an reconstructi oni sts start getti ng offers of professorshi ps at
neo-evangel i cal col l eges. These tenured schol arl y types want
reconstructi oni sts to keep our comments pol i te, as i f we were
members of good standi ng i n the campus facul ty cl ub, when i n
fact we have been uni versal l y bl ackbal l ed by the exi sti ng power
Foreword xi x
brokers i nsi de the so-cal l ed Chri sti an col l eges. Put us on the
team, fel l ows, and we mi ght just become good sports ! (Probabl y
not, though. We woul d probabl y do our best to pul l off what the
l i beral s who domi nate the facul ti es have done so wel l : screen out
our opponents from day one, and staff the i nsti tuti ons wi th peopl e
who bel i eve as we do. But at l east we woul d be open about i t. At
l east we are wi l l i ng to admi t that an i deol ogi cal war i s goi ng on,
and Western ci vi l i zati on i s at stake. At l east we admi t that we are
street fi ghters. We prefer to stab our opponents i n the bel l y, pub-
l i cl y; the campus l i beral establ i shment speci al i zes i n stabbi ng
them i n the back, pri vatel y. We do i t i n pri nt; they do i t i n cl osed-
sessi on facul ty meeti ngs.)
My correspondent says, I fi nd thi s terri bl y offensi ve. Wel l ,
then, I guess he got the i dea. 1am doing eue~thing I can to ojind class-
room humanists who parade themselves as Christians, and who live of the
donations of naive Christians who trust their children to these ideological
child seducem. They are steal i ng the mi nds of our chi l dren, and
they have been doi ng i t for two generati ons. They are doi ng
everythi ng they can to make l eft-wi ng, wel fare State-promoti ng
voters out of our chi l dren. I am tryi ng to catch the attenti on of
parents and donors. I care not a whi t for the sensi bi l i ti es of the
Ph.D.-hol di ng cl assroom compromi sers. My job i s to expose
them, but more to the poi nt, to do what I can to get thei r funds
cut off.
Fighting to Win
We who cal l oursel ves Chri sti an reconstructi oni sts are fi ghti ng
a war for Western ci vi l i zati on: to save i t, and then restore i t to i ts
ori gi nal Chri sti an underpi nni ngs. We are therefore fi ghti ng a war
for the ki ngdom of God. We are opposed by the cl assroom hu-
mani sts who cal l themsel ves Chri sti ans. We have outraged them
by suggesti ng that Chri sti an col l ege i nstructors shoul d teach every
di sci pl i ne stri ctl y i n terms of the revel ati on of the Bi bl e yes, even
i f the Bi bl e does not agree wi th cl assroom notes that were taken at
State U. back i n 1968, or even i n 1938.
The cl assroom compromi sers are not used to any ki nd of op-
x x Baptized I nzation
posi ti on. They have ri dden roughshod over two generati ons of
col l ege students who fear bei ng fl unked out of school i f they voi ce
opi ni ons counter to the New Deal economi cs of thei r professors.
The professors have had a free ri de, especi al l y Chri sti an col l ege
professors. Unti l the Chri sti an reconstructi oni sts started pound-
i ng on them, nobody pai d any attenti on to them except an occa-
si onal conservati ve donor, and he di dnt have an earned Ph.D.
from an accredi ted state uni versi ty. Now that the free ri de has
ended for a few of them, the fri ghtened mi ce are bandi ng together
i n hel pl ess outrage. You cant do these thi ngs! Yes, we can.
After al l , Jesus di d. I am presentl y wri ti ng a manuscri pt that I
i ntend to cal l , Thou Hypocrite! J esus Tactics of Direct Con~ontation.
He cal l ed the Phari sees whi ted sepul chers. He cal l ed them hypo-
cri tes. He cal l ed Herod, a ci vi l magi strate, a fox, and a femal e fox
at that. He di d everythi ng He coul d to embarrass hi s opponents i n
front of thei r formerl y hel pl ess fol l owers. Jesus was one of the
most effecti ve verbal street fi ghters i n hi story, and He was cruci -
fi ed for i t. Yet todays academi c wol ves i n sheeps cl othi ng pretend
that He was presi dent of the I nternati onal Associ ati on of Wi mps.
The Academic Seduction of the I nnocent
These cl assroom compromi sers are the products of a century
of cl assroom humani sm. They have i mmersed themsel ves i n the
humani sti c methodol ogi es of the secul ar uni versi ti es that granted
them thei r advanced academi c degrees. They have done every-
thi ng wi thi n thei r power to screen out students and ri val facul ty
members who come before them and announce that every aca-
demi c di sci pl i ne must be reformed, top to bottom, i n terms of
what the Bi bl e says. They wi l l not al l ow such peopl e to teach at
their col l eges. They wi l l not grant them tenure. They resent the
fact that others say i n publ i c that they, the compromi sers, have
sol d thei r spi ri tual bi rthri ghts for a mess of tenure.
They worry most of al l when they thi nk about the very real
possi bi l i ty that most of the donors to thei r col l eges are probabl y
cl oser i n thei r opi ni ons to the reconstructi oni sts than to the cam-
pus facul ty cl ub. Why, the donors mi ght . . . they just mi ght . . .
Foreword xxi
cut off the donati ons! And then what woul d happen to peopl e who
earn thei r l i vel i hood by readi ng ten-year-ol d l ecture notes to stu-
dents for 12 whol e hours a week? What woul d happen to thei r four
months of pai d vacati ons a year?
They go i nto the cl assrooms and teach l i berati on theol ogy
(Marxi sm) as i f i t were not a cal l for bl oody revol uti on; yes, even
i f they are pai d to teach ei ghteenth-century Engl i sh l i terature.
They teach the wonders of soci al i sm, as i f i t were not the founda-
ti on of uni versal tyranny and poverty. They cal l for ever-l arger
doses of the wel fare State, as i f i t had not destroyed three genera-
ti ons of fami l i es, especi al l y bl ack fami l i es, i n the Uni ted States. 15
But cal l attenti on to what they are doi ng i n tenured securi ty wi th
donors money, and they become outraged. You cant do that !
Yes, we can.
Li ke adul terers who are caught i n the act by a pri vate i nvesti -
gator hi red by an outraged spouse, they protest l oudl y that the i n-
vesti gator fai l ed to knock at the motel door before wal ki ng i n and
taki ng photographs. The photographer was terri bl y i mpol i te by
enteri ng wi thout knocki ng, whi ch therefore i s supposed to l et the
adul terers off the hook. See here, the startl ed man says, as he
gets i nto hi s trousers, thi s bargi ng-i n busi ness i s total l y uncal l ed
for. We are al l adul ts here. (I ndeed, we are.) As he i s buttoni ng
up hi s shi rt, he remi nds the photographer, Thi ngs just arent
done thi s way i n refi ned ci rcl es . Fi nal l y, as he i s putti ng on hi s
tweed jacket wi th the l eather patches on the el bows, he l owers the
boom. I can assure you, si r, that youre never goi ng to see one of
your arti cl es i n The J ournal of Comparative Obscuri ~, of whi ch I am
an associ ate edi tor.
Then, after the pri vate eye has publ i shed ful l -col or photo-
graphs of the man and hi s adul terous compani on, wi th the head-
l i ne, Adul terers Caught i n Tl yst~ he recei ves an outraged l etter
from one of the mans academi c col l eagues. We are offended by
such a capti on, the l etter says. Your photographs were i n ex-
15, Charl es Murray, Losing Ground: Ammcan Social Policy, 1950-1980 (New
York: Basi c Books, 1984).
xxi i Baptized I ny?ation
tremel y bad taste, and furthermore, the headl i ne was i n very
l arge pri nt, whi ch i s not schol arl y, and i t shoul d have read, Cl ose
Acquai ntances i n a Fri endl y Hug. You owe them both an apol -
ogy. There i s a P. S., too: I noti ce that no respectabl e schol arl y
press was wi l l i ng to publ i sh thi s scurri l ous attack, whi ch Proves
that you are way out of l i ne . No, i t onl y i ndi cates that the edi tors
of the schol arl y presses are not i nnocent bystanders. They guard
the hal l of the motel whi l e the coupl e i s otherwi se engaged; they
try to head off photographers.
These mi l d-mannered drones are defenders of the revol uti on-
ary destroyers of Western ci vi l i zati on. They thi nk they wi l l al l be
safe and sound when thi s ci vi l i zati on fal l s. They act as though
they bel i eve that thei r tweed jackets are bul l etproof. They thi nk
the revol uti onary confl i cts goi ng on today are the equi val ent of a
monthl y debate i n the facul ty l ounge. They are even nai ve
enough to i magi ne that the agreed-upon posi ti on statements of
the l atest facul ty cl ub meeti ng are rel evant to anyone, anywhere,
anyti me soon. They thi nk that the great i ssues of the worl d wi l l be
settl ed i n the pages of schol arl y journal s.
They are wrong. The onl y posi ti on statements that can make
i t through the facul ty commi ttees i n todays Chri sti an l i beral arts
col l eges are watered-down concl usi ons that were dropped as un-
workabl e (or no l onger useful i n a program of pl anned decepti on)
by the l i beral i ntel l i gentsi a ten years earl i er. I f you doubt me, wai t
unti l you read I an Hedges account of what happened to Dr. Vi ck-
ers revol uti onary new i deas l ong before Dr. Vi ckers went i nto
pri nt wi th Economics and Man. The del i ghtful fact i s that Dr. Vi ck-
ers sti l l hasnt fi gured out what hi s younger humani st peers di d to
hi m. They di d to hi m what he di d to hi s el ders decades ago. They
l eft hi m behi nd i n the dust, or the academi c economi sts equi v-
al ent of dust, stochasti c equati ons.
Over the Falls With the Mainstream
Herbert Schl ossberg, whose I dols for Destruction is a footnoted,
gentl emanl y, academi cal l y acceptabl e hand grenade agai nst mod-
ern campus l i beral i sm, has the trust of the neo-evangel i cal aca-
Foreword
. . .
XXI I I
demi cs. (Li ttl e do they suspect!) He speaks i n subdued and schol -
arl y tones whi l e he sl i ces them, throat to groi n. We i n the Chri s-
ti an reconstructi on movement regard hi m as our major wedge
i nto Chri sti an academi a, for he bri ngs many of our anti -establ i sh-
ment, anti -l i beral concl usi ons to thi s spi ri tual l y parched desert,
and i n a format that i s academi cal l y acceptabl e. But someti mes
we make hi m a bi t nervous.
He has commented on one aspect of the Chri sti an reconstruc-
ti oni st wri ters: thei r outsi der status. He bel i eves that for our
movement to gai n more i nfl uence, we must joi n the publ i shi ng
mai nstream. One thi ng that wi l l have to change for that to hap-
pen i s the styl e wi th whi ch these sharpi es skewer thei r opponents.
That ki nd of i nvecti ve i s just not done i n pol i te publ i shi ng
ci rcl es ~~l fi He shoul d have added, at l east i n the Uni ted States.
I n Bri tai n, knock-down, drag-out schol arl y battl es are qui te com-
mon. A. J. P. Tayl or, perhaps the most prol i fi c hi stori an of our
ti me, i s famous for hi s devastati ng schol arl y book revi ews, whi ch
are notabl e for thei r shark-l i ke sensi ti vi ty to weakness. To have
been Tayl ored wel l descri bes the vi cti ms. I t i s an educati onal ex-
peri ence, both for the reader and the vi cti m.
Schl ossberg has mi sunderstood our strategy. We have a com-
prehensi ve program. We tai l or (or Tayl or) our wri ti ng to fi t the i n-
tended audi ence. We wri te sweetness-and-l i ght books for some
audi ences, di sgui si ng oursel ves as mi l d-mannered reporters. But
when i t comes ti me to take off the ki d gl oves i n order to pul veri ze
some pompous academi c bozo who has devoted hi s career to
spewi ng out humani st wood, hay, and stubbl e i n the name of
Jesus, we take off the gl oves and pul veri ze hi m. Our motto i s si m-
pl e: Take no prisoners!
I f our styl e i s not consi dered pol i te i n certai n academi c ci rcl es,
then to avoi d bei ng manhandl ed, i t woul d be wi se for these epi ste-
mol ogi cal chi l d mol esters to stay out of pri nt, hi dden from publ i c
16. Schl ossberg, Evangel i cal Awakeni ngs,
a revi ew of Davi d Chi l tons Pr o-
ductive Christians in an Age of Guilt Manipulators, i n The Anwiian Spectator (Apri l
1986), p. 35.
xxi v Baptized I njation
vi ew i n thei r tenured cl assroom securi ty. I f they go i nto pri nt, as
Dougl as Vi ckers di d, they can expect the treatment . Mean-
whi l e, l et them pi ck up the battered, semi -consci ous body of thei r
col l eague, dress hi m i n a new tweed jacket, and tel l everyone that
he onl y suffered mi nor cuts and brui ses at the hands of unspeak-
abl e reconstructi oni st ruffi ans.
By the way, those who are unfami l i ar wi th Chri sti an academi a
need to be made aware of another aspect of these publ i c beati ngs.
Once the skewered col l eague i s out of earshot, hi s fel l ow schol ars
si t around readi ng reconstructi oni st materi al s, chortl i ng among
themsel ves. They real l y caught hi m on that one, di dnt they? Ho,
ho, ho. They may resent us, but they enjoy seei ng thei r col l eague
publ i cl y defl ated, yet they can hardl y admi t thei r del i ght publ i cl y.
Thi s i s one reason why they buy our books, al though i n pl ai n
brown wrappers. They l i ke to see an occasi onal beati ng. Li ke the
rest of us, they l i ke to see stuffed shi rts get the stuffi ng knocked out
of them once i n a whi l e. They are not compl ete i gnoramuses; they
recogni ze that the vi cti m real l y i s an i ntel l ectual l i ghtwei ght.
They have had to si t through hi s bori ng monol ogues i n facul ty
cl ub meeti ngs on numerous occasi ons. Furthermore, they are not
al together free from envy: the enjoyment of watchi ng some
superi or sort get knocked off hi s pedestal . He got a book i nto
pri nt; thy never have. But no one i nsi de the facul ty l ounge woul d
admi t thi s moral weakness, even to hi msel f. Neverthel ess, they
buy our books. Thei r col l eague, even wi th hi s new tweed jacket,
never agai n l ooks qui te the same i n thei r eyes. He suspects as
much, too. That i s why I enjoy publ i shi ng a book l i ke thi s one.
The best exampl e of thi s i s Ronal d J. Si der, whose Ri ch Chns-
tians in an Age of Hunger was the rage on neo-evangel i cal campuses,
1977-1982. He got the usual free ri de. Then I CE publ i shed Davi d
Chi l tons Productive Christians in an Age of Guilt-Man@ ulators i n 1981,
and a second edi ti on i n 1982. Si der was stunned. The free ri de
was over. He wrote a second edi ti on i n 1984, promi si ng on the
cover that he had repl i ed to hi s cri ti cs. I n fact, he repl i ed to none
of hi s publ i shed cri ti cs, especi al l y Chi l ton. Wi thi n a few months,
Chi l ton had wri tten and I CE had publ i shed the thi rd edi ti on of
Foreword xxv
Productive Christians, revi ewi ng Si ders desperate and i neffecti ve
squi rmi ng i n hi s second edi ti on, page by page. Sal es of Si ders sec-
ond edi ti on stal l ed, i ndi cati ng that the Si der fad i s just about over.
When he fai l ed to repl y to Chi l ton, pretendi ng that Chi l ton hadnt
beaten hi m to a pul p, he removed hi msel f from the i ntel l ectual
contest. Schl ossberg noted i n hi s revi ew of Chi l tons book that
Si der had fai l ed to repl y. Si der wi l l never recover hi s academi c
reputati on, to the extent that he ever had one. He knows that i f he
can get anyone to publ i sh a thi rd edi ti on, whi ch i s unl i kel y, Chi l -
ton wi l l si mpl y beat hi m up agai n. Who needs i t?
Vi ckers knows thi s, too. The free ri de i s over. Hedge does the
unforgi vabl e i n the worl d of l i beral academi a: he quotes Dr. Vi ck-
ers i n context, verbati m. When you read these passages, you wi l l
better understand how cruel Hedge i s. I n short, i f you enjoyed the
fi nal scenes i n the Rocky movi es, youl l enjoy Baptized I nz.ation.
When youre fi ni shed, I m sure youl l agree: Douglas Vickers is i n-
deed dead meat.
The i dea for thi s book was prompted by a number of ci rcum-
stances. Duri ng 1979 I read my fi rst economi cs book si nce l eavi ng
school i n 1964. For the fi rst ti me economi cs now made sense,
thanks to the remarkabl e cl ari ty Gary North gave to the topi c i n
hi s book An I ntroduction to Christian Economics. Thi s book was such
a del i ght that I fol l owed hi s advi ce and purchased many of the
books the author recommended.
Not to appear bi ased, however, I al so obtai ned books whi ch
presented an al ternati ve perspecti ve. I n the Chri sti an fi el d there
was not much choi ce. I n fact, the choi ce i s vi rtual l y the same i n
1986 as i t was i n 1979: Gary North, Ronal d Si der, and an Austral -
i an economi st named Dougl as Vi ckers. Dr. Vi ckers, i n contrast to
Dr. Si der (a hi stori an of European Anabapti sm), i s a professi onal
economi st, and therefore one wi l l fi nd much more of the di smal
sci ence theory i n hi s book Economics and Man than i n those whi ch
Dr. Si der has authored. But i t i s di smal for one reason: Dr. Vi ck-
ers i s a promoter of popul ar economi c theory, and by popul ar I
mean the theory of John Maynard Keynes. The theori es of
Keynes pervade the school s and uni versi ti es, and therefore the
economi cs professi on i n general . Economi c advi sers to busi ness
and government are usual l y advi si ng from a Keynesi an perspec-
ti ve, al though i n busi ness there i s pragmati c abandonment of
Keynesi an theori es because thg do not work. I t i s i n the practi cal
worl d of busi ness that economi c theory gets i ts real testi ng, not the
hal l owed wal l s of Congress, where economi c theory can be over-
rul ed by l egi sl ati ve act (at l east temporari l y).
I n fact, I can say qui te truthful l y that i t was Dr. Vi ckers who
xxvi i
. . .
Xxvl l l Baptized I njlation
made me a fol l ower of the free market system. I t was hi s attempt
to portray Keynesi an nonsense as seri ous economi c thi nki ng
whi ch caused me to accept the i deas of North and Rushdoony as
havi ng much more l ogi c ~nd coherence than coul d be found i nDr.
Vi ckers book. (Thanks, Doug!)
Duri ng 1980 I made the mi stake of attempti ng to i ntroduce
di scussi on on Chri sti an economi cs i nto a Reformed theol ogi cal
col l ege I was attendi ng. I t was a mi stake, as I have subsequentl y
real i zed, because there was no i nterest among staff or students to
know whether there mi ght be a speci fi cal l y bi bl i cal theory of eco-
nomi cs. I t was as i f the i ntel l ectual effort needed to make such an
anal ysi s of Scri pture was too great. (I have wi tnessed a si mi l ar i n-
tel l ectual l azi ness among many pastors, el ders, and deacons. )
Besi des, I was i nformed, Dr. Vi ckers had the answers to anythi ng
that Gary North, R. J. Rushdoony, and others mi ght happen to
say. I shoul d read Vi ckers book, I was tol d both by staff and stu-
dents, especi al l y i n the case of one who had been a former eco-
nomi cs teacher, and get strai ghtened out on my economi cs.
Fortunatel y, I had al ready made that effort and pl oughed my
way through Dr. Vi ckers book. (Pl oughi ng i s especi al l y necessary
when the soi l i s hard, and bel i eve me, the soi l i n thi s case was very
hard. ) One of the bri ghtest students i n that col l ege duri ng that
peri od actual l y made an effort to read Dr. Vi ckers book, but gave
up i n defeat after the fi r st chapter . He admi tted he di d not under -
stand i t, and nothi ng I coul d say at that ti me convi nced hi m of the
possi bi l i ty that he coul d not understand i t because i t did not make
sense. He preferred to bel i eve that there was somethi ng l acki ng i n
hi s own i ntel l i gence.
The i dea and outl i ne for thi s book began duri ng that peri od I
spent i n what i s known as a Protestant monastery: Theol ogi cal
Col l ege, a recl use where staff and students escape from the real
worl d and the real i ti es of l i fe. Thi s manuscri pt i s an attempt to
put Dr. Vi ckers book i nto perspecti ve and hi ghl i ght some of the
i nherent di ffi cul ti es Keynesi an economi c theory presents i n con-
trast wi th the Word of God. Most of what appears i n thi s book
comes from margi nal notes I made on my fi rst readi ng of Dr.
Pr~ace xxi x
Vi ckers, whi ch I had undertaken i n 1979. Subsequent readi ngs
(pl ural !) have not caused me to al ter the content of any of my i n-
i ti al notes, and i n some cases they have been expanded and addi -
ti onal comments made.
I am very grateful to those who have made the publ i cati on of
thi s book possi bl e. To my wi fe Jessi e, and chi l dren Matthew,
Rachel and Peter, who have been wi thout husband and father i n
order that thi s manuscri pt coul d come to frui ti on. To Noel Weeks
and Peter Wol ni zer who read the manuscri pt and offered hel pful
advi ce. A very speci al thanks to Dr. Gary North and the staff at
the I nsti tute for Chri sti an Economi cs who have not onl y been
wi l l i ng to publ i sh the manuscri pt, but al so provi de practi cal assi s-
tance and edi tori al ski l l s to make thi s project possi bl e. Whatever
shortcomi ngs exi st, however, must remai n my own.
I an Hedge
Engadi ne, NSW
Austral i a
Even more seri ous may be the fai l ure of the basi c postul ate
underl yi ng Keynesi an economi c policy: the economi st-ki ng, the
objecti ve, i ndependent expert who makes effecti ve deci si ons based
sol el y on objec~i ve, quanti tati ve, unambi guous evi dence, and free
of both pol i ti cal ambi ti ons and of pol i ti cal pressures on hi m. Even
i n the 1930s, a good many peopl e found i t di ffi cul t to accept thi s.
To the Conti nental Europeans i n parti cul ar, wi th thei r memori es
of the post-war i nfl ati ons, the economi st-ki ng was sheer hubris
whi ch i n l arge measure expl ai ns why Keynes has had so few fol -
l owers on the Conti nent unti l the l ast 10 or 15 years. By now, how-
ever, few woul d take seri ousl y the postul ate of the non-pol i ti cal
economi st who, at the same ti me, control s cruci al pol i ti cal deci -
si ons. Li ke al l enl i ghtened despots, the Keynesi an economi st-
ki ng has proven to be a del usi on, and i ndeed a contradi cti on i n
terms. I f there i s one thi ng taught by the i nfl ati ons of the l ast dec-
ade as i t was taught by the i nfl ati ons of the 1920s i n Europe i t
i s that the economi st i n power ei ther becomes hi msel f a pol i ti ci an
and expedi ent (i f not i rresponsi bl e), or he ceases to have power
and i nfl uence. I t i s si mpl y not true, as i s often asserted, that econ-
omi sts do not know how to stop i nfl ati on. Every economi st si nce
the l ate 16th century has known how to do i t: Cut government ex-
penses and wi th them the creati on of money. What economi sts
l ack i s not theoreti cal knowl edge, i t i s pol i ti cal wi l l or pol i ti cal
power. And so far al l i nfl ati ons have been ended by pol i ti ci ans who
had the wi l l rather than by economi sts who had the knowl edge.
Wi thout the economi st-ki ng, Keynesi an economi cs ceases to
be operati onal . I t can pl ay the rol e of cri ti c, whi ch Keynes pl ayed
i n the 1920s, and whi ch Mi l ton Fri edman pl ays today. I n opposi -
ti on, the Keynesi an economi st, bei ng powerl ess, can al so be
pol i ti cs-free. But i t i s an opposi ti on that cannot become effecti ve
government. The Keynesi an paradi gm i s thus l i kel y to be around
a l ong ti me as a cri ti que and as a gui de to what not to do. But i t i s
fast l osi ng i ts credi bi l i ty as a foundati on for economi c theory and
as a gui de to pol i cy and acti on.
Peter Drucker*
* Drucker, Toward the Next Economi cs, The Public I ntewst (Speci al I ssue,
1980), p. 12.
I NTRODUCTI ON
We have been driven intoa widespread system ofarbitra~ and
~rannical control ov~ our economic LJ e, not because %onomic laws
are not working the way they used to, not because the classical med-
icine cannot, t~proper~ applied, halt inzation, but because the public
at large has been led to expect standards ofperformance that as econom-
ists we do not know how to achieve. . . . I believe that we economists
in recent years have done vast harm to society at large and to our pro-
finsion in particular by claiming more than we can delivex We have
thereby encouraged politicians to make extravagant promises, inculcate
unrealistic expectations in the public at large, and promote discontent
with reasonab~ satisfactoV results because they fall short of the econ -
omists promised land.
Mi l ton Fri edman (1971)
Economi c recessi on and i ts products growi ng unempl oy-
ment, decreasi ng producti on, fal l i ng commodi ty pri ces, together
wi th the potenti al l y i mmi nent col l apse of the i nternati onal fi nan-
ci al system have become i ncreasi ngl y i mportant topi cs of con-
cern for everyone. What wi l l happen to my money i n my l ocal bank
i f Pol and, or Mexi co, or Brazi l , or the Phi l i ppi nes, or one of
several other countri es defaul ts on i ts payment to Western, and
especi al l y U. S., pri vate commerci al banks?
Some commentators i ncl i ne to the opi ni on there i s no prob-
l em, or i f a probl em does exi st, i t i s not real l y very seri ous. Two
1. Presi denti al address, Ameri can Economi c Associ ati on, repri nted i n the
Amcan Economic Review (May 1972), pp. 17-18.
1
2 Baptized I njation
young busi ness executi ves were heard to decl are thei r fai th i n our
government by acknowl edgi ng that economi c di ffi cul ti es di d exi st,
but at the same ti me they were sure that the government woul d
get them out of the mess. Such fai th shoul d not and shal l not
go unrewarded! On the other hand, the stati sti cal game pl ayed by
most governments creates confusi on i n the mi nd of the average
person because such profoundl y confl i cti ng stati sti cal data are
presented. The economy i s decl i ni ng; now i ts on the ri se; i nfl a-
ti on of 570, once thought to be out of control at that rate, i s now
consi dered acceptabl e after havi ng reached hei ghts of 10% or
more; unempl oyment i s ri si ng; job opportuni ti es have i ncreased
as never before; busi ness i s boomi ng as peopl e spend; sorry, cor-
rect that, they are savi ng i nstead of spendi ng; were i nto another
recessi on. No wonder we are a l i ttl e confused.
The perspecti ve of thi s book i s that there real~ is something rad-
ically wrong with the present economic climate. What i s today occurri ng
i s not merel y fl yi ng i n the face of sound economi c pri nci pl es, but
i s al so contrary to common sense and what most of us know by i n-
tui ti on. For exampl e, we al l know that i f we borrow somethi ng
from someone, one day we wi l l have to make repayment, unl ess
we are perverse. The wi cked borroweth, and payeth not agai n
(Ps. 37:21a). (Some economi sts, however, are perverts thi s book
deal s wi th the most famous pervert of them al l , John Maynard
Keynes so i t i s not surpri si ng that they recommend perverse
pol i ci es.) We mi ght l i ke to thi nk we can postpone such repayment
i ndefi ni tel y, but deep down we al l have the convi cti on i t wi l l be
made. I t i s a matter of when, not zi f. Yet the premi er economi sts of
our day Keynesi an, monetari st, suppl y-si de have al l ei ther ex-
pl i ci tl y or i mpl i ci tl y accepted the di ctum that defi ci ts dont matter
(at l east i n the short run), and that temporary i ncreases i n gov-
ernment debt may be hel pful i n sti mul ati ng the economy. There ~
has not been a si ngl e book by an academi cal l y certi fi ed economi st
of any school of thought i n over fi ve decades whi ch i nforms us of
just exactl y how a nati on can repay i ts debt wi thout sufferi ng
ei ther mass depressi on, mass i nfl ati on, or both: fi rst mass i nfl a-
ti on, then mass depressi on. I n fact, I am unaware of a si ngl e
I ntroduction 3
schol arl y study by an economi st i n this centuV whi ch provi des a
theoreti cal case (l et al one a moral case) for the compl ete repayment
of government debt, bri ngi ng al l government debt to zero. z
Why not? Fi rst, because economi sts pretend to be moral l y
neutral , so they do not acknowl edge the essenti al i mmoral i ty of
permanent debt. I t i s a form of sl avery: The ri ch r ul eth over the
poor, and the borrower i s servant to the l ender (Prov. 22: 7). The
economi sts i gnore thi s. Second, they do not di scuss the compl ete
repayment of government debt because of a di sti nct economi c
probl em that modern pol i ci es of government debt management
have created. Al l government debt structures today are parti al l y
moneti zed. Thi s means that the nati ons central bank has cre-
ated credi t money out of thi n ai r (or computer bl i ps) to buy bi l -
l i ons worth of government bi l l s or bonds. Thi s has i ncreased the
money suppl y of every nati on, and i t has i ntroduced the i nfamous
boom-bust cycl e. Once begun, monetary i nfl ati on l eads to i nfl a-
ti onary booms and pani c recessi ons. The questi on for whi ch no
economi st or pol i ti ci an has publ i shed a pol i ti cal l y acceptabl e (or
even an economi cal l y pl ausi bl e) answer i s thi s one: How can the
government repay 1OO$7O of i ts debt wi thout drasti cal l y shri nki ng
the money suppl y when i t buys back the central banks bonds?
Si nce monetary i nfl ati on and then pri ce i nfl ati on came when the
central bank bought the bonds, monetary defl ati on and then pri ce
defl ati on wi l l come when the government buys them back (reti res
them). 3 I f the debt i s repai d, the nati on goes i nto a defl ati onary
2. There are books by certai n Soci al Credi t wri ters that advocate thi s, but so
far, there has never been an academi cal l y trai ned or uni versi ty-certi fi ed econo-
mi st i n the Soci al Credi t movement, and we have wai ted fi fty years. Before
that, the greenbackers (pri nti ng press i nfl ati oni sts) i n the Uni ted States pro-
moted i deas si mi l ar to Soci al Credi t, but there was never an economi st i n thei r
camp, ei ther.
3. There i s one sol uti on, but i t may be worse than the cure. I f the central bank
decreases reserve requi rements for commerci al banks i n order to offset the reduc-
ti on i n the central banks monetary base i ts hol di ngs of government debt then
there need not be defl ati on. But then the commerci al banks are gi ven even
greater freedom to pump up the money suppl y by expandi ng l oans whi ch they
create out of nothi ng. Thus, the nati on wi l l experi ence a new wave of monetary
i nfl ati on and another round of the boom-bust trade cycl e. What we need i s zero
4 Baptized I nzation
depressi on, unl ess the central bank i s al l owed to start buyi ng up
pri vate fi rms debt certi fi cates. But thi s just extends the probl em of
permanent debt to the pri vate sector. So the now-monetized govern-
ment debt is never scheduled to be repaid.
Neverthel ess, i nsti ncti vel y we al l know that i t must be repai d.
The economi sts tel l us that we are wrong, that our i nsti ncts have
no sci enti fi c val i di ty. Yet year by year, the central banks i nfl ati on-
ary pol i ci es ratchet pri ces ever upward. Year by year, the com-
merci al banks face the threat of ever-l arger l oan defaul ts by Thi rd
Worl d nati ons and hard-pressed domesti c farmers. Year by year,
the economi c theori sts forecast events that do not come to pass.
A Loss of Confi dence
What i s wrong? The economi sts cannot say. They are baffl ed.
Neverthel ess, they keep offeri ng thei r opi ni ons. The publ i c keeps
hopi ng that they wi l l come up wi th sol uti ons soon, and the i ncum-
bent pol i ti ci ans keep hopi ng that these sol uti ons, when i mpl e-
mented, wi l l not l ead to thei r defeat at the next el ecti on. The pub-
l i c and the pol i ti ci ans are acti ng i n terms of fai th i n economi sts a
fai th that has l i ttl e or no evi dence to justi fy i tsel f. I ncreasi ngl y, i t
i s a wani ng fai th. (Questi on: Whats the di fference between a dog
whi ch has just been run over by a car, and an economi st who has
just been run over by a car? Answer: There are ski d marks i n
front of the dog.)
Academi c economi c theori es do not perform wel l any more.
Economi st Peter Drucker says that Keynes was a great economi st,
yet he wri tes of Keynes magi c: The Keynesi an pol i ci es; i n
spi te or perhaps because of thei r el aborate apparatus of math-
emati cal formul ae and stati sti cal tabl es, are spel l s. Because of
thi s, the fact that they fai l ed once, i n the [Uni ted States] New
Deal , means that they have fai l ed forever. For i t i s of the nature of
government debt and 10(?7. reserve commerci al banki ng. To get there, a nati on ei ther
has to go strai ght to mass defl ati on and depressi on, or fi rst go through uni versal
debt repudi ati on by mass i nfl ati on, and then defl ati on, meani ng the substi tuti on
of a new currency system, whi ch most Conti nental European nati ons have gone
through several ti mes si nce Worl d War I .
I ntroduction 5
a spel l that i t ceases al together to be effecti ve as soon as i t i s
broken once.4 He wrote these words i n the year Keynes di ed,
1946. He wrote them two decades prematurel y, as far as the eco-
nomi cs professi on was concerned, but Drucker i s al ways way
ahead of the pack. Hi s poi nt i s now correct: the Keynesian magic is
dead. But the spel l s and i ncantati ons are sti l l bei ng tri ed. Some-
ti mes economi sts gi ve the pol i ci es new names, such as suppl y-
-si de economi cs. The resul ts are the same: more government
spendi ng and l arger budget defi ci ts.
Christian Economics
Ami dst al l thi s confusi on, the Chri sti an has a parti cul ar obl i -
gati on to devel op a di sti ncti vel y bi bl i cal economi cs that wi l l pro-
vi de the answers to the worl ds di ffi cul ti es. Pol i ti cal economy, or
economi cs as i t i s now known, had been of l i ttl e i nterest to Chri s-
ti ans unti l Gary North and R. J. Rushdoony brought the subject
to the attenti on of the Chri sti an publ i c wi th thei r i mportant anal y -
ses, whi ch they offered from a sel f-consci ousl y bi bl i cal perspec-
ti ve.5 Si nce the
-
appearance of thei r two major earl y works-i n 1973,
I ntroduction to Christian Economics and I nstitutes of Biblical Law, other
authors have contri buted books from a si mi l ar perspecti ve.6 The
4. Peter Drucker, Keynes: Economi cs as a Magi cal System , Vi rgi ni a Quarter@
Review (Autumn 1946); repri nted i n Drucker, Men, I deas & Pohtics (New York:
Harper & Row, 1971), p. 247.
5. Gary North, An I ntroduction to Christian Economics (Nutl ey, New Jersey:
Crai g Press, 1973); The Dominion Covenant: Genesis (Tyl er, Texas: I nsti tute for
Chri sti an Economi cs, 1982), vol ume one of an i ntended mul ti -vol ume economi c
commentary on the Bi bl e. Vol ume two i s to be i n three parts: MOM and Pharaoh:
Dommion Religion vs. Power Religion (1985), The Si nai Strate~: Economics and the Tm
Commandments (1986), and the forthcomi ng book, ToolJ of Dominion: The Case Laws
o~ Exodus, al l publ i shed by the I nsti tute for Chri sti an Economi cs. Rou sas John
Rushdoony, The I nstitutes of Biblical Law, (Nutl ey, New Jersey: Crai g Press,
1973); The Myth of Overpopdation (Fai rfax, Vi rgi ni a: Thobum Press, [1969] 1978);
Politicj of Guilt and Pi~ (Fai rfax, Vi rgi ni a: Thoburn Press, [1970] 1978); The Roots
of I ntation (Val l eci to, Cal i forni a: Ross House Books, 1982).
6. E. L. Hebden Tayl or, Economics Mong and Banking: Chri sti an Principles (Nut-
I ey, New Jersey: Crai g Press, 1978); Tom Rose, Economics: Pnnc@es and Policy
From a Christian Perspective (Mi l ford, Mi chi gan: Mott Medi a, 1977); John Jeffer-
son Davi s, Your W2alth i n God3 World: Does the Bible Support the Free Ma?ket? (Phi l -
l i psburg, New Jersey: Presbyteri an & Reformed, 1984).
6 Baptized I nzation
head of Margaret Thatchers Conservati ve Party thi nk tank, Prof.
Bri an Gri ffi ths, an economi st at the Ci ty Uni versi ty of London, i s
al so a Chri sti an. He acknowl edges pri vatel y that he had never i m-
agi ned that there coul d be such a thi ng as a speci fi cal l y Chri sti an
economi cs unti l he read Gary Norths I ntroduction to Christian Eco-
nomics i n the l ate 1970s. He has now wri tten Chri sti an-ori ented
materi al s on economi cs.
Thi s perspecti ve coul d be categori zed, broadl y, as one of a
free market or lai~sez-faire economy, al though i t woul d be a grave
error to omi t menti oni ng that these authors i nsi st that Scri pture
be brought to bear on what has been tradi ti onal l y known under
these ti tl es. For these authors, free market does not mean an-
archy, si nce Scri ptural pri nci pl es provi de the moral and l egal
framework wi thi n whi ch a lai.ssez-jaire approach i s adopted, and
from whi ch Western capi tal i sm ori gi nated.s Chri sti an economi c
thi nki ng demands a rejecti on of economi c theori es that do not
stand the test of three standards: the Bi bl e, i nternal consi stency,
and hi stori cal veri fi cati on. I t therefore demands a rejecti on of
Keynesi an economi cs.
The Fl exi bl e Legacy of Keynes
Modern economi cs i s the economi cs of John Maynard Keynes,
the son of a Cambri dge Uni versi ty economi st, John Nevi l l e Keynes.
(The name i s pronounced CanesY as i n candy canes.) The younger
Keynes has been the most i nfl uenti al economi st of thi s century and,
as Gary North remi nds us, thi s speaks poorl y of thi s century. I t
matters l i ttl e where we study economi cs outsi de of the I ron Curtai n;
we can be sure that at l east some of the theori es of Keynes wi l l be
presented and acti vel y promoted as bei ng the panacea for the i l l s
7. Bri an Gri fi ths, Morali~and the Market Place: Christian Alternatives to Capitalism
and Socialism (London: Hodder and Stoughton, 1982); The Creation of Wealth (Lon-
don: Hodder & Stoughton, 1985).
8. By the term laissez-faire i s meant the general pri nci pl e of non-i nterventi on i n
the economy by coerci ve organi zati ons such as government-protected trade
uni ons. I t i ncl udes non-i nterventi on by government offi ci al s except for the pun-
i shi ng of those who i ndul ge i n theft, fraud, or coerci on.
I ntroduction 7
of soci ety. (Even Mi l ton Fri edman has sai d that, methodol ogi cal l y
speaki ng, we are al l Keynesi ans now.)
I n the search for a sol uti on to the percei ved probl ems, how-
ever, Keynesi ani sm has come i n for more than i ts fai r share of
cri ti ci sm, both from the ri ght and more recentl y the l eft .$
Keynesi ani sm, i t seems, does not work, or at l east has not worked
wel l recentl y. Neverthel ess, the sol uti ons to soci etys economi c
probl ems offered by most economi sts, especi al l y those i n the bu-
reaucracy and i n tenured uni versi ty posi ti ons, have cal l ed for
even more Keynesi ani sm. Exampl es of thi s can be ci ted i n great
number, from al l over the Western worl d.
Consi der the questi on of tari ffs. These barri ers to vol untary
trade between peopl e of di fferent geographi cal areas have been
promoted i n the Uni ted States and el sewhere i n ti mes of ri si ng
weal th and al so i n ti mes of recessi on. Some i nterest groups are
hurt duri ng one phase of the trade cycl e, who then cal l for protec-
ti on from cut-throat competi ti on, and di fferent groups are hurt
i n the other phase of the cycl e, who then cal l for protecti on from
cut-throat competi ti on. (What these speci al -i nterest groups
real l y want i s to protect consumers from cut-throat opportunities
offered by forei gn sel l ers. ) o Yet we are al ways assured by al l
groups that they are onl y cal l i ng for temporary tari ffs. Si mi l arl y,
most of those pol i ti ci ans who promote free trade wi l l do so onl y on
the basi s of temporary condi ti ons. I f condi ti ons change, the vot-
ers are assured, the i mposi ti on of tari ffs wi l l be consi dered.
Thi s tradi ti on of promoti ng both the accurate and i naccurate
concl usi ons of economi c theory i n the name of temporary exped-
i ency or hi stori cal ci rcumstances was rei nforced by Keynes. He
woul d promote bad economi c theory as enthusi asti cal l y and as
confi dentl y i n one peri od as he had previ ousl y promoted sound
economi c concl usi ons. Speci fi cal l y, he shi fted from advocati ng
l ow tari ffs i n the 1920s to a pro-tari ff posi ti on i n 1931. The shi ft
was made purel y i n terms of expedi ency; economi c theory was
9. Mi chael Bl eaney, The Rise and Fal l of K.yesian Economics: An investigation of
its contrsbution to capitalist developmmt (London: Macmi l l an, 1985).
10. Gary North, Cut-Throat Opportuni ti es, The Freeman (June 1982).
8 Ba@zed Inzation
al ways regarded by Keynes as a l amb to be sacri fi ced on the al tar
of expedi ency. Hi s devoted apol ogi st, Prof. Robert Lekachman,
has wri tten ~at Keynes readi l y shi fted ground on tari ffs i n the
Macmi l l an Commi ttee Report and el sewhere out of a sober consi d-
erati on of Bri ti sh i nterests. Not enti rel y consi stentl y, he preferred
these i nterests to a doctri ne of free trade, whi ch he conti nued to
val ue hi ghl y on i ntel l ectual grounds .l 1 Not entire~ corzsistdy: ah,
the wonders of schol arl y verbal restrai nt! What Keynes di d was to
sel l out the i nterests of Bri ti sh consumers (who woul d otherwi se
have purchased addi ti onal forei gn goods), as wel l as forei gn pur-
chasers of Bri ti sh goods (who needed export sal es to Bri tai n i n
order to earn Bri ti sh pounds sterl i ng, i n order to i mport Bri ti sh
goods), and he di d so i n the name of Bri ti sh i nterests , meani ng
the ol d boy network of uncompeti ti ve Bri ti sh manufacturers.
Another acol yte i n the Keynesi an church, E. A. G. Robi nson,
has al so pol i tel y commented on Keynes notori ous l ack of consi st-
ency: A carefi d study of Keynes wi l l , I bel i eve, show hi m to have
been remarkabl y consi stent i n hi s strategi c objecti ves, but extra-
ordi nari l y ferti l e i n tacti cal proposal s for achi evi ng them. Li ke a
resourceful tacti ci an, he woul d probe, try to fi nd the enemys
weak poi nts; i f repul sed he woul d qui ckl y fal l back and regroup
and put i n another attack el sewhere.l z What a marvel ous phrase:
ferti l e i n tacti cal proposal s. He mi ght have cal l ed i t Keynes fi -
nger i n the wi nd, but that woul d have i mpl i ed crass opportuni sm.
I t mi ght have reveal ed the truth, namel y, that economi c i deas
were treated by Keynes as l i ttl e more than pawns on a chess-
board, and he regarded the whole British economy as his personal chess-
board. He was ready to sacri fi ce these pawns consi stent i deas
for the sake of some overal l game pl an. But what ki nd of
game pl an for the economy can be constructed on the founda-
ti on of an economi c theory whi ch deni es the exi stence of rel i abl e
11. Robert Lekachman, The Age of Kgnm (New York: Random House, 1966),
p. 52.
12. E. A. G. Robi nson, John Maynard Keynes, 1883 -1946, i n Robert
Lekachman (cd.), Kgnes General ThwT: Reports of Three Decades (New York and
London: Macmi l l an; 1964), pp. 61-62.
I ntroduction 9
cause-and-effect rel ati onshi ps (tendenci es) i n economi c affai rs?
And what ki nd of l egal order resul ts from such unpredi ctabl e
shi fts of pol i ti cal opi ni on? What ki nd of protecti on for pri vate
property can anyone expect?
I cannot resi st ci ti ng Robi nsons next sentences, publ i shed i n
1964, at the tai l end of the post-War fai th i n the Keynesi an experi -
ment, wi thi n months of the peri od when Keynesi an pol i ci es at l ast
began to erode the worl d economy i n successi ve waves of pri ce i n-
fl ati on: But i n the end hi s vi ctory was compl ete. Ful l empl oy-
ment of resources has become the nati onal objecti ve; some woul d
say i t has obscured other objecti ves. Ordered fl exi bi l i ty y of ex-
change rates has become the agreed worl d system. Low i nterest
rates have become the offi ci al pol i cy to the extent that former ad-
vocates now begi n to fear.
Wi thi n 18 months, the Ameri can i nfl ati on began. Ten years
after these words were publ i shed, Keynes personal i nventi on, the
Bretton Woods system of managed currency exchange rates, had
col l apsed; free market (fl exi bl e) exchange rates were setti ng cur-
rency pri ces moment by moment. Two decades l ater, unempl oy -
.-
ment had become a worl dwi de phenomenon at rates hi gher than
any experi enced si nce 1940. Real i nterest rates market rates
mi nus expected pri ce i nfl ati on had become abnormal l y hi gh,
and stayed hi gh. I n short, the entire Keynesian experiment has collapsed.
As Hegel (and Marx, fol l owi ng Hegel ) once remarked, the owl of
Mi nerva fl i es onl y at dusk: men fi nal l y adopt some comprehen-
si ve and compl ete expl anatory system at the preci se moment
when thi s system or hi stori cal epoch i s about to break down. 13
Vi ckers Defense of Keynes
You woul d not i ma,gi ne that any Chri sti an economi st woul d
sti l l (or ever!) be an advocate of Keynesi an economi cs, but you
woul d i magi ne wrong. Dougl as Vi ckers, one-ti me Professor of
13. Perhaps the cl assi c owl book was Wal ter Hel l efs New Di recti om in Political
Economy (New York: Norton, 1966). Hel l er had been Chai rman of the Counci l of
Economi c Advi sors under Presi dents Kennedy and Johnson. The book an-
nounced the arri val of a new era of economi st-di rected prosperi ty.
10 Baptized I njation
Economi cs at the Uni versi ty of Western Austral i a, and more re-
centl y at the Uni versi ty of Massachusetts, i s a dedi cated Keynes-
i an. Hi s book Economics and Man was wri tten as a prel ude to a
more exhausti ve Chri sti an cri ti que 14 i n whi ch he endeavors to set
forth what he bel i eves to be a Chri sti an perspecti ve on the subject.
To date, hi s prel ude has not been fol l owed by that promi sed ex-
hausti ve Chri sti an cri ti que, al though he hi red a vani ty (author-
fi nanced) publ i sher to get i nto pri nt A Chrirtian Approach to Econom-
i cs and the Cultural Condition, I s a book much shor ter than Economics
and Man, and whi ch i s l i ttl e more than a re-statement of the i deas
presented i n hi s earl i er work. (Hi s i ni mi tabl e styl e i s easi l y recog-
ni zed on the dust jackets fl y l eafi Throughout hi s argument,
Dougl as Vi ckers adopts a careful l y del i neated scri ptural perspec-
ti ve, and textual support for the structure and concl usi ons of the
work i s adduced. Bear i n mi nd that a books fl y l eaf i s supposed to
grab the book browsers attenti on and get hi m to buy the book. I n
short, thi s i s the pl ace for an author who has to wri te hi s own fl y
l eaf when he hi res a vani ty press to prove hi s readabi l i ty. Pre-
sumabl y, thi s i s the most l i vel y wri ti ng that Dr. Vi ckers i s capabl e
of produci ng. I must admi t, i t i s a good deal l i vel i er than what we
fi nd i nsi de the book.)
I n hi s wri ti ngs, Dr. Vi ckers has had to di ssent at several
poi nts from the recent work of certai n Chri sti an schol ars whose
wri ti ng i n economi cs i s cal cul ated, I have judged, to mi sdi rect
rather than assi st the nascent concern for soci al and economi c
probl ems on the part of Reformed theol ogi ans and the Chri sti an
publ i c.l G These certai n schol ars are, pri mari l y, R. J. Rush-
doony and Gary North, but al so i ncl udes others who are i ncor-
rectl y l abel ed neo-Dooyeweerdi ans .17
14. Dougl as Vi ckers, Economi cs and Man (Nutl ey, New Jersey: Crai g Press,
1976), p. vi i i .
15. Smi thtown, New York: Exposi ti on Press, 1982.
16. Vi ckers, Economics and Man, pp. vi i i -i x.
17. I bid., p. i x; cf. p. 353-57. Herman Dooyeweerd was a Dutch professor of
l aw who wrote a massi ve four-vol ume set, A New Critique of Theoretual Thought
(Phi l adel phi a: Presbyteri an & Reformed, 1953-57). I t i s even more fi l l ed wi th
I ntroduction 11
The Blackout
More recentl y, Dr. Vi ckers has had opportuni ty to revi ew
E. L. Hebden Tayl ors Economi cs A40n~ and Banking (1978), a book
expl i ci tl y wri tten i n the tradi ti on of North and Rushdoony. (I n the
l ate-1960s, Tayl or was a conservati ve Dooyeweerdi an.) Dr. Vi ck-
ers was gi ven thi s opportuni ty by the edi tors of the Westminster
TheologicalJ ournal, the schol arl y publ i cati on of Westmi nster Theo-
l ogi cal Semi nary, an offi ci al l y Cal vi ni sti c i nsti tuti on. Thi s journal
systemati cal l y suppressed al l revi ews of Rushdoonys books after
1961, except for a margi nal l y favorabl e revi ew of The I nstitutes of
Biblical Law whi ch was vi rtual l y forced on the edi tor by John
Frame, a Westmi nster facul ty member, and i t has never revi ewed
a book by North, who attended Westmi nster, whose fi rst book ap-
peared i n 1968.18 For a quarter of a century, the edi tors of thi s
schol arl y journal have pl ayed the fami l i ar academi c game of pre-
tend our competi ti on wi l l go away soon, and pray that thei r i deas
wi l l not spread i n our ci rcl es.19 Tayl or, however, i s not consi dered
one of the l eaders of the Chri sti an Reconstructi on movement, and
perhaps thi s was why an excepti on was made to the l ong-standi ng
bl ackout. Smal l er fi sh are safer to fi -y when the great whi te sharks
are sti l l i n the vi ci ni ty. Besi des, a fri ed smal l er fi sh may be abl e to
jargon than Dr. Vi ckers books, al though i t has the meri t of bei ng massi vel y re-
searched and a seri ous schol arl y contri buti on. I suspect that Dooyeweer ds fol -
l owers treat hi m as the Founder; and the New Critique as the Book. Most of hi s
sel f-procl ai med fol l owers are compl etel y unfami l i ar wi th economi cs, and can
best be descri bed as medi eval gui l d soci al i sts. Dr. North has cri ti ci zed the Dooye-
weerdi an school repeatedl y si nce 1967, and he repri nts hi s 1967 essay, Soci al
Anti nomi ani sm ~ i n The Sinai Strategy.
18, They di d al l ow hi m to publ i sh a two-and-a-hal f page abstract of hi s doc-
toral di ssertati on on Puri tan economi c thought i n the November 1972 i ssue.
19, I t i s i nteresti ng that Rushdoonys essays and revi ews occasi onal l y ap-
peared i n the Westminster Theolo~icalJ ournal from the earl y 1950s unti l the Novem-
ber 1967 i ssue, when he wrote a general l y favorabl e revi ew of Hebden Tayl ofs
The Christian Philosophy of Law, Politics and the State (Nutl ey, New Jersey: Crai g
Press, 1967), i n whi ch he referred to the Netherl ands Anti -Revol uti onary Party
as the Moderatel y-Revol uti onary Party (p. 101). Westmi nster Semi nary rel i ed
heavi l y on contri buti ons by Dutch-Ameri can conservati ve Chri sti ans. Rush-
doony never gai ned access to the Journal agai n.
12 Baptized I rzzation
be pal med off on the uni nformed publ i c as fri ed shark, and both
the fi sherman and hi s publ i sher can then l ook l i ke fearl ess dare-
devi l s.
What di d Dr. Vi ckers say about Tayl ors book? He fol l owed
Westmi nsters party l i ne concerni ng al l so-cal l ed Chri sti an Re-
constructi on publ i cati ons, namel y, that suppression is the better Part
of ualor. The book needs careful attenti on because of i ts thorough-
goi ng and fatal error. I t i s a ki nd of economi cs whi ch shoul d not
be gi ven hospi tal i ty by the Chri sti an church.z There are so
many detai l s i n Tayl o~s book whi ch crowd on the reader, says
Dr. Vi ckers, that to menti on of any of them i s i n danger of caus-
i ng l oss of the cal m eval uati ve perspecti ve that i s needed.zl Keep
cal m, keep cool , and above al l , keep silent.
Warmed-Ovu Kgmesianisrn
Dr. Vi ckers i s unquesti onabl y verbal l y cal m i n hi s wri ti ngs.
He has adopted a styl e of expressi on whi ch al so produces cal m i n
hi s readers i ndeed, I woul d descri be thi s state of mi nd as near-
catatoni c. Anyone who smokes i n bed whi l e readi ng one of Dr.
Vi ckers economi cs books takes hi s l i fe i n hi s hands. But the more
i mportant questi on i s thi s one: I s Dr. Vi ckers book fai r? I contend
that i t i s not. My book i s an anal ysi s of the wri ti ngs, and the eco-
nomi c theori es, that Dr. Vi ckers proposes. Hi s theori es are sel f-
consci ousl y Keynesi an. He openl y professes hi s al l egi ance to the
work of John Maynard Keynes, whose subtl e and capaci ous
mi nd shook us from the bl i nkers of the cl assi cal postul ates [and]
brought somethi ng of moral i ty back i nto economi cs.zz He does
admi t that Keynes was not i nformed by a confessedl y Chri sti an
perspecti ve, and therefore Dr. Vi ckers does not commi t [hi msel f]
to al l that Keynes sai d on ei ther economi c thought or economi c
pol i cy si mpl y because we have found hi m reachi ng for a demon-
strabl y si gni fi cant anal yti cal proposi ti on .~ Keynes achi eved,
20. Watminst~ Theological J ournal, Vol . XLI 1 (Fal l 1979), p. 236.
21. I bid.
22. Vi ckers, Economics and Man, p. 350; cf. p. 212.
23. I bid, p. 39.
I ntroduction 13
however, a si gni fi cant l ogi cal and methodol ogi cal reconstructi on
i n economi cs thereby gi vi ng us a new way of l ooki ng at thi ngs
so that we now have a more compl ete understandi ng of the struc-
ture and functi oni ng of the economi c system. . . . 2
4
I n Economics and Man Dr. Vi ckers has as hi s purpose, jirst, to
set forth a Keynesi an system of Chri sti an economi cs and, second,
to redi rect the mi sdi rected efforts of North and Rushdoony who
have al l owed consi derabl e confusi on . . . to enter economi c
argument from a purportedl y Chri sti an perspecti ve. I t was i n
order to contri bute to a correcti on of that perspecti ve that we have
devel oped the enti re argument of thi s book i n the manner and i n
the order we have adopted.25
Concl usi on
Thi s book i s wri tten from the bel i ef that i t i s Dr. Vi ckers, not
North and Rushdoony, who has contri buted to the consi derabl e
confusi on i n the debate about Chri sti an economi cs. I cannot
cl ai m to be cal m and eval uati ve al ways, for I am overwhel med on
occasi ons that so many thi ngs whi ch do not make sense common
or otherwi se are taken for granted and passed off as seri ous
economi c schol arshi p on a more than gul l i bl e Chri sti an publ i c.
However, I have endeavored at al l ti mes to provi de answers to
those i deas that Vi ckers woul d have us bel i eve are Chri sti an and
economi c.
There are no brute facts facts i ndependent from other
facts, and i ndependent from Gods authori tati ve revel ati on. Al l
knowl edge resi des i n God, and si nce He knows everythi ng ex-
hausti vel y, al l facts exi st i n God-gi ven and God-i nterpreted rel a-
ti onshi ps. Mans knowl edge, on the other hand, i s forever fi ni te.
He struggl es to put facts i nto some coherent whol e, or el se he
rebel s agai nst the i dea and accepts the concept of brute factual i ty,
where meani ng (rel ati onshi p of i deas) does not and cannot exi st.
However, because man is l i mi ted i n knowl edge and does exi st i n
24. I bid., pp. 103, 212.
25. I bid., p. 241.
14 Baptized I n@ion
ti me and space, hi s thoughts do not come al l at once. I t i s not pos-
si bl e for man to th i n k of ev er y th i n g at on ce. Th i s r equ i r es th e
s pl i tti n g of k n owl edge i nto sequence. But ther e needs to be an i n-
tegr a ti n g th eor y to pu t th e s pl i t f r a gmen ts ba ck togeth er . Th e
Bi bl e provi des such a fr amewor k; Keynesi an economi c theor y
does not.
1
KEYNES, VI CKERS, AND VAN TI L
No one has done more, on either side of the Atlantic, to preserve the
kernel of the logic of Kgnes% position than his Cambridge [England]
disc@e, J oan Robinson, and we can acknowledge a valuable element
of truth in her obs~vation that Keynes, having shaken us jom the
blinkers of the classical postulates, brought something of moralip back
into economi cs. . . . And while his own confessed philosophic predi-
lections explain the absence from his injuence of any distinttive~
Christian concern for the deeper explanation of things which orzJ J a
Chnstian perspective can prouide, nevertheless Kgm.es did direct our
attention efective~ to the inevitable instabilities of the a~regative eco-
nomic system, and, on the level of pragmatic afairs, and down in the
earthy arena of economic policy formulation, to the need for compen-
satory economic action. Here, then, was the point of departure for a
Christian economics. 1
The contri buti on of Chri sti an phi l osopher Cornel i us Van Ti l
to twenti eth-century Chri sti an thought has centered on the fact
that there i s no such thi ng as neutral i ty i n the debate between
those who are for and those who are agai nst the Chri sti an fai th.
Al l thought i nescapabl y rests on certai n presupposi ti ons, meani ng
assumpti ons that are taken for granted before organi zed thought
can even begi n. Even the skepti cs cl ai m that we cant be sure
about anythi ng i s a contradi cti on, i n that i t rests on the premi se
that we can be sure about thi s much, at l east.
1. Vi ckers, Economics and Man, pp. 350-51.
15
16 Baptized I nzation
To deny the exi stence of presupposi ti ons i s to deni grate
human reason. I t i s to omi t one of the most basi c facts of exi st-
ence. I n addi ti on, al l presupposi ti ons whi ch do not take the God
of Scri pture as the ul ti mate reference poi nt end i n maki ng human
reason i mpossi bl e. Nothi ng i s known unl ess there i s fi rst the pre-
supposi ti on of knowl edge, and on no other ground i s such a presup-
posi ti on possi bl e than the Chri sti an thei sti c one. We know a real
worl d because we bel i eve by fai th that God created i t. From our
fi rst breath as a babe, we assume the real i ty of that worl d and the
trustworthi ness of our knowl edge and experi ence.z I n hi s rebel -
l i on agai nst the Creator, man wi l l deny al l knowl edge just to deny
that one basi c i nescapabl e fact: the exi stence of God.
The i nteresti ng aspect of Van Ti l s i nfl uence outsi de of hi s
more narrow academi c fi el d of apol ogeti cs i s that two school s of
economi c thought have devel oped that both gi ve homage to Van
Ti l . One school i s better known, for i t i s i ndeed a school . There
i s more than one member. Thi s i s the Chri sti an reconstructi oni st
group: Gary North, R. J. Rushdoony, and thei r fol l owers. The
other school i s i n fact a one-man band: Dougl as Vi ckers.
Christian Reconstruction
North and Rushdoony come to the fi el d of economi cs, Bi bl es
i n hand, and wi th the wri ti ngs of the Austri an School (Ludwi g
von Mi ses, F. A. Hayek, Murray Rothbard, I srael Ki rzner) and
Chi cago School economi sts (Fri edmani tes or monetari sts) i n
reserve. They pi ck and choose from the concl usi ons of these free
market schol ars, but al ways i n terms of the Bi bl e, and more speci -
fi cal l y, i n terms of Ol d Testament l aw.
The approach of these reconstructi oni sts i s unquesti onabl y
revol uti onary. No economi sts i n hi story have ever set out to create
a speci fi cal l y Bi bl i cal economi cs, meani ng an economi c system
governed by the revel ati on of the Bi bl e. There have been schol as-
ti c economi cs, natural l aw economi cs, moral economy, pol i ti cal
2. Rousas John Rushdoony, The Word of Flux (Fai rfax, Vi rgi ni a: Thoburn
Press, 1975), p. 98, emphasi s i n ori gi nal .
Kgmes, Vickers, and Van Til 17
economy, and other vari ants, but for the fi rst ti me i n hi story, a
group of (necessari l y) sel f-taught schol ars are cal l i ng for a recon-
structi on of economi c thought by means of Bi bl i cal revel ati on.
Thi s appeal has fal l en on deaf ears wi thi n the economi cs pro-
fessi on, whi ch i s understandabl e. Economi cs was the fi rst auton-
omous soci al sci ence. Economi sts were the fi rst schol ars who set
about sel f-consci ousl y to separate the content and categori es of
thei r techni cal di scussi ons from al l appeal s to rel i gi on and moral -
i ty. Thi s separati on began i n the seventeenth century, and i t has
never been heal ed. s Seventeenth-century economi sts bel i eved
that whi l e rel i gi ous and moral debates can never be settl ed by ap-
peal s to reason, techni cal economi c debates can be. Thi s fai th i s
sti l l i ntegral to modern economi cs. I t i s sti l l just as utopi an; the
economi sts are l egendary for thei r i nabi l i ty to agree on anythi ng.
Where there are fi ve economi sts, there wi l l be si x opi ni ons , goes
one barb. Lay al l economi sts end to end, and they woul d never
reach a concl usi on, goes another. Neverthel ess, there i s no aca-
demi c school of economi cs whi ch i s not speci fi cal l y and sel f-
consci ousl y val ue-free i n i ts offi ci al methodol ogy, except for the
Marxi sts, who procl ai m thei r commi tment to prol etari an val ues,
whi ch they predi ct wi l l be the onl y val ues after the Revol uti on .
Vi ckers the Di sci pl e
Li ke the reconstructi oni sts, Dougl as Vi ckers al so comes wi th a
bi bl e i n hand, but hi s bi bl e i s John Maynard Keynes General
Theoty of Employment, I n@rest, and Mong (1936). Yet i n an earl i er
work, Dr. Vi ckers acknowl edges hi s debt to Van Ti l . He pays
homage to Van Ti l l i an apol ogeti cs, and he can therefore make the
statement: Man i n si n i s, i n a phrase, the sl ave and the dupe of
the devi l .4 I f man i n si n i s the sl ave and dupe of the devi l , then
we mi ght l egi ti matel y ask: Can such a man produce anythi ng of
val ue?
3. Wi l l i am Letwi n, The Origins of Scien@c Economics (London: Methuen; New
York: Doubl eday, 1963),
4. Dougl as Vi ckers, Man in the Maelstrom oJ Modern Thought (Phi l l i psburg, New
Jersey: Presbyteri an and Reformed Publ i shi ng Co., 1975), p. 20.
18 Baptized I nzation
Thi s i s not the pl ace for a theol ogi cal argument about the doc-
tri ne of common grace and the creati ve possi bi l i ti es of unregener-
ate mi nds. Neverthel ess, we can and shoul d note that wi thout the
l i ght of Scri pture, Gods authori tati ve reveal ed Word to man, the
unregenerate mi nd can onl y grasp truth by means of theft. He
possesses true knowl edge onl y i nsofar as he operates i nconsi st-
entl y wi th hi s own presupposi ti ons. We mi ght paraphrase Van
Ti l s argument as fol l ows: What man knows autonomousl y i snt
true, and what he knows trul y i snt known autonomousl y. We
shoul d therefore have a heal thy skepti ci sm to anythi ng whi ch the
unbel i ever mi ght propose. The more devi l i sh he i s, the l ess we
shoul d expect from hi m, other thi ngs bei ng equal (as the econo-
mi sts l ove to say). The more immoral he is, the less kommon grace we
should expect him to display. Thi s i s what Van Ti l has taught for
many decades. s Yet i n hi s economi c methodol ogy and al so i n hi s
concl usi ons, Dr. Vi ckers has adopted the economi cs of John May-
nard Keynes, as sel f-consci ous an i mmoral publ i c fi gure as the
academi c worl d had seen i n hi s generati on, or todays.
I t i s somewhat surpri si ng, to ~ay the l east, that Dr. Vi ckers i s
wi l l i ng to gi ve credence to the theori es of Keynes. Gi ven the qual -
i fi cati ons he has made, to decl are that Keynes has gi ven us any-
thi ng l i ke the correct approach to economi c i ssues i s to pl ace a
great deal of fai th i n an unbel i evi ng mi nd. We shoul d argue, i n
fact, that no fai th can be put i n any human bei ng, unbel i ever or
bel i ever, unti l such ti me as hi s i deas have been tri ed and tested i n
the l i ght of Bi bl i cal teachi ng.
The Character of Kgnes
Recent bi ographi es of Keynes have provi ded evi dence not
onl y to hi s phi l osophi cal meanderi ngs, but hi s debauched and re-
5. Common grace wi l l di mi ni sh sti l l more i n the further course of hi story.
Wi th every condi ti onal act the remai ni ng si gni fi cance of the condi ti onal i s re-
duced. God al l ows men to fol l ow the path of thei r own sel f-chosen rejecti on of
Hi m more rapi dl y than ever toward the fi nal consummati on. Cornel i us Van Ti l ,
Common Grace (Phi l adel phi a: Presbyteri an and Reformed [1947] 1954), p. 83. Re-
pri nted i n Common Grace and the Gospel (Presbyteri an and Reformed, 1974), p. 83.
Keynes, Vi ckers, and Van Til 19
pul si ve l i festyl e.6 We al so see i n the forthri ghtness of thi s bi ogra-
phy the progressi ve debauchery of, and therefore progressi ve tol -
erati on of debauchery by, the general publ i c. Si r Roy Harrods
1951 bi ography was careful not to come ri ght out and say what
Keynes was, al though hi s l anguage i ndi cates that he was wel l
aware of Keynes sexual preferences.
7
He was content to wri te
such conceal ed summari es as: From the outsi de he seemed al l ur-
bani ty, suavi ty, sel f-possessi on. He appeared to some to be al most
i nhuman, so mechani cal was the preci si on wi th whi ch he achi eved
every objecti ve. Yet underneath that urbani ty he had an ardent,
passi onate nature. He had a great fund of affecti on whi ch he
wi shed to l avi sh and have reci procated. . . . One concentrates a
stronger stream of affecti on upon ones parti cul ar fri ends .s
Knowi ng what we know now about Keynes passi on, especi al l y hi s
fondness for Tuni si an boys (especi al l y when avai l abl e at di scount
hotel s),g thi s prose i n retrospect i s enough to encourage a good,
heal thy puke.
The academi c worl d di d not know of Keynes debaucheri es
unti l Mi chael Hol royd di scussed them i n hi s bi ography of Lytton
Strachey, a Bl oomsbury Ci rcl e bri ght l i ght, and one of Keynes
homosexual partners. Keynes was a homosexual whose acti vi ti es
i n thi s regard i ncl uded other wel l -known Bri ti sh subjects. But as
Ski del sky observes, thei r reasons for such acti vi ty were a l i ttl e
di fferent from those expressed by the current gay ri ghts move-
ment, whi ch asks for mere acceptance of thei r l i festyl e. They
6. Robert Ski del sky, J ohn Maynard Kgnes, Vol ume 1, Hopes Betrayed, 1883-1920
(London: Macmi l l an, 1983).
7. See, for exampl e, Harrods reference to Keynes rel ati onshi p wi th B. W.
Swi thenbank: He and Maynard became i nti mates. He then reproduces a l etter
from Keynes to Swi thenbank whi ch began, O Swi then, Swi then, and i ncl udes
the words, i f I wri te I must needs gush. . . Harrod, The Lt~e of J ohn Maynard
KUnes (New York: Norton, [1951] 1982), p. 68. Or, referri ng to Strachey, I f
Maynard fel l for hi m at once, that was by vi rtue of hi s own cl ever judgment . . .
(P. 86). I l i ke thi s one, too: TO i ntel l ectu~ compani onshi p was added a deeper
communi on of spi ri t (p. 90).
8. I bid., pp. 89-90.
9. Mi chael Hol royd, Lyttm Strachg, 2 vol s. (New York: Hol t, Ri nehart and
Wi nston, 1968), I I , p. 80,
20 Baptized I njation
[Keynes & Co. I . H.] thought that l ove of young men was a
hi gher form of l ove. They had been brought up and educated to
bel i eve that women were i nferi or i n mi nd and body. I f from the
ethi cal poi nt of vi ew . . . l ove shoul d be attached onl y to worthy
objects, then l ove of young men was, they bel i eved, ethi cal l y bet-
t
er
than l ove of women.10 I n other words, Keynes and hi s part-
ners were not just expressi ng a sexual preference. Thei rs was an
ethical and phi l osophi cal posi ti on. The Chri sti an must affi rm, i n
contrast, that perversi on i s perversi on, i rrespecti ve of the ap-
parent justi fi cati on for the act.
Keynes ethi cs were a product of hi s own rebel l i ous mi nd.
Si mi l arl y were hi s vi ews on economi cs. Hi s wri ti ngs careful l y de-
l i neate hi s fundamental phi l osophy and everythi ng he di d was
done from a phi l osophi c vi ewpoi nt. 11 One of hi s fel l ow members
of the Apostl es group, as they were known at Cambri dge Uni ver-
si ty, was G. E. Moore, who publ i shed a phi l osophi cal work on
ethi cs enti tl ed Pnncipia Ethics. I n commenti ng on thi s work,
Keynes decl ared that one of the greatest advantages of hi s [i . e.,
Moores] rel i gi on was that i t made moral s unnecessary meani ng
by rel i gi on ones atti tude to onesel f and the ul ti mate and by moral s
ones atti tude towards the outsi de worl d and the i ntermedi ate .12
Keynes thus bel i eved and practi ced the autonomy of human thought.
Nowhere does the concept of di vi ne revel ati on enter hi s thoughts,
nor does he percei ve the need for such revel ati on. After al l , i f man
i s god, man makes hi s own rul es and ethi cal pri nci pl es. Wrote
Keynes:
We enti r el y r epudi ated a per sonal l i abi l i ty on us to obey gener al
rul es. We cl ai med the ri ght to judge every i ndi vi dual case on i ts meri ts,
and the wi sdom to do so successful l y. Thi s was a ver y i mpor tant par t
of our fai th, vi ol entl y and aggressi vel y hel d, and for the outer worl d i t was
our most obvi ous and danger ous char acter i sti c. We r epudi ated enti r el y
customary moral s, conventi ons and tradi ti onal wi sdom. We were, that i s
10. Ski del sky, Keynes, pp. 128-129.
11. I bid., p, 133.
12. The Collected Writings ofJ ohn Maynard Kynes, X, 436, quoted i n ibid., p. 141.
Kgmes, Vickers, and Van Til 21
to say, i n the stri ct sense of the term, i mmor al i sts. The consequences of
bei ng found out had, of course, to be consi dered for what they were
worth. But we recogni zed no moral obl i gati on on us, no i nner sancti on,
to conform or obey. 13
The admi ssi on that they were i mmoral i sts i s evi dence that
Keynes knew that he and hi s col l eagues were breaki ng wi th con-
venti onal moral i ty. Thi s conventi onal moral i ty was essenti al l y
Chri sti an moral i ty whi ch had i nfl uenced the Bri ti sh I sl es for
al most 2,000 years. I n addi ti on, however, men do not si n i n i g-
norance. They have before them, as Remans 1:18-23 remi nds us,
the evidence that God exi sts. Men are created i n the i mage of God
and therefore know wi th certai nty what they are doi ng. No man
di sobeys God i n i gnorance; i t i s al ways wi l l ful and del i berate re-
bel l i on agai nst a soverei gn God.
Deliba-ate Obscuri&
Havi ng establ i shed some background to the character of
Keynes, i t shoul d not surpri se us that hi s economi c wri ti ngs are
not at al l what some woul d have us bel i eve. Keynes major contri -
buti on to economi c thought, hi s presentati on of hi s new eco-
nomi cs i n The General Theo~, i s one of the most di ffi cul t books to
read. I t frequentl y borders on the i ncoherent. I ts styl e i s abomi na-
bl e, i n sharp contrast i ndeed, suspi ci ousl y sharp contrast to
hi s l uci d Essays in Bi ography and hi s fi rst best-sel l er, The Economic
Consequences of the Peace. Thi s assessment of the styl e of the General
Theoy i s shared not just by hi s cri ti cs. Li sten to these comments
about The General TheoT publ i cati on by wel l -known Keynes di sci -
pl e and Nobel Pri ze-wi nni ng economi st Paul Samuel son:
I t i s a badl y wr i tten book, poor l y or gani zed; any l ayman who, be-
gu i l ed by th e au th or s pr ev i ou s r epu tati on , bou gh t th e book was
cheated of hi s fi ve shi l l i ngs. . . . I t abounds i n mares nests of confusi ons.
. . . I n i t the Keynesi an system stands out i ndi sti nctl y, as i f the author
wer e har dl y awar e of i ts exi stence or cogni zant of i ts pr oper ti es. . . .
13. Collected Writings, X, 446, quoted i n ibid., pp. 142-143.
22 Baptized I njatson
Fl ashes of i nsi ght and i ntui ti on i ntersperse tedi ous al gebra. An awkward
defi ni ti on suddenl y gi ves way to an unforgettabl e cadenza. . . . I thi nk I
am gi vi ng away no secr ets when I sol emnl y aver upon the basi s of
vi vi d personal recol l ecti on that no one el se i n Cambri dge, Massachus-
etts, r eal l y knew what i t was al l about for some twel ve to ei ghteen
months after i ts publ i cati on, I ndeed, unti l the appearance of the mathe-
mati cal model s of Meade, Lange, Hi cks and Har r od, ther e i s r eason to
bel i eve that Keynes hi msel f di d not trul y understand hi s own anal ysi s. 14
Thi s comment concerni ng Keynes i gnorance of the i mpl i ca-
ti ons of hi s own system comes from one of the founders of the
Keynesi an synthesi s , and a representati ve of a school of thought
whi ch cl ai med Keynes name. What he i s real ~ sayi ng i s that
Keynes never adopted the ri gorous methodol ogi cal , textbook-type
approach to economi cs that hi s di sci pl es adopted. There i s no evi -
dence that Keynes ever acknowl edged members of thi s school of
economi cs as hi s l egi ti mate i ntel l ectual hei rs. F. A. Hayek recal l s
hi s fi nal meeti ng wi th Keynes i n 1946: Later a turn i n the conver-
sati on made me ask hi m whether he was not concerned about
what some of hi s di sci pl es were maki ng of hi s theori es. After a not
very compl i mentary remark about the persons concerned he pro-
ceeded to reassure me: those i deas had been badl y needed at the
ti me he had l aunched them. But I need not be al armed: i f they
shoul d ever become dangerous I coul d rel y upon hi m that he
woul d agai n qui ckl y swi ng round publ i c opi ni on i ndi cati ng by a
qui ck movement of hi s hand how rapi dl y that woul d be done. But
three months l ater he was dead. i s
On top of thi s, at the end of hi s l i fe, Keynes coul d suggest that
14. Quoted i n Dani el Bel l s essay, Model s and Real i ty i n Economi c Di s-
course, The Public Zntiest (Speci al Edi ti on, 1980), pp. 62-63. Thi s speci al edi ti on
was devoted to a reassessment of Keynesi an economi cs. The general consensus
appears that the Keynesi an i deas have not achi eved thei r stated goal s of l ower
unempl oyment. For pragmati c reasons, there has been a shi ft away from the
ol der Keynesi an i deas.
15. F. A. Hayek, A Revi ew of The Lye ofJ ohn Maynard Kgmes, by Roy F, Har-
rod; publ i shed i n The J ournal of Modern Histoty (J une 1952); repri nted i n Hayek,
Studies in Philosophy, Politics and Economics (Chi cago: Uni versi ty of Chi cago Press,
1967), p. 348.
Kgnw.s, Vickers, and Van Til 23
doses of cl assi cal medi ci ne (free market economi cs) mi ght wel l
prevent the need for i mport restri cti ons and exchange control s.
Once more i n hi s career, he had shi fted compl etel y from hi s ear-
l i er recommendati ons. Keynes seemed aware that he real l y di d
not have the answers to the economi c i l l s of hi s day and age. 16
Vi ckers as Vi car
Gi ven the fact of Keynes background, the admi ssi on that
Keynes l acked understandi ng of the l ong-term i mpl i cati ons and
consequences of hi s own work, and the fact that he eventual l y
favored some cl assi cal medi ci ne: i t i s surpri si ng to fi nd that Dr.
Vi ckers can promote Keynes and hi s i deas wi th such vi gor. Ad-
mi ttedl y, Dr. Vi ckers has i ncl uded hi s own qual i fi cati on that
Keynes was not i nformed from a di sti ncti vel y Bi bl i cal perspec-
ti ve, but he then proceeds to defend those vi ews as i f they were
Bi bl i cal . The fundamental i deas that Dr. Vi ckers promotes have
thei r ori gi n i n Keynes. We may certai nl y recogni ze that Dr. Vi ck-
ers attempts to bapti ze those i deas wi th Chri sti an thi nki ng, but
when i t al l boi l s down, they are preci sel y that: bapti zed secul ar
i deas. They are secul ar because they do not have a basi s i n the
Word of God. Gi ven that Keynes l i ked to di spl ay hi s di sproofs of
Chri sti ani ty, 17 i t i s i ncumbent on Dr. Vi ckers to demonstrate pre-
ci sel y how thi s debauched homosexual pagan somehow rewrote
economi c theory to conform more cl osel y to Chri sti an pri nci pl es,
He has an obl i gati on to spel l out exactl y where thi s devi ant devi -
ated from the economi c perspecti ve of the Bi bl e. To negl ect thi s
and Dr. Vi ckers has devoted hi s enti re professi onal career to
just such a program of systemati c negl ect i s to convey the i m-
pressi on that Keynes was cl oser to Bi bl i cal truth than humani st
free market defenders are, but more to the poi nt, cl oser to the Bi b-
l i cal truth than Gary North or Rousas Rushdoony, nei ther of
whom i s a God-hati ng homosexual pervert.
16. W. H. Hutt, The Kgnesian E@rode: A Reassessment (I ndi anapol i s, I ndi ana:
Li berty Press, 1979), p. 20.
17. Ski del sky, p. 123.
24 Baptized I nj?ation
I n short, the burden of proof rests on Dr. Vi ckers shoul ders.
Nearer to the truth are the words of Scri pture. The fool bath
sai d i n hi s heart, There i s no God (Ps. 53:1). The troubl e i s, the
fool has a habi t of shari ng hi s fool i shness wi th the rest of the
worl d. A fool I ayeth open hi s fol l y (Prov. 13:16). The questi on i s,
has Dougl as Vi ckers made hi s academi c bed al ongsi de of fool s?
The Enthusiasm of Safe Wevolutionds
How can we expl ai n Vi ckers commi tment to Keynesi ani sm?
As I hope thi s book wi l l show, i t i s not Keynes l ogi c or cl ari ty
whi ch moti vated economi sts to joi n the Keynesi an revol uti on,
si nce The General Theoy is nei ther l ogi cal nor cl ear. I t i s al so not
the success of hi s pol i ci es i n recent years. I t has more to do wi th
the ori gi nal enthusi asm of a group of agi ng academi cs who re-
member fondl y thei r own parti ci pati on i n a now-di stant worl d of
exci ti ng change. The ol d ways were bei ng abandoned i n the
1940s; young economi sts had an opportuni ty to rebui l d thei r
worl d, even i f i t was onl y an academi c worl d. Thi s sense of revo-
l uti onary i nnovati on was basi c to Keynes thi nki ng, Harrod re-
ports. 18 Keynes wrote to George Bernard Shaw i n 1935, whi l e he
was wri ti ng The General TheoT: To understand my state of mi nd,
however, you have to know that I bel i eve mysel f to be wri ti ng a
book of economi c theory whi ch wi l l l argel y revol uti oni ze not, I
suppose, at once, but i n the course of ti me the way the worl d
thi nks about economi c probl ems.l g Thi s same sense of parti ci pat-
i ng i n revol uti on was al so an i mportant aspect of the young men
who fol l owed hi m. C anadi an-Ameri can- Bri t i sh economi st Harry
Johnsonz once descri bed the comi ng of the Keynesi an revol u-
ti on whi ch he real l y does not bel i eve was a revol uti on, but
18. Harrod, Lye of Kgnes, p. 88.
19. The General TheoT and AfteL Part Z, Collected Wntings, Vol . XI I I (London:
Macmi l l an, 1973), p. 492,
20. Johnson del i vered the presi denti al address at the 1971 meeti ng of the Cam-
bri dge Apostl es: Ri chard Deacon, The Cambridge Apost~es: A histo~ of Cambridge
Universi~s di te intellectual secret socie~ (London: Robert Royce Ltd., 1985), p. 173.
Kgnes, Vickers, and Van Til 25
rather a decl arati on of i ndependencezl as a fi ve-step process,
1. Attack on orthodoxy: a free market economy does not tend
automati cal l y towar d ful l empl oyment.
2. Appear ance of newness, yet mai ntai ni ng many of the ol der
tr adi ti ons i deas, but gi vi ng new names to ever ythi ng.
3. Di ffi cul ty of under standi ng the theor y, especi al l y for men
trai ned i n the earl i er tradi ti on.
4. A new methodol ogy: par ti al aggr egati on, mathemati cs, em-
pi r i cal r el evance.
5. A handl e for s tudy i ng economi c r el ati ons hi ps : the con-
sumpti on functi on.
Johnsons thi rd poi nt i s most rel evant to my di scussi on, and I
quote i t at l ength: Thi rd, the new theory had to have the appro-
pri ate degree of di ffi cul ty to understand. Thi s i s a compl ex prob-
l em i n the desi gn of new theori es. The new theory had to be so
di ffi cul t to understand that seni or academi c col l eagues woul d fi nd
i t nei ther easy nor worthwhi l e to study, so that they woul d waste
thei r efforts on peri pheral theoreti cal i ssues, and so offer them-
sel ves as easy marks for cri ti ci sm and di smi ssal by thei r younger
and hungri er col l eagues. At the same ti me, the new theory had to
appear both di ffi cul t enough to chal l enge the i ntel l ectual i nterest
of younger col l eagues and students, but actual l y easy enough for
them to master adequatel y wi th a suffi ci ent i nvestment of i ntel l ec-
tual endeavor. These objecti ves Keyness General Theo?y managed
to achi eve: i t neatl y shel ved the ol d and establ i shed schol ars, l i ke
Pi gou and Robertson, enabl ed the more enterpri si ng mi ddl e- and
l ower-mi ddl e-aged l i ke Hansen, Hi cks, and Joan Robi nson to
jump on and dri ve the bandwagon, and permi tted a whol e gener-
ati on of students (as Samuel son has recorded) to escape from the
sl ow and soul -destroyi ng process of acqui ri ng wi sdom by osmosi s
from thei r el ders and the l i terature i nto an i ntel l ectual real m i n
21. Harry G. Johnson, Keyness General Theo~: Revol uti on or War of I nde-
pendence? Canadian J ournal ~Economics (1976); i n El i zabeth S. Johnson and
Harry G. Johnson, The Shadow of Kgnzs: Undtmtandin,g Kgmes, Cambridge and
Kgmaian Economics (Chi cago: Uni versi ty of Chi cago Press, 1978), ch. 18.
26 Baptized I njation
whi ch youthful i conocl asm coul d qui ckl y earn i ts just reward (i n
i ts own eyes at l east) by the demol i ti on of the i ntel l ectual preten-
si ons of i ts academi c seni ors and predecessors. Economi cs,
del i ghtful l y, coul d be reconstructed from scratch on the basi s of a
l i ttl e Keynesi an understandi ng and a l ofty contempt for the exi st-
i ng l i terature and so i t was .ZZ
I t was thi s sense of overthrowing one~ eldezs almost overnight whi ch
moti vated the younger men. They mastered or pretended to
master the del i beratel y compl ex defi ni ti ons and formul as i n
Keynes General TheoV, and they rewrote economi cs to conform to
hi s pri mary proposal , whi ch was si mpl e enough: the State can
spend an economy i nto prosperi ty by taxi ng and spendi ng and
(ul ti matel y) by pri nti ng money. I t was the age-ol d hope of stones
i nto bread, as Mi ses has observed. q I t fi tted neatl y i nto the pl ans
of the pol i ti ci ans i n al most every nati on i n the l ate 1930s.
The great i rony today i s that another group of bri ght, young,
mathemati cal l y mi nded economi sts has appeared. They are doi ng
to the grayi ng Keynesi an ful l professors what the i ncumbents di d to
thei r predecessors four to fi ve decades ago. The new group i s
cal l ed the rati onal expectati ons school . The y concl ude that gov-
ernment pl anni ng does not accompl i sh i ts decl ared goal s because
i ndi vi dual s act to thwart the pl anners. Thi s i s basi cal l y the theme
of Mi ses and Hayek, goi ng back to the 1920s, but the younger
men dress up thei r arguments i n l ots of mathemati cs. Al so, unl i ke
Mi ses and Hayek, they do not cal l for a rol l -back of government;
they just argue that nothi ng the government does i s l i kel y to work
out as the pl anners have predi cted.
Thi s i s a revol uti onary i dea these days. The ol der Keynesi ans
resent the i dea, and they resent even more the fact that these
young whi ppersnappers are now begi nni ng to gai n the attenti on
22. Harry G. Johnson, The Keynesi an Revol uti on and the Monetari st
Counter-Revol uti on~ Ameri can Economic Review (1971); i n ibid., pp. 188-89. Thi s
devastati ng anal ysi s di d not appear i n the ori gi nal essay i n the AER.
23. Ludwi g von Mi ses, Stones I nto Bread, i n Henry Hazl i tt (cd.), Critics of
K~nesian Economics (Pri nceton, New Jersey: Van Nostrand, 1960).
K~nes, Vickers, and Van Til 27
of the most energeti c undergraduates. A sci enti fi c revol uti on2
4
i s
i n the maki ng. Susan Lee descri bes the tacti cs of the younger
men; i t i s stri ki ngl y paral l el to the tacti cs of the ori gi nal Keynes-
i ans i n thei r youth. Thi s process mi ght wel l be cal l ed the revenge
of the i nvi si bl e hand:
Sour Grapes?
Rati onal expectati ons (l atex) has become fai rl y commonpl ace for
model i ng economi c behavi or. Sti l l controversi al , however, are i ts sl eek
mathemati cs and other assumpti ons. For exampl e, accordi ng to thei r
cri ti cs, ratexi ans cl ai m the economy wi l l operate wi th al l resources ful l y
empl oyed and that markets wi l l cl ear (sel l ers equal buyers at any gi ven
pri ce) unl ess government, i nadequate i nformati on or bad l aws i nterfere.
Thus, cri ti cs argue that ratexi ans have no contact wi th real i ty wi th
a worl d of unempl oyment or unsol d houses. As one nonratexi an econo-
mi st puts i t: Sure, they make el egant model s. They just i gnore messy
pol i cy appl i cati ons.
The Keynesi an ol d guard, i n parti cul ar, feel s threatened by the new
mathemati cal tool s that have rendered thei r ski l l s obsol ete. They com-
pl ai n that the techni ques make for good Ph. D. theses and fast starts i n
publ i shi ng academi c arti cl es, but l i ttl e el se. Robert Sol ow, for i nstance,
compares the appeal the esoteri c math has for younger economi sts wi th
the appeal that devel opi ng the hydrogen bomb had for sci enti sts. Both
are techni cal l y so sweet , he says.
Al so, the ol d guard pooh-poohs the enthusi asm that rati onal expecta-
ti ons generates among younger economi sts. Paul Samuel son shrugs:
Gi ven the l ow sel f-esteem i n the economi cs professi on, any theory i s
goi ng to get a heari ng. Others si gh that the young have no sense. So
they have been temporari l y begui l ed by the opportuni ty to thumb thei r
noses at thei r teachers.
Some of thi s carpi ng and sni ffi ng i s just a normal reacti on when the
ol d makes way for the new. Stanfords John Shoven observes that the i n-
creasi ngl y sophi sti cated math has l eft the professi on wi th a bi t of a gen-
erati on gap. Thats a ni ce way of sayi ng the ol der chaps feel obsol ete.
Chi ef ratexi an Robert Lucas of the Uni versi ty of Chi cago puts i t thi s
24. Thomas Kuhn, The Structure of Scien$$c Revolutions (2nd ed.; Chi cago: Uni -
versi ty of Chi cago Press, 1970).
28 Baptized Inzation
way: I t hurts to see peopl e come i n wi th new tool s when you thought
you knew every thi ng.zs
But what i s Dr. Vi ckers rol e i n al l thi s? He was one of those
young men once upon a ti me. He was swept i nto the revol uti on i n
far-away Austral i a, on the fri nges of the academi c worl d. But he
was a Chri sti an, and he di d not want to abandon hi s fai th. So he
di d what evol uti oni sts and Freudi ans and other members of aca-
demi c gui l ds have done i n the past: he attempted to fuse two un-
reconci l abl e posi ti ons. He tri ed to bapti ze the Keynesi ani sm of hi s
youth. He di d not deci de to reconstruct the errors of youth; he de-
ci ded to persuade Chri sti an schol ars to accept hi s bapti zed
Keynesi ani sm i n the name of Chri sti an rel evance . He tri ed to
herd them on board at preci sel y the ti me that the academi c
worl ds fai th i n the Keynesi an paradi gm had begun to fade. The
owl of Mi nerva once agai n was fl yi ng at dusk.
The Red Curatd
I am remi nded of an earl i er revol uti onary generati on, the era
of the French Revol uti on and i mmedi atel y fol l owi ng. I n those
days, the revol uti onari es needed the support of cl eri cs. They even
adopted the l anguage of the Bi bl e to enl i st support. As Prof. Bi l l -
i ngton says: Al ready i n hi s Plebian Manz$esto, Babeuf had begun to
devel op a sense of messi ani c mi ssi on, i nvoki ng the names of
Moses, Joshua, and Jesus, as wel l as Rousseau, Robespi erre, and
Sai nt-Just. He had cl ai med Chri st as co-athl ete and had wri tten
i n pri son A New HistoT of the LZ~e ofJ esus Christ. Most of the con-
spi rators shared thi s bel i ef i n Chri st as sans-cullotte at heart i f not a
prophet of revol uti on. The strength of the red curates wi thi n the
soci al revol uti onary camp i ntensi fi ed the need to keep Chri sti an
i deas from weakeni ng revol uti onary dedi cati on.ZG
Who were these red curates? They were pri ests who attempted
to fuse Jesus and the Revol uti on. These men found an al most
25. Susan Lee, The un-managed economy, Forbes (Dec. 17, 1984), p. 149.
26. James Bi l l i ngton, Fire in the Minds of Men: Origins of the RevolutionaV Faith
(New York: Basi c Books; London: Templ e Smi th, 1980), p. 76.
Kqvnes, Vickers, and Van Til 29
rel i gi ous exal tati on i n i denti fyi ng wi th the masses and arti cul ati ng
a soci al i deal that went beyond Pari si an pol i ti cs to suggest secul ar
sal vati on .2
7
They vol unteered i n the forces of revol uti on. They
sol d thei r soul s for a mess of i deol ogi cal pottage. And a l ot of them
l ost thei r heads.
Dr. Vi ckers i s not exactl y a red curate. Furthermore, todays
revol uti onary (and even stodgy) humani sts thi nk they are i n no
need of support from woul d-be red curates. The aci ds of human-
i sm have done thei r work, especi al l y i n academi a. But Dr. Vi ckers
apparentl y needs psychol ogi cal consol ati on. He needs to know
that hi s l i feti me efforts i n the academi c sl ough of despond were
not wasted. He cl ai ms to have found a treasure to share wi th the
rest of us untutored Chri sti ans, who sti l l bel i eve i n such out-
moded economi c pri nci pl es as suppl y and demand, payi ng off our
debts, the gol d standard, competi ti on, and responsi bi l i ty i ndi -
vi dual , fami l i sti c, and eccl esi asti cal . He wants us to rel earn al l
thi s, for i t i s antedi l uvi an, meani ng pre-Keynesi an, i n perspec-
ti ve. We must get wi th i t , as he di d when he was a young man.
We, too, must adopt the new economi cs of 1936. We, too, must
joi n gray-hai red revol uti onari es emeri tus i n thei r conti nual cel e-
brati on of a revol uti on whi ch i s now hal f a century ol d.
So he wrote Economics and Man. He announced a revol uti on to
tenured Chri sti an schol ars everywhere. Nobody came. Wel l , not
qui te nobody. A few facul ty members at Westmi nster Theol ogi cal
Semi nary showed up for a few of hi s l ectures. I n Austral i a, hi s
book was qui etl y but unsuccessful l y promoted at Reformed
Theol ogi cal Col l ege. Other than thi s, Dr. Vi ckers recrui tment
program has been a fai l ure.
After you fi ni sh thi s book, you wi l l understand why nobody
el se came.
Concl usi on
When Dr. Vi ckers expl ai ns Van Ti l s phi l osophy i n hi s shorter
book, A Christian Approach to Economics and the Cultural Condition, he
27. I bid., p. 72.
30 Baptized I nzation
dri fts i nto uncharacteri sti c cl ari ty, but as soon as he bri ngs up the
subject of economi cs, he becomes muddl ed. (Hi s l onger book on
Van Ti l , Man in the Maelstrom of Modern Thought, is muddl ed, per-
haps because he was tryi ng to be schol arl y. ) Keynes suffered from
thi s same affl i cti on: cl ear when wri ti ng outsi de hi s fi el d, muddl ed
when he got seri ous . There i s a reason for thi s. Both Keynes and
Vi ckers shared the power of competent expressi on, but they both
adopted the economi cs of confusi on. Dr. Vi ckers fate i s that i n-
stead of remai ni ng an amateur theol ogi an and amateur phi l oso-
pher, where he occasi onal l y shows at l east a mi ni mal competence,
he deci ded to wri te books i n hi s chosen fi el d of economi cs, i n
whi ch he defends the arguments of a charl atan. John Maynard
Keynes i s a fal se gi ant who i s surrounded by real pygmi es. Dr.
Vi ckers had a choi ce: to joi n ful l -ti me the ti ny throng surroundi ng
a real gi ant, Cornel i us Van Ti l , or to joi n ful l -ti me the pygmi es
surroundi ng Keynes. Sadl y for hi m, he chose the l atter.
Dr. Vi ckers i s at war wi th the speci fi c teachi ngs of the Bi bl e re-
gardi ng economi cs. He i s unwi l l i ng to abandon hi s youthful en-
thusi asm at bei ng a mi nor parti ci pant i n an i ntel l ectual revol u-
ti on a revol uti on whi ch has brought the West to the bri nk of eco-
nomi c di saster.
2
NEI THER CAPI TALI SM NOR SOCI ALI SM (MAYBE)
. . . we shall argue that a well-designed and well-articulated
national policy on wages andprkesismost decided~ necessary at this
time. To argue to thecontraV is to lean too far in the direction ofa
reactiona~ economic conservatism.
l
Al l those who want to i denti fy themsel ves as reacti onary eco-
nomi c conservati ves, pl ease stand up ! I l ove thi s sort of argu-
ment. I t i s so . . . so utterl y Keynesi an.
One of the probl ems we face today i s that sel f-procl ai med
Chri sti an schol ars have adopted phi l osophi c rel ati vi sm as thei r
i ntel l ectual foundati on. They have been compromi sed by todays
cl i mate of i ntel l ectual opi ni on. Thi s great phi l osophi c shi ft of the
past 300 hundred years - from truth to rel ati vi sm has been wel l
documented. Commenci ng wi th Ren6 Descartes, who hypothe-
si zed a radi cal dual i sm between mi nd and matter, between
human understandi ng and mathemati cal preci si on,
2
modern man
has backed hi msel f i nto a corner where he i s no l onger abl e to
ascertai n what i s true and i s not true. s I mmanuel Kan~s dual i sm
between the phenomenal real m of sci enti fi c truth and the nou-
menal real m of human ethi cs and freedomq was the cul mi nati on
1. Vi ckers, Economics and Man, pp. 179-80.
2. E. A. Burtt, The Metaphysical Foundations of Modern Physical Scisnce (Garden
Ci ty, New York: Doubl eday Anchor, [1932] 1954), ch. I V.
3. Wi l l i am Barrett, I rrational Man: A Stdy in Exi.stmtial Philosophy (Garden
Ci ty, New York: Doubl eday Anchor, [1958] 1962).
4. Ri chard Kroner, Kanti Weltanschauung (Chi cago: Uni versi ty of Chi cago
Pr ess, [1914] 1956).
31
32 Baptized I ny?ation
of two mi l l enni a of phi l osophi cal debate. Today, modern man
vi gorousl y deni es that truth i s anythi ng more than a matter of
opi ni on, ei ther cul tural s or personal . G Even the ri gor of Kants
cause-and-effect phenomenal real m of sci enti fi c knowl edge has
been undermi ned by certai n aspects of modern (post-Hei senberg)
physi cs and by modern exi stenti al i sm.
G. W. F. Hegel s uni que ni neteenth-century contri buti on to
thi s phi l osophi cal mal ai se i s the i dea that truth i s obtai ned from
Kants dual i sti c worl d by means of a process of synthesi s. Al l i deas
or statements (thesi s) have an al ternati ve (anti thesi s). Truth i s
arri ved at by compromi si ng these two opposi ng i deas (synthesi s).
The resul t becomes a new thesi s, whi ch i n turn i s opposed by i ts
anti thesi s, and the truth of the matter i s agai n arri ved at by syn-
thesi s. Thi s di al ecti cal procedure goes on and on i nto the di m
recesses of the future, l i ke the good vs. evi l dual i sm of anci ent
Mani cheani sm, for Hegel never admi tted that somewhere, at
some ti me, one (or more) of those theses just mi ght be true for al l
men, for al l ti mes, i n al l pl aces. Not even on the day of judgment.
There i s no hi stori cal day of judgment i n Hegel s system. Thi s i s
the essence of Hegel s system, and of al l other humani st systems:
no fLnaljudgment.
Consi stentl y Chri sti an thi nki ng deni es such a posi ti on. Truth,
says the Chri sti an, i s not just a matter of opi ni on. There are
truths whi ch are at present, were i n the past, and wi l l conti nue to
be i n the future, true for al l manki nd. Such a statement depends
on the Bi bl i cal vi ew of God and creati on for i ts foundati on. There
are three basi c facts to consi der. First, God has exi sted from al l
eterni ty. There i s no ti me when He di d not exi st. Truth, therefore,
i s not rel ati ve, but rooted i n the eternal bei ng of God. Second, al l
5. Karl Mannhei m, I deology and Utopia: An I ntroduction to the Sociology of Knowl-
edge (New York: Harvest, [1936]).
6. Carl Becker, Everyman Hi s Own Hi stori an; hi s presi denti al address to
the Ameri can Hi stori cal Associ ati on (1931), and hi s book by the same name
(Chi cago: Quadrangl e, [1935] 1966); Charl es A. Beard, Wri tten Hi story as an
Act of Fai th; a 1933 address to the Ameri can Hi stori cal Associ ati on, repri nted i n
Hans Meyerhoff (cd.), The Philosophy of HistoT in Our Time (New York: Doubl e-
day Anchor, 1959).
Neither Capitalism Nor Socialism (Maybe) 33
el se that exi sts apart from God was created by Hi m. Truth there-
fore ori gi nates i n God and not created real i ty. Third, the Creator
has communi cated Truth to Hi s creati on. God has spoken. A
Chri sti an theory of knowl edge rests upon the doctri nes of God,
creati on, and revel ati on.
7
Denyi ng these three thi ngs, modern man fi nds hi msel f i ncapa-
bl e of determi ni ng what i s true or fal se, ri ght or wrong, just or un-
just. Neverthel ess, hi s l anguage i s consi stentl y couched i n these
terms. We cannot have capi tal i sm, says the soci al i st, for i t i s so-
ci al l y unjust and i nequi tabl e. The same moral appeal i s someti mes
i mpl i ci tl y used by the capi tal i st when he argues agai nst soci al i sm,
though more commonl y, the economi st defends capi tal i sm by
means of an appeal to economi c effi ci ency (reduced waste) and the
l egi ti mate autonomy of the i ndi vi dual deci si on-maker. Over si x
decades ago, the German soci ol ogi st and hi stori an Max Weber ar-
gued that thi s dual i sm between humani st soci al ethi cs and market
efi ci ency i s i nescapabl e.8 He has yet to be proven wrong. Hardl y
any economi st has even attempted to prove hi m wrong. Econo-
mi sts just i gnore hi m.
Dr. Vi ckers Synthesi s
I n the real m of economi cs, the i deas of soci al i sm and capi tal -
i sm were once presented as the onl y al ternati ves avai l abl e (thesi s
and synthesi s). Thi s certai nl y was Karl Marxs vi si on. He be-
l i eved that capi tal i sm contai ned the seeds of i ts own destructi on,
and the cri si s i n capi tal i sm woul d i nevi tabl y l ead to the prol etar-
i an revol uti on and the establ i shment of soci al i sm. John Maynard
Keynes chal l enged thi s vi ew by argui ng that enl i ghtened State
pl anni ng can overcome the contradi cti ons of an economi c order
7. Cornel i us Van Ti l , A Christian Theoy of Knowledge (Phi l l i psburg, New Jer-
sey: Presbyteri an & Reformed, 1969).
8. Max Weber, Economy and Socie~ (New York: Bedmi nster Press, [1924] 1968),
pp. 107-13, 583-89, 635-40. Cf. Gary North, Max Weber: Rati onal i sm, I rra-
ti onal i sm, and the Bureaucrati c Cage, i n North (ed.), Foundations o~ Chriktian
Scholars+: Essays in the Van Til Pers@&ve (Val l eci to, Cal i forni a: Ross House,
1976).
34 Baptized I nsatiorz
based on enl i ghtened personal sel f-i nterest. For thi s reason,
Keynesi an theory i s rejected by Marxi st schol ars. But they recog-
ni ze the i mportance of Keynes contri buti on. Wri tes one Sovi et
economi st: The i mportance of Keynesi an theory i s due above al l
to the fact that i t l ai d the foundati ons for macroeconomi c theory, a
new department of bourgeoi s pol i ti cal economy, wi thout whi ch
state-monopol y regul ati on i s now i nconcei vabl e .
9
I s thi s just an exampl e of extreme Communi st schol arshi p? 1
I s i t total l y unjusti fi ed? Not i f you bel i eve Keynes. I n a /ttl e-
known document, Keynes admi tted i ndeed, bragged that hi s
economi c theori es work far better i n a system of total State pl an-
ni ng than under a free market. Hi s fol l owers were for decades
compl etel y unaware of thi s admi ssi on. They woul d have been
even more embarrassed by i ts pl ace of publ i cati on: the Preface to
the German l anguage edi ti on of The General TheoT, whi ch was
publ i shed i n 1936 i n Nazi Germany. Keynes frankl y admi tted:
The theory of aggregate producti on, whi ch i s the poi nt of the fol l ow-
i ng book, neverthel ess can be much easi er adapted to the condi ti ons of a
total i tari an state [ei rm totakn Staates] than the theory of producti on and
di stri buti on of a gi ven producti on put forth under condi ti ons of free
competi ti on and a l arge degree of l ai ssez-fai re. Thi s i s one of the reasons
that justi fi es the fact that I cal l my theory a general theory. 11
You can easi l y understand why thi s jui cy ci tati on i s never, ever
referred to i n any pro-Keynesi an textbook, and rarel y i n narrow
monographs on Keynes. I t i s conveni entl y i gnored by those few
schol ars who are aware of i ts exi stence. The onl y economi st I have
read who even hi nted at Keynes rol e i n promoti ng Nati onal Soci al -
9. I ri na Osadchaya, From Keynes to Neoclassical Synthais: A Critical Anal ysi s
(Moscow: Progress Publ i shers, 1974), pp. 7-8.
10. J. M. Leti che, Sovi et Vi ews on Keynes: A Revi ew Arti cl e Surveyi ng the
Li terature, J ournal of Economi c Literature, I X (June 1971).
11. Thi s was fi rst transl ated by Dr. James J. Marti n, and pl aced si de-by-si de
wi th the ori gi nal German, i n the l i bertari an peri odi cal , Rampart J ournal of Zndiuid-
ucdist Thought, I I I (Spri ng 1967), pp. 39, 41. Marti n l ater repri nted thi s i n hi s
book, Revisior& Viewpoints (Boul der, Col orado: Ral ph Myl es Press, 1971), pp.
203, 205. The ci tati on now appears i n the 1973 edi ti on, i n the Collected Writing~,
Vol . VI I , p. xxvi .
Neither Capitalism Nor Soci al i sm (Maybe) 35
i sm i s the l ate Wi l hel m Ropke, 12 whose works were burned by the
Nazi s, and who was, more than any economi st of hi s day, the one
most concerned about Chri sti an val ues. I t wi l l be i nteresti ng to
see what, i f anythi ng, Dr. Vi ckers wi l l do wi th thi s ci tati on. Noth-
i ng, I woul d bet. He wi l l hope we al l forget. But we wont. A
quote l i ke thi s i s unforgettabl e.
Drowning in Deeper Springs
Qr. Vi cker s, a di sci pl e of Keynes, woul d have us bel i eve i n
thi s thi rd al ternati ve (synthesi s) i n between free market capi tal i sm
and State soci al i sm. But he does so because he i s a Chri sti an.
Fi rst, he rejects the more common epi stemol ogi cal presupposi ti on
of free market economi sts, namel y, that economi cs i s a val ue-free
sci ence. Thi s i s argued by Mi l ton Fri edman and Keynes, i s as wel l
as by Ludwi g von Mi ses. 14 Economi cs, says Dr. Vi ckers, i s not a
val ue-free i nqui ry. Then he adopts a mi xed economy concept
whi ch supposedl y overcomes the needl ess dual i sm of soci al i sm
and capi tal i sm. (He al so adopts a mi xed Engl i sh form of l i ngui s-
ti c communi cati on. )
Economi c i nqui ry i s not exhausted, or even i ts l i mi ts properl y de-
fi ned, by arguments for the pri ori ty of i ndi vi dual i sm, soci al i sm, laissez-
fiaire capi tal i sm, or col l ecti vi sm. To al l ow i nqui ry to proceed or begi n on
l evel s correspondi ng to thoughtforms i nherent i n al ternati ves such as
12. I ndeed, i t was hi s [Keynes] fate one i n whi ch, i ni ti al l y, he even ap-
peared to fi nd some vi si bl e sati sfacti on and whi ch at any rate he di d not expl i ci tl y
di savow to become the i ntel l ectual authori ty for economi c pol i cy i n Nati onal
Soci al i st Germany. Ropke, Economtc. of the Free Soci.U (Chi cago: Regnery, 1963),
p. 221. Thi s i s the Engl i sh transl ati on of the 9th German edi ti on (1961) of hi s 1936
book, Die Lehre von der Wirtschaft. The Gestapo sei zed the book, publ i shed i n
Austri a, when Germany i nvaded Austri a.
13. Posi ti ve economi cs i s i n pri nci pl e i ndependent of any parti cul ar ethi cal
posi ti on or normati ve judgments. As Keynes says, i t deal s wi th what i s, not wi th
what ought to be. Fri edman, The Methodol ogy of Posi ti ve Economi cs; i n
Fri edman, Essays in Positive Economics (Chi cago: Uni versi ty of Chi cago Press,
1953), p. 4.
14. I t i s true that economi cs i s a theoreti cal sci ence and as such abstai ns from
any judgment of val ue. Mi ses, Human Action: A Treattse on Economics (3rd ed.;
Chi cago: Regnery, 1966), p. 10.
36 Baptized Inzation
these i s to betray the possi bi l i ty of successful and meani ngful resul ts
ri ght at the begi nni ng of the journey. I t i s to shunt the engi ne of eco-
nomi c di scovery i mmedi atel y onto tracks that exi t from meani ng and i ntel l i -
gi bi l i ty, at l east as far as the ul ti mate objecti ves of i nqui ry are concerned. 15
When meani ng and i ntel l i gi bi l i ty are the i ssue, Dr. Vi ckers
styl e i s a bi t suspect. But I di gress. Dr. Vi ckers wants to avoi d the
tendency to equate the l egi ~i mate l i mi ts of economi c objecti ves
and behavi or wi th the narrowl y defi ned i nterests of atomi sti c, per-
sonal , i ndi vi dual i sti c sati sfacti ons . . . as wel l as the deeper cat-
egori es behi nd such pragmati c expressi ons as the cap~tal i sm-
soci al i sm debate. . . . 16 After al l , accordi ng to Dr. Vi ckers, i f we
thi nk i n the area of i ndi vi dual i sm, we are i n danger of bei ng trap-
ped i n the frui tl ess morass of anarchi es, expl oi tati on, and soci al
di sharmoni es.~7 There are much deeper spri ngs and moti vati ons
of human acti on than are to be found i n the capi tal i sm-soci al i sm
and col l ecti vi sm-i ndi vi dual i sm di chotomi es. . . . l a
I n other words, we should not think in traditional categories of
economics. The reason why we shoul d not thi nk i n thi s manner i s
not stated, and unfortunatel y hi s wri ti ngs do not cl ari fy preci sel y
what these deeper spri ngs are, or what he percei ves to be the
anarchi es, expl oi tati on and soci al di sharmoni es. Moreover, Dr.
Vi ckers argues that the avoi dance of these deeper spri ngs al so
l eads to the avoi dance of the l ogi cal and ethi cal demands of the
noti on of stewardshi p. . . .1$
Now thi s i s an i nteresti ng method of argument on Dr. Vi ckers
part. Not one concrete economi c theory or Scri ptural reference i s
offered, yet Dr. Vi ckers i s endeavori ng to mani pul ate hi s readers
consci ences i n such a way that we feel gui l ty for havi ng had such a
si mpl i sti c vi ew of economi cs: an either-or choice between capi tal -
i sm and soci al i sm. ~ I n addi ti on, Economi cs i s suddenl y no l onger
15. Vi ckers, Economics and Man, p. 3.
16. I bid., pp. 2, 3.
17. I bid., p. 2.
18. I bid., p. 3.
19. L&m.
20. For further exampl es of argument by gui l t mani pul ati on, see Davi d
Neither Capitalism Nor Socialism (Maybe) 37
qui te so sure of i tsel f,zl the i nnuendo bei ng that al l economi cs i s
unsure of i tsel f, a sweepi ng general i zati on and most di ffi cul t to
prove. I n contrast, Dr. Vi ckers seems absol utel y sure of hi msel f.
He expresses no doubts concerni ng the authenti ci ty of the theori es
he defends, despi te the fact that he has abandoned the epistemological
neutrality of modern humanist economics without clear~ substituting a spe-
C$C, concrete, Biblical law-based alternative. Yet in a si ngl e sentence,
Dr. Vi ckers attempts to wi pe out the past two hundred years of
economi c thi nki ng, l eavi ng the economi cal l y untrai ned reader
wi th consi derabl e doubt as to what shoul d, or shoul d not, be
bel i eved.
Concl usi on
We must therefore ask: I s what Dr. Vi ckers says at thi s poi nt
true? I s there real l y an al ternati ve to the si mpl e i deas of capi tal -
i sm and soci al i sm? More i mportantl y, are such general i zati ons
gi ven any support by the arguments Dr. Vi ckers offers i n hi s
book? Does he provi de a Bi bl i cal bl uepri nt whi ch wi l l enabl e us,
as God-feari ng peopl e, to begi n to reconstruct our economi c worl d
i n terms of a Bi bl e-sancti oned and God-requi red al ternati ve to both
soci al i sm and capi tal i sm? Or i s Dr. Vi ckers si mpl y bl owi ng
smoke? To answer these questi ons, an understandi ng of what Dr.
Vi ckers presents as capi tal i sm and soci al i sm i s necessary.
Chi l ton, Productive Christians i n an Age of Guilt-Man@dators (3rd ed., Tyl er, Texas:
I nsti tute for Chri sti an Economi cs, 1985); cf. Chi l tons essay The Case of the
Mi ssi ng Bl uepri nts i n The journal of Christian Reconstruction, Vol . VI I I , No. 1
(Summer 1980, (Chal cedon, P.O. BOX 158, Val l eci to, CA 95251), pp. 132-154.
21. Vi ckers, op. cit., p. 4.
2
THE HARMON.Y OF I NTERESTS
The real kernel of the sign@ cance of his [Kgmes~ work lies on an
essential~ methodological level, in that he gave us a new way of look-
ing at things, OL to use Schumpeterh felicitous phrase, a new vtiion,
which could neuer have been achieved as long as we wore the blinkers of
the classical and neo-classical a.rsumptions of automatic harmonies. 1
Capi tal i sm, l ai ssez--ai re, or the free market, i s an anathema to
Dr. Vi ckers. Si n . . . i s abroad i n the worl d
2
and any theory of
automati c economi c harmoni ess cannot be expected to work.
The fact that no economi st of repute i n hi story has ever argued i n
favor of automati c economi c harmoni es4 i s no doubt besi de the
poi nt del i berate ni t-pi cki ng on the part of hi s cri ti cs. Dr. Vi ckers
al so contends that the i nvi si bl e hand doctri ne of Adam Smi th
i mpl i es that the consi stent pursui t of i ndi vi dual economi c sel f-
i nterest woul d l ead automati~a@ vi a the i nterdependent market
mechani sm i n the system, to the maxi mum benefi t for soci ety as a
whol e .s The fact that Smi th di d not teach such a doctri ne, and
that you woul d be hard-pressed to fi nd any textbook on the hi s-
1. Vi ckers, Economics and Man, p. 212.
2. I bid., pp. 289, 355; cf. A Christian Approach to Economics and the Cultural Con-
dition, p. 119.
3. I bid., p. 288.
4. The one excepti on noted i n the textbooks i s the mi d-ni neteenth-century
French pamphl eteer, Frederi c Basti at. Another possi bl e excepti on was the
ni neteenth-century Ameri can economi st, Henry C. Carey. Nobody has read
Carey, except as a hi stori cal curi osi ty, for a hundred years.
5. I bid., p. 8, emphasi s added; cf. p. 288.
39
40 Baptized I nzation
tory of economi c thought whi ch says that he does, i s al so no doubt
besi de the poi nt del i berate ni t-pi cki ng on the part of hi s cri ti cs.
Thi s i s the probl em the seri ous revi ewer has when he tri es to
take Dr. Vi ckers at hi s word. You thi nk through what he has
pl ai nl y wri tten, and i f you know anythi ng at al l about economi cs,
or the hi story of economi c thought, you real i ze that what he has
wri tten i s such utter nonsense that i t i s i nconcei vabl e that he coul d
have wri tten i t, except that he di d. You reread i t, just to make
sure. Yes, he real l y wrote i t. So you poi nt out that what he has
wri tten i s utterl y wrong. And then you al most hear hi m sayi ng,
Pi cky, pi cky, pi cky.
Dr. Vi ckers never si ts qui et. He keeps compoundi ng hi s
errors. These cl assi cal economi c noti ons the i nvi si bl e hand and
the guarantee of automaticjid utilization of the resources of the nati on
and thus the maxi mi zati on of economi c wel fare qui ckl y sol i d-
i fi ed i nto a fi rm orthodoxy.6 As an anal yti c hypothesi s, yes, thi s
noti on di d become orthodox, but economi sts al ways knew that
thi s was si mpl y a hypotheti cal model , not a perfect descri pti on of
real i ty. They were di scussi ng what they have l ong cal l ed equili-
brium, whi ch i s defi ned as the way the worl d of economi c exchange
woul d oper ate Z# al l parti ci pants possessed perfect knowl edge of
the present and the future. Economi sts al l know that such a worl d
can never exi st. So di d the cl assi cal economi sts. Keynesi ans al so
use equi l i bri um model s, as do al l humani st economi sts, whi ch Dr.
Vi ckers knows very wel l . But Keynesi an cri ti cs of free market
economi sts have a tendency (other thi ngs bei ng equal ) to chi de
cl assi cal economi sts for hol di ng a posi ti on whi ch none of them
ever hel d a bi t of hi stori cal decepti on whi ch makes the hi ghl y
questi onabl e new economi cs of Keynes l ess costl y to sel l to nai ve
undergraduates.
I t i s not onl y the cl assi cal economi sts who, accordi ng to Dr.
Vi ckers, bel i eved that the economi c system woul d automatical~
equilibrate . . . at a posi ti on of maxi mum economi c wel fare .
7
He
6. I bid., pp. 10, 11, emphasi s added.
7. I bid , p. 8, emphasi s added; cf. pp. 136, 147, 195.
The Harmony of I nterests 41
warns hi s readers that there are school s of economi c thought
whi ch tend to rel y on the cl assi cal and neo-cl assi cal assumpti ons
of underl yi ng and inevitable harmonies i n the economi c system.a I
wonder who he has i n mi nd. The Austri an economi sts? The
Chi cago economi sts? Or even worse, the dreaded Chri sti an Re-
constructi oni st economi sts?
Here i s a descri pti on of Dr. Vi ckers percepti on of laissez-faire,
or capi tal i sm, and, more i mportantl y, Adam Smi ths i nvi si bl e
hand metaphor. We shoul d note, i n addi ti on, that Dr. Vi ckers
uses thi s concepti on of automati c harmoni es to berate Gary
North for hi s argument that the i nterest rate i s the equi l i brati ng
devi ce between savi ngs and i nvestment. Here, at the begi nni ng
of an attempt to construct a Chri sti an perspecti ve on economi c
anal ysi s and pol i cy, a total capi tul ati on i s made to the cl assi cal no-
ti on that whatever part of the nati ons i ncome i s saved wi l l auto-
mati cal l y fl ow i nto ~nvestment. . . . But to assume they wi l l neces-
sari ~ and automatical~ be re-empl oyed i n the manner suggested i s
to betray economi c anal ysi s before i t gets under way, and before i t
has a chance even to ask the real l y meani ngful questi ons of soci al
and economi c si gni fi cance. Such a procedure i s decl ari ng a Chri s-
ti an economi cs bankrupt before i ts real mi ssi on can even begi n .9
After al l , he goes on, laissez-faire coul d not be expected, from
a Chri sti an perspecti ve, to produce the general i zed benefi ci al
resul ts whi ch mi ght be hoped for from i t. Consi derati ons of greed,
rapaci ty, sel fi shness, monopol y, and expl oi tati on, as i ndeed the
sheer di ffi cul ti es of adjustment of compl ex economi c mechani sms,
mi ght be expected to keep on getti ng i n the way.l o
There i s one cruci al probl em wi th these comments of Dr.
Vi ckers regardi ng the cl assi cal economi sts defense of capi tal i sm:
they are not an accurate interpretation of classical economic theoy Thi s
l eads hi m to another probl em: DZ North has never relied on any such
notions of automatic harmony either. To prove thi s to oursel ves, and to
8. I bid., p. 265, emphasi s added; cf. pp. 195, 212, 350.
9. I bid., p. 27.
10. I btd., p. 9.
42 Baptized I ry?ation
get a better understandi ng of the extent of the rel i abi l i ty of Dr.
Vi ckers rhetori c, we need to eval uate the hi stori c accuracy of hi s
accusati ons i n greater detai l .
Automati c Har mony
Consi der Dr. Vi ckers cl ai m that Adam Smi th and the cl assi cal
economi sts taught an automati c harmony theory. The objecti on
here i s wi th the word automati c, for thi s gi ves the connotati on of
bei ng sel f-propel l ed or sel f-moti vated, as i f there i s somethi ng i n-
herent i n a laissez-jaire economy that acts i n accordance wi th, and
at the di screti on of, i ts own vol i ti on. Thi s, however, i s not what
Adam Smi th, or those fol l owi ng hi m, meant by the metaphori cal
expressi on i nvi si bl e hand . The evi dence for thi s i s i n Dr. Vi ck-
ers book, i n the quotati on he gi ves from Smi ths Wialt/ z oJ Nations.
I t i s onl y necessary to l ook at the fi nal sentence of that quotati on
to show Adam Smi th had no concept of an automati c economi c
system. By preferri ng the support of domesti c to that of forei gn
i ndustry, he [the i ndi vi dual ] i ntends onl y hi s own securi ty; and by
di recti ng that i ndustry i n such a manner as i ts produce maybe of
the greatest val ue, he i ntends onl y hi s own gai n, and he i s i n thi s,
as i n many other cases, led by an invisible hand to promote an end
whi ch was no part of hi s i ntenti on.11
I t i s often suggested that laissez-faire i mpl i es that al l acti ons that
are moti vated by sel f-i nterest promote the wel l -bei ng of soci ety as
a whol e. Thi s charge cannot be sustai ned agai nst Adam Smi th,
however. El sewhere, i n hi s book The TheoT of Moral Sentiments, 12
Smi th argues there are acti ons whi ch coul d be harmful to soci ety.
An unbri dl ed vi rtue of sel fi shness cannot be found i n the wri t-
i ngs of Adam Smi th.
Dr. Vi ckers appears so preoccupi ed by the phrase i nvi si bl e
hand and hi s asserti on that thi s means automati c or i nevi tabl e
11. Adam Smi th, Wealth of Natiow, 1776 (New York: Modern Li brary, ed.
Edwi n Cannan, 1937), p. 423, quoted i n Economics and Man, p. 10, emphasi s
added by Vi ckers.
12. Repri nted by Li berty Press, I ndi anapol i s, I ndi ana.
The Harmony of I nterests 43
harmoni es that he overl ooks Smi ths contenti on that i ndustry i s
di rected i n such a manner that i ts produce maybe of the greatest
val ue . I n other words, Adam Smi th i s sayi ng that i t i s the projt
motive whi ch i nfl uences and control s the free market. Contrary to
Dr. Vi ckers cl ai m, thi s i s not an automati c harmony theory but
si mpl y a statement whi ch says i f a person wants to make the maxi -
mum profi t, he does so by servi ng the best i nterests of the con-
sumers he i ntends to suppl y, and the better way of servi ng poten-
ti al customers i s to produce qual i ty goods at as l ow a pri ce as i s
profi tabl e. I n thi s manner publ i c i nterest i s promoted, as an at-
tempt i s made to obtai n maxi mum use of resources.
To i l l ustrate, a farmer who i s abl e to i ncrease hi s wheat yi el d
from three to fi ve tons an acre usual l y does so wi th the purpose of
maki ng greatest val ue that i s, greatest profi t from the use of
hi s l and. At the same ti me, he serves the publ i c i nterest by pro-
duci ng more food, the addi ti onal suppl y of whi ch has a tendency
to reduce the pri ce of wheat.
Smi th was wel l aware that groups of producers mi ght band
together and attempt to promote thei r own i nterests agai nst the
publ i c i nterest. He cri ti ci zed that excl usi ve corporati on spi ri t
whi ch prevai l s i n them. . . . 13 Here i s the man who wrote that
The government of an excl usi ve company of merchants i s, per-
haps, the worst of al l governments for any country whatever .14
Thi s i s the man who wrote some of the most famous l i nes i n the
hi story of economi c thought regardi ng the evi l i ntenti ons of mer-
chants: Peopl e of the same trade sel dom meet together, even for
merri ment and di versi on, but the conversati on ends i n a conspi r-
acy agai nst the publ i c, or i n some contri vance to rai se pri ces .i 5
I am not sayi ng that Dr. Vi ckers has never sat down and read
Smi ths Wealth of Nations cover to cover, as any professi onal cl ass-
room economi st shoul d do several ti mes duri ng hi s career. I am
not sayi ng that he has never read Smi ths Theory of Moral Senti-
13. Wealth of Nations, p. 429.
14. I bid., p. 537.
15. I bid., p. 128.
44 Baptized I njation
ments. What I am sayi ng i s that he doesnt thi nk that hi s readers
have ever done so, and he therefore expected to be abl e to get
away wi th academi c murder at l ow or zero cost.
Now, what about Dr. North? Has Dr. North ever rel i ed on the
concept of automati c harmoni es i n the free market soci ety? He
devotes an enti re chapter of hi s book, The Dominion Covenant:
Genesis to thi s very probl em, The God-Desi gned Harmony of I n-
terests . He says very cl earl y that before mans fall into sin, there was
a uni versal harmony of economi c (and al l other) i nterests. Not so
after the Fal l . What the free market does, he argues, i s to provi de
economi c incentiuesfor men to cooperate uokntan~. I t does not automat-
i cal l y create thi s tendency. I t si mpl y puts economi c penal ti es on
fraudul ent and vi ol ent behavi or. He makes hi s vi ews qui te pl ai n:
I t must be under stood that the bi bl i cal doctr i ne of the har mony of
i nterests i s not the same as the one whi ch has been used i n the past by
humani sts i n thei r defense of the free market. Actual l y, modern defend-
ers of the market do not use such an argument, al though soci al i sts and
Mar xi sts someti mes attr i bute such an ar gument to them. A few econo-
mi sts of the ni neteenth century, most notabl y the pamphl eteer, Frederi c
Basti at, ar gued al ong these l i nes, but not many economi sts have. I t i s
the wi l l i ngness of free market economi sts to recogni ze the i nnate di shar-
mony of i nterests that has l ed them to extol the benefi ts of the market as
a system of coordi nati on. 16
Dr. North then devotes two pages to ci tati ons from Wi l hel m
Ropke, the free market economi st. Ropke chal l enges the whol e
noti on of an i nnate harmony of i nterests. Dr. North summari zes
hi s posi ti on:
Ropke concerned hi msel f wi th the probl ems of soci ety, not just wi th
the more narrow sphere of economi cs. He was convi nced that i t i s nai ve
and mi sl eadi ng to base ones defense of the market on the hypotheti cal
abi l i ty of the market to cl eanse i tsel f of al l fraud, monopol y, and coer-
ci on. He di d not bel i eve that the market economy i s, i n hi s words, a
16. Gary North, The Dominion Covenant: Genesis (Tyl er, Texas: I nsti tute for
Chri sti an Economi cs, 1982), p. 94.
The Harmony of I nterests 4.5
sel f-dependent cosmos , or a trul y natural order. 17 Producers want the
hi ghest pri ces possi bl e for thei r goods or servi ces, whi l e the buyers want
the l owest pr i ces. Ther e i s a di shar mony of i nter ests apar t fr om the
medi ati n g i n fl u en ce of th e competi ti v e fr ee mar k et, h e con cl u ded.
Bewar e of those seeki ng monopol i sti c power . But the easi est way to
achi eve monopol y, he knew, i s to gai n the assi stance of the ci vi l govern-
ment. I f you wi sh to rel ease the underl yi ng di sharmony of i nterests, he
sai d, al l you need to do i s unl eash the monopol i sti c powers of the ci vi l
government. What he descri bed as the enemy of the harmony of i nter-
ests, the enemy of a market-produced, competi ti on-produced harmony
of i nterests, i s preci sel y the stati st system whi ch has been constructed by
those who ri di cul e the markets form of competi ti on, who ri di cul e the
i dea of a competi ti on-produced harmony of i nterests. 1s
Whi l e Dr. North wrote these words i n a book publ i shed si x
years after Economics and Man, there was no i ndi cati on i n hi s ear-
l i er wri ti ngs, especi al l y i n An I ntroduction to Christian Economics,
that Dr. North ever hel d to a Basti at-l i ke versi on of the harmony
of i nterests. Si nce no economi st of the twenti eth century has ever
argued for the i nnate harmony of i nterests, why shoul d Dr. Vi ck-
ers have i magi ned that Dr. North di d?
What No~th argues i s that i n order to reduce the di sharmony
of sel l ers vs. buyers, we need a broad, open free market i n whi ch
sel l ers compete against sellen , and consumen compete against consum -
ers.19 What he extol s i s competi ti on wi thi n a framework of Bi b-
l i cal l aw. Thi s seems to be what has most outraged Dr. Vi ckers
not that Dr. North i s some sort of anarchi sti c defender of a har-
moni ous zero-ci vi l government soci ety, but that he and Rev.
Rushdoony are proponents of a soci al order i n whi ch the ci vi l gov-
ernment enforces Ol d Testament l egal sancti ons. I assume that
Dr. Vi ckers wrote Economics and Man wi th the i ntenti on of l eadi ng
hi s readers to hi s concl usi ons. Hi s concl udi ng chapter i s a de:
nouncement of Rushdoonys I nstitutes of Biblical Law. He refers
speci fi cal l y to Rushdoonys posi ti on as a defect on the l evel of
17. Wi l hel m Ropke, Ci vi tar Humana (London: Hodge, 1948), p. 49.
18. North, The Domimon Covenant: Genesi s, p. 95.
19. I bid., p. 224.
46 Baptized I nzation
tel eol ogy.z I n short, Dr. Vi ckers recogni zed very cl earl y that
North was not an advocate of the i nnate harmony of i nterests as
the foundati on of a free market soci al order. Had Dr. North be-
l i eved i n such a defense, he woul d never have adopted hi s vi ews on
the necessi ty of the ci vi l governments enforcement of Bi bl i cal l aw.
But i f Dr. Vi ckers recogni zed thi s, why does he argue the opposi te?
There are three possi bl e answers to thi s questi on. Fi rst, Dr.
Vi ckers chooses not to read careful l y. I n short, he i s l azy. Second,
Dr. Vi ckers tri es to read careful l y, but he i s unabl e to do i t. I n
short, Dr. Vi ckers i s a mental i ncompetent. Thi rd, Dr. Vi ckers
sel f-consci ousl y parodi ed Dr. North, just as he sel f-consci ousl y
parodi ed Adam Smi th and the cl assi cal economi sts. I n short, Dr.
Vi ckers i s: 1) a l azy schol ar, 2) a mental i ncompetent, or 3) a
knave.
I doubt that he i s l azy; he has not onl y read l ots of i nsufferabl y
dul l academi c tomes, he has even gone to the troubl e of wri ti ng
several of them. The turgi di ty of hi s wri ti ng styl e does i ndi cate
mental i ncompetence, but hi s determi ned i nabi l i ty to state hi s
opponents posi ti on accuratel y, or even gi ve a standard col l ege
textbook account of thei r bel i efs, i ndi cates hi s sel f-consci ous di s-
torti ng of ri val vi ewpoi nts. What any C+ grade average upper
di vi si on economi cs major knows i s not true, Dr. Vi ckers tri es to
pal m off as standard knowl edge.
I n short, the man cannot be trusted. Whether hi s weakness i s
pri mari l y i ntel l ectual or moral , the reader shoul d deci de for hi m-
sel f after fi ni shi ng thi s book and then by rereadi ng (i f i t seems
worth the effort) Dr. Vi ckers two Chri sti an economi cs books.
Concl usi on
There was i ndeed a God-desi gned harmony of i nterests pri or
to the Fal l . After the rebel l i on of man, the ground was cursed
(Gen. 3:17-19), and other changes took pl ace. The ethi cal goal of
the i nsti tuti onal reconstructi on of soci ety sti l l exi sts. We are to
work to bui l d a soci ety i n whi ch the harmony of i nterests i s @ogres-
20. Vi ckers, Economics and Man, p. 358.
The Harmony of I nterests !7
si ve~ restored. The death of Chri st and Hi s resurrecti on has made
such an effort meani ngful and possi bl e.
One aspect of thi s restorati on i s the creati on of ci vi l l aw whi ch
respects the pri vate property of al l l aw-abi di ng peopl e. The free
market i s soci etys most effecti ve i nsti tuti onal means of putti ng a
pri ce tag on non-cooperati on. I t puts a premi um on harmony and
pl aces economi c restrai nts on those who vi ol ate soci al harmony. I t
cannot el i mi nate di sharmony, but i t enabl es al l parti ci pants to bi d
for the cooperati on of thei r nei ghbors. The defense of the free
market must not be i n terms of an i nnate harmony of i nterests i n a
fal l en worl d; on the contrary, i ts defense rests on the theoreti cal
accuracy and hi stori cal real i ty of the potenti al for economi c
gr owth and per sonal advancement of those who cooper ate
through vol untary transacti ons i n a free market soci ety.
The State i s not to become a pri mary owner of goods and ser-
vi ces. Combi ned taxes of al l l evel s of ci vi l government are to be
kept under the l evel of the ti the, meani ng under ten percent of i n-
come. The State i s to be shrunk radi cal l y. I n short, we are to seek
del i verance from todays Egypt. Keynes i s one of Egypts major
economi sts. (Marx i s the other. ) I f Dr. Vi ckers were wel l -known
and i nfl uenti al , he woul d be, too. But he woul d be empl oyed as a
taskmasters agent, to cal m the peopl e i n bondage. He woul d tel l
us that we are actual l y i n the promi sed l and, and that any tal k of
freedom from bondage i s the heresy of those who woul d l ead them
i nto the wi l derness to di e. I n the wi l derness, there are no l eeks, no
oni ons, and no State wel fare checks.
4
CREATI ON AND CAPI TALI SM
Men are constituted, in short, in such a way as to minimize the
expectation that, Zf left to itse~, the economic sociep could function
with that natural harmony of interests which we have seen the classical
economists and their latter-day intellectual progeny to suppose. Per-
sonal freedoms, individual nghts, the dignity of man, and the accord-
ance of liberp to hopeful~ responsible se~-interest, can al ! too easi~
degenerate into an economic anarchy. The Christian proposition,
espoused on the sanction of clear scriptural prescription, that the state
has been ordained by God for the restraint, correction, and punish-
ment of evil, has as positive and pervasive an application in the eco-
nomic sphere as in other more readily acknowledged realms. 1
We have al ready seen that Dr. Vi ckers cl ai m that the cl assi cal
economi sts, l et al one Dr. North, rel i ed on a concept of the i nnate
harmony of i nterests i s a fal se cl ai m. Thi s mi srepresentati on al so
undergi rds hi s 1982 book on economi cs. Si nce he persi sts i n cl i ng-
i ng to thi s mi sl eadi ng hi stori c summary, i t must be i mportant for
hi s overal l argument. I t i s an argument whi ch cannot be sus-
tai ned. He begi ns wi th a fal se premi se. Now he wants us al so to
bel i eve that economi c anarchy l ooms because the State meani ng
pol i ti ci ans and safel y tenured bureaucrats has a posi ti ve rol e to
pl ay i n economi c pl anni ng, i n order to avoi d an economi c anar-
chy. Thi s concl usi on, he says, i s i n accord wi th Paul s l etter to the
Remans, chapter 13, verse 1 and fol l owi ng.
1. Vi ckers, Economics and Man, p. 73.
49
50 Baptized I nJ ation
Creati on and Provi dence
To repl y to Dr. Vi ckers, we need to know the origin of the capi -
tal i st system. Fi rst, the Chri sti an economi st can and must argue
that the worl d i s not based on chance. I t was created by a God
who i s not the author of chaos but of order and harmony, and He
control s whatsoever comes to pass. I t i s presentl y sustai ned by
that God provi denti al l y.
Second, the Chri sti an economi st shoul d be wi se enough to say
that economi cs i s the study of si nful human bei ngs and the acti ons
they take to i mprove thei r wel l -bei ng. Homo sapi ens i s made i n the
i mage of God, and i s a thi nki ng and i ntel l i gent bei ng. Hi s acti ons
are though@i acti ons even though we admi t that i ncreased knowl -
edge can i nfl uence the way man wi l l act. Hi s acti ons are @@ose-
fi l , just as Gods acti ons are. I n pri nci pl e, we can say that al l
human acti on i s purposeful . Whether a parti cul ar acti on wi l l
achi eve i ts ai m, however, i s another questi on. Whether i t i s mor-
al l y good or moral l y evi l i s al so another questi on.
Thi rd, i ndi vi dual human acti ons fal l wi thi n a hi gher, overal l
pl an. They do not happen by chance, but fal l wi thi n the counsel
and provi dence of the Creator (Eph. 1:11). The capi tal i sti c system
has been defended i n the past wi thout reference to God and Hi s
eternal decrees, the reason bei ng that laissez-faire economi sts have
adopted a sel f-consci ousl y secul ari zed versi on of the doctri ne of
provi dence, wi th the i mpersonal market substi tuti ng for a person-
al i sti c soci al order.
2
Thi s does not mean that free market defend-
ers are necessari l y wrong i n al l that they say, for Chri sti an roots
run deep i n market theory. Some economi sts have understood
how i nfl uenti al hi stori cal l y the Bi bl i cal arguments concerni ng
provi dence were for the economi sts concept of economi c order.3
What I am argui ng, fol l owi ng Gary Norths l ead, i s that l ai ssez-
2. See R. J. Rushdoony, The Roots of I njation (Val l eci to, Cal i forni a: Ross
House Books, 1982), p. 67 R.
3. Jacob Vi ner, The Role of Providence in the Soci al Order: An Essay in I ntellectual
Histoty (Phi l adel phi a: Ameri can Phi l osophi cal Soci ety, 1972). Sadl y, Dr. Vi ner
di d not l i ve to compl ete thi s i ntroductory study.
God?s Creation and Capitalism 51
faire theory i s cl oser to Bi bl i cal truth than other economi c systems
are, for reasons whi ch wi l l be di scussed throughout thi s book
reasons deni ed by Dougl as Vi ckers.
Moreover, i f al l acti on i s purposeful acti on, we can safel y con-
cl ude that the essenti al di fference between a laissez-faire economi c
system and any other economi c system comes down to the way
i ndi vi dual human acti ons are vi ewed. The essence of free market
theory i s that i ndi vi dual s shoul d general l y be l eft to themsel ves to
determi ne and pursue thei r own goal s. The market i n pri nci pl e
honors Phi l i ppi ans 2:12: Work out your own sal vati on wi th fear
and trembl i ng.
I s the Free Market Random or Di sor der l y?
Thi s rel i ance on i ndi vi dual deci si on-maki ng i s far from sayi ng
that the market i s chaoti c, contrary to the Marxi sts and soci al i sts.
The market i s orderl y. What the soci al i sts refuse to admi t i s that
there i s a bottom-up, decentralized order i n economi c affai rs. I t i s the
i nteracti on of vol untari l y choosi ng i ndi vi dual s whi ch produces
economi c order, i f they are operati ng under a system of pri vate
ownershi p and l aws agai nst vi ol ence and fraud.4 The acti ons of
i ndi vi dual s have consequences. There i s nothi ng automati c
about thi s, nor does i t possess some magi cal qual i ty. I t i s merel y a
recogni ti on that peopl e act a certai n way under gi ven ci rcum-
stances; they act i n thei r own best i nterests as they perceiue them.
A laissez-faire system i s not uncontrol l ed i n the sense that Dr.
Vi ckers i mpl i es when he states that i f l eft to i tsel f, the market wi l l
gyrate uni nhi bi tedl y and randoml y of i ts own accord .s Far from
bei ng uncontrol l ed, the market i s governed by the subjective val -
uati ons of al l buyers and sel l ers, as mani fested i n thei r actual deci -
si ons to buy and sel l . (Remember, buyi ng i s al ways sel l i ng, and
vi ce versa. ) I ndi vi dual subjecti ve val uati ons, and the acti ons
resul ti ng from these val uati ons, control the free market economy.
4. F. A. Hayek, The Constitution of Lib.@ (Chi cago: Uni versi ty of Chi cago
Press, 1960).
5. Vi ckers, op. cit., p. 234,
52 Baptized Inzation
Thi s i ntel l ectual defense of thi s market process has been known to
professi onal economi sts for over a centur y.G
Marxk Argument
To cal l the free market economi c anarchy, or to say that i t i s
a rampant and potenti al l y anarchi c i ndi vi dual i sm,T i s mere
hyperbol e on the part of Dr. Vi ckers. I t was al so hyperbol i c on the
part of Karl Marx, i n Das Kapital (1867), when he argued that the
anarchy i n the soci al di vi si on of l abor requi red an author i tati ve
pl an to bri ng coherence.s I t was equal l y hyperbol i c when Freder-
i ck Engel s, the co-founder of Communi sm (Marxs associ ate), ar-
gued the same way i n 1877: The contradi cti on between soci al i sed
producti on and capi tal i sti c appropri ati on now presents i tsel f as an
antagonism between the organisation of production in the individual work-
shop and the anarchy ofproduction in society general@g Hyperbol e i s not
economi c anal ysi s.
I am of course not argui ng that Dr. Vi ckers i s a cl oset Marx-
i st. What I am argui ng i s that there i s a fami l i ar theme i n the
wri ti ngs of those who propose that the States bureaucrats serve as
overal l pl anners for the market, whether soci al i sts (State owner-
shi p of the means of producti on), fasci sts (pri vate ownershi p wi th
State control ), or i nterventi oni sts (State mani pul ati on of the econ-
omy through taxati on, spendi ng, and monetary pol i cy). They al l
come to the market wi th a bui l t-i n bi as, whi ch i n turn i s based on
a vi ew of God and Hi s creati on. They assume that rati onal i sm i s
essenti al l y a top-down phenomenon. They assume that anythi ng
whi ch i s not top-down rati onal i sm i s essenti al l y i rrati onal . I t i s
thi s perspecti ve, whi ch F. A. Hayek has battl ed for over four dec-
6. Carl Menger, Principles of Economics (New York: New York Uni versi ty
Press, [1871] 1981), pp. 114 ff.
7. Vi ckers, op. ci t., p. 125; cf. p. 190.
8. Marx, Capital (Modern Li brary edi ti on, repri nt of the 1906 edi ti on), pp.
391-92.
9. Engel s, Socialism: Utopian and ScientiJ c (New York: I nternati onal Publ i shers,
1935), p. 61. Thi s was an extract from En gel s book, Her r Eugen Diihringk Resolu-
tion in Science (Anti-Diihting), publ i shed i n 1877.
Gods Creation and Cafiitalism 53
ades, 10 whi ch Dr. North has cal l ed the mythol ogy of Darwi ni an
central pl anni ng. i
Former U.S. Secretary of Defense Robert McNamara has ex-
pressed thi s vi ewpoi nt forthri ghtl y: Some cri ti cs today worry that
our democrati c, free soci eti es are becomi ng overmanaged. I
woul d argue that the opposi te i s true. As paradoxi cal as i t may
sound, the real threat to democracy comes not from overmanage-
ment, but from undermanagement. To undermanage real i ty i s
not to keep i t free. I t i s si mpl y to l et some force other than reason
shape real i ty. That force may be unbri dl ed emoti on; i t may be
greed; i t may be aggressi veness; i t may be hatred; i t may be i g-
norance; i t may be i nerti a; i t may be anythi ng other than reason.
But whatever i t i s, i f i t i s not reason that rul es man, then man fal l s
short of hi s potenti al . Vi tal deci si on-maki ng, parti cul arl y i n pol -
i cy matters, must remai n at the top.
~~12 p
er
h
aP
s the most el oquent
cri ti que of the resul ts of McNamaras dedi cated top-down rati on-
al i sm i s chapter 12 of Davi d Hal berstams masterpi ece on the
Johnson Admi ni strati ons handl i ng of the Vi etnam War, The Best
and the Brig/ zte~t (1972).
Al so noti ce McNamaras concern wi th greed. We shal l be
confronted wi th thi s theme agai n, when we exami ne Dr. Vi ckers
defense of Keynesi an i nterventi oni sm.
I nterest Rates and Market Deci si ons
Dr. Vi ckers i s concerned about the anarchy of the free mar-
ket. He has not taken seri ousl y the i dea that there i s another ki nd
of rati onal i sm, the rati onal i sm of vol untary cooperati on i n a pri -
vate property soci al order. He refuses to acknowl edge thej%ee mar-
kett integration of decentralized individual economic plans as the pri mary
10. Especi al l y i n hi s book, The Counttr-Revolution of Science (I ndi anapol i s,
I ndi ana: Li berty Press, [1952] 1979).
11. Gary North, The Dominion Covenant: Gene-ris (Tyl er, Texas: I nsti tute for
Chri sti an Economi cs, 1982), Appendi x A, From Cosmi c Purposel essness to
Humani sti c Soverei gnty.
12. Robert McNamara, The Essence of SecuriQ: Rg?ectiom i n Oj?i ce (New Yor k:
Harper & Row, 1968), pp. 109-10.
54 Baptized I nzation
i nsti tuti onal source of a soci etys producti vi ty. We see thi s same
anal yti cal myopi a (to borrow a phrase Dr. Vi ckers uses to
descri be hi s opponents 13) when Dr. Vi ckers deal s wi th Dr. Norths
comments on i nterest rates bei ng the equi l i brati ng devi ce be-
tween savi ngs and i nvestments. 14
We need to understand i n advance how i mportant the ques-
ti on of i nterest rates i s. I t i s the central phenomenon i n gui di ng
mens deci si ons to save or spend. No other probl em i s more i m-
portant to sol ve for the overal l economy the macroeconomi c
probl em than thi s one. Prof. Roger Garri son has poi nted thi s
out. The markets abi l i ty to sol ve thi s more gl obal coordi nati on
probl em conventi onal l y concei ved as the probl em of coordi nat-
i ng savi ngs deci si ons wi th i nvestment deci si ons has al ways been
the central i ssue i n macroeconomi cs. 15
The Discount of Future Asset Value
Before l aunchi ng i nto a di scussi on of i nterest rates, we need to
ask oursel ves a few basi c questi ons? Are men omni sci ent? Are
men i mmortal ? Are men l i mi ted i n ti me and space? Do men l i ve
i n a worl d of scarci ty, defi ned as a worl d i n whi ch they cannot get
everythi ng they want at zero pri ce? Do men have to make deci -
si ons about what they want? Do they make trade-offs, deci si ons to
take more of one scarce resource and l ess of another? I snt i t l egi ti -
mate to descri be economi c deci si ons as the vol untary exchange of
one set of hi stori cal ci rcumstances for another? Fi nal l y, i s thi s eco-
nomi c deci si on-maki ng Purposeji d?
I f we see man as l i mi ted, mortal , and constrai ned by ti me and
scarci ty, we then have to ask oursel ves another questi on: How do
we evaluate the fhre? Do we val ue a future asset as hi ghl y as we
val ue the same asset ri ght now? Obvi ousl y, we dont. I n the exam-
pl e Dr. North i s fond of usi ng, i f you were to wi n a brand-new,
13. Vi ckers, Economics and Man, p. 248; cf. pp. 76, 178, 190.
14. I bid., p. 27.
15. Roger Garri son, A Subjecti vi st Theory of a Capi tal -usi ng Economy, i n
Geral d P. ODri scol l , Jr. and Mari o Ri zzo, The Economics of Time and I gnorance
(London: Basi l Bl ackwel l , 1985), p. 170.
God5 Creation and Capitalism 55
tax-free Rol l s-Royce automobi l e, but you were gi ven a choi ce of
del i very date ei ther today or fi ve years from now, whi ch del i very
date woul d you choose? You woul d choose today. Why? Because
you discount the value offuture goods and seruices.
Another exampl e he uses: I f you deci de to buy a farm whi ch
wi l l produce a net return of one ounce of gol d per year for a
mi l l i on years, wi l l you pay a mi l l i on ounces of gol d for i t today?
Obvi ousl y not. Why not? Because you do not val ue that mi l l i onth
ounce of future gol d as hi ghl y as you val ue the mi l l i onth ounce of
todays gol d. Thi nk about thi s. I t i s real l y a very si mpl e concept.
I f you agree that the exampl e i s correct, then you shoul d not fi ght
the addi ti onal i nsi ght that you do not val ue the hundredth ounce
of future gol d as hi ghl y as you val ue todays hundredth ounce.
You now understand why there must always bean interest rate. The
rate of i nterest i s basi c to l i fe. Even i n a ri sk-free worl d (whi ch
ours i snt ever goi ng to be) and an i nfl ati on-free worl d (whi ch i t
i snt today), there wi l l sti l l be a rate of i nterest. Thi s ori gi nary
rate i s si mpl y the discount which we impute (app~ mental~) to the value
offuture goods in contrast to those same goods in the present. Put si mpl er,
a bi r d i n hand i s wor th two i n the bush, dependi ng on how l ong i t
takes us to get to the bush. An ounce of gol d today i s wor th mor e
to us than an ounce of gol d i n the futur e.
What I am getti ng at i s si mpl e enough: we pl an for the futur e.
We mak e deci s i on s abou t th e fu tu r e. Ev er y on e does . How do we
as s es s th e pr ofi tabi l i ty of gi v i n g u p a s car ce econ omi c r es ou r ce to-
day i n or der to r ecei ve a r etur n on the i nvestment i n the futur e? I f
I am futur e-or i ented (as Chr i sti ans shoul d be), then I wi l l gi v e up
today s as s et (s av e i t, meani ng i nvest i t) for a l ower r ate of r etur n
i n th e fu tu r e th an a pr es en t-or i en ted per s on wou l d deman d. Dr .
Nor th gi v es th e ex a mpl e of Esau, wh o wa s s o pr es en t-or i en ted
that he sol d hi s bi r thr i ght for a mess of pottage. 16
How can a s oci ety pl an for th e fu tu r e? How do peopl e mak e
i n tel l i gen t, effi ci en t deci s i on s con cer n i n g h ow mu ch to gi v e u p
and how much to consume now? Peopl e l ook at the prevai l i ng rate
16. North, The Dominion Covenant: Genesis, pp. 182-83.
56 Baptized Ly?ution
of i nterest on i nvestments of varyi ng ti me and ri sk, and they
deci de ei ther to i nvest or spend on consumer goods and servi ces.
Ei ther they choose ji.dure goods or present goods. There has to be
some i ndi cator whi ch tel l s rati onal , purposeful peopl e whether i t
i s to thei r advantage to i nvest or spend. Dr. North says (fol l owi ng
the Austri an School economi sts) that market i nterest rates gui de
peopl e i n thei r ti me-ori ented economi c deci si ons, and that these
vari ous rates are the product of mens shi fti ng ti me-preferences i n
the market pl ace. Whi l e each deci si on-maker faces objective market
rates of i nterest, some pezsonal, subj>ctiue rate of i nterest di scounts
the future val ue of assets i n hi s deci si on-maki ng, wi th or wi thout a
publ i shed rate of i nterest i n some newspapel .
I f the prevai l i ng avai l abl e return on hi s money i s hi gher than
hi s subjecti ve rate of ti me-preference, he wi l l i nvest the money,
thereby foregoi ng the benefi ts of i mmedi ate consumpti on. The per-
son wi th l ower ti me-preference (a comparati vel y hi gh val uati on of
the future) l ends money to peopl e wi th hi gher ti me preference (a
comparati vel y l ow val uati on of the future). Each person buys what
he prefers. One person buys the present use of assets and gi ves up
even more future assets, whi l e the other sel l s present assets i n order
to recei ve even more future assets. These peopl e get together as a
resul t of thei r own profi t-seeki ng search, and the searchl i ght they
use to l ocate each other i s the market rate of i nterest.
I f thi s sounds si mpl e enough, i t i s because i t i s si mpl e. I f Dr.
Vi ckers di scussi on sounds compl ex, i t i s because i t i s confused.
Thi s confusi on was al so basi c to Keynes di scussi ons of the i nter-
est rate.
The Keynesian View(j) of I n@rest
To understand Dr. Vi ckers del i berate mi srepresentati on of
Dr. Norths posi ti on, i t i s onl y necessary to refer to Dr. Vi ckers
quotati on of Dr. North. The rati of interest is supposed to act as an
equilibrating device. . . .17 Now, when Dr. Vi ckers concl udes that
17. North, I ntroduction to Christian Economics, p. 63, quoted i n Economics and
Man, p. 27, emphasi s i n ori gi nal .
Go#s Creation and Capitalism 57
Dr. North i s i ncorrect i n assumi ng the i nterest rate for l oans
woul d act automatical~ and necessary@, Dr. Vi ckers makes an er-
ror. Dr. North di d not say the i nterest rate woul d necessari~ and
automatical@ bri ng a bal ance between savi ngs and i nvestments.
What Dr. North did say i s that the i nterest rate i s supposed to act
(emphasi s added) as the equi l i brati ng devi ce. What Dr. North
stresses throughout hi s economi c wri ti ngs i s what al l Austri an
School economi sts stress: the key el ement i n al l economi c acti ons
i s future-ori ented, profi t-seeki ng, uncertai nty-beari ng entrepwneur-
ship. There i s nothi ng automati c about entrepreneurshi p.s
Dr. Vi ckers contenti on that Dr. North has presented a bank-
rupt economi c theory i s dependent upon hi s own mi sstatement of
Dr. Norths posi ti on. When Dr. Vi ckers l ater admi ts that the i n-
terest rate is the determi ni ng factor i n savi ngs and i nvestment, we
may begi n to suspect even more hi s al l egati ons agai nst those he i s
argui ng agai nst. For, i n suggesti ng economi c pol i ci es from the
Keynesi an perspecti ve, Dr. Vi ckers states that fi nance can be
made more di ffi cul t to obtai n by al l owi ng the i nterest rate to i n-
crease . An i ncrease i n i nterest rates . . . may render unprofi t-
abl e and no l onger economi cal l y worthwhi l e certai n i nvestment
projects whi ch woul d otherwi se have been undertaken. 19 I n other
words, the i nterest rate does i nfl uence savi ngs and i nvestment.
Thi s i s what Keynes bel i eved, too.zo
How Dr. Vi ckers can reconci l e thi s wi th hi s earl i er asserti on
that the l evel of nati onal i ncome i s the equi l i brati ng devi ce21 i s
i mpossi bl e to ascertai n, for he does not seem aware that he has
offered two contradicto~ theori es regardi ng savi ngs and i nvestment
and what determi nes the bal ance between them. Dr. Vi ckers has
fi rst of al l argued that the national income i s the equi l i brati ng devi ce
18. I srael M. Ki rzner, Competi ti on and Entrepreneurship (Chi cago: Uni versi ty of
Chi cago Press, 1973); Ki rzner, Paception, Opportuni ~, and Projit (Chi cago: Uni ver-
si ty of Chi cago Press, 1979).
19. Vi ckers, op. cit., p. 261.
20. Thomas Sowel l , Says Law: An Historical Ana@s (Pri nceton, New Jersey:
Pri nceton Uni versi ty Press, 1972), pp. 207-8.
21. Vi ckers, p. 29.
58 Baptized I njation
between savi ngs and i nvestment, and then l ater suggests that intirest
rates ought to be mani pul ated to make some projects unprofi tabl e.
Whi ch i s i t, nati onal i ncome or i nterest rates? He does not
provi de an expl anati on of exactl y how a broad aggregate such as
nati onal i ncome woul d equi l i brate (adjust) i nvestments and sav-
i ngs. What he refuses to accept i s the asserti on by Dr. North and
economi sts such as Mi ses and Hayek that we must begi n our eco-
nomi c anal ysi s wi th the decisions of acti ng individuals. We must
begi n wi th a di scussi on of Purposeji d human behavior. Obvi ousl y,
nati onal i ncome does not deci de what to i nvest or where. Na-
ti onal i ncome does not go down to hi s fri endl y l ocal bank and
make a deposi t. But i t i s qui te cl ear how the i nterest rate adjusts
individuals deci si ons concerni ng spendi ng, savi ng, and i nvesti ng.
I f certai n projects are expected to be unprofi tabl e because the ex-
pected rate of profi t wi l l not be hi gh enough to repay the i nvestors
or l enders, peopl e wi l l not i nvest i n them or l oan money to them.
I f the rate of i nterest (the so-cal l ed rate of return on capi tal ) i s
hi gher than the project i s expected to produce, the rati onal i ndi -
vi dual wi l l put hi s money el sewhere. Thi s i s the l ogi cal reason
why Dr. Vi ckers someti mes uses the i nterest rate as an expl an-
atory tool i n economi c anal ysi s. Thus, Dr. Vi ckers i s sayi ng that
i nterest rates will someti mes act as an equi l i brati ng devi ce be-
tween i nvestment and savi ngs. 22 Why not all the ti me?
I f al l thi s sounds muddl ed and confused, thi s i s because Dr.
Vi ckers i s muddl ed and confused. He has adopted the anal ysi s of
22. I nterest rates affect savi ngs i n the same manner, for exampl e, that the
pri ce of computers affects thei r purchase. Peopl e do not buy because of pri ce.
They buy a computer because they percei ve that what they gai n wi l l be of greater
benefi t than what they hand over i n the transacti on. The pri ce i s the result of the
exchange between buyer and sel l er. Si mi l arl y, the determi ni ng factor i n what
amount wi l l be saved i s real l y the prefimwce peopl e have between present and
future consumpti on, between usi ng an economi c commodi ty now, or putti ng off
i ts consumpti on unti l a future date. The i nterest rate i s the result of the val uati ons
whi ch both buyers and sel l ers make of the ti me peri od i nvol ved. The i nterest rate
al l ows subjecti ve preferences (val uati ons) to be cal cul ated i n economi c terms.
See W. H. Hutt, The Kcyrzestin Episode, pp. 235ff. On subjecti ve val uati on, see
especi al l y Ludwi g von Mi ses, Human Action: A Treatise on Economics (3rd ed.;
Chi cago, I l l i noi s: Regnery, 1966), ch. 11; on i nterest, see chapter 19.
Go#s Creation and Capitalism 59
Keynes General Theoy, whi ch was deliberate~ muddl ed and con-
fused. Dr. Norths observati on i s i nsi ghtful : Keynes i n hi s earl y
wri ti ngs was cl ear and conci se, yet the General Theory i s obscure to
a faul t, as hi s fol l owers admi t. There has to be a reason. Hi s
guess: Keynes wanted to become obscure, the better to hi de the
anomal i es and outri ght contradi cti ons of the General Theoy.zs
Has Greed Destroyed the Case for Capi tal i sm?
There i s an addi ti onal accusati on by Dr. Vi ckers that hi stor-
i cal facts bel i ed the theor yzA of the cl assi cal economi sts because
greed, rapaci ty, sel fi shness, monopol y, and expl oi tati on,~ as wel l
as the compl exi ty of the economi c system, kept getti ng i n the way
of the free market. Unfortunatel y, Dr. Vi ckers does not bother to
say whose greed, rapaci ty, sel fi shness . . . and expl oi tati on di s-
turbed the system. He al so does not expl ai n how thei r greed,
rapaci ty, and sel fi shness got i n the way of the free market. I t i s not
the fact that peopl e are greedy (how defi ned?) or rapaci ous whi ch
i s si gni fi cant. What is i mportant i s how thei r particular form of
greed or rapaci ousness overcame the i nsti tuti onal restrai nts of pri -
vate property, competi ti on, and l aw enforcement agai nst fraud
and vi ol ence i n spect$c histoncal i nstances.
I rrespecti ve of thi s si l ence, hi s cl ai m that a pure and untram-
mel ed state of economi c laissez-faire has never exi sted or been abl e
to exi st2G means he has undermi ned hi s own contenti on that
facts have di sproven laissez-faire theory. Si mpl y put, i f laissez-faire
never exi sted i n hi story, then how di d the facts overcome i t?
Here we get to the ol d bai t and swi tch techni que whi ch has
been so i mportant i n the i ntel l ectual arsenal of capi tal i sms cri ti cs
over the years. Fi rst, you tel l peopl e that what capi tal i sms de-
fenders cl ai med for jx.we theory was al so cl ai med by them for the
hi stori cal mani festati ons of capi tal i sm. Next, you tel l them that
23. Gary North, Moses and Pharaoh: Dominion Rehgion vs. Power Rehgion (Tyl er,
Texas: I nsti tute for Chri sti an Economi cs, 1985), p, xvi i i , footnote 17,
24. Vi ckers, op. cit., p. 8.
25. I bid., p. 9.
26. I bid., p. 10.
60 Baptized I ny?ation
the unpl easant facts of the real worl d overcame the i mperfect real
worl d mani festati on of the capi tal i st model . Then you concl ude
that thi s unpl easant si n-fi l l ed real i ty refutes the theory of capi tal -
i sm. And, just to make the whol e argument i rrel evant, you top i t
off wi th the observati on that capi tal i sm has never real l y exi sted
anyway, i mpl yi ng that i t i s just too utopi an for any soci ety to
adopt i t.
Wel l , not to put too fi ne a poi nt to i t, they are starvi ng i n
Marxi st Ethi opi a, and they arent i n any capi tal i st soci ety. Soci al -
i st i deol ogues mi ght repl y that thi s i s too crass an argument. I
am tryi ng to compare appl es and appl es (actual soci eti es). Unfai r,
they shout. What I shoul d be compari ng i s appl es and oranges
soci al i sms i deal theory vs. real worl d capi tal i sms si n-fi l l ed per-
formance. That i s what they al ways compare, and what i s good
enough for them had better be good enough for al l of us.
Any cl assi cal economi st woul d agree wi th Dr. Vi ckers that an
unhampered free market has never exi sted, i f onl y because the
greed, rapaci ty, sel fi shness . . . and expl oi tati on of government
bureaucrats and speci al -i nterest groups (farmers, trade uni oni sts,
manufacturers, i mporters, Keynesi an economi sts, etc. ) have been
State-legislated obstructions to the operati ons of competi ti ve markets.
The cl assi cal economi sts woul d say that the lack of a free market i s
preci sel y the probl em.
Let us freel y admi t that peopl e are greedy, rapaci ous, and just
pl ai n unpl easant. They are si nners i n rebel l i on to God. Why
shoul d we expect si nners to be al l sweetness and l i ght wi th each
other, peopl e made i n that hated Gods i mage? The questi on i s:
What kind of social order channels menk sin@ motives into productive
eforts that serve their neighbors? I t was the i nsi ght of Adam Smi th i n
1776 that the free market order i s the most effecti ve devi ce to turn
evi l moti ves i nto producti ve efforts. We shoul d begi n wi th mens
sel f-i nterest i f we wi sh to get them to serve us. We shoul d there-
fore start wi th the assumpti on of the depravi ty of man. Very earl y
i n The Wealth of Nations, Smi th wrote hi s cl assi c l i nes:
But man has al most constant occasi on for the hel p of hi s brethren,
Gods Creation and Capitalism 61
and i t i s i n vai n for hi m to expect i t from thei r benevol ence onl y. He wi l l
be more l i kel y to prevai l i f he can i nterest thei r sel f-l ove i n hi s favor, and
shew them that i t i s for thei r own advantage to do for hi m what he re-
qui res of them. Whoever offers to another a bargai n of any ki nd, pro-
poses to do thi s. Gi ve me that whi ch I want, and you shal l have thi s
whi ch you want, i s the meani ng of any such offer; and i t i s i n thi s man-
ner that we obtai n from one another the far greater part of those good
offi ces whi ch we stand i n need of. I t i s not from the benevol ence of the
butcher, the brewer, or the baker, that we expect our di nner, but from
thei r regard to thei r own i nterest. We address oursel ves, not to thei r hu-
mani t y but to thei r sel f-l ove, and never tal k to them of our own necessi -
ti es but of thei r advantages.zp
Noti ce that Smi th sai d that we do not expect hel p from our
nei ghbors from thei r benevol ence on~. Yes, i t i s true that they
may occasi onal l y l end a hel pi ng hand, but i t i s more often that
they wi l l hel p a l endi ng hand. The borrower i s servant to the
l ender, after al l (Prov. 22:7).
Those who woul d cri ti ci ze the cl assi cal economi sts for thei r i n-
abi l i ty to understand the soci al real i ty of greed and rapaci ty have
very l i ttl e understandi ng of the cl assi cal economi sts. Those who
woul d cri ti ci ze the market order for i ts i nabi l i ty to deal wi th greed
and rapaci ty have onl y tyranni es to offer i n thei r pl ace. How wel l
does soci al i sm restrai n greed? How wel l does Keynesi an central
pl anni ng el i mi nate greed? How wel l does the Gul ag Archi pel ago
restrai n greed?
I snt my best defense agai nst a greedy sel l er my abi l i ty to
l ocate an even more greedy sel l er? Never forget: sellers compete
against sellers. I snt the geni us of the free market i ts system of open
entry, meani ng the abi l i ty of new potenti al sel l ers to enter the auc-
ti on pl ace and offer a better deal to consumers? I snt thi s a more
l i kel ~ way to reduce the efects of greed than any bureaucrati c
scheme? Who i s to guarantee that the bureaucrats wi l l not seek
thei r own i nterests, too, but wi thout the restrai ni ng pressure of
open entry and new competi tors? Not Keynesi an economi sts, cer-
tai nl y. Not Dougl as Vi ckers, certai nl y.
27. Adarn Smi th, T/ u Wmlth of Natiom (Modem Li brary, Cannan edi ti on), p. 14.
62 Baptized I nzation
Concl usi on
The evi dence so far i ndi cates that Dr. Vi ckers does not real l y
understand cl assi cal economi c theory, or i f he does, he does not
thi nk hi s readers wi l l , whi ch therefore al l ows hi m a great deal of
creati ve l ati tude i n descri bi ng cl assi cal economi c theory. He has
not offered any substi tute expl anati on for how peopl e wi l l be abl e
to deci de between spendi ng and i nvesti ng, between now and then,
apart from freel y fl uctuati ng i nterest rates. He has not expl ai ned
why savi ngs wi l l not equal i nvestments, and nei ther di d hi s mentor,
Professor (a term he despi sed) Keynes. He has not expl ai ned how
aggregate stati sti cal concepts such as nati onal i ncome somehow
al l ocate capi tal deci si ons that are made by acti ng i ndi vi dual s.
Dr. Vi ckers has adopted at l east a mi l d versi on of the standard
soci al i st refrai n: Capi tal i sm i s anarchi sti c, and i t therefore needs
a gui di ng hand. Dr. Vi ckers woul d substi tute the l i teral clenched
@of the governnwnt bureaucrat for Adam Smi ths anal ogy of the i n-
vi si bl e hand of free market orderl i ness. He bel i eves that top-down
rati onal pl anni ng i s necessary to compensate for the supposed
bl i ndness and greed of the market process.
The probl em i s that he has not offered a cogent substi tute for the
competi ti ve markets system of sel f-i nterested servi ce to nei ghbors.
I f we do not expect to appeal to mens sel f-i nterest i n order to gai n
our objecti ves, are we not l i vi ng i n a fantasy worl d? The questi on
i s: What system of rewards and constrai nts makes mens sel f-
i nterest most producti ve for thei r nei ghbors? That i s the ques-
ti on of questi ons that was asked by the cl assi cal economi sts. They
di d not answer i t wel l enough to sati sfy a seri ous Chri sti an econo-
mi st, but certai nl y John Maynard Keynes, i n al l hi s termi nol ogy,
equati ons, and obfuscati ons i n the General ZieoV, di d not answer i t
nearl y so wel l as hi s cl assi cal and neo-cl assi cal predecessors di d.
The Austri an School economi sts answered i t better than any of
them. Thi s i s why Dr. Vi ckers never summari zes the arguments
of the Austri an School . He sees hi s job as wi nni ng a debate, not
enl i ghteni ng hi s readers, and a debater wi ns no poi nts for bri ngi ng
up hi s opponents best arguments arguments that he i s i ntel l ec-
tual l y i ncapabl e of answeri ng . . . or perhaps even understandi ng.
5
MANS REBELLI ON AND SOCI ALI SM
. . . in the complexities of modern times responsibili~ for an over-
sight of the economic health of the system must reside in the central gove-
rnment authonties acting on behalf of the people. . . . ~
Al l economi c systems revol ve around some pi votal poi nt.
There i s some parti cul ar theory or doctri ne whi ch becomes the
central determi ni ng poi nt for al l addi ti onal theori es and i deas. I t
i s possi bl e to say that all economi c theori es are determi ned by
thei r atti tude to property ri ghts. There are onl y two possi bi l i ti es:
ei ther God owns i t, or someone el se does. Ei ther God del egates
control over property to Hi s subordi nates, or these subordi nates
own i t autonomousl y.
Then there i s the secondary questi on: I s mans stewardshi p (or
autonomous ownershi p) private or public, meani ng i ndi vi dual or
stati st?z Ei ther i ndi vi dual s have fi nal say over property, or the
State does. Thi s does not mean that a number of i ndi vi dual s may
not vol untari l y cooperate to control property. I n the sense we are
tal ki ng about, thi s woul d sti l l come under the headi ng of pri vate
ownershi p. Pri vate ownershi p, i n other words, i s opposed to pub-
l i c or State ownershi p. I ndi vi dual men are the ones who deci de to
1. Vi ckers, Economics and Man, p. 205.
2. Thi s i s not to i mpl y that al l theori es are determi ned exclusive~ by thei r i dea
on property ri ghts. Other key doctri nes coul d al so be the determi ni ng factor for a
general i zed theory. A parti cul ar vi ew of Scri pture, and how to i nterpret Scri p-
ture, wi l l al so determi ne whi ch di recti on the devel opment of economy theory
takes.
63
64 Baptized I rzzation
sel l or not to sel l a gi ven pi ece of property; no State bureaucrat
need be consul ted.
Wi thi n these two broad headi ngs pri vate vs. publ i c ownershi p
al l humani sti c economi c theori es can be subsumed. Any eco-
nomi c theory can be tested by i ts commi tment to ownershi p: where
ownershi p ul ti matel y resi des. But once we have establ i shed i n
whi ch category a parti cul ar theory l i es, there sti l l l i es a central doc-
tri ne or theory whi ch sets that parti cul ar theory apart from others.
For exampl e, one parti cul ar theory whi ch sets the neo-cl assi cal
Austri an School apart from other cl assi cal and neo-cl assi cal theo-
ri es i s i ts understandi ng of and atti tude towards i ncreasi ng the
money suppl y (monetary i nfl ati on).
3
\
Vague Defi ni ti ons
When Dr. Vi ckers makes reference to the i dea of capi tal i sm,
he does at l east offer a defi ni ti on of the term, al bei t an i naccurate
defi ni ti on. But i t i s an enti rel y di fferent matter when he di scusses
soci al i sm, for he offers no defi ni ti on at al l . There i s a good reason
for thi s. I f he can keep the readers of hi s books i n a state of mi nd
where they are never sure preci sel y what he i s tal ki ng about, per-
haps they wi l l be more than wi l l i ng to agree wi th hi s vi ew that
Keynesi ani sm i s Chri sti an economi cs. The cl ai m that he i s advo-
cati ng nei ther capi tal i sm nor soci al i sm, however, i s meaningless un-
ti l he defi nes Preci se@ what he i s tal ki ng about. Preci si on of l angu-
age, however, i s not one of hi s strong poi nts.
Dr. Vi ckers has no i ntenti on of bei ng cl ear. There i s no need
to al l ow the ar<gument to become ensl aved to words or termi nol -
ogy at thi s earl y stage. I t shoul d be hoped that economi c argu-
ment can avoi d a needl ess degenerati on i nto empty l ogomachy.4
(Empty l ogomachy? What does he want, ji l l ed l ogomachy?) True,
empty l ogomachy i s not needed. But cl ari ty and understandi ng
3. See Ludwi g von Mi ses, TheoT of Mong and Credit (I r vi ngton-on-Hudson,
New York: Foundati on for Economi c Educati on, [1912] 1971). A repri nt of thi s
has been rel eased by Li berty Press, I ndi anapol i s, I ndi ana.
4. Vi ckers, Economics and Man, p. 49.
Mank Rebellion and Socialism 65
concerni ng what he and those he di sagrees wi th are sayi ng woul d
go a l ong way towards assi sti ng those searchi ng for a Bi bl i cal eco-
nomi cs. John Kenneth Gal br ai th sai d i t best: I n the case of econom-
i cs there are no i mportant proposi ti ons that cannot, i n fact, be
stated i n pl ai n l anguage.5 Ei ther Dr. Vi ckers refuses to assent to
thi s pri nci pl e, or chooses to i gnore i t. (One other possi bi l i ty exi sts:
perhaps he thi nks that, unl i ke i mportant proposi ti ons, uni mpor-
tant proposi ti ons cannot be stated i n pl ai n l anguage, and he re-
gards hi s proposi ti ons as uni mportant.)
I n the l i ght of Dr. Vi ckers omi ssi on, i t appears reasonabl e to
adopt the di cti onary defi ni ti on of soci al i sm to see, i n spi te of the
l ack of cl ari ty on hi s part, i f i t i s possi bl e to come to an under-
standi ng of the Keynesi an economi c theori es Dr. Vi ckers woul d
l i ke us to embrace.
The Shotier Oxford English DictionaV defi nes soci al i sm as a
theory or pol i cy of soci al organi zati on whi ch advocates the owner-
shi p and control of the means of producti on, capi tal , l and, pr op-
ert y, etc. by the communi ty as a whol e, and thei r admi ni strati on
or di stri buti on i n the i nterests of al l . I t i s i nstructi ve to note that
the same di cti onary defi nes communi sm as 1. A theory of soci ety
accordi ng to whi ch al l property shoul d be vested i n the commun-
i ty and l abor organi zed for the common benefi t. 2. Any practi ce
whi ch carri es out thi s theory. There is no economic d#_ence between
communism and socialism. Both advocate State control of property.
I ndi vi dual s are not al l owed to have the fi nal word over thi ngs i n
thei r possessi on. I ndi vi dual s are to become servants to the com-
muni t y at l arge and serve some supposedl y hi gher purpose.
Property Ri ghts
The Chri sti an must begi n wi th one cruci al premi se: the fi nal
and absol ute ownershi p of al l thi ngs by God (Ps. 50:10). The
questi on then i s: To whom or to what agency or agenci es has God
del egated the responsi bi l i ty of temporal control of any gi ven asset
at any parti cul ar poi nt i n hi story? Who has the legal authon~ to re~-
5. Ci ted by Adam Smi th; New fi rk Tim (Sept. 30, 1979).
66 Baptized I nr.ation
resent God i n the management of any gi ven asset? Who i s Goo% ati -
pointed steward of any gi ven asset?
The Scri ptures pl ai nl y teach the concept of private property
ri ghts or przuate ownershi p. The commandments agai nst theft and
covetousness (Ex. 20:15,17) teach expl i ci tl y that there are posses-
si ons that bel ong ri ghtful l y to other pri vate ci ti zens whi ch we may
not take, nor even desi re, because they bel ong to someone el se.
The owner of at l east some possessi ons has the ri ght to excl ude
others from the use of hi s property, so l ong as he adheres to Bi b-
l i cal l aw wi th respect to the use of hi s property. I t i s thi s concept of
havi ng the ji nal earth$ word to buy or sel l , to keep or destroy
whi ch del i neates where ownershi p resi des. I f a State or commun-
i ty offi ci al can tel l the i ndi vi dual , i n the fi nal anal ysi s, what i s to
be done wi th somethi ng i n the i ndi vi dual s possessi on, then tem-
poral ownershi p resi des i n that offi ci al , not the possessor of the
goods. The questi on then i s: Who has Biblical~ legitimate tempor al
control over any gi ven asset?
What does the secul ar economi st mean by property ri ghts?
He means, fi rst of al l , the l egal ri ght (l egal immuni~) to exclude
others from the use of the property. Second, i t means the ri ght to
col l ect any i ncome from the asset. Thi rd, i t means the ri ght to sel l
or rent the property or i ts i ncome stream. G I n other words, the
owner has the l egal ri ght to disown an asset. I f he does not have
the ri ght to di sown i t, he does not trul y own i t. T Thus, the whol e
i dea of common ownershi p i s fraught wi th di ffi cul ti es, not just
admi ni strati ve di ffi cul ti es (whi ch are l egendary i n economi c l i ter-
ature), but theoreti cal and l egal di ffi cul ti es.
The Bi bl i cal Concept of Ownershi p
Pri vate property, however, i s even more fundamental than
mere control . I t i s rooted i n the nature and character of the Tri une
6. Steven Cheungj The Myth of Soctal Cost (San Franci sco: Cato I nsti tute,
1980), p. 34.
7. F. A. Harper, Liber~: A Path to I ts Recouery (I rvi ngton, New York: Founda-
ti on for Economi c Educati on, 1949), p. 106,
Mans Rebellion and Socialism 67
God.
E
The premi se of pri vate ownershi p underl i es the whol e of
Scri pture and forms the basi s for the Bi bl i cal noti on of steward-
shi p. God, the ul ti mate Owner of al l thi ngs, gi ves to peopl e as He
chooses, and requi res of them proper use of those possessi ons;
what i s proper bei ng defi ned by Hi m i n Hi s Word. But i f 1, as an
i ndi vi dual , must gi ve way to an offi ci al i n deci di ng how the goods
i n my possessi on may be used, how can I be hel d responsi bl e for
thei r use? I snt the responsi bl e agent that bureaucrat who i s now
maki ng the deci si on i n my pl ace?
There are some, i ncl udi ng Dr. Vi ckers i t seems, who are not
convi nced that the command agai nst theft i s suffi ci ent reason for
Chri sti ans to hol d to the i dea of pri vate ownershi p i n the sense
descri bed above. I f we adopt the vi ew that the Bi bl e does expl ai n
i tsel f cl earl y, then we can turn to other passages to substanti ate
our cl ai ms. We can fi nd two passages whi ch i l l ustrate ownershi p
i n the terms defi ned here.
Naboth and Ahab
The fi rst of these i s Ki ng Ahab who, spyi ng Naboths vi ne-
yard, approached hi m wi th the objecti ve of buyi ng i t (I Ki ngs
21:1-29). Gi ve me thy vi neyard, that I may have i t for a garden of
herbs, because i t i s near unto my house: and I wi l l gi ve thee for i t
a better vi neyard than i t; or, i f i t seem good to thee, I wi l l gi ve
8. As Dr. F. N. Lee observes, Scri pture anchors pri vate property i n the
Tri une God Hi msel f, before the foundati on of the worl d! I n Hi m, the propri ety
of pri vate property i s i mmedi atel y apparent. For the Father, the Son, and the
Spi ri t have Each, from al l eterni ty past, al ways possessed some pri vate property
whi ch the Other Two of Them never have and never wi l l possess. (Compare
Mal . 3:6 wi th Rem. 11:29,36 and Jas. 1:17.) Onl y the Father possesses paterni ty
(Heb, 1:5-8). Onl y the Son possesses fi l i ati on (John 1:14-18). And onl y the Spi ri t
possesses processi on (John 15:26). Paterni ty i s the pri vate property of the Father;
fi l i ati on i s the pri vate property of the Son; and processi on i s the pri vate property
of the Spi ri t - al one! Each of the Three Persons pri vate property i s i nti matel y
connected to Hi s own i ndi vi dual personal i ty qui te di sti ngui shabl e from that of
Each of the Other Two Persons (Luke 3 :21-22). As the great modern Reformed
theol ogi an Wi l l i am Gee si nk ri ghtl y remarks: Property ri ghts root i n eterni ty,
and precede al l man-made l aws. Lee, Chnstian Private Proper~ V2rsus Socialistic
Common Propau (unpubl i shed essay, 1985).
68 Ba@zed I nJ ation
thee the worth of i t i n money (v. 2). I t i s of i nterest to note here
that there is no attempt by Ahab to get out of paying a reasonable price for
the land. Hi s fi nanci al offer was more than fai r, from a pure market
perspecti ve. Ahab si mpl y wanted the l and because i t was near to
hi s pal ace. Possi bl y he was l azy and di d not want to travel so far.
More to the poi nt, hi s servants probabl y exhi bi ted the si gns of al l
bureaucrats and a keen eye needed to be kept on them i n order
that a fai r days work was put i n tendi ng the herbs. But i t i s
Naboths answer whi ch attracts our attenti on. The LORD forbi d i t
me, that I s houl d gi v e the i nher i tance of my father s unto thee
(v. 3). I n other wor ds, Naboths unwi l l i ngness to sel l hi s l and was
bas ed on th e fact th at th e Lor d h ad for bi dden i t. Hi s l and was an
i n h er i ta n ce to h i m a n d h i s des cen da n ts a n d Na both cou l d n ot
di s i n h er i t th em.
Some commentator s mi ght r ai se the questi on that thi s l and, i n
Canaan, was the pr oduct of a speci al act of God i n gi vi ng i t to Hi s
ch os en peopl e, an d th at i s tr u e. Bu t i t i s al so tr ue that the l and
obtai nabl e today and al l the other possessi ons we have ar e al so the
gi f t of God to u s a n d to ou r des cen da n ts . For a l l pos s es s i on s ,
i ncl udi ng the Promi sed Land, are gi ven on condi ti on of covenantal
obedi ence to God. There is no such thing as unconditional inheritance in
S@ture, not now nor i n Gods past deal i ngs wi th I srael . Nei ther i s
there any Bi bl i cal warrant for some other person even the ki ng
to assume the prerogati ves of deci di ng when and how the l and i s
to be di stri buted and used. I n other words, Ahab had no rightful
power or authori ty over Naboths property unl ess Naboth volun-
tari~ chose to gi ve hi m such, whi ch he di d not.
The Parable of the Employer
The second Bi bl i cal i l l ustrati on of the meani ng of ownershi p i s
to be found i n Matthew 20:1-16. Al though i t i s true that the poi nt
of thi s parabl e our Lord i s tel l i ng i s not the meani ng of ownershi p,
what Jesus teaches at thi s poi nt i s dependent upon the vi ew of
ownershi p that we have defi ned here. Jesus i s usi ng a parabl e to
teach Hi s fol l owers about the absolute sovereignty of God i n di stri but-
i ng rewards for thei r earthl y servi ce. Si nful human bei ngs cannot
Man? Rebellion and Socialism 69
earn any rewards i n the ki ngdom of heaven, for al l acts are tai nted
wi th our si n nature. Perfecti on i s the standard requi red by God,
and no one manages to attai n to that standard. What then i s the
basi s for our future rewards? The basi s i s the same as that on
whi ch we obtai n sal vati on: Gods mercy. Si nce no person can
cl ai m that he wi l l be saved because of what he has done i n thi s l i fe,
therefore no one wi l l be abl e to put hi s hand out for rewards on
the basi s of what he has done. Al l that comes to si nful man i s by
way of grace, Gods unmeri ted favor. Our Lords parabl e here i s
i n response to Peters questi on, Behol d, we have forsaken al l , and
fol l owed thee; what shal l we have therefore? (Matt. 19:27). The
answer comes back: rewards wi l l be gi ven accordi ng to Gods de-
termi nati on, and when we compl ai n that others recei ve more
when they have done l ess for the ki ngdom, the repl y wi l l be, I s i t
not l awful for me to do what I wi l l wi th mi ne own?
Al though Jesus i s here teachi ng about the ki ngdom of heaven,
the poi nt He i s maki ng depends upon a concept of covenantal prop-
erty ri ghts. He expected hi s l i steners to grasp Hi s poi nt. We need
to understand i t, too, even i f we are uni versi ty economi sts. The
Lord J esus Chnst believes in the private ownership of ProPer@.
9
We are to
exerci se derivative and anal ogous authori ty over the property whi ch
God has del egated to us.
There are other exampl es i n Scri pture whi ch l end support to
thi s concept of pri vate ownershi p. The wel l -known and much-
abused passage i n Acts 5:1-11 about Anani as and Sapphi ra i s further
evi dence that, as owners of thei r possessi on, they had a freedom
to control the use of those thi ngs whi ch they had. The poi nt, how-
ever, has been made and substanti ated for al l those who are wi l l -
i ng to take Scri pture as the voi ce of authori ty on the matter. I t i s
9. Mi ses i s i ncorrect when he says al l efforts to fi nd support for the i nsti tuti on
of pri vate property general l y, and for pri vate ownershi p i n the means of producti on
i n parti cul ar, i n the teachi ngs of Chri st are qui te vai n . Socialism (London:
Jonathan Cape, 1936), p. 418. (Thi s book has been repri nted by Li berty Press,
I ndi anapol i s, I ndi ana.) See al so Carl F. H. Henry, Chri sti an Perspecti ve on
Pri vate Pr oper ty: in Samuel L. Bl umenfel d (cd.), Properu I n A Humane Economy
(LaSal l e, I l l i noi s: Open Court Publ i shi ng Co., 1974), pp. 23-45.
70 Baptized I njation
no coi nci dence that i n the past our forefathers condemned soci al -
i sm, for the y had Bi bl i cal warrant to do so. The Thi ti y-Ni ne Articles
of the Angl i can Church (#38), and the Belgic Conzes~ion3 (#36) con-
demn the Anabapti sts and thei r attempts to establ i sh communi ty
of goods. 10
Vi ckers on Pri vate (Sort of) Property
Dr. Vi ckers acknowl edges the concept of property ri ghts. He
says, for exampl e, that the ri ght of property carri es wi th i t, i t i s
cl ear, the ri ght of di sposal . . . . 11 There i s i n the parabl es of
Chri st. . . an affi rmati on of the ri ght of pri vate property. . . .12
But Dr. Vi ckers does not i ntend such property ri ghts i n the sense
of havi ng fi nal and excl usi ve control . I nstead, he argues that ex-
cl usi ve ownershi p exi sts in the general cme. . . .13 Accordi ng to
Dr. Vi ckers, thi s i s an i mpl i cati on of the Reformati on and i ts
understandi ng of the i ndi vi dual person. . . . 14 You woul d have
to concl ude that hi s l anguage i s a bi t vague. I t woul d not be easy
for a soci al reformer to reconstruct soci etys economi c i nsti tuti ons
by usi ng Dr. Vi ckers defi ni ti on as hi s gui del i ne.
Dr. Vi ckers sol e defense of hi s own vi ew of property ri ghts i s
that apparentl y i t was the same vi ew whi ch was put forward by
those duri ng the peri od of the Reformati on. Thi s hi stori cal asser-
ti on, however, i s a debatabl e poi nt. Pri vate property ri ghts had
major support duri ng the Reformati on. Accordi ng to Gottfri ed
Di etze,
the Reformati on was probabl y the most revol uti onary event i n modern
church hi story. I t chal l enged the most powerful church on the earth. I t
10. I n an age when the communi st phi l osophy of ownershi p pervades the
Church, i t i s not surpri si ng to fi nd attempts to abol i sh previ ousl y accepted doc-
tri nes condemni ng soci al i sm. Thus, the Reformed Churches whi ch adhere to the
Bel gi c Confessi on are embarrassed by i ts condemnati on of the Anabapti st move-
ment to the extent that some have al tered thi s arti cl e of fai th.
11. Vi ckers, op. cit., p. 113.
12. I bid., p. 126.
13. I bid., p. 292, emphasi s i n ori gi nal .
14. I dsm.
Man% Rebellion and Socialism 71
br ought for th str ong denunci ati ons of the weal th of that chur ch combi ned
wi th exhortati ons that the cl ergy l ead a more modest l i fe. I t seemed, by
threateni ng an i nsti tuti on that owned great materi al weal th and by cri ti -
ci zi ng the use of that weal th, to questi on the i nsti tuti on of property. But
i t di d not do so. Throughout the Reformati on, pri vate property conti n-
ued to be consi dered an ethi cal val ue. I n fact, the bases for i ts protecti on
were expanded. Cathol i c thi nkers had contented themsel ves wi th cl ai m-
i ng that property was protected mai nl y by natural l aw. Protestant theo-
l ogi ans al so emphasi zed that property was sancti oned by the Scri ptures.
Not merel y a broader justi fi cati on was rendered, but al so, the functi on
of property to promote progress was stressed to a greater extent. Wi th
thi s emphasi s, the Reformati on sti mul ated the i ndustry and energy of
men, and had no smal l i nfl uence upon the ri se of such powers as the
Netherl ands, Engl and, Sweden, the Uni ted States and Germany. 15
There i s no reason to accept Dr. Vi ckers asserti on about the
Reformati ons supporti ng hi s vi ew of property ownershi p. To be
true, there was a movement whi ch cal l ed for the commonal i ty of
goods, but the mai nl i ne Reformers saw the fal si ty of the i dea and
argued agai nst i t on Bi bl i cal grounds. Luther, for exampl e, sup-
ported the i dea of pri vate ownershi p as agai nst some form of publ i c
ownershi p, whi ch i n real i ty i s what Dr. Vi ckers i s advocati ng. I f
property ri ghts onl y i nhere i n the general case, then what happens
to the excepti ons? More i mportantl y, who i s to deci de whi ch are
the general cases and whi ch are the excepti ons? Di etze conti nues:
Luthers support of pri vate property was matched by John Cal vi n.
. . . He real i zed that common ownershi p i s utopi an and denounced the
Anabapti sts pl an to abol i sh property and i nequal i ty. God the supreme
l egi sl ator, by decreei ng Thou shal t not steal ; ordai ned the protecti on of
property. What each i ndi vi dual possesses has not fal l en to hi m by
chance, but by the di stri buti on of the Soverei gn Lord of al l . . . . The
state shoul d see to i t that every person may enjoy hi s property wi thout
mol estati on. The pri nce who squanders the property of hi s subjects i s a
tyrant. 16
15. Gottfri ed Di etze, Zn D@nse of Propcr~ (Bal ti more, Maryl and: The John
Hopki ns Press, 1971), p. 17.
16. I bid., p. 18.
72 Baptized I ny?ation
One suspects that Dr. Vi ckers woul d not total l y di sagree wi th
thi s. After al l , he i s not tryi ng to be agai nst pri vate property as
such i n the general case. I t i s onl y those i nstances whi ch deny hi s
economi c i deas of consemati on, devel opment, and equi ty whi ch
must be brought under exteri or control . But l et us l ook at what
Dr. Vi ckers advocates i n the way of i nterference before we make
our deci si on about hi s posi ti on.
Defining Away One% Probhms
After maki ng the effort i n one part of hi s book to say he agrees
wi th pri vate ownershi p, Dr. Vi ckers now qual i fi es thi s by sayi ng
that correcti ve and regul atory economi c acti on i s, from ti me to
ti me and i n speci fi abl e ci rcumstances, necessary on the part of the
state. . . . 1
7
Si nce there are l egi ti mate and necessary economi c
functi ons of the state~l s there shoul d be sui tabl e compensatory eco-
nomi c pol i cy acti on . . . takenl g by the government authori ti es
and thei r economi c advi sers who must be al ert to the need for
prompt and effecti ve acti on. . . . ZO After al l , the State i s a God-
ordai ned i nsti tuti on for the restrai nt of evi l and the righ ordang OJ
social ajairs . . . i t i s properl y wi thi n the provi nce of the economi c
responsi bi l i ti es of the state to regulate and control the l i mi ts of uni n-
hi bi ted acti on of i ndi vi dual s i n such a way that the economi c
heal th and stabi l i ty of the system as a whol e wi l l be preserved.21
What Dr. Vi ckers i s sayi ng that oversight of the economi c health of
the system must reside in the central government authorities acti ng on
behal f of the peopl e2
2
who must attempt a ski l l ful di agnosi s23 of
the economy so that a sensi bl e mi xture of compensatory eco-
nomi c pol i ci es may be appl i ed. 24
17. Vi ckers, p. 7.5.
18. I dem.
19. I bid., p. 185; cf. p. 186.
20. I bid., p. 188.
21. I bid., pp. 188, 191, emphasi s added; cf. pp. 291, 343.
22. I bid., p. 205, emphasi s added.
23. I bid., p. 206.
24. I bid., p. 207.
Mani Rebellion and Socialism 73
I n other words, there are deep fl aws i n the free market, and
God has gi ven wel l -trai ned Keynesi an economi sts the necessary
i nsi ghts to compensate for these weaknesses i n the market. They
wi l l be abl e to use the coerci ve power of the State to bri ng ful l em-
pl oyment and economi c justi ce i nto an otherwi se unstabl e and
unmerci ful free market order. And thi s can be done wi thout creat-
i ng a monster of bureaucrati c effi ci ency or a total i tari an State.
How, he does not say. I t just can be. Trust hi m.
Socialism?
Soci al i sm? I ni ti al l y, i t sounds l i ke i t. But before Dr. Vi ckers
may be accused of bei ng a soci al i st, heed thi s di scl ai mer: To ob-
ject wi th a cry agai nst an i magi ned soci al i sm at thi s stage i s qui te
besi de the poi nt.zs (Touchy, i snt he? Ready to warn us agai nst
cal l i ng hi m a soci al i st. No one has cal l ed hi m a soci al i st . . . yet.
At thi s poi nt I cannot resi st ci ti ng Proverbs 28:1: The wi cked fl ee
when no man pursueth.) Thi s i s not soci al i sm he i s cal l i ng for.
Oh, no! I t i s just your i magi nati on and mi ne! whi ch think
he wants soci al i sm. No, he has just tol d us he i s al l i n favor of
personal property ri ghts. After al l , the authori ti es must have
adequatel y good reason for usurpi ng the ri ghts and prerogati ves
of i ndi vi dual s. They must sati sfactori l y meet the burden of
proof to show that reasons do exi st for thei r i nterference. 26 I n
fact, ue~good and rigorou.s~ necessay reasons must be found to exi st
before the state can properl y assume and perform those economi c
functi ons whi ch can be shown to be wel l wi thi n the normal do-
mai n of i ndi vi dual responsi bi l i ty.zT
At thi s poi nt i t i s probabl y worth recal l i ng Dr. Vi ckers verbal
commi tment to Reformed Chri sti ani ty and the work of Cornel i us
Van Ti l . I f Dr. Vi ckers were consi stent at thi s poi nt, he woul d
remember Van Ti l s observati ons that proof i s al ready con-
tai ned wi thi n the presupposi ti on wi th whi ch thi nki ng commences.
25. I bid., p. 191.
26. I bid., p. 295.
27. I bid., p. 293, emphasi s added.
74 Baptized I nyiation
Therefore, i f we begi n wi th the premi se that government regul a-
ti on i s needed, proof wi l l al ways be forthcomi ng to justi fy the
regul ati ons. Al ternatel y, i f we begi n wi th the premi se there shoul d
be no government control , we wi l l al ways prove that regul ati ons
are unnecessary. Where we need to begi n i s wi th the Bi bl e. What
does the Bi bl e r eveal spec~cal ~ and concrete~ about the rol e of the
State i n economi c affai rs? That questi on, above al l other ques-
ti ons, i s the one Dr. Vi ckers avoi ds.
Dr. Vi ckers i s commi tted to the i dea that regul atory i nterfer-
ence i s necessary i n the economy. I t i s i ndi cati ve of Dr. Vi ckers
concept of proof that the onl y reason he gi ves for State regul ati ons
i s the statement that we l i ve al so i n a fal l en soci ety, and our eco-
nomi cs must therefore be the economi cs of a fal l en soci ety.za As a
resul t of thi s fal l en condi ti on, our modern economi es . . . are i n-
herentl y unstabl e.zg There are, he says, i nherent i nstabi l i ti es i n
the mi xed capi tal i st economi c system. . . . [T]he mi xed capi tal i st
enterpri se system wi th whi ch we are fami l i ar i s i nherentl y un-
stabl e .3 As I read hi m, I seem to get the i mpressi on that he re-
gards capi tal i st economi es as i nherentl y unstabl e. I hope no one
wi l l accuse me of exaggerati on. I n the l i ght of al l thi s, Dr. Vi ckers
wants to suggest that the ti me has come, such are now the ac-
cumul ated pressures to economi c di sorder, for new guidelines to be
l ai d down forpermissibleprivate economic behavior i n certai n i nstances.
. . . [W]e do cal l for new kinds ofregulato~fiameworks wi thi n whi ch
i ndi vi dual economi c acti vi ty can functi on. . . . 31
Why are capi tal i st economi es i nherentl y unstabl e? He does
not say. Marx tri ed to say, but hardl y anyone takes Marxs eco-
nomi c anal ysi s seri ousl y any l onger.
32
More to the poi nt, why are
capi tal i st economi es more unstabl e than soci al i st economi es? He
28. I bid., p. 234.
29. I bid., p. 212.
30. I bid., pp. 213, 223.
31. I bid., p. 337, emphasi s added.
32. Anyone who does owes i t to hi msel f to read Eugen Bohm-Bawerks 1896
essay, Unresol ved Contradi cti on i n the Marxi an Economi c System, i n The
Shorts-r Cla.wits of Bohm-Bawerk, Vol . 1 (South Hol l and, I l l i noi s: Li bertari an Press,
1962). Thi s essay has al so been ti tl ed, Karl Marx and the Close of His System.
Mant Rebellion and Socialism 75
does not even rai se the questi on. Most to the poi nt, why are un-
hampered free market economi es more i nherentl y unstabl e than
Keynesi an-gui ded economi es? He does not demonstrate thi s any-
where i n hi s books. He merel y assumes i t.
Kgnesian Assumptions
He i s fol l owi ng i n the footsteps of hi s more famous humani st
peers. When i t comes to expl ai ni ng why recessi ons and depres-
si ons take pl ace, they have no consi stent expl anati ons, ei ther. As
Garri son remarks, I n the typi cal treatment of macroeconomi c
phenomena, the vari ati on i n fi nal output i s attri buted to the ex-
tent to whi ch resources, both capi tal and l abor, are i dl e. Thi s i s
the standard textbook rendi ti on of Keynesi an theory. The exi st-
ence of unempl oyed resources on an economy-wi de basi s i s si mpl y
assumed.3
3
Yet i t i s not si mpl y that they assume that resources
under capi tal i sm are i dl e. I t i s that they do not offer a theoreti cal
expl anati on for the st.ucessrl use of all the other r esour ces. The cr uci al
questi on i s: Why shoul dnt al l resources be i dl e? Thi s was F. A.
Hayeks questi on to Keynes hal f a century ago a questi on whi ch
sti l l remai ns unanswered i n terms of Keynesi an economi c anal y-
si s. The si tuati on seems here to be that, before we can expl ai n
why peopl e commi t mi stakes, we must fi rst expl ai n why they
shoul d ever be ri ght.s4
Keynesi ans assume that resources wi l l be i dl e under unham-
pered capi tal i sm. They cannot expl ai n preci sel y why. Textbook
Keynesi ani sm may be abl e to show how vari ati ons i n fi nal output
are rel ated to vari ati ons i n resource i dl eness, but i t cannot expl ai n
why there shoul d be resource i dl eness i n the fi rst pl ace .
35
I t i s as i f
Dr. Vi ckers and hi s peers have never bothered to read W. H.
33, Roger Garri son, A Subjecti vi st Theory of a Capi tal -usi ng Economy, i n
Geral d P. ODri scol l , Jr. and Mari o Ri zzo, The Economics of Time and Uncertamp
(London: Basi l Bl ackwel l , 1985), p. 175.
34. F. A. Hayek, Economi cs and Knowl edge; Economics, I V (new seri es,
1937); repri nted i n Hayek, I ndividualism and Economic Ordm (Chi cago: Uni versi ty
of Chi cago Press, 1948; London: Routl edge & Kegan Paul , 1949), p. 34.
35. Garri son, op. ci t., p. 175.
76 Baptized I nJ ation
Hutts book, The TheoT of I dle Resources (1939).36 Hutt argued bri l -
l i antl y that there can be no such thi ng as an i dl e resource. Every
scarce economi c resource i s owned by someone. Every resource i s
therefore the object of purposeful human acti on. Peopl e may keep
resources off the market, but they have reasons for doi ng so.
Keynes never repl i ed to Hutt. He at l east had an excuse: he was
runni ng Bri tai ns monetary pol i cy duri ng Worl d War I I . Hi s di sci -
pl es have no excuse.
I f the economi c model used by the Keynesi ans does not tel l us
where the market went wrong and the anal yti cal bankruptcy
of Keynes supposed refutati on of Says Law i ndi cates that he had
no such model then they are stuck wi th some other model , or
even worse, no model at al l . What we need i s expl anati ons, not
asserti ons. I f the market economy empl oys resources effi ci entl y i n
the vast majori ty of cases (whi ch Keynes never deni ed), then how
does i t accompl i sh thi s? What expl anatory devi ce can the Keynes-
i ans offer whi ch shows that the free market i s al most al ways suc-
cessful i n empl oyi ng resources, yet not qui te successful enough so
as to al l ow us to di spense wi th the servi ces of an ever-growi ng
army of economi c pl anners?
How Private Should Ownership Be?
Pri vate ownershi p? I t depends, after al l , on how you defi ne i t.
Dr. Vi ckers i s happy to concede pri vate ownershi p, t~ the i ndi vi d-
ual s acti ons are subservi ent to those of some regul atory agency of
the State. Thi s i s not the ki nd of ownershi p whi ch the Bi bl e tal ks
about, when even the Ki ng may be refused hi s request.
I magi ned soci al i sm? Far from i t. Dr. Vi ckers i s advocati ng
government economi c pl anni ng. What i s soci al i sm i f not thi s? Hi s
arguments are the same ti red arguments that Marx and Engel s
used the al l eged anarchi sm of free market producti on and di stri -
buti on and hi s concl usi ons are si mi l ar: more government con-
trol over thi s supposed anarchy. Neverthel ess, he prefers to cal l
hi s system Chri sti an economi cs . Why? Does hi s rel uctance to
36. Second edi ti on: I ndi anapol i s, I ndi ana: Li berty Press, 1979.
Mans Rebellion and Socialism 77
pl ace the more fami l i ar name on hi s system stem from hi s concern
that i f hi s Chri sti an readers real l y begi n to percei ve where he and
hi s system are headed, that they wi l l refuse to fol l ow? Does he sus-
pect that Chri sti ans are i nnatel y conservati ve and hosti l e to soci al -
i sm because they read thei r Bi bl es, and the Bi bl e utterl y rejects
anythi ng that even hi nts of soci al i st pl anni ng?
He has a di ffi cul t sel l i ng job. He has to sel l the benefi ts of the
power State to peopl e who recogni ze i ts ori gi ns: the pi ts of hel l . He
hi des i ts ori gi n by cal l i ng for mi l d pl anni ng, or parti al pl anni ng.
But i n pri nci pl e where does such control l ead? To bureaucrati c
fai l ure. And wi th each fai l ure comes the cry for more control s,
better pl anni ng. I t di dnt work before, but i t wi l l work thi s ti me!
Trust me ! What does he recommend as hi s Chri sti an pol i ci es?
Onl y these: . . . i ndustri al arbi trati on and gri evance procedures
. . . unempl oyment i nsurance . . . nati onal educati on pol i ci es . . .
[and] provi si ons to moti vate and faci l i tate the economi c and geo-
graphi c mi grati on of workers. . . . s7 There shoul d be redi stri bu-
ti on of i ncomes through progressi ve taxati on and i nheri tance
taxes, monetary and fi scal pol i ci es to i nsure a sati sfactory rate
and di recti on of growth, as wel l as a certai n amount of wel fare
expendi ture, tari ff and quota restri cti ons, and a wel l -desi gned
and wel l -arti cul ated nati onal pol i cy on wages and pri ces i s most
deci dedl y necessary at thi s ti me .3s
I f thi s i s not soci al i sm, then there i s onl y one other al ternati ve.
I t must befasctim (cal l ed Nati onal Soci al i sm i n Nazi Germany). I f
we are supposed to cal l hi s recommended system the pri vate own-
ershi p of the means of producti on, then i t i s pri vate ownershi p
wi th the control over what i s done wi th those assets l odged i n the
State. Thi s, hi stori cal l y, i s what pol i te economi sts cal l the corpor-
ate State , but whi ch hi stori ans who understand Nazi Germany
and fasci st I tal y are wi l l i ng to cal l fasci sm.
To summari ze, Dr. Vi ckers suggested pol i ci es are: 1) govern-
ment-regul ated money to mani pul ate the busi ness cycl e, 2) gov-
37. Vi ckers, Economics and Man, pp. 342-43; cf. p. 153,
38. I bid., pp. 319, 340, 150, 294, 298-310, 317, 228, 229, 180.
78 Baptized InJation
ernment-pl anned fi scal mani pul ati on to control the busi ness cycl e,
3) government-speci fi ed i ncome and pri ce control s, 4) government-
fi xed exchange rates (forei gn currency pri ces), 5) tari ffs, 6) man-
power control , and 7) i ndustri al structure regul ati on.qg Shades of
Karl Marx! I f such a compari son i s regarded by over-sensi ti ve
readers as an exaggerati on, then consi der a few of the ten steps
that Marx proposed for the establ i shment of a communi st State i n
The Communist Manfesto: a graduated (progressi ve) i ncome tax;
abol i ti on of i nheri tance ri ghts; central i zed credi t i n the hands of
the state; popul ati on redi stri buti on; and free educati on for al l
chi l dren i n publ i c school s. w We mi ght wel l i nqui re just where Dr.
Vi ckers di ffers i n economi c pri nci pl e from these Marxi an propos-
al s. The answer i s: he does not! 41 He woul d argue onl y about the
details and the degree of government control and, of course, he
woul d reject the label. (I f he thi nks Marx was wrong i n pri nci pl e,
l et hi m speak out i n the name of God and Hi s word agai nst a cen-
tral bank, agai nst publ i c educati on, agai nst the progressi ve [grad-
uated] i ncome tax, agai nst al l i nheri tance taxes, and so forth. I f
the shoe doesnt fi t, dont wear i t. Take i t off. Publ i cl y.)
The Corporate State
Thi s i s not to say that Dr. Vi ckers i s uni quel y a soci al i st i n the
mi dst of a nati on of true-bl ue capi tal i sts. The doctri nes of soci al -
i sm have taken over the thi nki ng of most voters and thei r el ected
representati ves, despi te thei r free market rhetori c. Norman
Thomas, the perenni al Soci al i st Party candi date for Presi dent of
the Uni ted States (1932-48), compl ai ned after hi s vote total fel l by
50% i n the 1936 campai gn that the Democrati c Party had stol en
39. I bid. , pp. 296-297.
40. Karl Marx and Frederi ck Engel s, Mani festo of the Communi st Party
(1848), i n Marx and Engel s, Selected Works, 3 vol s. (Moscow: Progress Publ i shers,
1969), I > pp. 126-27.
41. The connecti on between Keynes and Marx has been wel l documented by
Paul Matti ck i n hi s book Mum and I Lyrzes (Boston, Massachusetts: Extendi ng
Hori zons Books, 1969). I t shoul d be of no surpri se to fi nd the l i nk al so exists be-
tween Vi ckers and Marx.
Man% Rebellion and Socialism 79
hi s partys 1932 pl atform.Az Si nce that ti me, the Republ i can Party
has stol en most of the pl atform provi si ons of the Democrati c Party
of 1936. So has every other pol i ti cal party i n the Western worl d
that hasnt adopted somethi ng even more soci al i sti c. The fact that
a l ot of sel f-procl ai med defenders of free enterpri se, i ncl udi ng
busi nessmen, refuse to recogni ze what they have become i n the
name of the mi xed economy shoul d not keep us from seei ng
what ki nd of economy that Dr. Vi ckers i s real l y recommendi ng i n
pri nci pl e. The modern Keynesi an mi xed economy i s the pi ece-
meal road to soci al i sm.4s
The fai l ure of economi c pl anni ng i s obvi ous today. I t may not
have been obvi ous to Dr. Vi ckers when he recei ved hi s doctorate
so l ong ago, but today the whol e worl d knows. Central economi c
pl anni ng has produced sl ow economi c growth, unempl oyment,
and pri ce i nfl ati on wherever i t has been tri ed. ~ The theoreti cal
case agai nst soci al i st pl anni ng was made by Mi ses i n 1920, and by
Hayek i n the 1940s.4s The case has been strengthened repeatedl y
si nce then. % Don Lavoi es book asks the appropri ate questi on:
Nati onal Economic Planning: What I s Left?47 The answer i s cl ear:
from a theoreti cal standpoi nt, nothi ng i s l eft.
A wage and pri ce control pol i cy i tsel f i s suffi ci ent for the crea-
ti on of a soci al i st State. I t was by means of pri ce control s that the
Nazi s ran Ger many.qB I t was al so how the Al l i ed Powers kept Ger-
42. Wi l l i am Manchester, The Gloy and the Dream: A Narratioe HistoV of Ameriia,
1932-1972 (Boston: Li ttl e, Brown, 1973), p. 207.
43. Ludwi g von Mi ses, The Mi ddl e of the Road Pol i cy Leads to Soci al i sm:
i n Mi ses, Planning for Freedom (South Hol l and, I l l i noi s: Li bertari an Press, [1952]
1980), ch. 2. The company i s now l ocated i n Spri ng Mi l l s, Pennsyl vani a.
44. The Politics of Planning: A Review and Critique of Centralized Economic Planning
(San Franci sco: I nsti tute for Contemporary Studi es, 1976).
45. Ludwi g von Mi ses, Economi c Cal cul ati on i n the Soci al i st Common-
weal th (1920), i n F. A. Hayek (ed .), Col/ ectivist Economic Pl anni ng (London: Rout-
l edge and Kegan Paul , [1935]), ch. I I I ; Mi ses, Socialism, op. cit.; Hayek, I ndividu-
alism and Economic Ordq op. cit., chaps. 7-9.
46. T. J, B. Hoff, Economic Cal cul ati on m the Soctalist Socie~ (London: Hodge,
1949). A repri nt has been rel eased by Li berty Press, I ndi anapol i s, I ndi ana.
47. Cambri dge, Massachusetts: Bal l i nger, 1985.
48. Hans Sennhol z, The Second German I nfl ati on and Destructi on of the
Mar k (1933 -1948), The J ournal of Christian Re.ondmction, VI I (Summer 1980).
80 Baptized I ntation
many near starvati on, 1945-48.49 I f al l pri ces and wages are regu-
l ated by the central authori ti es, @ectiue control of the total econ-
omy (except the bl ack or underground market, whi ch i s si mpl y
the free market sti l l i n operati on) has passed i nto thei r hands. Us-
i ng pri ce regul ati on (wages bei ng the pri ce for l abor), the State i s
abl e to deci de what wi l l be produced, bought, and sol d; i t can
cause profi ts and l osses, weal th or pauperi sm, thereby determi n-
i ng who wi l l be producers and who wi l l be workers; and i t may ac-
tual l y determi ne where peopl e wi l l l i ve and how l ong they remai n
there.
50
The wage control Dr. Vi ckers envi sages i s expl i ci t. Work-
ers mi ght even be taxed to the ful l extent of the amount by whi ch
thei r wage i ncreases . . . exceed nati onal l y establ i shed norms.sl
That, dear reader, i s soci al i sm wi th a vengeance! And i f i t i snt,
then i t i s fasci sm. I t i s the economi c system descri bed by l awyer
Charl otte Twi ght i n her book, Americas Emezging Fascist Economy
(1975). 52 I t i s certai nl y not i magi ned capi tal i sm.
Even hi s cal l for managed exchange rates by the monetary
authori ti es [who] have reason to bel i eve that too wi de a fl uctua-
ti on i n the exchange rate has occurred must be seen as a cruci al
move towards the total i tari ani sm of a soci al i st State .
53
I n the
words of F. A. Hayek, Nothi ng woul d at fi rst seem to effect pri vate
l i fe l ess than a state control of the deal i ngs i n forei gn exchange, and
most peopl e wi l l regard i ts i ntroducti on wi th compl ete i ndi fference.
Yet the experi ence of most Conti nental countri es has taught
thoughtful peopl e to regard thi s step as the deci si ve advance on
the path to total i tari ani sm and the suppressi on of i ndi vi dual l i b-
erty. I t i s, i n fact, the compl ete del i very of the i ndi vi dual to the
tyranny of the state, the fi nal suppressi on of al l means of escape
not merel y for the ri ch but for everybody. Once the i ndi vi dual
49. Ni chol as Bal abki ns, Germany Under Direct Controls: Economic Aspects of I ndus-
trial Disarmament, 1945-1948 (New Brunswi ck, New Jersey: Rutgers Uni versi ty
Press, 1964).
50. See Sudha R. Shenoy (cd.), Wage-Pnce Control: Myth and Realip (St. Leon-
ards, New South Wal es: The Centr e for I ndependent Studi es, 1978).
51. Vi ckers, Economics and Man, p. 340.
52. New Rochel l e, New York: Arl i ngton House.
53. Vi ckers, Economics and Man, p. 233.
Man% Rebellion and Socialism 81
i s no l onger free to travel , no l onger free to buy forei gn books or
journal s, once al l the means of forei gn contact can be restri cted to
those of whom offi ci al opi ni on approves or for whom i t i s regarded
as necessary, the effecti ve control of opi ni on i s much greater than
that ever exerci sed by any of the absol uti st governments of the sev-
enteenth and ei ghteenth centuri es.5
4
Concl usi on
The pol i ci es suggested by Dr. Vi ckers are si mpl y soci al i sm i n
di sgui se and not very wel l -di sgui sed at that. But they are soci al -
i sm i n fact. Dr. Vi ckers does not admi t that the Keynesi an pol i ci es
he offers are soci al i sti c; i nstead, he tri es to argue they are Chri s-
ti an. He does not prove hi s case that he i s not an i mpl i ci t soci al i st.
He fai l s to see that regul ati ons must usurp pri vate ownershi p. As
Rushdoony has noted, Property can be al i enated by expropri a-
ti on, i njury, restrictive legislation, and a vari ety of other means.ss
Dr. Vi ckers cl ai m that the new gui del i nes and new ki nds of reg-
ul atory frameworks are not a cal l for the speci fi c control and
di recti on of any persons economi c acti vi ty i s decepti ve, to say the
l east, i f he i mpl i es these regul ati ons can exi st and, at the same
ti me, mai ntai n pri vate property ri ghts i n the sense we have
ar gued her e. se By defi ni ti on, regulations must specz$cal~ control the in-
dividual at some point; otherwise thg are not regulatoy
Dr. Vi ckers wi l l never be content unti l the supposed causes of
di sharmony are removed. He bel i eves that government economi c
pl anni ng and regul ati ons can remove many of these causes of di s-
harmony. Hi s pol i ci es move i nexorabl y towards compl ete control
by the authori ti es. We cal l such a system socialism. To gi ve i t any
other name i s sel f-decepti on. 57 Soci al i sm i s not a system of pl an-
ned harmoni es; i t i s a system of pl anned chaos .5s To masquerade
54. Fri edri ch A. Hayek, The Road To S&dorn (Chi cago: Uni versi ty of Chi cago
Press, [1944] 1976), p. 92, n. 2.
55. Rushdoony, I nstitutes, p. 497, emphasi s added.
.56. Vi ckers, Economics and Man, p. 337.
57. Mi ses, Soci al i sm, p. 2.53.
58. Mi ses, Pl anned Chaos (1949); repri nted i n Socialism, Epi l ogue.
82 Baptized I nzation
soci al i sm as Chri sti an economi cs i s an attempt to decei ve every-
one. Especi al l y onesel f.
6
ANTI NOMI ANI SM AND AUTONOMY
The Chnstian thinke~ while he can in no sense devalue the impor-
tance of the individual and personal experience of the salvation which
God has set forth for His people in Christ, nevertheless is aware that it
is in the midst of the world that God has redeemed and established His
church. This world is the world over which God reigns as Creator and
King, and the Christian necessari~ sees it as part of his God-given
task to understand, and where possible to in$uence, societal structures
so that th~ are brought into closer conformi~ with the scriptural~
articulated preceptive will of God. I t is not that it is proper to speak of
the fact or possibili~ of a Christian sociep. For sociep is fallen,
apostate, inherent~ and structural~ pagan. ~
Here i s the heart and soul of Dr. Vi ckers worl d-and-l i fe vi ew.
He bel i eves that Chri st i s a Ki ng, but that Chri sts ki ngshi p wi l l
never be mani fested i n ti me and on earth. Jesus regenerates men,
but regenerate men never have suffi ci ent numbers or suffi ci ent i n-
fl uence to reconstruct the worl ds pagan i nsti tuti ons al ong Bi bl i cal
l i nes. Therefore, si nce Gods peopl e wi l l not be abl e to do thi s, Dr.
Vi ckers i mpl i ci tl y argues throughout hi s book, God no longer has
given us a law structure by which we might reconstruct this world, and, even
more important psychological$J for Dr Vickers, a law structure which God
holds us responsible to promote.
I n order for us to establ i sh that what Dr. Vi ckers i s cal l i ng for
i s a di sgui sed versi on of soci al i sm or communi sm, i t has been nec-
1. Vi ckers, Economics and Man, pp. 44-45.
8 3
84 Baptized I nzation
essary to determi ne what the Scri ptural teachi ng i s concerni ng
property ri ghts. The Bi bl i cal basi s for pri vate ownershi p was
argued i n terms of the Ten Commandments. At l east two of those
commandments establ i shed the r i ght of pr i vate pr oper ty,
al though pri vate property i s assumed by the other ei ght. Z
Restrai ned by Whose Law?
I t i s i ndi cati ve of Dr. Vi ckers posi ti on that he does not gi ve
any consi derati on to Bi bl i cal l aw and the commandments of God.
On the one hand, he decl ares that as to the sancti ty and the con-
ti nui ty of the moral l aw there can be no argument at al l .s Never-
thel ess, i n attempti ng to di sagree wi th the Chri sti an Reconstruc-
ti oni st posi ti on that there i s an abi di ng val i di ty i n the detai l ed
l aws gi ven to I srael unl ess Scri pture i tsel f modi fi es or sets them
asi de, Dr. Vi ckers draws the concl usi on that as we l i ve i n a fal l en
soci ety,4 and that si nce the economi cs wi th whi ch we have to
deal i s necessari l y the economi cs of a fal l en soci ety~s i t woul d be
a grave mi stake . . . to i magi ne that economi c l egi sl ati on, at the
conceptual or pragmati c l evel , i s or can be l egi sl ati on for a theo-
cracy, i n the sense, for exampl e, i n whi ch Gods peopl e i n the Ol d
Testament economy consti tuted a theocr acy.G
The preposterous yet i nescapabl e i mpl i cati on i n thi s l i ne of
reasoni ng i s that we l i ve i n a fal l en soci ety but I srael di d not;
hence, we must not adopt I srael s l egal code. Yet Dr. Vi ckers con-
tradi cts thi s when he correctl y observes that the scri ptural ad-
dress to the worl d i s al ways an address to the worl d as si nful .T
Always? Thi s i mpl i es that I srael was si nful after al l . Dr. Vi ckers
unfortunatel y makes no attempt to reconci l e the contradi cti on i n
hi s thi nki ng at thi s poi nt, or at any other poi nt, for that matter. I n
2. Gary North, The Si nai Strategy: Economics and the Tm Cornmandnunts (Tyl er,
Texas: I nsti tute for Chri sti an Economi cs. 1986).
3. Vi ckers, Economi cs and Man, p. 313.
4. I bid., p. 47; cf. p. 362.
5. I bid., p. 355; cf. p. 289.
6. I bid., p. 47.
7. I bid., p. 119,
Antinomtanism and Autonomy 85
hi s economi c exposi ti ons, sel f-contradi cti on i s a way of i ntel l ec-
tual l i fe.
Unshackling the State
Al though i t i s true that what he says i s contradi ctory regardi ng
the val i di ty of Gods l aw, i n real i ty Dr. Vi ckers i s against the re-
qui rements of the moral l aw of God. We have seen thi s al ready i n
hi s wi l l i ngness to forgo a Bi bl i cal defi ni ti on (or even a free market
economi sts defi ni ti on) of pri vate property ri ghts. There are two
further i l l ustrati ons of thi s.
The jirst is hi s cal l for progressi ve taxati on. Dr. Vi ckers i ni -
ti al l y draws attenti on to the i dea that Bi bl i cal taxati on consi sted of
a pol l tax, or head tax, whi ch was an amount equal l y payabl e by
al l mal es twenty years of age and over. s He al so observes that ti th-
i ng was a proportional tax. g Yet, for the sake of what he cal l s Chri s-
ti an desi derata of equi ty and justi ce , Dr. Vi ckers i s prepared to
argue that there ought to be some ki nd of progressi veness i n the
taxati on scal es. . . . I f, of course, we were l egi sl ati ng for an i deal
soci ety, or, agai n, for a theocrati c order of an earl i er ki nd, then a
stri ctl y proporti onal tax, such as the ti the, woul d probabl y be al l
that woul d be requi red.l o I n other words, Bi bl i cal l aw i s i rrel e-
vant to a fal l en soci ety. We must ask oursel ves: Why?
The second exampl e i s to be found i n hi s contenti ons agai nst
North and Rushdoony over the Bi bl i cal requi rements for hard
money, money by wei ght and fi neness of preci ous metal s, speci fi c-
al l y gol d and si l ver. I t woul d appear an appropri ate method i n
di sputi ng wi th someone, especi al l y when that person substanti -
ates hi s argument from Bi bl i cal texts, fi rst, to set forth accurately
hi s arguments and the verses used as support, second, show how
8. I bid., p. 314. Thi s tax was col l ected onl y duri ng a census, and a census was
conducted onl y i mmedi atel y pri or to war. I t was real l y a payment to God, not the
State, for each fi ghti ng-age man was to gi ve hal f a shekel as a ransom for hi s soul
unto the Lord (Exodus 30:12-13). The money was to prevent a pl ague from God.
See James B. Jordan, The Mosai c Head Tax and State Fi nanci ng: Biblical Eco-
nomics Today, I V (June/Jul y 1981).
9. I dem.
10, I bid., p. 319.
86 Baptized lnzation
these verses have been mi si nterpreted, and thi rd, to fol l ow thi s
wi th an al ternati ve i nterpretati on. Remember that Dr. Vi ckers
purpose i n wri ti ng i s to contri bute to a correcti on of the North-
Rushdoony perspecti ve, whi ch i s the reason for the manner i n
whi ch he has devel oped hi s argument. 11 Wi th thi s as background,
consi der Dr. Vi ckers treatment of Bi bl i cal texts, si nce he di s-
agrees wi th North and Rushdoony.
I gnori ng the Bi bl es Pl ai n Teachi ng
A careful readi ng of Economics andMan reveal s Dr. Vi ckers un-
wi l l i ngness to take seri ousl y the Ol d Testament. He apparentl y
regards i t, i n the words of Dr. North, as the word of God (emer-
i tus). I t i s a sort of di scarded fi rst draft. We do not have to take i t
seri ousl y as a bl uepri nt. When i t says that somethi ng speci fi c i s
evi l , then we must begi n our study of anal ogous evi l i n general ,
but onl y on the assumpti on that the general i zed evi l whi ch we wi l l
deri ve from the speci fi c exampl e somehow wi l l rel ease the speci fi c
practi ce from the category of evi l . Thus, we can go ri ght on do-
i ng what the Ol d Testament says i s evi l , but we can reassure our-
sel ves that we are neverthel ess honori ng the pri nci pl e concerni ng
evi l i n general . I n short, Thank God for general i mpl i cati ons of
speci fi c evi l practi ces; they enabl e us to i gnore the speci fi cs .
There i s more than a fai nt echo here of the words whi ch God
spoke through the prophet Hosea: Though I wrote for hi m ten
thousand precepts of My l aw, they are regarded as a strange
thi ng.l z
Metallic Monq
The Bi bl e i s very cl ear concerni ng the evi l s of debasi ng the
monetary uni t. Dougl as Vi ckers i s equal l y cl ear i n hi s rejecti on of
any such obvi ous i nterpretati on of the text, though hi s arguments
are not al l that cl ear.
11. hd., p. 241.
12. Hosea 8:12. New Ameri can Standard Bi bl e.
Antinomiani.sm and Autonomy 87
How the fai thful ci ty has become a harl ot, she who was ful l ofjusti ce!
Ri ghteousness once l odged i n her , but now mur der er s. Your si l ver has
become dross, your dri nk di l uted wi th water. Your rul ers are rebel s and
compani ons of thi eves; everyone l oves a bri be and chases after rewards.
They do not defend the orphans, nor does the wi dows pl ea come before
them.l s
Dr. North argues that I sai ahs cri ti ci sm of mi xi ng dross metal s
(base, cheap metal s) wi th si l ver was a cri ti ci sm of counterfei ti ng.
Di scussi ng the North-Rushdoony exposi ti on of I sai ah 1:22, Dr.
Vi ckers regrets what he percei ves to be thei r error i n argui ng for a
metal l i c monetary system from thi s verse. Fint, Dr. Vi ckers gi ves
the im@ssion that hi s i nter pr etati on of thi s ver se i s the same as Dr .
Nor th s , 14 but thi s i s not the case. Dr . Nor th has cogentl y ar gued
th a t I sai ah 1: 2?2! l i sts spect~c si ns of I s r ael , th er eby poi nti ng to the
u n der l y i n g s pi r i tu al s tate of th e peopl e. 15 I n context, ther e i s no
val i d exegetical reason to assert, as does Dr. Vi ckers, that verse 22
shoul d not be taken l i teral l y. There i s a val i d debati ng reason,
however: the text poi nts to the i mmoral i ty of monetary debase-
ment, whi ch means the i mmoral i ty of unbacked paper or credi t
money, whi ch Dr. Vi ckers promotes. Therefore, i gnore the text.
Dr . Vi ckers, i n contr ast to Dr . Nor th, sees these ver ses onl y as
an anal ogy of thei r spi ri tual condi ti on. These two i nterpretati ons
are not the same thi ng. Dr. Norths i nterpretati on i mpl i es an es-
senti al uni ty between the acti ons of the peopl e and thei r spi ri tual
state, whereas Dr. Vi ckers, by hol di ng that thei r acti ons are onl y
an anal ogy, makes the spi ri tual l i fe of the peopl e and thei r acti ons
two di sti nct enti ti es. Dr. Vi ckers appeal to other passages of
Scri pture to i l l ustrate thi s anal ogi cal reasoni ng 16 does not neces-
sari l y prove hi s case. Ul ti matel y, i t i s the context of a parti cul ar
verse whi ch must govern i ts i nterpretati on. Therefore i t i s possi -
bl e to agree wi th Dr. Vi ckers that i n Jeremi ah 6:28,30, for exam-
13. I sai ah 1:21-23, New Ameri can Standard Bi bl e,
14. I bid., p. 244.
15, North, op. ci t., p. 4.
16. Ezk, 22:18-19; Ps. 119:119: Jer. 6:28,30; Lam. 4:1-2.
88 Baptized Iny?atiors
pi e, the I srael i tes are referred to as brass and i ron and repro-
bate si l ver: because the context cl earl y warrants thi s. But the
same i s not the case i n I sai ah 1:22, where I sai ah i s cl earl y nami ng
sPect@ si ns. What Dr. Vi ckers i s desperate to avoi d i s the obvi ous
concl usi on: speci fi c si ns i mpl y a vi ol ati on of specji c laws. Thi s i n
turn i mpl i es that men are requi red to obey these speci fi c l aws.
Thi s i s anathema to Dr. Vi ckers. Why? Because Dr. Vi ckers re-
jects Bi bl i cal l aw.
Second, i rrespecti ve of the di fferences i n i nterpretati on of thi s
verse, Dr. Vi ckers makes an i ncorrect concl usi on that I sai ah 1:22
i s the basi s for the North-Rushdoony argument for nong by
weight. But the grave economi c error that North and Rushdoony
have made, and the mi sdi recti on of scri ptural economi c thought
of whi ch they accordi ngl y become gui l ty at thi s poi nt, l i es i n thei r
transi ti on from the proper terms of the anal ogy to the supposi ti on,
a magni fi cent non sequitur, that because money i n I sai ahs ti me was
frequentl y i n the form of metal l i c i ngots changi ng hands by
wei ght, money shoul d therefore al ways and onl y be of thi s
form.17 Dr. Vi ckers i s absol utel y correct when he says such a con-
cl usi on woul d be a magni fi cent non sequitur. But i t i s a concl usi on
Nor th a n d Ru s h doon y n ev er ma de!
The Bi bl i cal basi s for a har d money sy stem i s to be found h-s
what Gar y Nor th cal l s the l aw of honest wei ghts and measures.16
That l aw i s found i n Levi ti cus 19:35-36. I wi l l have mor e to say on
thi s passage when I di scuss the meani ng of i nfl ati on; meanwhi l e,
i t i s s uffi ci ent at thi s poi nt to note that the Scr i ptur es s peak of
money as weight. 19 I n so doi ng, God i s decl ari ng what the l egal
basi s of money shal l be: a commodi ty whi ch possesses preci sel y
the wei ght and fi neness that are announced on an i ngot or coi n or
other shape. Thi s i mmedi atel y takes the deci si on out of the do-
mai n of man. Nei ther the State nor pri vate ci ti zens have the ri ght
17. Vi ckers, Economics and Man, p. 24.5.
18. North, p. 6.
19. Rushdoony, Zmtitutes, pp. 468-473; cf. Rushdoony, Hard Money and
Soci ety i n the Bi bl e, i n Hans F. Sennhol z (cd.), Gold is Mong (Westport, Corm.:
Greenwood Press, 1975), pp. 157-175.
Antinomianism and Autonomy 89
to decl are dross the economi c equi val ent of preci ous metal . But
Dr. Vi ckers gi ves no consi derati on to thi s passage of Scri pture. I t
i s as i f thi s verse does not exi st i n hi s thi nki ng. But si nce he per-
cei ves an error on the part of some Chri sti ans for usi ng the verse
to argue for a gol d or si l ver monetary uni t, he has an obl i gati on to
poi nt out the correct i nterpretati on of the verse to hi ghl i ght the
er r or .
The argument for a hard monetary system i s not based on
I sai ah 1:22 as such. I sai ah 1:22 i s si mpl y a case-law application of the
general prohi bi ti on agai nst fal se wei ghts and measures. I sai ah de-
cl ared a speci fi c appl i cati on of thi s l aw of wei ghts and measures by
poi nti ng out that the secret debasment of any economi c asset i s a si n.
Passi ng off di l uted si l ver as the real thi ng i s somethi ng for whi ch
they wi l l be judged, decl ared the prophet. Hi s chal l enge i ncl uded
the practi ce of monetary debasement, but i t di d not appl y excl u-
si vel y to such a practi ce. Water-di l uted wi ne was equal l y si nful .
Here i s another fi ne exampl e of how Dr. Vi ckers l eads the
trusti ng reader away from the facts, so that Dr. Vi ckers may sub-
stanti ate hi s own opi ni on. We have al ready noted that he has mi s-
stated the cl assi cal i dea of the i nvi si bl e hand, and how he has
argued agai nst a non-exi stent versi on of the harmony of i nterests.
We see at thi s poi nt he has agai n used the same devi ce mi sstate-
ment i n hi s di sagreement wi th those who want to re-establ i sh
hard money i n soci ety. The devi ce of mi sstati ng the posi ti on of
those wi th whom he di sagrees al l ows Dr. Vi ckers to present what
appears, on the surface, to be a schol arl y and Chri sti an presenta-
ti on of Bi bl i cal economi c theory. I n real i ty, i t i s a debate tacti c
whi ch he uses, perhaps uni ntenti onal l y, to avoi d the real argu-
ments, and i t al so enabl es hi m to i gnore compl etel y the requi re-
ments of Bi bl i cal l aw.
I f Dr. Vi ckers i s genui nel y i nterested i n equi ty, and i f he has
a si ncere desi re to promote justi ce i n economi cs, then he wi l l
stand on the sol i d foundati on of Scri pture* and decl are that the
use of fal se bal ances i s oppressi on. *1 I nstead of the words of modern
20. Matt. 7:24.
21. Hosea 12:7.
90 Baptized I nzation
academi a, I n my opi ni on . . ., we coul d have the words, Thus
sai th the Lord . Dr. Vi ckers has fool i shl y traded the Word of God
for the autonomous word of man. Such a trade i s unprofi tabl e i n
the l ong (especi al l y eternal ) run.
Dejicit Financing by the Stati
Does Dr. Vi ckers real l y bel i eve that the canons of justi ce and
equi tyzz can be obtai ned from human reasoni ng? Apparentl y so,
and thi s can be seen cl earl y i n hi s argument for defi ci t fi nanci ng.
Agai n, he offers no di scussi on of the appropri ate Bi bl i cal verses
agai nst debt. 23 The onl y argument he advances i s that i t makes
no necessary economi c sense to begi n wi th an a przori noti on that
budgets shoul d necessari l y be bal anced. . . . I n fact, he cl ai ms,
i t woul d be economi cal l y cri mi nal . . . . such an acti on woul d be
cul pabl e i n the hi ghest degree.z4 I n other words, economi c
sense takes precedence over Bi bl i cal pri nci pl es!
Here we see i l l ustrated the fundamental di fference between the
reconstructi oni sts and al l of thei r cri ti cs, both secul ar and thei sti c.
The reconstructi oni sts defi ne sense i n terms of what the Bi bl e
reveal s. I f the Bi bl e tel l s us speci fi cal l y that such and such i s true
the si x-day creati on, for exampl e then we must accept thi s
truth as our operati ng presupposi ti on. We must then cri ti ci ze al l
concl usi ons that are not consi stent wi th thi s presupposi ti onal
starti ng poi nt. Thi s i s the essence of Van Ti l s methodol ogy. And
thi s i s why we must concl ude that al though Dr. Vi ckers may thi nk
he i s a fol l ower of Van Ti l , and he may choose to defend hi msel f
by occasi onal appeal s to Van Ti l s name, i n fact hi s methodol ogy
i s radi cal l y opposed to everythi ng Van Ti l ever wrote.
How Dare We Di sagree?
Noti ce hi s attempt to moti vate the reader by gui l t mani pul a-
ti on. How dare we di sagree wi th Dr. Vi ckers? To do so woul d
make us economi cal l y cri mi nal and that woul d be the l ast thi ng
22. Vi ckers, ibid., p. 319.
23. Rem. 13:8, Deut. 15:6; compare Prov. 22:7 wi th I Cor. 7:23.
24. I bid., pp. 331, 332.
Antinomianism andAutonomy 91
we woul d want, ri ght? Such an argument i s desi gned to make the
reader feel reprehensi bl e for havi ng the audaci ty to suggest such a
thi ng as a bal anced budget. The Psal ms say that The wi cked bor-
roweth, and payeth not agai n (Ps. 37:21), but Dr. Vi ckers pays
no attenti on. He si mpl y argues for wi ckedness i n the name of
Chri sti an ethi cs.
Once we put Dr. Vi ckers accusati on i n i ts ri ghtful pl ace, and
ask What sai th Scri pture? we fi nd a di fferent answer from the
one he i s offeri ng. Even i f we take at face val ue hi s supposi ti on
that economi cs from a Chri sti an perspecti ve must be based on the
three i deal s of conservati on, devel opment, and equi ty, we fi nd no
substanti ati on of hi s Keynesi an pol i cy concl usi ons from Scri p-
ture. I t i s as i f the Bi bl e contai ned no sPect@ teachi ngs on di sci -
pl i ni ng and restri cti ng the State. See, for exampl e, hi s cl ai m that
ci vi l governments pol i ci es and i ndi vi dual freedom are subject to
the preservati on of the on-goi ng devel opment whi ch the economi c
aspect of the creati on mandate requi res, and subject to the preser-
vati on of equi ty i n the di stri buti on of economi c benefi ts .ZS The
di ffi cul ty wi th thi s comment i s that the Bi bl e does not gi ve a rate
of economi c devel opment whi ch i s requi red by the creati on man-
date, nor does i t provi de any i ndi cati on of what an equi tabl e di s-
tri buti on of economi c benefi ts woul d be, at l east not i n the sense
that Dr. Vi ckers means i t. The whol e of Scri pture i mpl i es eco-
nomi c bl essi ng i s a gi ft whi ch God bestows upon the just (and
often the unjust) i n accordance wi th Hi s Di vi ne purposes. At-
tempts to enforce pol i ci es based on the i deas of economi sts, bu-
reaucrats, pol i ti ci ans, and di ctators are therefore an attempt to
usurp Gods functi ons. I t i s an endeavor to be as God.
Legislating Kgmesian I mmoralip
I t seems as i f the real i ty of the si tuati on i s that Dr. Vi ckers
real l y woul d l i ke the Ol d Testament l eft out of the controversy. I n-
credi bl y, he comes up wi th that ol d si nners sl ogan, moral i ty can-
not be l egi sl ated.zG So what can be l egi sl ated, i mmor al i ~? Where
25. I bid., pp. 334-335.
26. I bid., p. 219.
9 2 Baptized I njation
i s he getti ng thi s pri nci pl e from, Van Ti l s apol ogeti cs or a 1962
Hugh Heffner Pl ayboy Phi l osophy col umn? I s he a Ph.D. i n
economi cs or a sophomore student i n busi ness wi th a C grade
poi nt average? I t i s beyond bel i ef! Here i s a schol ar who pro-
cl ai ms hi s adherence to the Bi bl e and to Van Ti l , and yet he tel l s
us that moral i ty cannot be l egi sl ated. What then can be l egi s-
l ated? Of course! Neutral l aw. You know: the thi ng Van Ti l has
spent hi s enti re career argui ng agai nst.
Dr. North has sai d i t wel l : You cannot l egi sl ate anythi ng except
moral i ty. A l aw says that you must do somethi ng, or that you
must not do somethi ng. The l aw excludes. I t does so on the basi s of
a moral vi si on. I t does so on the basi s of ri ght vs. wrong. I t i s
never a questi on of l egi sl ati ng or not l egi sl ati ng moral i ty. I t i s i n-
escapabl y a questi on of whi ch moral i ty. I t i s a questi on of who$e
moral i ty.
Dr. Vi ckers l i kes Keynes moral i ty. No, not hi s homosexual i ty.
He wants to l egi sl ate Keynes economic moral i ty, whi ch we al l know
had nothi ng to do wi th hi s personal sexual tastes. (We al l know
thi s because i t i s a bi t embarrassi ng as a Chri sti an economi st to
fi nd onesel f al i gned too cl osel y wi th a pervert. ) He argues that
progressi ve taxati on i s justi fi ed i n order to i nsti tuti onal i ze and
make compul sory i n a fal l en soci ety what there i s every reason to
anti ci pate woul d, i n an i deal soci ety, be done vol untari l y. . . .
27
Thi s i ndi cates cl earl y that l egi sl ati on doe~ have a moral basi s. And
wi th that i dea we agree, for all l egi sl ati on decl ares one acti on to be
the ri ght one, and others to be wrong. The purpose of l egi sl ati on,
therefore, i s to i mpose someones moral code on everyone el se.
The questi on we face i s: Whose moral code do we want to be l egi s-
l ated? For the Chri sti an there can onl y be one answer, for onl y
God can decl are what i s ri ght and wrong. He al one i s the arbi ter
of what i s moral .
Gi ven the Bi bl i cal vi ew of the l aw of God, i t i s surpri si ng that
Dr. Vi ckers woul d have us di sregard i t i n favor of some hi gher
set of economi c pri nci pl es. The l aw of God i s cal l ed perfect and
27. I bid., p. 319
Antinomianism and Autonomy 93
pure. Because Gods l aws are ri ghteous and true they are to
be desi red more than gol d, and i n keepi ng them, we are i n-
formed, there i s great reward (Ps. 19:7-11). The whol e of Psal m
119, the l ongest chapter i n the Bi bl e, i s devoted to decl ari ng the
gl ory of the l aw and statutes of God. Yet Dr. Vi ckers wants us to
bypass these speci fi cs i n favor of economi c pri nci pl es ori gi nati ng
i n the mi nd of si nful man. That i s the essence of humani sm, mak-
i ng man the arbi ter of what i s ri ght and wrong (Gen. 3:5).
Ah, Dr. Vi ckers woul d say. What the reconstructi oni sts are
argui ng for i s theocracy. But we dont want a theocracy, do we?
Why, that i dea was tri ed for centuri es and l ed to tyranny every
ti me. (Even i n anci ent I srael ? I woul d ask. Al l of a sudden, I
hear arguments that sound suspi ci ousl y l i ke si tuati on ethi cs.
Wel l , back then God wanted men to obey Hi m and honor Hi m
publ i cl y, i n every sphere of l i fe, i ncl udi ng ci vi l government. To-
day, however. . . . ) No, what we need i s democracy, the rul e of
the demos, the Peopl e, not theocracy, the rul e of God. VOX pop-
ul i , Vox Dei ?2* Wel l , no, not that exactl y, but, but. . . .
Dr. Vi ckers rejects the reconstructi oni sts vi si on of economi cs
because he sees what sort of foundati on such a vi ew of economi cs
or anythi ng el se necessari l y rests upon. The reconstructi oni sts
have drawn the l i ne: Gods laws or man~ laws. Dr. Vi ckers does not
want to step over that l i ne i n front of al l hi s hel l -bound Ph.D.
peers. So he prefers to thi nk that God no l onger requi res Hi s
fai thful servants to draw such a l i ne. He prefers to i magi ne that
the reconstructi oni sts are hereti cal , or at l east seri ousl y mi si n-
formed. He wrote Economics and Man to prove thi s. We therefore
need to l ook a l i ttl e more cl osel y at Dr. Vi ckers arguments agai nst
a theocracy, for therei n, we bel i eve, l i es hi s central reason for i g-
nori ng the Scri ptures as a source of detai l s for economi c pol i cy
and practi ce.
The Meani ng of Theocracy
A si gn of the ti mes i s the i ncreased i nvol vement by Chri s-
ti ans i n areas they formerl y despi sed. Al though the Chri sti an
28. Voi ce of the peopl e, voi ce of God.
94 Baptized I nzation
school movement i s possi bl y the best exampl e of thi s, there i s al so
i ncreased acti vi ty i n the areas of pol i ti cs, l aw, economi cs, and
many other di sci pl i nes. I n each case, there i s some attempt to
come to gri ps wi th the i dea that the Scri ptures, as Gods reveal ed
Word, contai n pri nci pl es whi ch can be appl i ed i n these areas to
gi ve gui dance on how we shoul d l i ve and act.
I f there i s a word that can qui ckl y di vi de those who are cal l i ng
for i ncreased Chri sti an i nvol vement i n soci ety, that word i s theo-
cr ac y. Dr. Vi ckers, for exampl e, goes to great l engths to di spar-
age the i dea of a theocr ati c ci vi l government. I t i s a grave mi stake
. . . to i magi ne that economi c l egi sl ati on, at the conceptual or
pragmati c l evel , i s or can be l egi sl ati on for a theocracy, i n the
sense, for exampl e, i n whi ch Gods peopl e i n the Ol d Testament
economy consti tuted a theocracy.m Dr. Vi ckers i s so obsessed
wi th the i dea that we must not, under any ci rcumstances, i magi ne
that we can have a theocrati c ci vi l government, that he rei nforces
thi s poi nt several ti mes i n Economics andMan. After al l , there i s the
fact that si n i s i n the worl d, and that the economi cs wi th whi ch
we have to deal i s necessari l y the economi cs of a fal l en soci ety.3
I t i s a theme whi ch he returns to i n A Christian Approach to Eco-
nomics and the Cultural Condition. Dr. Vi ckers recogni zes that the
I srael i tes, havi ng been brought out of Egypt, were gi ven ful l , ex-
pl i ci t, and adequate l egi sl ati ve gui dance for the organi zati on and
admi ni strati on of the economi c affai rs consonant wi th the theocracy
that was thereby establ i shed. But we no l onger l i ve i n that sense i n
a theocracy. At the i ni ti al poi nt of our i nqui ry we must acknowl -
edge that we l i ve i n a fal l en worl d. Si n i s abroad i n the worl d and i n
the hearts of men. And that fact i s determi nati ve of the forms and
structures and practi cal potenti al of the economi c arrangements
we see around us. . . . Al l our soci al , cul tural , and economi c pre-
scri pti ons, expl anati ons, and di agnoses must accordi ngl y be those
whi ch are consonant wi th the fal l enness of that soci ety.3i
29. I bid., p. 47.
30. I bid, p. 355; cf. pp. 48, 74, 289, 319.
31. Vi ckers, A C%rtitian Approach to Economi cs and the Cultural Condition, pp. 5,
180; cf. pp. 90, 126, 130, 154.
Antinomianism and Autonomy 95
Lets get thi s strai ght, The Hebrews wer e gi ven the l aw of God
when they fl ed from Egypt. They wer e tol d to enforce these l aws
as a condi ti on of thei r remai ni ng safe i n the Promi sed Land. But
we are not bound by these l aws because we l i ve i n a si nful worl d.
Now i t does not take a Ph.D. i n l ogi c to come up wi th the n ex t
questi on: I n what ki nd of worl d di d the Hebrews l i ve? Thi s i s so
obvi ous that i t makes me wonder whether there may be a rel ati on-
shi p between the hatred of Gods l aw and the abi l i ty to thi nk
strai ght. Thi s, by the way, i s preci sel y what Van Ti l has argued
for years: that the hatred of God does i nhi bi t the covenant-breaker
from thi nki ng strai ght.
Dr. Vi ckers i s not content wi th argui ng agai nst the i dea of a
God-governed ci vi l government whi ch enforces Gods l aw i nstead
of Satans l aw (for there are onl y two choi ces, after al l ). He goes so
far as to cal l any attempted appl i cati on of the l aws of I srael to
modern soci ety a grave mi stake. A soci al phi l osophy whi ch i nsi sts
on the contemporary normati ve status of the economi c i nsti tu-
ti onal arrangements of theocrati c I srael i s gravel y i n danger of
overl ooki ng two thi ngs: fi rst, the fact that the pri or economi c
questi on i n modern ti mes i s more sharpl y rel ated to the probl ems
of economi c stabi l i ty, progress, and wel fare i n an economi c struc-
ture of thi ngs whi ch i s natural l y propense to di sequi l i bri um; and
second, that we have consi stentl y to do not wi th the economi cs of
a theocrati c nati on-state, but wi th the economi cs of an obvi ousl y
fal l en soci ety.3
2
Autonomy: Se~-Proclaimed and Legislated
We are sti l l l eft wi th the questi on as to why there i s such di sap-
pr oval of the i dea of a theocracy. There i s nothi ng magi c about the
word theocracy, after al l . I t means, l i teral l y, rule by God. Th e
Greek word theos, God, i s combi ned wi th kratos, meani ng rul e or
s ov er ei gn ty . A th eocr acy , th er efor e, i s nothi ng mor e than the ci vi l
gov er n men ts r ecogn i ti on th a t God r u l es , n ot ma n . I t does n ot
mean ecclesiocracy, the rul e of the i nsti tuti onal church. I t means
32. Vi ckers, Economics and Man, p. 362.
96 Baptized I njation
theonorny, the rul e of Gods l aw. Thi s i ncl udes ci vi l l aw, but i s not
l i mi ted to ci vi l l aw. I t i ncl udes every area of l i fe i n short, i n
ev er y ar ea wh er e God i s s ov er ei gn .
An y on e wh o den i es th at Gods l aw s h ou l d r u l e ov er ci vi l gov-
er nment i mpl i ci tl y i s deny i ng the s ov er ei gnty of God. Thi s s hock s
tr adi ti onal Cal v i ni st pr edesti nar i ans, who swear al l egi ance to the
doctr i n e of Gods s ov er ei gn ty bu t wh o al s o cl i n g to s ome v er s i on
of natur al l aw. Dr . Vi ck er s i s one such tr adi ti onal Cal vi ni st. Thi s
i s wh y tr adi ti on al Cal v i n i s ts wh o don t l i k e wh er e Dr . Vi ck er s i s
tak i n g th em h ad better r eth i n k th ei r own pr es u ppos i ti on s r egar d-
i ng the l aw of God.
Dr . Vi ck er s ar gu men ts fal l i nto th e categor y of n on s en s e. To
asser t that we cannot have the l aws of I sr ael today because we l i ve
i n a fal l en soci ety, i s to decl ar e that I sr ael was not a fal l en soci ety.
Noth i n g cou l d be fu r th er fr om th e tr u th : to th e con tr ar y , i t was
pr eci sel y because of si n that the l aw of God was gi ven i n the fi r st
pl a ce. Ma n , i n h i s r ebel l i on , becomes h i s own God, deter mi n i n g
for h i ms el f wh at i s r i gh t or wr on g, good or evi l (Gen. 3:5). Bu t
then God appear s and decl ar es that He i s the one who r i ghtful l y
d e t e r mi n e s w h a t i s r i gh t or wr on g. Her e, by th e way , i s the l i st:
don t h a v e oth er gods ; n o i dol s ; don t mi suse My n a me ; h on or
par en ts , wi v es an d n ei gh bor s , an d s o for th (Ex . 20:1-17).
Th er e i s on e wa y to ex pl a i n wh y Ch r i s ti a n s den y th a t men
need a theocr acy, meani ng the r ul e of Gods l aw i n ever y spher e of
l i fe: they sti l l cl i ng to the humanist Greek idea that after al l i s sai d
and done, we human bei ngs, though we are si nful , are capabl e of
mak i n g our own way i n l i fe wi thout consul ti ng or enfor ci ng Gods
l a w. Yes , we do n eed s ome Bi bl i ca l pr i n ci pl es to gu i de u s , bu t
these pr i nci pl es ar e for tunatel y so vague as to l eave us wi th the ne-
ces s i ty of deter mi n i n g wh at i s r i ght or wr ong. I n shor t, Jal l en man
is autonomous. Fal l en man i s sover ei gn. Hi s l aw-or der testi fi es to
thi s s ov er ei gnty a l aw-or der whi ch we Chr i s ti ans mus t pr omote
i n the name of democr ati c pl ur al i sm.
Th i s i s p r e ci s e l y wh a t f a l l e n me n h a v e b e e n s a y i n g s i n ce
Ada m a n d Ev e a te th e f or bi dden f r u i t. Th e a n ti -th eocr a ts h a v e
a l wa y s j oi n ed h a n ds wi th th e pa ga n God-h a ter s a n d covenant-
Antinomianism and Autonomy 97
breakers, and they have decl ared tog-ether: We want to l i ve under
any l aw but Ol d Testament l aw. I n s hor t, the anti -theocr ats ar e
i n es ca pa bl y anti nomi ans an ti -Gods l aw an d th er efor e th ey
h a v e become i mpl i ci tl y th e def en der s of th e i dea of a u ton omou s
m a n .
Freedom Und~ God
Does a theocracy l ack checks and bal ances, as some cri ti cs
have argued? Nothi ng coul d be further from the truth. There ar e
cl earl y defi ned and del i neated rol es for the State, for the pri est-
hood, for the tri be of Levi , and for the fami l y. For exampl e, taxes
are l i mi ted (Ex. 30:11-16), peopl e are tol d to be chari tabl e to thei r
nei ghbors who are not as fortunate as they (Deut. 14:22-29), debts
are for a l i mi ted peri od onl y (Deut. 15:1-6), and the l i st goes on.
Rushdoony has poi nted out that Few thi ngs are more com-
monl y mi s under s tood than the natur e and meani ng of theocr acy .
l t i s commonl y assumed to be a di ctator i al r ul e by sel f-appoi nted
me n w h o cl ai m to r u l e for God. I n r eal i ty , th eocr acy i n Bi bl i cal
l aw i s the cl osest thi ng to r adi cal l i ber tar i ani sm that can be had. 3
3
A theocr acy does not mean total i tar i an r ul e by s ome human per -
s on or i ns ti tuti on. Nei ther does i t l ack check s and bal ances . I t i s
the fact that the Scr i ptur es l ay down l i mi ted functi ons for al l
ear thl y i ns ti tuti ons whi ch pr ov i des the neces s ar y check s and bal -
ances i n a fal l en wor l d. For ex ampl e, i t i s beca u s e th e Scr i ptu r e
for bi ds even the ci vi l au th or i ti es tak i n g pr oper ty wh i ch bel on gs to
s omeon e (I Ki n gs 21:3,20; cf. Ex. 20:15) th a t a per s on ma y f i n d
r efu ge an d s ecu r i ty i n pos s es s i n g th e pr oper ty i n th e fi r s t pl ace.
Understandabl y, socialism-promoting anti-theocrats within the church are
repelled by this uey limitation of State power. They hate Bi bl i cal l aw be-
cause they l ove the State.
A theocrati c ci vi l government i s one whi ch acknowl edges the
God of Scr i ptur e as the source of al l l egi ti mate power and author-
i t y . Wr i t e s Ru s h d oon y : Th er e a r e th u s a v a r i ety of s ph er es of
33. The Meani ng Of Theocracy, Chal cedon Posi ti on Paper No. 15, avai l abl e from
Chal cedon, P. O. Box 158, Val l eci to, CA 95251.
98 Baptized I nzation
government under God. These spheres are l i mi ted, i nterdepen-
dent, and under Gods soverei gn government and l aw-word.
They can n ot l egi ti matel y ex ceed th ei r sphere.s* Fr om the human
per s pecti v e, ther e ar e s ev er al i ns ti tuti ons , each wi th equal author -
i ty , th e fu n cti on s of wh i ch ar e car efu l l y s et for th i n Scr i ptu r e.
Hi ghest Law
A theocracy, therefore, i s si mpl y a nati on whi ch acknowl edges
a hi gher l aw than what the State can l egi sl ate or than what auton-
omous men can concei v e of s peci fi cal l y , the l aw of God. Thi s i s
not some vague natur al l aw concept of the l aw of God, a l aw sup-
pos edl y equ a l l y u n der s tood by f a l l en men ev er y wh er e. I t r ef er s
i n s tead to th e r ev eal ed l aw of God, Ol d an d New Tes tamen ts . 35
Remans 13 speaks of ci vi l magi str ates everywhere bei ng s er v an ts
(Gr eek: diakonos) of the Li vi ng God. As servants, they are not free
to mak e th ei r own r u l es an d r egu l ati on s . Th ey ar e r equ i r ed to ac-
k n owl edge th e l aw of th ei r Mak er . Bu t i f al l men ev er y wh er e ar e
to be obedi en t to th e l aw of God, th en al l n ati on s ar e i n es s en ce
theocraci es. I f a Theocracy i s a nati on under obligation to enfor ce
Gods l aw, then Scri pture teaches . . . that al l nati ons are Theo-
craci es . 36
To ar gue agai nst a theocr acy i s to ar gue agai nst havi ng the l aw
of God as our r ul e and gui de. I t i s , i n other wor ds , deny i ng the
God whom we say we wor shi p. I t i s al s o con tr adi ctor y on th e par t
of th os e wh o on th e on e h an d s ay th ey wan t Scr i ptu r e appl i ed to
ev er y ar ea of l i fe, an d wh o th en i nsi st th a t we don t wa n t a n y
k i nd of a theocr acy . Th i s i s mu ddl ed r ea s on i n g.
Wh at we n eed to l ear n i s that al though i deas i n gen er a l a r e
tal k ed abou t, th os e wh o den y th e i dea of a th eocr acy do n ot wan t
to be too s peci fi c abou t wh at th e Bi bl e teach es . On th e on e h an d,
i t i s si mpl e to say we shoul d appl y the Scr i ptur es to ever y ar ea of
34. I dem.
35. Greg L, Bahnsen, By This Standard: The Authors~ of Gods Law Today (Tyl er,
Texas: I nsti tute for Chri sti an Economi cs, 1985).
36. Greg L. Bahnsen, Theonomy in Chnstian Ethics (2nd ed.; Phi l l i psburg, New
Jersey: Presbyteri an & Reformed, 1984), p. 431, emphasi s i n ori gi nal .
Antinomiani.sm and Autonomy 99
l i fe and thought, but then we need to ask some speci ji c questi ons.
Shoul d a 30-year mor tgage be taken i n order to get a home?
Sh ou l d pi eces of paper wi th pi ctu r es of pol i ti ci an s on th em s er v e
a s cu r r en cy ? Wh a t s h ou l d be don e wi th a mu r der er ? Sh ou l d a
th i ef be jai l ed or ma de to r epa y wh a t h e h a s s tol en ? Wh a t i s a
just r ate of taxati on? Ten per cent, or somethi ng l i ke the fi fty per -
ce n t l e v e l s cu r r e n t l y a p p l i ca b l e i n t h e We s t e r n d e mocr a ci e s ?
Wh a t s h ou l d th e ci v i l ma gi s tr a te do wi th h omos ex u a l s ? (Rea d
th ei r econ omi cs book s ? Mak e th em adv i s or s to th e Br i ti s h Tr eas -
ury?) Who i s to deci de these thi ngs? As Chri sti ans we say God
determi nes them; but i f thi s i s true, l et us be spec$c about the
answers.
By What Standard?
The di ffi cul ty many Chri sti ans have i n provi di ng speci fi c Bi b-
l i cal answers ari ses because Chri sti ans want to deny the val i di ty of
l arge porti ons of the Bi bl e. Too many have bought the l i e that the
l aws of I srael were onl y gi ven for Ol d Testament I srael . They
bel i eve these l aws were not gi ven to the genti l e nati ons, ei ther
then or now. But i f thi s i s the case, what di d Jonah preach to
Ni neveh? Coul d he have asked the Ni nevi tes to turn to obedi ence
to Jehovah unl ess Hi s l aw was the standard by whi ch they shoul d
l i ve? I f Gods l aw was gi ven to Ni neveh, then the l aws of I srael
zone i ntended for those outsi de that speci al nati on.
God, through the prophet Amos, condemned the nati ons sur-
roundi ng I srael for thei r si n. Because si n i s si mpl y di sobedi ence to
the l aw of God (I John 3:4), i t i s reasonabl e to concl ude that God
i ntended nati ons outsi de I srael to keep Hi s l aw.
I s i t possi bl e to preach a message of repentance wi thout ji rst
detai l i ng the l aw of God? Thi s i s the standard from whi ch you
have departed; you shoul d turn back to i t. That i s what repent-
ance i s al l about. I s i t any wonder that we hear l i ttl e today about
the need for repentance? The tal k now i s about accepti ng Chri st
or make a deci si on for Jesus. But wherei n l i es the cal l for repent-
ance, for turni ng away from that whi ch is evi l unto that whi ch i~
ri ghteous, the l aw of God?
100 Baptized I nzation
Havi ng deni ed Gods royal l aw (James 2:8) i n favor of hu-
mani sti c l aw, modern Chri sti ani ty has abandoned i ts basi s of ap-
peal to the l ost. I t can no l onger show a fal l en worl d how far short
of Gods perfect standards i t has fal l en, and therefore can no
l onger expl ai n the need of a Savi or (cf. Gal . 3:24). I f man i s not so
bad, he mi ght be abl e to pul l hi msel f i nto heaven by hi s own boot-
straps after al l .
To deny the i dea of theocracy i s thus to deny the l aw of God,
and to deny the l aw of God i s to undermi ne every essenti al tenet
of the Chri sti an fai th. I n short, we must say: No l aw, no God. No
l aw, no si n. No si n, no Savi or. No Savi our, no justi fi cati on. No
justi fi cati on, no sancti fi cati on and adopti on as sons and hei rs of
the Li vi ng God. No l aw, no justi ce and ri ghteousness, for i t i s the
l aw of God whi ch defi nes what i s just and ri ghteous. No l aw, no
eschatol ogi cal ful fi l l ment, for there i s no need to make al l thi ngs
new. The central i ty of the Bi bl i cal message i s thus theocracy, the
rul e of God, as mani fested on earth as i t i s i n heaven: Thy wi l l be
done. Or, i n the words of Dr. Bahnsen, Theonomy i s pi tted
agai nst autonomy; no man can take stand i n between, for no man
can serve two masters (Matt. 6:24). . . . We do not attempt to be
as God, determi ni ng good and evi l ; rather, we gl adl y take our
pl ace beneath the soverei gn Lordshi p of the Tri une God. Hi s
word, not our autonomous reasoni ng, i s our l aw. Theonomy i s
the exclusiue normati ve pri nci pl e, the onl y standard, of Chri sti an
ethi cs. I t i s al l or nothi ng, ethi c or non-ethi c, obedi ence or si n.sr
Concl usi on
I t i s i nstructi ve to note that those who deny the val i di ty of the
i dea of theocracy are usual l y si l ent on the sfi ecfi cs of l i vi ng the
Chri sti an l i fe. A growi ng number of Chri sti ans have been vocal i n
denounci ng aborti on, and ri ghtl y so. But to be a l i ttl e more speci -
fi c, i f the Bi bl e condemns aborti on because i t i s murder, does i t
al so tel l the ci vi l magi strate how he shoul d treat such murderers?
Or are the ci vi l authori ti es free to determi ne for themsel ves how
37. I bid., p. 306, emphasi s i n ori gi nal .
Antinomianism and Autonomy 101
they wi l l treat those who practi ce aborti on?
A si mi l ar di ffi cul ty appears for Dr. Vi ckers. Havi ng deni ed
the i dea of a theocracy i n order to deny the speci fi cs of Ol d Testa-
ment l aw, i t shoul d not surpri se us that l i ttl e use i s made of the
Scri ptures to provi de expl i ci t gui del i nes on how our economi cs
shoul d be devel oped. We have observed earl i er that Keynes was
hosti l e to Bi bl i cal Chri sti ani ty, and i t comes as no surpri se to fi nd
that he was not i nformed at any poi nt by the l i ght of Hol y Wri t.
But to fi nd a professi ng Chri sti an payi ng l i p servi ce to the i ntel l ec-
tual ravi ngs of an economi c, phi l osophi c, and moral Phi l i sti ne i s
somewhat di sconcerti ng, to say the l east.
7
ECONOMI C LAW
But the scriptural principles do not imp~ that an inherited societal
structure is necessari~, at any given time, to be regarded as being in
full accordance with the preceptive law of God. To ar gue that they did
wou[d overlook entire~ the pervasive operation in the world of the
cankerous principle of sin, and the need for society continually to be
returned to a closer conformity to the patterns of rectitude and integrip
and righteousness that God has prescribed. 1
I n di scussi ng Dr. Vi ckers vi ew of economi c l aw, we must gi ve
i ni ti al attenti on to hi s vi ew of Bi bl i cal l aw. He says that he i s a
Chri sti an. He says that he i s argui ng Bi bl i cal l y. I argue that he i s
argui ng humani sti cal l y, from start to fi ni sh, and that thi s i mpl i ci t
humani sm i s vi si bl e i n hi s vi ew of l aw, both Bi bl i cal and eco-
nomi c. He contrasts hi msel f wi th Dr. North and Rev. Rushdoony
throughout hi s book. He wrote hi s book to refute them. They be-
l i eve i n Bi bl i cal l aw and economi c l aw. He bel i eves i n nei ther.
Thi s i s the bottom l i ne i n understandi ng why Vi ckers system
makes no sense, ei ther Bi bl i cal l y or economi cal l y.
You shoul d pay cl ose attenti on to hi s l i ne of argumentati on.
Fi rst, no i nheri ted soci etal structure i s i n fi l l accordance wi th
the percepti ve l aw of God. Obvi ousl y not. We l i ve i n a worl d of
si n. No human i nsti tuti on si nce the Fal l has been perfect. I s thi s
any reason to argue that Gods l aw doesnt appl y? Shoul dnt we
argue i nstead that thi s i s why Gods l aw must be appl i ed to i nsti tu-
1. Economzcs and Man, pp. 130-31.
103
104 Baptized I ny7ation
ti ons? As we shal l see shortl y, this line of argumentation becomes a
smoke screen for lawlessness. I t pl aces Dr. Vi cker s i n the camp of the
radi cal Anabapti sts, who al so have argued for four centuri es that
because of the si nful ness of human ci vi l government and even
church government, the y are moral l y requi red to retreat from the
responsi bi l i ti es of appl yi ng Gods reveal ed l aws i n soci ety.
Second, he concl udes that we therefore need to promote pat-
terns [ah, what a gl ori ousl y unspeci fi c word I . H.] of recti tude
and i ntegri ty and ri ghteousness. Patterns. Not the speci fi c l aws of
God as found i n the Ol d and New Testament, but patterns. I t i s al l
so vague. I t i s al l so conveni ent. I t i s al l so l awl ess. Dr. Vi ckers
wrote thi s book to convi nce Chri sti ans that speci fi c Ol d Testa-
ment l aws are forever abol i shed; thi s i s the message of the fi nal
chapter of Economics and Man. Dr. Vi ckers i s a sel f-consci ous anti-
nomian wi th respect to Gods speci fi c, reveal ed, concrete l aws.
Thi rd, the speci fi c, reveal ed l aws of God wi l l never be abl e to
operate i n soci ety, and furthermore, they should not:
I n the thi rd pl ace, we menti on agai n by way of summary a poi nt
whi ch has al r eady been made i n ear l i er chapter s. We do so bri efl y and
wi thout further argument at thi s ti me because the poi nt does have cri ti c-
al l y i mportant si gni fi cance for the preci se economi c probl ems wi th whi ch
we have been concerned. Thi s i s the fact that we have found Rushdoonys
argument consi stentl y to commi t the mi stake of argui ng from the sanc-
ti ty and perpetui ty of the moral l aw to the sancti ty and perpetui ty of cer-
tai n of the i nsti tuti onal forms i n whi ch the pragmati c i mpl ementati on of
that l aw fi rst came to expressi on. We have seen, for exampl e, that thi s
defect, whi ch we saw i n some respects to be associ ated wi th the economi c
arguments of Gary North, was i nstanced i n Rushdoonys pl ea for metal -
l i c money and hi s vi ew of the i mmoral i ty and theft attached to un-
backed paper money, and to some of hi s proposi ti ons regardi ng scri p-
tural l y admi ssi bl e forms of taxati on. A soci al phi l osophy whi ch i nsi sts
on the contemporary normati ve status of the economi c i nsti tuti onal ar-
rangements of theocrati c I srael i s gravel y i n danger of overl ooki ng two
thi ngs: fi rst, the fact that the pri or economi c questi on i n modern ti mes i s
more sharpl y rel ated to the probl ems of economi c stabi l i ty, progress, and
wel fare i n an economi c structure of thi ngs whi ch i s natural l y propense to
di sequi l i bri um; and second, that we have consi stentl y to do not wi th the
Economic Law 105
economi cs of a theocrati c nati on-state, but wi th the economi cs of an ob-
vi ousl y fal l en soci ety.
2
Hi s l ogi c, obvi ousl y, i s preposterous. Hi s contrast between the
economi cs of anci ent I srael and todays economi cs i s nothi ng short
of stupi d. Anythi ng thi s stupi d i s the work of a man who i s desper-
ate to avoi d the cl ear teachi ng of the Bi bl e regardi ng l aw. Ques-
ti on: Wasnt economi c l i fe i n Ol d Testament I srael equal l y con-
cerned wi th the probl ems of economi c stabi l i ty, progress, and
wel fare?
Furthermore, what i s uni quel y modern about a structure of
thi ngs whi ch i s natural l y propense to di sequi l i bri um? Wasnt l i fe
i n anci ent I srael equal l y propense to di sequi l i bri um from a
Keynesi an vi ewpoi nt, or equal l y propense toward equi l i bri um
from a tradi ti onal free market vi ewpoi nt? Can you i magi ne Dr.
Vi ckers standi ng i n front of a conference of economi sts Keynes-
i ans or any other school and argui ng that modern economi cs
onl y appl i es to the hi stori cal worl d after the cross of Chri st, and
al so outsi de of I srael pri or to the cross, but that a di fferent ki nd of
economi cs appl i ed i n I srael from Moses to the resurrecti on? Re-
formed theol ogi ans such as Dr. Vi ckers fri end Meredi th G. Kl i ne
have taught i mpl i ci tl y such a dual i sti c concept of l aw,s but Mere-
di th Kl i ne has never tri ed to be an economi st.
Fi nal l y, wasnt the economi cs of a fal l en soci ety operati ve
i n I srael , bejore the death and resurrecti on of Chri st? I n fact,
wasnt I srael even more si nful pri or to Chri sts resurrecti on? Di dnt
Chri sts resurrecti on defi ni ti vel y deliuer the whol e worl d from the
ki l l i ng effects of si n? Arent Chri sti ans worki ng out Progressi ve@
Chri sts defi ni ti ve vi ctory over si n at the resurrecti on?
2. I btd. , pp. 361-62.
3. Meredi th G. Kl i ne, The Structure of Biblical Authori~ (2nd ed.; Grand Rap-
i ds, Mi chi gan, 1975), Pt. I I , ch. 3: The I ntrusi on and the Decal ogue. Kl i nes
posi ti on i s i mpl i ci tl y a form of di spensati onal i sm, but wi th the peri od of Moses to
Chri st as the great parenthesi s, rather than the Church Age. For an anal ysi s of
Kl i nes anti nomi ani sm, see Greg L. Bahnsen, M. G. Kl i ne on Theonomi c Pol -
i ti cs: An Eval uati on of Hi s Repl y, The J ournal of Chridian Reconstruction, VI (Wi n-
ter 1979-80); Bahnsen, Appendi x 4 i n Theonomy in Chnstian Ethics (2nd ed.; Phi l -
l i psburg, New Jersey: Presbyteri an & Reformed, 1984),
106 Baptized I nz.ation
What Dr. Vi ckers assumes throughout hi s book i s i mpl i ci tl y
hereti cal , namel y, that the post-resurrection world of Chnstiani~ is in-
comparab~ more fallen than the pre-Resurrection world of ancient I srael. I n
other words, the reveal ed l aws of God, as wel l as the l aws of eco-
nomi cs, no l onger appl y to the Chri sti an worl d i n the same stri ct
sense as they appl i ed i n anci ent I srael , because todays world is
unique~ fallen. I t i s a fantasti c l i ne of argumentati on, and he re-
turns to i t throughout the book.4 Why? Because antinomian scholars
are in revolt against the law of God, and they will serious~ consider euen this
line of reasoning, despite its obvious heresy, in order to escape their own
responsibility to preach, obey, and conuince the ciuil government to enforce
Biblical law.
Thi s same wi l l i ngness to accept heresy i s true of pi eti sm i n
general , and of the ol der fundamental i sm i n parti cul ar, whose
theol ogi ans have had to repl y on si mi l arl y fl awed arguments to
justi fy thei r own i nacti on and l ack of domi ni on responsi bi l i ty. But
Reformed theol ogi ans usual l y di sti ngui sh themsel ves from funda-
mental i sts, procl ai mi ng thei r commi tment to a broader hi stori cal
and more wel l -rounded fai th i n Chri st. They del ude themsel ves.
What i s i mportant at thi s poi nt i s that the-reader recogni ze Dr.
Vi ckers use of a three-step argument. Fi rst, thi s worl d i s i mper-
fect. Second, the l aws of God therefore do not appl y. Thi rd, the
l aws of God wi l l never rul e soci ety. What you need to recogni ze i s
thi s: he also uses this same three-step argument to deny the existence of eco-
nomic law.
I mperfect Law I snt Law
The key words i n the fol l owi ng argument are automati c equi -
l i brati on:
We have argued at some l ength that the exi genci es of si n i n the fal l en
soci ety wi th whi ch we are concerned i mpl y that there i s no reason to be
confi dent that, i f l eft to i tsel f, the economi c system wi l l automati cal l y
equi l i brate at a hi gh l evel of i ncome, producti on, empl oyment, and eco-
nomi c wel far e. Our posi ti on i mpl i es, i n other wor ds, that we have no
4. Vi ckers, pp. 48, 73, 130-31, 357-62.
Economic Law 107
reason to be confi dent i n the effecti ve operati on of the i nvi si bl e hand of
Adam Smi th and the effi cacy of the assumpti ons of automati c harmony
on the basi s of whi ch the cl assi cal and neo-cl assi cal school s of economi c
thought proceeded. As we have seen, a more percepti ve readi ng of eco-
nomi c hi story shows that a system of uni nhi bi ted / aissez faire has never
exi sted and cannot properl y be expected to exi st. The proper defi ni ti on
of the economi c functi ons of the God-or dai ned i nsti tuti on of the state
wi l l therefore fi gure promi nentl y i n our anal ysi s. s
I hate to bri ng i t up agai n, but cl assi cal economi cs di d not rest
on the assumpti on of any automati c harmony. No textbook ac-
count of the hi story of economi c thought argues that cl assi cal
economi sts (except the pamphl eteer Basti at) ever used such argu-
ments. What cl assi cal economi sts di d argue i s that the competi ti ve
market pressures that are produced by the quest for profi t serve as
l i mi ti ng devi ces. Thi s free market competi ti on pl aces pressures on
busi nessmen to serve the needs of customers. (I f thi s argument i snt
the essence of Adam Smi ths Wealth of Nations, what i s?) Not onl y i s
there no automati c equi l i brati on, the very lack of automati c equi -
l i brati on i n the market i s what offers the hope of profi t and the
threat of l oss to busi nessmen. I f i t were automati c, there woul d be
no entrepreneurshi p, no seeki ng out of profi t opportuni ti es. G
The cl assi cal economi sts certai nl y argued that there i s a tend-
ency for pri ces to become equal , and for the rate of return on i n-
vestments to become equal , and for wage rates to become equal
for the same goods, services and risks. They ar gued you wont bel i eve
thi s! that i f I can market a product for an ounce of si l ver per
uni t, and I try to sel l i t for fi ve ounces, whi l e you can al so market
i t for one ounce, you wi l l have an i ncenti ve to take away some of
the sal es I woul d generate. You wi l l probabl y attempt thi s by sel l -
i ng uni ts for somethi ng under fi ve ounces a pi ece. This is the essence
of the classical economists argument. I t was Keynes revol uti on (fol -
l owi ng Parson Mal thus, Chal mers, and a few other l esser-known
temporay general gl ut economi sts) to deny that the market stead-
5. I bid., p, 195.
6. I srael Ki rzner, Competition and Entrepreneurship (Chi cago: Uni versi ty of
Chi cago Press, 1973).
108 Baptized I ry?ation
i l y cl ears i tsel f of unsol d consumer goods, unsol d capi tal goods,
and unempl oyed workers by means of thi s competi ti ve pri ci ng
process. Dr. Vi ckers conti nues to argue as Keynes di d: inaccurate~.
Thi s process of competi ti ve pri ci ng and seeking out profi t oppor-
tuni ti es i s not automati c. On the contrary, the very exi stence of
profi t and l oss opportuni ti es, argue the Austri an School econo-
mi sts, i ndi cates that the market does not automati cal l y do anythi ng.
I t takes profi t-seeki ng entrepreneurs to accompl i sh the so-cal l ed
equi l i brati on, whi ch at most i s a tendency toward equi l i bri um a
mental construct whi ch can never mani fest i tsel f i n hi story. T Dr.
Vi ckers knows about the Austri an School economi sts. He wrote hi s
book to refute Dr. North, and Dr. North fol l ows the Austri ans i n
thei r expl anati on of market pri ci ng and entrepreneurshi p. But not
a word of thi s l i ne of reasoni ng can be found i n Economics and Man.
Dr. Vi ckers returns to a si mi l ar l i ne of reasoni ng (i f i t can be
cal l ed that) whi ch he used to di smi ss Bi bl i cal l aw. Poi nt one, he
says that there i s no such thi ng as automati c equi l i bri um, just as
there i s no such thi ng as si n-free soci eti es today. Then he fol l ows
hi s previ ous l i ne of reasoni ng. Poi nt two, si nce there i s no perfec-
ti on whi ch everyone knows and no one has ever chal l enged,
l east of al l Ol d Testament prophets or Adam Smi th he then con-
cl udes that there can never be a free market soci ety whi ch i s capa-
bl e of matchi ng what State i nterventi on can bri ng i n terms of con-
servati on, equi ty, and growth.
Conser vati on, devel opment, and equi ty, we have sai d, together ex-
haust the economi c pr obl em. . . . For to envi sage the exi stence of a
mor e or l ess centr al i zed economi c pol i cy-maki ng body whi ch has l egi ti -
mate functi ons to perform i s to acknowl edge that, as we recogni zed i n
our cri ti que of hi stori cal cl assi cal and neo-cl assi cal economi c thought, we
have no confi dence that i f l eft to i tsel f a compl ex economi c system wi l l
automati cal l y equi l i br ate at a condi ti on of hi gh empl oyment, gener al -
i zed pr osper i ty, and maxi mum economi c wel far e. I t wi l l ther efor e be
7. I t i s not just the Austri an School economi sts who use such arguments. The
cl assi c formul ati on i s found i n Uni versi ty of Chi cago economi st Frank H.
Kni ghts 1921 masterpi ece, Risk, Uncertain~ and Projt.
Economic Law 109
necessary to consi der, at l east i n outl i ne, what mi ght be understood as
the l egi ti mate economi c functi ons of the state. B
No Appeal to Princ@e
Let us revi ew. Dr. Vi ckers has argued that because thi s worl d
i s si n-fi l l ed, the speci fi c provi si ons of Gods l aw, as r eveal ed at
l east i n the Ol d Testament, no l onger appl y. Thi s means that we
cannot l egi ti matel y appeal to the fi xed l aw of God i n order to
reduce the power of the State, e.g., taxati on above the lQ~o level
or i ts i mposi ti on of fi at paper (or el ectroni c) money. The States
l aw i s soverei gn over Gods l aw, or Gods l aw (emeri tus).
Dr. Vi ckers si mi l arl y argues that because there i s no automati c
equi l i bri um i n a real -worl d economy, i t i s therefore i l l egi ti mate to
appeal to fi xed free market pri nci pl es i n cri ti ci sm of the State.
I n short, it is illegitimate to appeal tojxedprinciples in criticism of the
State. Thi s, by the way, was al so the opi ni on of Keynes. He hated
pr i nci pl es, especi al l y i n sexual affai rs and I do mean a~ai rs but
al so i n econ omi cs . Her e i s wh at h e wr ote i n 1930 con cer n i n g eco-
n omi c pr i n ci pl es :
Al l the same I am afr ai d of pr i nci pl e. Ever si nce 1918 we, al one
amongst the nati ons of the worl d, have been the sl aves of sound general
pr i nci pl es r egar dl ess of par ti cul ar ci r cumstances. We have behaved as
though the i nter medi ate shor t per i ods of the economi st between our
[one?] posi ti on of equi l i bri um and another were short, whereas they can
be l ong enough and have been before now to encompass the decl i ne
and downfal l of nati ons. Nearl y al l our di ffi cul ti es have been traceabl e to
an unfal teri ng servi ce to the pri nci pl es of sound fi nance whi ch al l our
nei ghbors have negl ected. . . . Wasnt i t Lord Mel bourne who sai d that
No statesman ever does anythi ng real l y fool i sh except on pri nci pl e ?9
I n Dr. Vi ckers scheme, all roads lead to the Stati. There are onl y
two roads for soci eti es, once they have abandoned the fi xed gui de-
l i nes of Bi bl i cal l aw: i nto stati st tyranny, or i nto l awl ess anarchy
8. Vi ckers, Economics and Man, p. 147.
9. Ci ted by D. E. Moggri dge, The Return to Gold, 1925: The Formation of Eco-
nomic PoliV and its Critics (Cambri dge: At the Uni versi ty Press, 1969), p. 90.
110 Baptized I nzation
(from whence peopl e fl ee back to tyranny). Thi s i s what both Rev.
Rushdoony and Dr. North have argued for twenty years, and Dr.
Vi ckers book i s a l arge grab-bag of footnotes provi ng thei r poi nt.
At thi s poi nt, we can begi n to anal yze the arguments Dr.
Vi ckers uses i n denyi ng the exi stence of economi c l aw. These con-
sti tute poi nt three ,
Defi ni ti ons
One di ffi cul ty encountered i n anal yzi ng Dr. Vi ckers work i s
si mi l ar to that found i n Keynes General Theo~. Anyone who has
tri ed to read ei ther book wi l l know that both are si ngul arl y l acki ng
i n a l ogi cal arrangement of i deas. I n addi ti on, because there i s a
defi ci ency i n defi ni ti ons of termi nol ogy used, i t i s a mi stake to i m-
agi ne that words are used i n thei r hi stori c sense or i n thei r usual
meani ng. I deas i ntroduced i n an earl i er part of Dr. Vi ckers book
are dropped for a whi l e and returned to l ater on as i f they had
been expl ai ned. But nowhere does Dr. Vi ckers real l y de$ine the ter-
mi nol ogy he i s usi ng. Thi s means that i t i s very di ffi cul t to ascer-
tai n at ti mes preci sel y what Dr. Vi ckers i s tal ki ng about. I n fact, i t
i s al most i mpossi bl e to come to gri ps wi th some of Dr. Vi ckers
vi ews. Somehow we have to make our way through the i ntri cate
maze of i deas and weed out the vari ous strands of hi s thought to
determi ne what he means. I n order to chal l enge hi s theori es,
there i s the consi stent need to di scuss prel i mi nary matters that
have a di rect beari ng on the i deas propounded.
Economic Law
For exampl e, a typi cal hi gh school knowl edge of economi cs, or
even some i deas gl eaned from the fi nanci al pages of a l ocal news-
paper or fi nanci al journal , woul d provi de the thought that there
are such thi ngs as economi c l aws, especi al l y the l aws of suppl y
and demand. A common understandi ng of these l aws woul d be
that they are somewhat l i ke sci enti fi c l aws, i n that they are a regu-
l ar occurrence i n the worl d, and come what may, the l aws of suppl y
and demand remai n unchanged.
Economic Law 111
Dr. Vi ckers woul d l i ke to chal l enge that bel i ef. But there does
not exi st a l aw of economi cs i n the same sense as, to use Dr.
Vi ckers exampl e, the l aw of gravi ty.l o True, the l aw of gravi ty i s
an unchangeabl e factor i n sci enti fi c i nvesti gati on, and any sci en-
ti st wanti ng to send rockets to the moon, for i nstance, must take
thi s l aw i nto consi derati on. Laws such as thi s al l ow the sci enti st to
make the necessary cal cul ati ons for such a venture, and the rea-
son for thi s i s rel ati vel y si mpl e. I f there were no l aws i n the sense
i ndi cated, thi s physi cal worl d woul d operate by pure chance, and
i f thi s uni verse i s pure chance, the possi bi l i ty of sci enti fi c i n-
vesti gati on i s, i n pri nci pl e, i mpossi bl e. The physi cal sci ences are
dependent upon the fact that when sci enti sts make an i nvesti ga-
ti on, or conduct an experi ment, there are certai n gi vens whi ch
they can count on, thi ngs that wi l l not change. Take as an exam-
pl e the attempts to pl ace men on the moon. Certai n cal cul ati ons
are necessary, based on the fact of certai n l aws, one of those l aws
bei ng i n thi s case the l aw of gravi ty.
The i dea of l aws i s i nherentl y Chri sti an i n ori gi n. I t i s no co-
i nci dence that the ri se of sci enti fi c i nvesti gati on has taken pl ace i n
those countri es heavi l y i nfl uenced by the Protestant Reformati on. 11
Orthodox Chri sti ani ty teaches that God control s whatsoever
comes to pass accordi ng to the counsel of Hi s own wi l l (Eph. 1:11).
I t does not i nvol ve any vi ol ati on of Scri pture to make the deduc-
ti on that we creatures may observe certai n occurrences i n Gods
uni verse and concl ude that they wi l l appear wi th some regul ari ty.
Observati on then becomes the basi s for determi ni ng the outl i nes
of these regul ari ti es, and those thi ngs whi ch do recur are cal l ed
l aws . We do not hol d them on the same l evel as the l aws of
Scri pture, for that i s the unchangeabl e Word of God. But on the
creaturel y l evel , we may ri ghtl y say that a regul ar occurrence i s a
l aw i n that sense. What we must do, however, i s consi der that
because these l aws ori gi nate i n the observati ons of fi ni te human
10. Vi ckers, Economics and Man, p. 91.
11. For many ci tati ons to the schol arl y l i terature, see the essays by E. L. Heb-
den Tayl or and Charl es Dykes i n The J ournal of Chri sti an Reconstmctton, VI (Sum-
mer 1979).
112 Baptized I nflation
bei ngs they may be wrong to some degree, and further observati on
mi ght bri ng new evi dence to l i ght whi ch coul d cause us to modi fy
or abandon that l aw.
Dr. Vi ckers, however, wants us to bel i eve that there are no
such l aws as thi s i n economi cs. There are, he says, onl y stati sti cal
r egul ar i ti es .2 Now, i f Dr. Vi ckers means by thi s that we can
never be absol utel y sure that any l aw di scovered by autonomous
man wi l l operate i n the future, he may have a poi nt, for mans
knowl edge, unl ess grounded i n Scri pture, cannot be guaranteed
to be 100 percent correct. But thi s i s not what he i s getti ng at. He
i s al so cor;ect i n argui ng that we cannot di scover a one to one fi t
between fi xed l aw and the external real m. But thi s i s al so true for
chemi sts, bi ol ogi sts, and every other sci enti fi c i nvesti gator. He
may mean that men, bei ng responsi bl e agents before God, do not
act i n a predi ctabl e fashi on. Thi s, too, i s qui te true. Thi s i s what
Mi ses and the Austri an economi sts have argued from the begi n-
ni ng.
So just what i s Dr. Vi ckers tryi ng to prove? He i s tryi ng to
prove that the acti ons of men i n a free market an economy
whi ch i s protected by l aw from vi ol ence and fraud are not real l y
predi ctabl e, compared to a bureaucrat-dominated planned economy. He i s
tryi ng to prove that men who compete i n a mi ni mum-State free
market envi ronment do not usual l y produce goods and servi ces
that benefi t thei r nei ghbors.
Free market economi sts have from the begi nni ng appeal ed to
economi c l aw, by whi ch they, too, mean stati sti cal regul ari ti es,
but they al so i mpl i ci tl y meanl aw i n a broader sense: moral ~ valid
legal and institutional arrangements that promote freedom and ther~ore the
benejit of men in socie~. Onl y by denyi ng the exi stence of regul ari ti es
that are produced by acti ng individuals i n a free market envi ron-
ment, can Dr. Vi ckers get us to accept those Keynesi an theori es
he propounds theori es of human acti on that al l ow the State to
step i n and determi ne the true boundari es of the l atest regul ar-
i ti es, wi thout reference to the l aw of God.
12. Vi ckers, p. 93.
Economic Law 113
Gi ffens I rrel evant Theoreti cal Paradox
A cl oser l ook at Dr. Vi ckers proof for the deni al of the l aws
of suppl y and demand, what he cal l s an exception to the l aws, i s
requi red i n order to determi ne i f he does i n fact substanti ate hi s
al l egati on. I magi ne, he says, a poor communi ty whi ch has a rel a-
ti vel y l ow l evel of annual real i ncome per capi ta, and whi ch i s
forced to subsi st mai nl y on potatoes, or some other easi l y obtai n-
abl e food. The l aw of suppl y and demand tel l s us that i f the pri ce
of potatoes drops, other thi ngs remai ni ng equal , more potatoes
wi l l be demanded. Not necessari l y, says Dr. Vi ckers. I f the potato
pri ce drops, peopl e woul d have more di sposabl e i ncome avai l abl e
to spend, and they may therefore purchase substi tutes for
potatoes. Fewer potatoes wi l l then be demanded. Wi th potatoes
sel l i ng for l ess, there has been, Dr. Vi ckers accuratel y concl udes,
an i ncrease i n the real i ncome of the peopl e. But, adds Dr. Vi ck-
ers, thi s purchase of potato substi tutes may cause a di mi ni shi ng
of the demand for potatoes.
I f such were the case i t woul d have been shown that the fal l i n potato
pri ces has l ed to a reducti on rather than an i ncrease i n the quanti ty of
potatoes demanded. I n such an event the economi sts normal l aw of de-
mand woul d have been shown not to hol d i n that case at al l . . . . But
other possi bl e excepti ons to the normal l aw of demand coul d be exami ned.
A reducti on i n the pri ce of margari ne, for exampl e, may l ead to an i n-
crease i n the consumpti on of butter and to an actual reducti on i n the
consumpti on of margari ne. 13
Thi s statement i s amazi ng. Dr. Vi ckers i s sayi ng that the way
to run a cl earance sal e may be to rai se pri ces i nstead of l oweri ng
them. (I can vi sual i ze the banner across the front of the store:
Sel l i ng Everythi ng Fast Pri ces Now Doubl ed!) We shoul d note
that he i s not tryi ng to deny compl etel y the fact that l oweri ng the
pri ce i s the best way to attract potenti al buyers, but he i s seri ousl y
suggesti ng there may be i nstances where pri ce reducti ons mi ght
l ead consumers to purchase other goods of a si mi l ar nature.
13. I bid., p. 92.
114 Baptized I nzation
He i s pl ayi ng i ntel l ectual games at the expense of the r eader s
understandi ng of economi cs. Yes, in theory, such a thi ng i s possi -
bl e. I n the l i terature, thi s i s cal l ed the Gi ffen Paradox. I t has been
around for over a century. For i nstance, a consumer good may be
very i mportant i n a poor fami l ys basket of goods . I t i s not a
hi ghl y val ued consumer good, but i t i s al l thi s poverty-stri cken
fami l y can afford. The pri ce i s l owered, so the fami l y has extra
money to spend. I t i s just enough extra money to enabl e them to
reduce thei r purchases of thi s Gi ffen good , and buy more of a
good that they real l y wanted al l al ong, but coul d not afford.
Let the reader be forewarned: duri ng the l ast century of eco-
nomi c anal ysi s, no economi st has yet presented a single exampl e of a
real -l i fe si tuati on i n whi ch Gi ffens Paradox has been demon-
strated. Yes, when i t i s di scussed at al l , potatoes are usual l y
offered as an exampl e of the type of Gi ffen good that mi ght exi st,
#we coul d fi nd one i n real l i fe . But no economi st has ever offered
any cl ear-cut exampl e from economi c hi story of potatoes bei ng
treated thi s way. The Gi ffen Paradox has al ways been an exampl e
of an i ntel l ectual pecul i ari ty of economi c reasoni ng. But it has no
impact i n the real world. Furthermore, i t i s such an obscuri ty i n the
hi story of economi c l ogi c that al most no textbook i n the hi story of
economi c doctri nes, thought, or anal ysi s wi l l even l i st i t i n the i n-
dex. Yet Dr. Vi ckers i s seri ousl y offeri ng i t to buttress hi s case
agai nst the real-world operati ons of free market capi tal i sm. Hi s
readers the vast majori ty of whom Dr. Vi ckers knows wi l l not
have been formal l y trai ned i n economi cs are presented wi th an
oddi ty of economi c theory, as i f i t were a real i ty i n economi c prac-
ti ce. Thi s shoul d i ndi cate Dr. Vi ckers approach to economi cs: al l
theory (mostl y i naccurate), no real i ty. Al l argument (mostl y con-
fused), no facts. Hi s exampl es throughout the book are enti rel y
hypotheti cal . He makes them up as he goes along. Qui te frankl y, so di d
Keynes. I n short, Douglas Vickers cannot be trusted.
Unempl oyment
Dr. Vi ckers appl i es thi s same fal l aci ous reasoni ng to the un-
empl oy men t s i tu a ti on , a n d con ten ds th a t a wa ge r edu cti on ma y
not neces s ar i l y caus e an i ncr eas e i n empl oy ment.
Economi c Law 115
For i f acti on i s taken to cause workers i ncomes to be l owered, thei r
expendi tures must al so be l ower, and i t must therefore be recogni zed
that the assumpti on of a conti nuati on of general expendi ture l evel s i s not
compati bl e wi th the assumpti on of a general i zed reducti on of wage rates
i n the manner proposed. I t therefore fol l ows that rather than a general -
i zed reducti on i n the pri ce of l abor i nduci ng an i ncrease i n the demand
for l abor, preci sel y the opposi te effect may fol l ow. 14
(Arent you happy that you never had to major i n economi cs?
Arent you gl ad nobody ever taught you to wri te thi s i ncoherentl y?)
I contend that Dr. Vi ckers si mpl y makes up these exampl es.
He fakes them. What does he mean, i f acti on i s taken to cause
workers i ncomes to be l owered? What sort of acti ons? By whom?
Wi th what resul ts? I f he means a si ngl e pl ant or fi rm, then work-
ers wi l l stay on the job onl y i f they bel i eve that thi s i s the best deal
avai l abl e to them. I f i t real l y i s the best deal , then the employer had
been ou~paying them earlier. Why not stop payi ng more for
-
so
m
e-
thi ng i f you get the opportuni ty? Workers certai nl y stop payi ng
extra when the y go shoppi ng. That i s what sal es and bargai ns
are al l about, contrary to Dr. Vi ckers Gi ffen good worl d.
But what i f the workers see better opportuni ti es, now that
thei r wages have been l owered? They wi l l qui t. The empl oyer wi l l
be gi ven a l esson i n market competi ti on. Hi s competi tors wi l l be
gi ven an opportuni ty to buy a resource from hi m: l aborers.
General Wage Reductions
What i s Dr. Vi ckers tal ki ng about? (I fi nd that I ask thi s ques-
ti on to mysel f on al most every page of Economics and Man. ) I s he
tal ki ng about a general reducti on of wages? How coul d such a gen-
eral reducti on i n wages be accompl i shed? By an empl oyers cartel
of vi rtual l y every empl oyer i n the country? Ri di cul ous! I magi ne
the cartel costs of hol di ng that scheme together (l et al one the
astronomi cal costs of pul l i ng the cartel together i n the fi rst pl ace).
You can see every empl oyer joi ni ng, promi si ng to hol d wages
down, and secretl y thi nki ng to hi msel f Al l ri ght, you i di ots, go
14. I bid., p. 93.
116 Ba@zed Inzation
ahead and drop the wages of your workers. Meanwhi l e, I wi l l
offer your best workers secret cash pay-offs for qui tti ng your fi rm
and comi ng to work for me. (Look, i f Dr. Vi ckers i s goi ng to
argue throughout hi s book about the si nful greed of empl oyers, at
l east al l ow me to gi ve an anal ysi s based on si nful greed.) That car-
tel woul d l ast about a month. Maybe. Possi bl y l ess.
What about these general wage reducti ons? How general i s
general ? Every wage-earni ng worker i n soci ety? We have
al ready seen that a general wage reducti on of thi s sort cannot be
sustai ned, and therefore i s unl i kel y to be attempted, unl ess l abors
producti vi ty has fal l en, or unl ess the demand for l abors output
has fal l en (e.g., i n a ti ny nati on whi ch exports onl y one or two
i tems, and whi ch i s al so hi ghl y dependent on i ncome from forei gn
sal es). He never tel l s us how general wages coul d be depressed by
busi nessmen. Wages can be depressed by governments, of course,
but then we are not tal ki ng any l onger about free market capi tal -
i sm. We are tal ki ng i nstead about Dx Vickers recommended alternative
to free market capi tal i sm, the State-pl anned economy.
Local Wage Reductions
I f he means that the wages of a few workers, or workers i n a
regi on, or workers i n a fai l i ng i ndustry, can have thei r wages l ow-
ered, he i s correct. Thei r wages drop because market demand for
l abors output has dropped. I t i s consumers who drop l abors wages;
empl oyers are onl y the mtiidlemen i n the transacti on between work-
ers and consumers. Laborers, l i ke retai l sel l ers, understand a r ul e
of economi cs whi ch Dr. Vi ckers constantl y i s at pai ns to i gnore or
deny: I f you cant sel l i t, drop i ts pri ce! Thi s l aw yes, l aw
appl i es to l abor, too.
What Dr. Vi ckers i s suggesti ng here i s that a spec~c wage re-
ducti on may not necessari l y be accompani ed by a reducti on i n
pri ces general l y, whi ch we must admi t i s a theoreti cal , and often
practi cal , possi bi l i ty. Maybe the fi rm whi ch empl oys them i s cl ose
to bankruptcy. Maybe i t needs a commi tment from workers to
l ower thei r demands for a whi l e, so that the fi rm can get enough
profi t to pay the bankers who are fi gurati vel y bangi ng at the door.
Economic Law 117
Workers may be wi l l i ng to do thi s temporari l y i n order to save
thei r jobs, i f the empl oyer and hi s accountant can prove the case
of i mmi nent col l apse. Thi s i n no way di sproves economi c l aw.
Local wage reducti ons that are not accompani ed by pri ce re-
ducti ons i n the goods and servi ces produced by l aborers who have
thei r wages cut wi l l usual l y resul t i n l ower sal es and l ower profi ts.
The average reader may not understand thi s aspect of free market
capi tal i sm, but i t i s true. I t i s normal l y a mi stake for busi nessmen
to l ower the wages of hi s workers unl ess there has been a drop i n
l abors producti vi ty or a drop i n the demand for l abors output. By
reduci ng l abors wages, except as a l ast-di tch effort to save a fi rm
or i ndustry from bankruptcy, busi nessmen create a si tuati on i n
whi ch the more producti ve empl oyees wi l l begi n to seek better op-
portuni ti es. Busi nessmen wi nd up wi th the l ess producti ve work-
ers. I n short, you get what you pay for. I f a busi nessman pays hi s
workers as i f they were l ow-producti vi ty peopl e, he wi l l eventual l y
wi nd up wi th a work force fi l l ed wi th l ow-producti vi ty peopl e.
Hi stori cal l y, capi tal i sm has produced condi ti ons i n whi ch hi gh
wages, l ow pri ces, and hi gh profi ts accompany each other. Thi s i s
what i nnovati on i s al l about. Thi s i s why Henry Ford coul d revo-
l uti oni ze the automobi l e i ndustry and al so the face of the West
when he rai sed workers wages to an astoundi ng fi ve dol l ars a
day, put them on a mass producti on l i ne, and dropped the pri ce of
the ti n Li zzi e? (Model T) to where the average Joe coul d afford to
buy one. He became a bi l l i onai re. I n short, high wages, low prices,
and high profits.
Treating Works-s as I diots
Dr. Vi ckers argues that a l oweri ng of wages may not i ncrease
the demand for l abor. 15 Bal oney. He i s treati ng l abor as i f i t were
potatoes, and potatoes as i f they were Gi tfen goods. Labor and po-
tatoes are not Gi ffen goods (or servi ces). (Nothi ng ever di scovered
has ever acted as a Gi ffen good or servi ce.)
Let us consi der a si tuati on i n whi ch l ower wages wi l l not l ead
15, I bid., pp. 269-270,
118 Baptized I rij?ation
to an i ncrease i n l abor servi ces purchased. A fi rm i s about to go
bankrupt. The quanti~ of labor damanded i s about to drop. There-
fore, by l oweri ng thei r wage demands, the workers keep their jobs.
The quanti ty of l abor actual l y demanded i ncreases from what it
would have been had thg not agreed to the wage cut. Dr. Vi cker s may be
abl e to provi de stati sti cal evi dence that a dr op i n wages i n some
fi rm di d not resul t i n more workers bei ng hi red, but the stati sti cs
conceal the economi c truth: had they not consented to reduced
wages, thg would have been j$red. I t i s once agai n the case of what
Basti at cal l ed over a century ago the falla~ of the thing unseen.
We must begi n wi th a reasonabl e presupposi ti on: laborers are
not idiots. Thi s may not seem l i ke a very remarkabl e i nsi ght, but
Keynesi an economi c theory treats them as i f they were i di ots. The
whol e Keynesi an sol uti on to the great depressi on was to l ower the
real wages of workers by i nfl ati ng the money suppl y, thereby forci ng
wor k er s unknowirzg~ to accept r educed i ncome (hi gher pr i ces, but
fi xed wages), i nstead of aski ng them, i ndustr y by i ndustr y, to take
pay cuts i n or der to s av e th ei r fi r ms an d th ei r own j obs . Key n es
th ou gh t th at wor k er s wou l d n ot l ower th ei r mon g wages , bu t th at
they coul d be fool ed i nto accepti n g l ower r eal wages . Key n es ev en
a dmi tted th a t th i s wa s th e n a tu r e of h i s l i ttl e ga me: H a v i n g
r ega r d to th e l a r ge gr ou ps of i n comes wh i ch a r e compa r a ti v el y
i nfl ex i bl e i n ter ms of money , i t can onl y be an unj us t per s on who
wou l d pr ef er a f l ex i bl e wa ge pol i cy to a f l ex i bl e mon eta r y pol -
i cy. . . . 16 Cheat the wor ker s, fool the wor ker s and anyone who
i snt wi l l i ng to go al ong wi th thi s nati on-wi de ex per i ment i n mon-
etar y debas emen t an d del i ber ate s u bter fu ge i s an unj ust per son.
Spar e me th e mor al l ectu r es , Key n es ; y ou ar e n ot wel l k n own for
y ou r mor a l v i s i on . Not i n Ch r i s ti a n ci r cl es , a n y wa y .
Conclusion
Dr. Vi ckers concl usi on that wage reducti ons mi ght not resul t
i n an i ncrease i n the quanti ty of l abor demanded i s correct on~ i f
al l other factors i ncl udi ng pri ce l evel s drop i n the same di rec-
16. Keynes, The Genmal Theoy, p. 268.
Economic Law 119
ti on as wages. But i f they do drop, then real wages have remai ned
the same. I n such a si tuati on, what Dr. Vi ckers i s argui ng a
drop i n mong wages i s therefore i rrel evant. But, then agai n, so
i s 90 percent of Economi cs and Man.
Dr. Vi ckers argument that lower wage rates wi l l cause more un-
empl oyment i s not si mpl y i rrel evant; i t i s preposterous. I t woul d
be the equi val ent of the goi ng out of busi ness cl earance sal e
menti oned above. I magi ne the empl oyers response to a trade
uni on offi ci al who announces: So youre goi ng to fi re us, are you?
Al l ri ght, we demand double our previ ous sal ari es. Now what are
you goi ng to do? I wi l l tel l you what the empl oyer wi l l do, unl ess
the ci vi l government threatens hi m wi th i mmoral vi ol ence: he wi l l
fi re them, assuming that there ar e equal~ competent (or rapid~ trainable)
workers who stand ready to replace them at a lower wage. And i f there
arent, and the empl oyer knows i t, then hi s threat to cut thei r
wages was si mpl y a bl uff. The workers shoul d cal l hi s bl uff.
Vi ckers: But State Laws Are Laws
One fi nal comment i s appropri ate on hi s attempted deni al of
economi c l aw: Dr. Vickers does not real~ believe his own argument! He
knows economi c l aws do exi st. I n other contexts, he speaks of the
l aw of absolute advantage and the l aw of comparative advan-
tage.17 When di scussi ng exchange rates, he concl udes, wi thout
hesi tancy, that the pri ce of any parti cul ar currency i n terms of
other currenci es wi l l depend on the vol ume of the demand for,
and the suppl y of i t. . . . 1s
Questi on: How can Dr. Vi ckers concl ude that these pri ces are
dependent upon economi c l aws when he says the l aws do not al -
ways operate? Furthermore, i f they functi on i n these i nstances,
how does he know thi s, and can he be sure they al ways do? An-
swers to these questi ons are not to be found i n ei ther Economics and
Man or A Christian Approach to Economics and the Cultural Condition,
but on the evi dence avai l abl e, the onl y concl usi on i s that Dr.
17. Economics and Man, p. 227, emphasi s i n ori gi nal .
18. Zbtd., p. 230; cf. p. 231.
120 Baptized I ny?ation
Vi ckers knows the l aws of economi cs are al ways found to functi on
(other thi ngs bei ng equal ). g There can, then, be onl y one reason
Dr. Vi ckers i s prepared to present such a contradi ctory argument,
and that i s because economi c laws mitigate against the Keynesian system.
Take Dr. Vi ckers exampl e on wage rates. He does not want
wages l owered because that mi ght l ead to i ncreased unempl oy-
ment. (He cannot show why, however. ) I n other words, accordi ng
to the Keynesi ans, the on~ time economic laws dont exist is when thg
prove that Kgnesian theories are wrong in theo~ and practice.
The probl em wi th Dr. Vi ckers rejecti on of economi c l aw i s
anal ogous to the Keynesi ans fai l ure to di scuss why i t i s that the
free market works most of the ti me. The mai n probl em for the
Keynesi ans i s not to expl ai n why the free market someti mes fai l s
to cl ear i tsel f of goods and servi ces (i . e., al l ows unempl oyment);
the probl em i s to expl ai n by means of Keynesi an theory why the
free market shoul d ever work at al l . As. Prof. Roger Garri son
says, we must know how thi ngs coul d go ri ght befo~e we can ask
what mi ght possi bl y go wrong.~ The probl em that Dr. Vi ckers
needs to deal wi th i s why there shoul d be any stati sti cal reg-ul ar-
i ti es at al l . He al so needs to answer thi s questi on: By what pattern
of regul ari ti es wi l l government pl anners govern the economy?
The deni al of economi c l aw i s a necessary part of any
soci al i sts armor. I f there are no certai n l aws, such as the l aws of
suppl y and demand, chaos must rei gn i n the free market. To
remove thi s chaos, the Keynesi ans argue, l et us have State regul a-
ti on. I n short, the on~ reliable luw k State legislation. Thi s i s the
essence of Dr. Vi ckers arguments agai nst capi tal i sm and laissez-
jaire. (I t i s al so the essence of modern Darwi ni sm,z of whi ch the
19. Vi ckers does not use the word al ways. By al ways I do not mean i n the
sense of i mmutabl e, but rather that so far as mans experi ence extends the l aws
have been substanti ated by stati sti cal regul ari ty. Presumabl y they wi l l occur i n
the future because of past regul ari ty.
20. Roger Garri son, A Subjecti vi st Theory of a Capi tal -usi ng Economy, i n
Geral d P. ODri scol l , Jr. and Mari o Ri zzo, The Economks of Time and Uncertainty
(London: Basi l Bl ackwel l , 1985), p. 171.
21. Gary North, The Dominion Covenant: Genesis, Appendi x A: From Cosmi c
Purposel essness to Humani sti c Soverei gnty.
Economic Law 121
Keynesi an system i s a subset.) Recal l hi s descri pti ve phrase concern-
i ng the fkee market, that market forces gyrate uni nhi bi tedl y and
randoml y of [thei r] own accord .ZZ Dr. Vi ckers wants us to bel i eve
that State regul ati on of the economy i s necessary because of the mar-
ket?s apparent chaoti c nature, and that hi s demands for conserva-
ti on, devel opment, and equi ty can onl y be met by regul ati on of the
economy from the top down. But what makes the stati sti cal regul ar-
i ti es of State pl anni ng so predi ctabl e and sci enti fi c? What i nsti tu-
ti onal control s need to be i mpl emented to make pol i ti ci ans and bu-
reaucrats trustworthy? Dr. Vi ckers never even rai ses the questi on.
Despi te hi s assurances to the contrary, Dr. Vi ckers does not
want the ki nd of soci ety i n whi ch i ndi vi dual s are free to pursue
thei r own goal s. Why not ? There can be onl y one reason: he
bel i eves /ti .r goal s shoul d be the goal s of everyone i n soci ety!
Keynesi ans want to i mpose their vi ew onto everyone el se. I f they
coul d prove that Gods l aw supports them, we shoul d l i sten, but
thi s case, above al l , i s what Keynes woul d never have attempted
to argue. He was sel f-consci ousl y i n revol t agai nst God and Gods
l aw. Thi s man-mani pul ati ng goal i s the goal of al l soci al i sts, and
Dr. Vi ckers, as we have seen,zs i s a soci al i st, i f not of the fi rst
order (government ownershi p), then at l east the second order
(government control ). Soci al i sts are so convi nced, for exampl e,
that i t i s somehow i mmoral for some to be weal thy whi l e others
are i n poverty, that they i nsi st that pri vate weal th must be redi s-
tri buted by vari ous means, and the taxi ng system i s the method
Dr. Vi ckers woul d use.g4
Tyrants through al l ages have al ways thought thei r i deas
superi or to those of the common person. Pl an as they wi l l , how-
ever, the soci al i sts cannot get past one undeni abl e fact, and that i s
that peopl e are human bei ngs who wi l l act accordi ng to the way
they thi nk, i rrespecti ve of the rul es whi ch may be i mposed upon
them. The y are i nveterate seekers after l oophol es . They may
conform for a ti me i f suffi ci ent force i s used, but i n the l ong run
22. Vi ckers, Economics and Man, pp. 234.
23. Chapter 5, above.
24. Vi ckers, Economics and Man, pp. 319, 340.
122 Baptized I nijZation
i ndi vi dual s al ways do what they percei ve to be the correct acti on.
Dr. Vi ckers obvi ousl y l i kes progressi ve (graduated) i ncome
taxes. But at what l evel wi l l he set, for exampl e, the hi ghest scal e?
Si xty percent, as we have i n Austral i a? Perhaps he i s a l i ttl e more
modest and woul d onl y want forty percent. The di ffi cul t y he wi l l
have, though, i s that i t i s very wel l to tel l someone he must pay a
tax of si xty cents on the dol l ar, but i f that person thi nks thi s i s too
hi gh, he i s about to do everythi ng possi bl e to get out of payi ng i t.
I t i s no coi nci dence that tax avoi dance and outri ght evasi on
abound wherever tax l evel s are on the i ncrease.
Concl usi on
I t i s never a questi on of l aws vs. no l aws. I t i s al ways a ques-
ti on of whose l aws. I t i s al ways a questi on of whi ch l aws. I t i s
al ways a questi on of whose ox gets gored. I t i s, i n short, just what
Leni n sai d i t i s: Who, whom? I n a worl d created and mai ntai ned
by God, i t i s thi s seri es of choi ces:
Gods l aw or chaos
Gods l aw or tyranny
Gods l aw or Gods wrath
25
Dr. Vi ckers has no more proven hi s thesi s that economi c l aws
do not al ways exi st than he has proven that the earth i s fl at, or
that Keynes refuted Says Law. I t i s just that i n the l atter case,
he has not tri ed to prove i t. But hi s attempts woul d meet wi th the
same resul t. G
Agai n and agai n, when confronti ng Chri sti an anti nomi ans,
we shoul d ask them thi s questi on: By what standard? When they
argue that Gods reveal ed l aws no l onger appl y, we must ask: By
what standard? Who repeal ed them? On what basi s? When they
assure us that there i s a better way to achi eve soci al peace than by
25. Gary North, The Si nai Strategy: Economics and the Ten Commandmts (Tyl er,
Texas: I nsti tute for Chri sti an Economi cs, 1986), p. 6.
26. See Eugen von Bohm-Bawerk, Control or Economi c Law; i n Shorter
Classics (South Hol l and, I l l i noi s: Li bertari an Press, 1962), I , ch. 3.
Economic Law 123
means of Gods reveal ed l aw, we must ask: By what other standard?
The fact of the matter i s: they do not like Gods law. They are embar-
rassed by Gods l aw. They prefer to thi nk that God changed Hi s
mi nd about economi cs, pol i ti cs, and moral i ty. Especi al l y moral -
i ty. Keynes unquesti onabl y had good reasons for hopi ng that God
had changed hi s mi nd. He had good reasons for hopi ng that there
i s no God, and no day of judgment. He i mpl i ci tl y concl uded: No
l aw no God; no God no day of judgment . I t i s understandabl e
why the whol e concept of fi xed economi c l aw, ordai ned by God,
or fi xed economi c pri nci pl es, ordai ned by God, woul d have been
repugnant to hi m. Fi xed l aws remi nded hi m too much of God.
What i s Dr. Vi ckers excuse? What i s hi s reason for hopi ng
that God has changed Hi s mi nd and therefore changed Hi s soci al
l aws? I s hi s reason pri mari l y i ntel l ectual ? Or moral ?
What i s Dr. Vi ckers reason for thi nki ng that God has not pro-
vi ded men wi th economi c l aw? I s hi s reason pri mari l y i ntel l ec-
tual ? Or moral ?
And shoul d we be surpri sed that both Keynes and Dr. Vi ckers
wi nd up on the road to the central pl anni ng State?
FI SCAL POLI CY:
But while monetmy
8
DI SGUI SED COUNTERFEI TI NG
restraint can be quite @ective in dampening
excessiue~ actiue economic conditions, it is doubtful that an easing of
the monetaV situation can be as efective in stimulating the economy
out ofa recession. . . . I t is in such an economic situation that a heav-
ier contnbution from jiscal policy may be necessa~, with the govern-
ment taking action, via its budget policies in ways we shall consider in
the next section, to boost the expenditure streams in the economy and
thereby production and employment. 1
Dr. Vi ckers statement of the Keynesi an posi ti on i s character-
i sti c of what Prof. Axel Le~onhufvud (no, I cant pronounce i t
ei ther) i denti fi es as the revol uti onary orthodoxy branch of
Keynesi ani sm. He contrasts i t wi th the neocl assi cal synthesi s
branch. The orthodoxy tends to sl i ght monetary i n favor of fi scal
stabi l i zati on . Thi s i s Dr. Vi ckers posi ti on. Back i n 1967, ni ne
years before Economics and Man was publ i shed, Prof. Lei jonhufvud
commented: As descri bed, the orthodoxy i s hardl y a very reputa-
bl e posi ti on at the present ti me. I ts i nfl uence i n the currentl y most
fashi onabl e fi el ds has been steadi l y di mi ni shi ng, but i t seems to
have found a refuge i n busi ness cycl e theory and, of course, i n
the teachi ng of undergraduate macroeconomi cs .2
Consi der the i mpl i cati ons of what he was sayi ng. Fi rst, the
school of Keynesi an i nterpretati on to whi ch Dr. Vi ckers bel ongs
1. Economics and Man, pp. 305-6.
2. hel Lei jonhufvud, Keynes and the Keynesi ans: A Suggested I nterpreta-
ti on; American Economic Review, LVI I (May 1967), p. 401.
125
126 Baptized I ny?ation
was by 1967 al ready out of fashi on, not taken very seri ousl y by the
economi cs professi on, and basi cal l y a thi ng of the past. Second,
i ts members had been banned by thei r peers to the Si beri a of the
professi on: teachi ng undergraduates and wri ti ng textbooks. Ti me
pl ays cruel tri cks on once-young i ntel l ectual revol uti onari es. I t
turns them i nto fuddy-duddi es. The methodol ogi cal expropri ators
are expropri ated.
Who i s Axel Lei jonhufvud? He i s the author of the major rei n-
terpretati on of Keynes i n thi s generati on, whi ch appeared a year
after hi s essay. s Furthermore, the essay appeared i n the American
Economic Review, the most presti gi ous of al l the professi onal eco-
nomi cs journal s i n the Uni ted States, and therefore i n the worl d,
gi ven the i nfl uence of U.S. economi sts. Lei jonhufvud was an-
nounci ng the demi se of the previ ousl y rei gni ng branch of Keynes-
i ani sm, and he was doi ng so i n the confi dence that the bul k of the
professi on understood th-at he was correct. Those who refused to
recogni ze i t were preci sel y the agi ng hol douts whose opi ni ons no
l onger counted.
What i s i roni c about the post-Keynesi an revol uti on whi ch
buri ed the ol der Keynesi ans i s that the ol der men conti nue to
wri te as i f they were sti l l on the cutti ng edge of revol uti on, rather
than under the cutti ng edge. They are rather l i ke those agi ng neo-
cl assi cal schol ars i n the l ate 1930s and earl y 1940s who expected
thi s Keynesi an nonsense to go away after the War. The major
non-Keynesi an schol ars di d recogni ze the chal l enge of The General
Theory and tri ed to chal l enge i t. They understood that a methodo-
l ogi cal earthquake was underway. I t was the cl assroom teacher on
the fri nges of the professi on who never qui te knew what had hi t
hi m. So i t i s today. Dr. Vi ckers, as l ate as 1982, was sti l l wri ti ng as
i f he were i n the army of the i nnovators, i n hot pursui t of the
neocl assi cal Phi l i sti ne:
The outl i nes of thi s di scontent are cl ear on onl y a mi ni mal i nspec-
ti on. An earl i er and comfortabl e orthodoxy has been shattered, and new
3. On K~nesian Economics and the Economics of Kgmes: A Stdy in Monetaty Theoty
(New York: Oxford Uni versi ty Press, 1968).
Fiscal Policy: Disguised Counterfeiting 127
ways of l ooki ng at the worl d are bei ng sought to repai r the l ogi cal i nade-
quaci es and the empi r i cal i r r el evanci es of economi c sci ence. Assump-
ti ons that the economi c worl d was conti nual l y i n some ki nd of descri b-
abl e equi l i br i um; that automati c har moni es exi sted and pr opel l ed the
economy conti nual l y to posi ti ons of maxi mum benefi t and wel far e; that
si mpl i sti c anal yses that abstr acted fr om the dynami cs of r eal hi stor i c
ti me coul d adequatel y expl ai n observabl e states of economi c affai rs . . .
these comfor tabl e si mpl i ci ti es, these damagi ng i l l usi ons we mi ght say,
have been fai rl y compl etel y shattered, and new paradi gms of economi c
argument have emerged. The assumpti ons of equi l i bri um, of the pres-
ence i n the economi c system of so-cal l ed ri sks that coul d be assumed
away by the appl i cati on of a cal cul us of probabi l i ty based on postul ates
of randomness and chance, of the safety i n anal ysi s of i gnori ng genui ne
ti me, have had to gi ve way to newer perspecti ves. An earl i er crust of or-
thodoxy has crumbl ed.4
What i s astoni shi ng about these words i s that i t i s vi rtual l y at
each of these poi nts that the post-Keynesi an economi cs revol uti on
against the older Kgnesian orthodoxy has been ai med: at Keynes stati c
model , at hi s i gnori ng of real ti me, at hi s model s de-emphasi s of
entrepreneurshi p. Even more astoni shi ng, i t i s preci sel y on these
poi nts that the Austri an School economi sts have al ways concen-
trated thei r attack agai nst Keynes, al ong wi th the stati c neocl as-
si cal equi l i bri um economi cs tradi ti on oj which Keynes was clear~ a
part.
5
Yet Dr. Vi ckers i magi nes that i t i s he and hi s reti red
Keynesi an col l eagues who are i n the front l i nes of the offensi ve at-
tack agai nst stod~ conservati sm. I n the mi dst of a 20-year meth-
odol ogi cal rout of hi s army, reti red Sergeant Vi ckers i magi nes
that he i s cheeri ng on hi s ol d uni t i n a fi nal charge agai nst a nearl y
defeated enemy. I f he werent so arrogant i n hi s confi dence, he
woul d be a patheti c fi gure.
The Fl ow of Money
Dr. Vi ckers l eaves us i n no doubt as to where he bel i eves the
heart of the Keynesi an system l i es. The kernel of the Keynesi an
system, says Dr. Vi ckers, i s thi s: The total l evel of the producti on
4. Vi ckers, A Christian Approach to Economics and the Cultural Condition, pp. 22-23.
.5. Geral d P. Ol l r i scol l , Jr . and Mari o J. Ri zzo, The Economics of Time and Un-
certain~ (London: Basi l Bl ackwel l , 1985).
128 Baptized I njation
and output of goods and servi ces i n the economy, and thus the
l evel of empl oyment whi ch producers and empl oyers were abl e to
offer, was dependent upon the total l evel of the fl ow of monetary
expendi ture or demand.G I n a nutshel l , expenditure generates i ncome.
One i ndi vi dual s expendi ture becomes, or generates, another i n-
di vi dual s i ncome.7 Thi s persons i ncome, when spent, creates i n-
come for a second person, and so on. Thus, the total monetary
demand i s the amount of money fl owi ng throughout the economy
at any gi ven ti me. So far, so good. Nothi ng too revol uti onary
here. Yet.
The deducti on made by Dr. Vi ckers from thi s i s that whenever
a person refrai ns from spendi ng hi s money, thi s causes a decrease
i n monetary demand and resul ts i n the l oss of i ncome to someone
el se. I n turn, thi s resul ts i n reduced purchases, so busi nesses are
forced to scal e down thei r operati ons or cl ose up shop al together.
Let us be preci se, that i s, l et us avoi d Dr. Vi ckers verbi age. I f
he doesnt spend his money, I dont get my money. Al ternati vel y,
I f I dont spend my money, he doesnt get hi s money. Oh, yes, I
forgot to speci fy that thi s i s a two-person model. I want to be preci se.
I want to be sci enti fi c. I want to sound l i ke a cl assroom economi st.
I n thi s form, the whol e i dea i s a trui sm. Thi s i nsi ght, pl us a
subway token, wi l l get you a ri de on the subway. But there i s a
hi dden agenda l urki ng i n the shadows. What the Keynesi ans
real l y mean i s that i f I hoard my goods (represented by money),
then nobody el se wi l l get access to them. Then we al l stop tradi ng
wi th each other. The di vi si on of l abor col l apses, per capi ta pro-
ducti vi ty col l apses, and therefore per capi ta weal th col l apses. But
wai t, you say. To col l apse the system compl etel y, everyone has to
hoard al l hi s goods forever. Why woul d we al l do such a stupi d
thi ng? Then you show absol ute economi c geni us. You next ask:
I f we al l were to start hoardi ng, and as a resul t we al l started to
suffer a drop i n our i ncomes, and therefore a drop i n our weal th,
woul dnt we drop our pri ces? And i f everyone started droppi ng
6. Vi ckers, Economics and Man, p. 13,
7. I dem,
Fiscal Poli~: Disguised Counterfeiting 129
pri ces, woul dnt we start tradi ng wi th each other agai n because of
al l the bargai ns comi ng on the market? Now, smarty pants, you
have just questi oned your way out of a Ph.D. i n economi cs from
the Uni versi ty of Al most Everywhere. Or at l east you woul d
have, had you attended pri or to the mi d-1960s, when Dr. Vi ckers
crowd control l ed the system.
The Rejiusai to Trade
Why wont I spend my money to buy what you want to sel l ?
Here are the onl y reasons I can thi nk of:
1. I dont know what youre sel l i ng.
2. You dont have what I m buyi ng.
3. Your pri ce i s too hi gh.
4. Your pri ce i s acceptabl e to me, but I thi nk you wi l l take l ess
l ater on.
5. The government has made i t i l l egal (or expensi ve) to trade.
I f you want to sel l i t to me, and my probl em i s i gnorance, you
wi l l advertise what you have and the pri ce you want (or are at l east
wi l l i ng to accept). Thi s costs you more money to make the sal e,
but you deci de i t i s worth i t. Your expendi ture reduces my i gnor-
ance or l ack of moti vati on, whi chever i s greater. (Sal esmanshi p.)
I f you do not have what I want to buy, you may be abl e to get
me to buy it anyway, i f you l ower the price enough, or i f you can con-
vi nce me that there i s someone el se who wi l l sel l me what I want i f
I can offer hi m what you are tryi ng to sel l to me. (We are now at a
three-person model , just for the record.)
I f your pri ce i s too hi gh, you can lower the price, or you can con-
vi nce me that I real l y want i t enough to buy i t at the hi gh pri ce.
(Sal esmanshi p.)
I f I thi nk you wi l l l ower the pri ce l ater on, you can ei ther
l ower i t now, or you can sit and wait. Maybe you will take a l ower
pri ce l ater on. Maybe you wont. Ti me wi l l tel l . (But you proba-
bl y wont wai t forever to sel l , wi l l you? Somethi ng i s better than
nothi ng. )
I f the government has made i t i l l egal or too expensi ve to trade,
130 Baptized I njation
we can both get together and vote out the government. Then we can
trade. Or we can i gnore the government, i ncrease our ri sks of ac-
ti on, and trade anyway.
The Great Depressi on
What gave the Keynesi an revol uti on i ts market i n 1936 was
the fact that for over si x years, peopl e al l over the Western worl d
had not been tradi ng very much wi th each other. Al l the unpl ea-
sant resul ts of a col l apsi ng di vi si on of l abor were mani festi ng
themsel ves. Peopl es i ncomes and thei r net weal th dropped. Why
had thi s happened? More i mportant to the average pol i ti ci an,
what coul d be done about i t? Actual l y, the average pol i ti ci an had
al ready deci ded what shoul d be done: spend government money.
Keynes came al ong i n 1936 to provi de the academi c justi fi cati on
for what they were al ready doi ng. (I t took a worl d war to get the
spendi ng up, and the pri ce control s on, suffi ci ent to pl acate the
voters. ) Mi ses i s correct:
The pol i ci es he advocated were preci sel y those whi ch al most al l gov-
ernments, i ncl udi ng the Bri ti sh, had al ready adopted man y years before
hi s General Theory was publ i shed. Keynes was not an i nnovator and
champi on of new methods of managi ng economi c affai rs. Hi s contri bu-
ti on consi sted rather i n provi di ng an apparent justi fi cati on for the pol -
i ci es whi ch were popul ar wi th those i n power i n spi te of the fact that al l
economi sts vi ewed them as di sastrous. Hi s achi evement was a rati onal i -
zati on of the pol i ci es ah-cad y practi ced. 8
What had happened was that governments had done too
much for the peopl e . . . earl i er. They had i nfl ated thei r curren-
ci es from 1914 onward. They had suspended the gol d standard
when the Fi rst Worl d War began. They had agreed to an i nfl a-
ti onary versi on of the i nternati onal gol d standard, cal l ed the gol d
exchange standard , at the Genoa Conference of 1922. Bri tai n
went back on the gol d standard i n 1925, but at an arti fi ci al l y hi gh
exchange rate for the pound, pretendi ng that the pound was what
8. Ludwi g von Mi ses, Lord Keynes and Says Law (1950), i n Planning for
Freedom (South Hol l and, I 1l i noi s: Li bertari an Press, [1952] 1980), p. 69.
Fiscal Policy: Disguised Counterfeiting 131
i t had been worth before the i nfl ati on of the War. The Bri ti sh gov-
ernment, through the efforts of the head of the Bank of Engl and,
Montague Norman, then pressured the U.S. Federal Reserve
System to i nfl ate the dol l ar, i n order to keep forei gn currenci es
(and gol d) from fl owi ng out of the Bank of Engl and i nto the
Uni ted States. I n 1929, the Federal Reserve System ti ghtened
money, meani ng that they stopped i nfl ati ng, whi ch l ed to a rapi d
ri se i n short-term i nterest rates, thereby creati ng a recessi on. (Re-
member, recessi ons are created by pri or i nfl ati ons, )
9
I n 1930, the
U.S. government passed the i nfamous Smoot-Hawl ey tari ff,
thereby reduci ng i mports and si mul taneousl y cri ppl i ng U.S. for-
ei gn trade. Thi s cri ppl ed Europes abi l i ty to earn dol l ars by sel l i ng
to the U.S. market, whi ch reduced Europes abi l i ty to repay l oans
to the U.S. The rest, as they say, was hi story. 10
The Kgmesian Solution
Keynes, a gr eat defender of Br i ti sh tar i ffs after 1930, obvi ousl y
di dnt s ee thi ngs thi s way , that i s , i n ter ms of mar k et economi cs .
H e h a d a di f f er en t s ol u ti on . I n s tea d of i n v es ti ga ti n g th e l a ck of
tr a de, ou tpu t, a n d i n come i n ter ms of r es tr a i n ts 1-5, a n d th en
thi nk i ng about how to s ol v e the pr obl em(s ), Key nes added a s i x th
r eas on to ex pl ai n wh y I r efu s e to bu y y ou r goods .
6. I need more money.
I t i s true, of course. I f I had enough money, I woul d buy your
goods, assumingyou would still sell me something I want at this moment?
price. I f I had enough money, we coul d then overcome the i mpedi -
ments of any of the fi ve. Yes, even i f the government has made
tradi ng i l l egal . I f necessary, I coul d bri be a bureaucrat. We coul d
hi de what we are doi ng. Anyway, i f I just had more money, al l my
9. Ludwi g von Mi ses, Human Action: A Treatise on Economics (3rd ed.; Chi -
cago: Regnery, 1966), ch. 20.
10. A readabl e account of al l thi s i s found i n Paul Johnson, Modem Times: The
Worldfrom the Twent2es to the Eighties (New York: Harper& Row, 1983), ch. 7. He
bases hi s narrati ve on the bri l l i ant Austri an School anal ysi s of Murray Roth-
bard, Americas Great Depression (Pri nceton, New Jersey: Van Nostrand, 1963).
132 Baptized I njation
hesi tati on woul d go, i fl real~ want whatyou want to sell. And i f you
dont have what I want, I can get someone el se to sel l me what I
want, i f I had more money, and then he can buy what youre sel l -
i ng. Al l I need i s more money. But where am I goi ng to get more
money? How am I goi ng to get more money?
Keynes answer? Get it from the government. Thi s i s cal l ed fi scal
pol i cy.
But where wi l l the government get i t? From taxes. Response:
then those who get taxed cant spend i t. Aggregate spendi ng
doesnt change. Al l ri ght, you have a poi nt. The government wi l l
have to borrow i t. Response: then those who l oan the government
the money cant spend i t. Aggregate spendi ng doesnt change. Al l
ri ght, the government has a thi rd opti on. It can print more money.
Thi s i s cal l ed monetary pol i cy.
No, you are sayi ng to yoursel f. I t cant be. Not that. That has
been tri ed over and over agai n si nce the dawn of the di vi si on of
l abor economy based on money. That i s just the same ol d govern-
ment confi dence game. That i s the same ol d government-approved
count~eiting scheme. That i s the ol d-ti me rel i gi on of i nfl ati on.
Keynes must have offered somethi ng more constructi ve than thi s.
Surel y there i s some super-sophi sti cated answer buri ed i n al l that
verbi age, some magi c formul a hi dden i n al l those equati ons.
Surel y. Because i f there i snt, and i f economi sts and pol i ti ci ans
were to accept hi s answer, we woul d fi nd oursel ves i n the age of
i nfl ati on.
And that, my fri end, i s exactl y where we fi nd oursel ves.
The Age of I nfl ati on (and Unempl oyment, Too)
We speak of the Keynesi an revol uti on. So do the Keynesi ans.
We are assured that al l pre-Keynesi an economi cs i s dead. The
wi nners i n the competi ti on for the mi nds of men are the Keynes-
i ans. We have the proof. Keynesi an pol i ci es have produced uni -
versal prosperi ty. We are al l tradi ng wi th each other agai n. The
depressi on i s over. I t has been over for al most hal f a century.
There i s one man who di d i t al l : John Maynard Keynes. We are
now ready, announced Wal ter Hel l er i n 1966, for the New Frontiers
Fiscal Policy: Disguised Counterfeiting 133
i n Political Economy.
Well, we were not ready. We were not ready for two decades of
worl dwi de pri ce i nfl ati on. Pri ce i nfl ati on i s where Keynes i ani sm
must l ead, warned Mi ses and the other pre-Keynesi an economi sts
i n the l ate 1930s. Pri ce i nfl ati on i s the Keynesi an sol uti on, Hayek
argued for fi ve decades. Swal l ow the Keynesi an sol uti on, and i t
wi l l turn out to be a poi sonous sol uti on, they warned. Then the
whol e Western worl d swal l owed i t.
To Get Peopk Buying Again
The troubl e i s , says the di sgruntl ed potenti al buyer to the
sel l er who has just rai sed hi s sel l i ng pri ce, you cheated. Yes, you
di d. I was wi l l i ng to buy. I di dnt buy for a whi l e, but then I got
the newl y pri nted money, and I deci ded to buy. But you changed
the rul es. You raisedyour pnce. You saw I had that new money, and
then you got some, too, and you got greedy. You went and broke
the rul es .
What rul e i s thi s? Keynes rul e, on whi ch he based hi s enti re
revol uti on, namel y, that the sellers of goods, especial~ labor goods, are
never supposed to catch on to the conjdence game that the government is run-
ning. I f the sel l ers ever catch on as sel l ers, the Keynesi an mi r acl e
col l apses. They are al l owed to catch on as buyers of goods (i n-
creased aggregate demand), but never as sel l ers. I f they catch on as
sel l ers, they wi l l rai se pri ces, thereby reduci ng aggregate demand
for goods. I n short, the Keynesi an revol uti on i s based on the pre-
posterous assumpti on that each economi c actor has two separate
brai ns: a buyers brain and a seller? brain, and these two brai ns are
not supposed to understand each other. Unfortunatel y, they do
understand. As soon as the sel l ers brai n catches up wi th the buy-
ers brai n, the sel l er rai ses pri ces, and trade i mpedi ments 1-5
appear agai n. The i nfl ati on-fuel ed boom turns i nto yet another
recessi on. Unempl oyment ri ses.
Unempl oyment i s up, al l over the worl d. Why? I f the Keynes-
i an mi racl e i s so mi racul ous, why are so many peopl e unem-
pl oyed? Because they are aski ng too much money i n wages. Be-
cause trade uni on restri cti ons keep them out of the l abor force.
134 Baptized I nz.iation
Because other government restri cti ons agai nst trade exi st: wage
fl oors, pri ce fl oors, tari ffs, etc. I n short, because of al l those economic
factors that Kgnes catigorical~ refused to con-.riier as causes Ofunemploynwnt.
We were tol d that i f we i nfl ated the currency, we coul d hol d
down unempl oyment. Better si x percent i nfl ati on than si x per-
cent unempl oyment, was the motto of the 1960s. So the Uni ted
States got doubl e-di gi t pri ce i nfl ati on i n the l ate 1970s, and over
si x percent unempl oyment. Remember, thi s was under the rei gn
of Presi dent Carter and hi s Keynesi an advi sors.
What happened was si mpl e: the publ i c fi nal l y caught on to the
game. They saw that peopl e had more money to offer, so person
by person, they asked for more money i n return. Thg refused to sell
at yesterday prices. That spoi l ed the Keynesi an mi racl e.
No, youre sayi ng to yoursel f agai n. I t cant be. Thats al l there
was to i t? You mean to say that when sel l ers fi nal l y started aski ng
for more money, the same probl em occurred agai n? Peopl e stop-
ped tradi ng agai n? You mean we are back to reasons 1-5?
Yes, that i s exactl y where we are. Except for one mi nor detai l :
debt. A tri l l i on dol l ars i n debt i s owed to Western commerci al
banks, and as much as hal f of thi s cannot be col l ected. I t wi l l take
more fi at money to repay thi s debt repay i t nomi nal ~. Add to thi s
debt the tri l l i ons of dol l ars, pounds, whatevers that are owed by
governments to thei r peopl e i n the form of economi c promi ses
promi ses that are i mpossi bl e to ful fi l l . Add tri l l i ons more i n pri vate
debt i nternal to each nati on. We have changed peopl es psychol -
ogy. Keynesi an economi sts tol d them: Buy now, pay l ater. They
took the economi sts at thei r word. Now, shoul d we adopt mone-
tary pol i ci es that do not spew ever-more quanti ti es of money i nto
the system i n order to enabl e debtors to repay existing debt, the
whol e system col l apses. We get another defl ati onary depressi on.
And then 1936 wi l l l ook pretty good i n retrospect.
11. Summari zi ng Keynes: I t i s not necessary, moreover, to rel y on monopo-
l i es, l abor uni ons, mi ni mum wage l aws, or other i nsti tuti onal restrai nts on the
uti l i ty maxi mi zi ng behavi or of i ndi vi dual transactors i n order to expl ai n fi ni te
pri ce vel oci ti es. Keynes, i n contrast to many New Economi sts, was adamantl y
opposed to theori es whi ch bl amed depressi ons on such obstacl es to pri ce adjust-
ments. Lei jonhufvud, American Economic Revs2w (May 1967), p. 403.
Fiscal Policy: Disguised Counterfeiting 135
Fi scal Pol i cy: I nfl ati on Wi th Decepti on
I have argued that the Keynesi an kernel i s si mpl y to create
money. That was not qui te fai r. We must gi ve Keynes hi s due. He
wanted to create money, al l ri ght, but he wanted to do i t i n a way
whi ch woul d confuse peopl e. Al so, he wanted to do i t i n a way
whi ch woul d i ncrease the power of the State. I t was not that he
approved of pri vate counterfei ti ng. No, what he wanted was public
counterfei ti ng.
I f the Treasury were to fi l l up ol d bottl es wi th banknotes, bury them
at sui tabl e depths i n unused coal mi nes whi ch are then fi l l ed up to the
surface wi th town rubbi sh, and l eave i t to pri vate enterpri se on wel l -tri ed
pri nci pl es of laissez-faire to di g the notes up agai n (the ri ght to do so bei ng
obtai ned, of course, by tenderi ng for l eases of the note-hol di ng terri tory),
there need be no more unempl oyment and, wi th the hel p of the reper-
cussi ons, the real i ncome of the communi ty, and i ts capi tal weal th al so,
woul d probabl y become a good deal greater than i t actual l y i s. I t woul d,
i ndeed, be more sensi bl e to bui l d houses and the l i ke; but i f there are
pol i ti cal and practi cal di ffi cul ti es i n the way of thi s, the above woul d be
better than nothi ng. 12
Keynes was bei ng cl ever, of course. But thi s i s what brought
the Keynesi an revol uti on. I t was not hi s equati ons but hi s charm
and cl everness that persuaded hi s academi c di sci pl es. What hi s
fol l owers dare not admi t, and what i s i nescapabl y true i n retro-
spect, i s that hi s cl ever anal ogi es were the very heart and SOU1 of
the Keynesi an revol uti on. The equati ons were wi ndow-dressi ng,
or better put, the hard shel l s; the kernel s of untruth were hi dden
i nsi de. I n promoti ng the theori es of The General Theory, Keynes
was a sal esman far more than an economi st.3
12. John Maynard Keynes, The Gen~al Theoy of Employment, I ntmesl, and Mong
(New York: Harcourt, Brace and Worl d, 1936), p. 129.
13. Prof. Lel and Yeager has commented: Keynes made many contri buti ons
besi des what became known as Keynesi ani sm. But hi s mai n contri buti on, as I
now see i t, was an effecti ve sel l i ng job for concern wi th the probl ems of empl o y-
ment and effecti ve demand. . . I t i s a sad commentaq on the Ameri can eco-
nomi cs professi on that the wi l es of sal esmanshi p, i nstead of or i n addi ti on to
sober anal ysi s, shoul d have been necessary to gai n due attenti on to the probl em
136 Baptized I nzation
Useless Work
The fi rst notabl e feature of Keynes vi vi d anal ogy i s the use-
l essness of the work. The Treasury coul d spend the money i nto
ci rcul ati on by payi ng for publ i c housi ng projects. That was what
he real l y preferred: government-bui l t houses. But di ggi ng up
fi l l ed-i n hol es was sati sfactory.
The poi nt to bear i n mi nd i s that when worki ng men di g up
coal , i t i s because they bel i eve they wi l l meet a consumers de-
mand for coal . I t i s not the acti vi ty, but rather the consumer needfil-
jdled, whi ch i s cruci al i n a free market arrangement. Di ggi ng up
bottl es fi l l ed wi th paper money i s usel ess expendi ture. I nstead,
di g for coal . But i f the mi ne has pl ayed out, and i t costs too much
to di g i t, then stop di ggi ng. You can just hand out the counterfei t
money But stop digging. You are wasti ng ti me and money i n di g-
gi ng. Yes, you get some coal , but i t costs too much.
True, the government coul d construct houses. But thi s i s no
di fferent from di ggi ng up coal whi ch i s too expensi ve to extract i n
terms of what i t wi l l bri ng on the free market. Do not bui l d houses
that woul d not otherwi se sel l . Do what the coal mi ners had to do:
stop bui l di ng. You can just hand out the counterfei t money But
stop building,. You are wasti ng ti me and money i n bui l di ng. Yes,
you get some houses, but they cost too much.
Professional~ Managed Counte~eiting
The second notabl e feature of hi s cl ever anal ogy i s that the
Treasury must pri nt the notes. Why not pri vate counterfei ters?
He di d not say. I thi nk he mi ght have repl i ed: Peopl e want to
trust the government. They dont want to be arrested for deal i ng
i n counterfei t notes. So why not rewri te the l aw and al l ow pri vate
counterfei ti ng? Because the government pol i cy-makers must
gui de the overal l creati on of money, i n order not to al l ow mass i n-
of effecti ve demand. Keynes, probabl y to hi s credi t, saw and provi ded what was
needed enthusi asti c pol emi cs, sardoni c passages, bi ts of esoteri c and even
shocki ng doctri ne. Yeager, The Keynesi an Di versi on, Watern Economic J ournal,
XI (June 1973), p. 150.
Fiscal Policy: Disguised Counte~eiting 137
fl ati on. You mean that mass i nfl ati on i s a possi bi l i ty? Yes, of
course. And thi s i s bad? Yes, of course . What we need, you are
sayi ng, i s managed i nfl ati on. Thats i t, exactl y! (The publ i c
asks: Oh, wi se economi st, how can you manage i nfl ati on? The
repl y: Dont worry; I l l manage.) What we need, i n other words,
i s professional counterfeiting. Thi s means countmfeiting managed by
Kgnes-trained economists.
Keynes bel i eved that when you and I (buyers and sel l ers)
refuse to make an exchange, we are hurti ng each other. We just
cant seem to hel p i t. Somehow, we just cannot sort out the prob-
l em and come to terms. What we need i s an i ncenti ve to trade. We
need the State to come i n and provi de the needed i ncenti ve. Thi s
i ncenti ve i s more money for the buyer (sel l er of money), and more il-
lusion for the sel l er (sel l er of goods and servi ces).
I f the probl em i s the shortage of money, why not al l ow pri vate
counterfei ti ng? I s i t a form of theft? Then so i s offi ci al counterfei t-
i ng. Wi l l pri vate counterfei ti ng debase the val ue of the currency
and i nvestments presentl y hel d by the publ i c? Then so wi l l offi ci al
counterfei ti ng. Wi l l pri vate counterfei ti ng destroy the peopl es
fai th i n the exi sti ng currency uni t? Then so wi l l offi ci al counter-
fei ti ng. Wi l l pri vate counterfei ters l ack the sel f-restrai nt needed to
steal from the publ i c sl owl y, and to debase the peopl es hol di ngs of
money-denomi nated assets? Then we are argui ng about time, not
pr i nci pl e.
I n short, i f i t i s wrong and sel f-defeati ng for pri vate counterfei t-
ers, i t i s equal l y wrong and sel f-defeati ng for offi ci al counterfei ters.
Yet the offi ci al counterfei ti ng sti l l goes on. I t i s cal l ed progressi ve
monetary pol i cy. Keynes and Mi l ton Fri edman and the suppl y-
-si de economi sts and the Soci al Credi t cranks al l agree: a l i ttl e i n-
fl ati on of the money suppl y i s necessary. But why? What i s the
di fference who does i t? The answer i s cl ear: the State can do it in a
managed fashion, and Zf the bad results can be delayed until afier the next
election, the politicians will continue to print the money. I n short, the
i ssue i s ti me. Pri vate counterfei ters get greedy. They wi l l compete
agai nst each other. They wi l l destroy the game too soon. Counter-
fei ti ng eventual l y wi l l destroy the economy, but sl ow counterfei t-
138 Baptized I njation
i ng managed money does not al ert the vi cti ms unti l years
l ater. That, i n essence, i s the kernel of truth i n the overal l shel l of
economi c depravi ty. The publ i c l earns sl owl y. The publ i c trusts
the experts, and the publ i c l earns sl owl y. Oji ci a/ counte~eiting be-
trays the publick trust . . . slow~.
Thi s i s the heart of the Keynesi an revol uti on. Thi s i s why
Keynesi ans favor fi scal pol i cy taxi ng and spendi ng and runni ng
l arge defi ci ts rather than monetary pol i cy, that i s, outri ght i nfl a-
ti on. The publ i c can be fool ed a l ot l onger i f the central pl anners
di sgui se the theft of counterfei ti ng through government spendi ng.
The government needs to spend the money to buy somethi ng
pr oducti ve; or bui l d somethi ng producti ve . I f the government
just handed out the fi at money on street corners, the publ i c woul d
fi gure out that the governments sol uti on to depressi on i s si mpl y
the ol d con job of mass i nfl ati on. Pri ces woul d go to i nfi ni ty, and
the game woul d start over. But i n the meanti me, everyone woul d
have been rui ned, fi rst by mass i nfl ati on, and then by the resul t-
i ng depressi on. Keynes had l earned the l esson of the German i n-
fl ati on of 1919-23. Fi scal pol i cy was hi s answer: concealed l ong-term
mass i nfl ati on. I n short, hi de the real i ty as l ong as possi bl e.
The Need for Government Pyramids
Does thi s mean that publ i c works projects are nothi ng more
than modern-day pyrami ds? Are they real l y just smoke screens
for the engi ne of i nfl ati on? Are they real l y not much better than
di ggi ng hol es i n the ground, and pi l i ng up di rt somewhere el se? I s
thi s the kernel of untruth i n Keynesi an fi scal pol i cy? Yes, and
Keynes sai d so hi msel f
I n so far as mi l l i onai res fi nd thei r sati sfacti on i n bui l di ng mi ghty
mansi ons to contai n thei r bodi es when al i ve and pyrami ds to shel ter
them after death, or, repenti ng of thei r si ns, erect cathedral s and endow
monasteri es or forei gn mi ssi ons, the day when abundance of capi tal wi l l
i nterfere wi th abundance of output may be postponed. To di g hol es i n
the ground , pai d for out of savi ngs, wi l l i ncrease, not onl y empl oyment,
but the real nati onal di vi dend of useful goods and servi ces. 14
14. I bid. , p. 220.
Fiscal Policy: Disguised Count~feiting 139
Of course, he real l y di dnt bel i eve i n such a system of
pyrami d-bui l di ng and hol e-di ggi ng. Why not? Because it was pri-
vate. So he added thi s qual i fi cati on: I t i s not reasonabl e, however,
that a sensi bl e communi ty shoul d be content to remai n dependent
on such fortui tous and often wasteful mi ti gati ons when once we
understand the i nfl uences upon whi ch effecti ve demand depends .
Effecti ve demand therefore means government pyrami ds and hol es.
Oh, yes, he was cl ever. So cl ever that he sol d thi s nonsense to
two generati ons of economi sts, who i n turn made good i ncomes
sel l i ng the justi fi cati on for pyrami ds and hol es to the pol i ti ci ans
who, i n the tradi ti on of Pharaoh, had l ong si nce adopted the prac-
ti cal concl usi ons anyway.
G
UMAuNsfm?i s h-
J!!!it-.
G
-W
o.xG...-.-
8My pkm woufd sti mul ote the economy whi fe hol di ng
down Moti on. . . urge the peopl e to bte the bul i et,
ti ghten thei i belts, and spend more money.
140 Bapttied I nzation
Any Chri sti an economi st who adopts such nonsense becomes the
pai d agent of the taskmasters of Egypt. Yes, I mean Dr. Vi ckers.
Where Does the Money Come From?
What i f the economy i s i n a recessi on? Accordi ng to Keynes
and Dr. Vi ckers, thi s happens because the economy i s i n an equi -
l i bri um posi ti on i n whi ch resources are unused. (As Hayek sai d
hal f a century ago, the probl em i s not so much expl ai ni ng how re-
sources are unused at any poi nt i n ti me, but rather how i t i s that
they are properl y used at any poi nt i n ti me. ) The Keynesi ans l ove
thei r free market equi l i bri um concept, but onl y so l ong as i t i s an
equilibrium with unemployment. Thi s i s the onl y ki nd of free market
equi l i bri um that revol uti onary orthodoxy Keynesi ans are wi l l -
i ng to di scuss. Such an equi l i bri um and Keynes never di d
expl ai n how i t coul d exi st for very l ong, gi ven the profi t-seeki ng
acti vi ti es of entrepreneurs cal l s forth the State to get thi ngs mov-
i ng and ful l y empl oyed.
Does Dr. Vi ckers real l y bel i eve al l thi s? I ndeed he does: Let
us therefore, i n order to focus cl earl y and sol ey on the poi nt at
i ssue, suppose that before the i ncrease i n i nvestment expendi tures
occurred the economy was i n a posi ti on of macroeconomi c equi -
l i bri um i n the sense i n whi ch that has al ready been defi ned, but
that at that equi l i bri um posi ti on a certai n amount of unempl oyed
resources of manpower and equi pment exi sted. Thi s, then, i m -
pl i es that any i ncreases i n expend~ures that occur can be expected
to sti mul ate a hi gher l evel of producti on and cal l forth the hi gher
requi red l evel of output, wi thout exerti ng any upward pressures
on the general l evel of pri ces.l s
Here we are i n depressi onary equi l i bri um. On the one hand,
he rejects the i dea of an entrepreneur-dri ven tendency toward ful l -
empl oyment i n a free market: For thi s reason the system cannot
be l eft, and Chri sti an economi c consci ences cannot l i ghtl y agree to
l eave i t, to gyrate uni nhi bi tedl y and randoml y of i ts own accord. 16
15. Economi cs and Man, p. 202.
16. I bid., p. 234.
Fiscal Policy: Disguised Counterfeiting 141
You see, there are no stabi l i zi ng forces i n an unhampered free
market economy. (We are back to the Marx-Engel s l i ne of reason-
i ng: anarchy of pri vate producti on. ) But on the other hand, we
can have an equi l i bri um of unempl oyed resources i n a free mar-
ket, an equi l i bri um whi ch i s so stabl e that government economi sts
know just what to do to make thi ngs better agai n. I n other words,
the free market orates random~, whi ch i s cl earl y unacceptabl e, yet
i t al so ~tabilizesforyears at l evel s of hi gh unempl oyment, whi ch i s
equal l y unacceptabl e. Somehow, I get the i mpressi on that Dr.
Vi ckers i s determi ned to fi nd the free market u-nacceptabl e.
We are tol d that an i nvestment wi l l sti mul ate a hi gher l evel of
producti on . Fi ne. Then why doesnt some profi t-seeki ng entre-
preneur make the requi red i nvestment? This question is one which
Kgmes and Dr. Vickers never want to answer. For some reason, the
entrepreneur wont i nvest. (Maybe i t has somethi ng to do wi th
profi t.) So guess who wi l l i nvest? Ri ght! The government bureau-
crat you know, Mr. I nnovati on. He wi l l spend a hundred dol -
l ars on somethi ng or other. I t real l y doesnt matter what. Pyra-
mi ds, you know. Hol es i n the ground.
The $100 i ncrease i n i nvestment expendi ture wi l l obvi ousl y
cause an i mmedi ate i ncrease of $100 i n GNP. Yes, i t wi l l . That i s
how the s tati s ti ci ans defi ne one component of the Gr os s Nati onal
Product: an i ncrease i n government spendi ng, on anything. The
stati sti ci an never asks whether the expendi ture i s producti ve. Al l
GNP stati sti cs assume that i t i s. Pyrami ds, you know. Hol es i n the
ground. I ts al l GNP to the stati sti ci ans. Abstracti ng now from al l
the other factors we have consi dered as affecti ng the rel ati on be-
tween GNP and di sposabl e i ncome, l et us suppose, agai n to focus
on the si ngl e most i mportant poi nt at i ssue, that di sposabl e i n-
come i ncreases al so by $100. Now thi s wi l l generate an i ncrease i n
consumpti on expendi tures, the magni tude of the i nduced effect
dependi ng on the si ze of what we have just defi ned as the mar-
gi nal propensi ty to consume.17 Presto: an increase in disposable in-
come. The economy gets rol l i ng agai n.
17. I bid,, p. 202.
142 Bapttied I nj7ation
I rub my eyes i n di sbel i ef. Thi s i s the Keynesi an sol uti on?
You can see the probl em as wel l as I can, W%ere did the bureaucrat get
the $100? From the taxpayer? Then i n doi ng so, he reduced di spos-
abl e i ncome i n the fi rst pl ace. From borrowi ng? Then he reduced
the di sposabl e i ncome i n the fi rst pl ace, From the pri nti ng press
(or bank)? Then thi s i s the same ol d con game that coi n cl i ppers
and counterfei ters have pl ayed si nce the dawn of money. There i s
no thi rd al ternati ve, and Dr. Vi ckers knows i t. He descri bes the
al ternati ves i n detai l . 18
Thats i t, fol ks. Thats al l there i s. Take away the graphs,
charts, equati ons, and i ncoherent gobbl edygook, and thi s i s the
famous bottom l i ne. Spend yoursel f ri ch wi th counterfei t money.
No, not qui te: the government wi l l spend the rest of us ri ch wi th i ts
counterfei t money (mi nus 30%0 for handl i ng).
Why Wont Peopl e Trade?
We have covered al l fi ve reasons. Let us revi ew them once
more.
1. I dont know what youre sel l i ng.
2. You dont have what I m buyi ng.
3. Your pri ce i s too hi gh.
4. Your pri ce i s acceptabl e to me, but I thi nk you wi l l take l ess
l ater on.
5. The government has made i t i l l egal (or expensi ve) to trade.
How do we sol ve these probl ems? We al l ow the parti ci pants to
sol ve them. We al l ow each other to sol ve them. We do not ask the
State to coerci vel y sol ve them. We ask few servi ces from the State.
The State guarantees the enforcement of vol untary contracts. The
State does not tamper wi th the monetary uni t. The State prohi bi ts
fraud and vi ol ence. The State keeps taxes bel ow the ti the of 10
percent. That i s just about i t a few roads, perhaps, but that i s
just about i t.
What happens then? We make a deal .
18. I bid., pp. 316-334.
Fiscal Policy: Disguised Counterfeiting 143
1. You adver ti se. I shop.
2. Youl ocate what I wantto buy and sel l me the i nfor mati on
on where to buy i t.
3. You l ower your pr i ce.
4. You wai t to see i f I offer more. I wai t to see i f you drop your
pr i ce.
5. The government repeal s al l l egi sl ati on whi ch restri cts trade.
I f we cannot agree, then we go tal k to someone el se. I f condi -
ti ons change, we change. I f we want to trade, we keep bargai n-
i ng. We retai n our freedom to bargai n. Thi s i s what economi sts
cal l price jexibili~. Keynes di d not bel i eve that i t works. He coul d
never show theoreti cal l y why i t doesnt work. I t seems obvi ous to
anyone that i t can work. I f i t doesnt, then peopl e wi l l not trade
unti l condi ti ons get tougher. Eventual l y, they wi l l trade. The pri ce
of not tradi ng i s too hi gh. We do not need moral appeal s to trade,
such as the one Dr. Vi ckers has wri tten. g We just need the freedom
to trade wi thout i nterference from pol i ti ci ans and bureaucrats.
The Keynesi an l ogi c about the breakdown of trade and the
col l apse of i ncome i s correct, but on~ under one speci fi c condi -
ti on: namel y, where an unchanging pri ce structure exi sts. I t i s true
that a wi thhol di ng of spendi ng or consumpti on (i . e., a decl i ne i n
monetary demand) wi l l cause the predi cted nasty resul ts. There
are, however, two possi bl e sol uti ons. On the one hand, the expen-
di ture stream coul d be boosted i n some manner, or, on the other
hand, pri ce reducti ons coul d occur whi ch woul d bri ng suppl y and
demand, measured i n dol l ars and cents, cl oser to a market-clearing
p-ice, where al l sel l ers and al l buyers coul d make thei r exchanges
and go home sati sfi ed. The fi rst sol uti on, that of boosti ng mone-
tary demand monetary i nfl ati on i s the Keynesi an answer to
the probl em. The l atter, that of al l owi ng pri ces to fl uctuate, i s the
laissez-faire sol uti on. For some unstated reason, Dr. Vi ckers l i ke
Keyn~s never menti ons the effect pri ce reducti ons woul d have
on the economy.
The secret of Keynes theory of equi l i bri um wi th unempl oy-
19. I bid., p. 122.
144 Baptized I n@ation
ment i s thi s: he di d not want to see trade uni on members have to
suffer nzonetay pay cuts. I nstead, by creati ng money and l oweri ng
i ts val ue that i s, by al l owi ng pri ces to ri se i n a worl d of stabl e
money wages (!! !) the government l owers the real i ncome of
workers. Thus, the i nvi si bl e hand of the market takes over
because of the invisible tax of pri ce i nfl ati on. Keynes wrote: Hav-
i ng regard to the l arge groups of i ncomes whi ch are comparati vel y
i nfl exi bl e i n terms of money, i t can onl y be an unjust person who
woul d prefer a fl exi bl e wage pol i cy to a fl exi bl e money pol i cy,
unl ess he can poi nt to advantages from the former whi ch are not
obtai nabl e from the l atter.zo
But we can poi nt to such advantages. The major one i s that
wi thout monetary i nfl ati on, there wi l l not be a repeti ti on of the
boom-bust cycl e. 21 Another one i s that the publ i cs trust i s not vi o-
l ated by offi ci al counterfei ters. Another i s that peopl e and govern-
ments are not tempted to amass huge debts on the assumpti on
that the government wi l l pri nt the money to enabl e them to pay
off thei r debts wi th cheaper money. Another i s that governments
wi l l not be tempted to i mpose pri ce and wage control s, whi ch di s-
rupt producti on. Another i s that rel ati ve pri ces of economi c resour-
ces wi l l not be di storted by i njecti ons of fi at money i nto the system.
Perhaps the greatest i rony of al l i s that Keynes pol i ci es have
l ed to the accumul ati on of debt on a massi ve scal e by govern-
ments, corporati ons, and fami l i es. Yet i t i s debt, perhaps above
al l , that keeps sel l ers and wage-earners from l oweri ng pri ces dur-
i ng a recessi on.
Concl usi on
The kernel s of untruth i n the Keynesi an system are numer-
ous. Here are several :
1. Pr i ces ar e downwar dl y i nfl exi bl e.
2. The i ncenti ve to tr ade does not r egul ar l y over come down-
war d pr i ce i nfl exi bi l i ty.
20. Keynes, General Themy, p. 268.
21. Mi ses, Human Action, ch. 20.
Fiscal Policy: Disguised Counterfeiting 145
3. There can be free market equi l i bri um wi th unempl oy-
ment (because of downward pri ce i nfl exi bi l i ty).
4. The gover nment can br eak the tr ade bar r i er by taxi ng and
spendi ng pol i ci es.
5. The government can pay for thi s through monetary i nfl a-
ti on wi thout pri ce i nfl ati on.
6. The governments bureaucrats are wi ser i nvestors for the
publ i cs good than profi t-seeki ng entrepreneurs who are
ri ski ng thei r own money.
7. Pyrami ds areas good as anythi ng el se to spend money on, i f
onl y governments bui l d them.
8. The tri ck i s to l ower real wages through pri ce i nfl ati on wi th-
out l etti ng the vi cti ms cat& on.
9. The vi cti ms wi l l not catch on, and they wi l l not rai se thei r
wage or pri ce demands.
Dr. Vi ckers cal l s thi s system Chri sti an. I dont. I cal l i t Egypt-
i an to the core. Dr. Vi ckers woul d del i ver Gods peopl e back i nto
bondage. He i s a defender of the power rel i gi on. 22
22. Gary North, Moses and Pharoah: Dominion Rel@ion us. PoweY Religion (Tyl er,
Texas: I nsti tute for Chri sti an Economi cs, 1985), I ntroducti on.
9
SAYS LAW
Says Law simp~ did not hold in fact. Supp~ did not create its
own demand at all conceivabk levels of employment. The aggregative
economic system could and dti stagnate at a permanent~ depressed
level of employment and activity. I t was the achievement of Ky.esk
Gener al Theor y to demonstrate that the economy could, and in ob-
servable instances did, settle at what we have characterized as equilib-
rium income levels at which not all of the available workforce was em-
ployed. What Kgnes demonstrated, in other words, was the possibil-
ity of what henceforth had to be recognized as an underemployment
equilibnum condition. 1
We now come to a somewhat rari fi ed economi c debate. I t i s
real l y very i mportant i n understandi ng both the Keynesi an sys-
tem and Dr. Vi ckers bapti zed versi on. I wi sh i t werent so i mpor-
tant, for Dr. Vi ckers presentati on, l i ke Keynes presentati on,
does not l end i tsel f to enjoyabl e readi ng. Yet Dr. Vi ckers and the
Keynesi an economi sts agree that Keynes refutati on of Says Law
was at the very heart of hi s revol uti on. I t was the decade of unem-
pl oyment and depressi on of the 1930s whi ch softened the resi st-
ance to Keynes revol uti on. The l ong-term unempl oyment, to use
Thomas Kuhns anal ysi s,z was the anomal y to whi ch the ol der
cl assi cal economi cs (but not Austri an economi c theory) no
1. Vi ckers, Economics and Man, p. 35.
2. Thomas Kuhn, The Structure of Scient$c Revolutions (2nd eel .; Chi cago: Uni -
versi ty of Chi cago Press, 1970).
147
148 Baptized I nzation
l onger seemed to appl y.3
I wi l l say from the outset that Dr. Vi ckers gi ves no i ndi cati on
that he has ever read Thomas Sowel l s standard account, Say\
Law: An Historical Ana@is (1972 ),4 and thi s gl ari ng omi ssi on from
hi s books makes suspect everythi ng he says about Says Law and
i ts i mpl i cati ons. Gi ven the i naccuraci es of hi s di scussi ons of Say
and the i mpl i cati ons of cl assi cal economi c theory, i t i s cl ear that he
desper atel y needs to r ead Sowel l , as wel l as understand hi m.
Why Are There Gl uts?
Answer: Because sellers are asking prices that are too high. (I l l bet
you knew that al ready.) Because nei ther Dr. Vi ckers nor Keynes
woul d accept thi s obvi ous answer, I feel obl i ged to devote ti me,
energy, and pages to a di scussi on of Keynes and Says Law. You
may feel the same pressure, just for the sake of di scoveri ng one
more case where Dr. Vi ckers i s not pl ayi ng fai r.
Jean Bapti ste Say, a French economi st of the mi d-ni neteenth
century, was the ori gi nator of Says Law. That l aw, i n i ts Keynes-
i an mi sstatement, says that suppl y creates i ts own demand.5 Ac-
cordi ng to Dr. Vi ckers, i t was Keynes who exposed the fal l aci es
of the cl assi cal school ,6 one of those fal l aci es bei ng Says Law, the
i dea of the i mpossi bi l i ty y of general overproducti on. The theorem,
says Dr. Vi ckers, that there coul d not be overproducti on and that
there coul d not be underempl oyment because there coul d not be a
general i zed defi ci ency of monetary demand for goods, rested on
the transparent~ fallaciom proposition . . . that the money val ues, or
money i ncomes, earned from produci ng goods woul d automati c-
al l y be spent. . . .8
3. The economi cs professi on, both pre-Keynes and post-Keynes, chose to
i gnore the Austri an vi ew. Systemati c sel ecti ve i gnorance on the part of both the
gui l d masters and the revol uti onari es i s basi c to any sci enti fi c revol uti on.
4. Thomas Sowel l , Says Law: An Historical Ana@is (Pri nceton, New Jersey:
Pri nceton Uni versi ty Press, 1972).
5. From the ti me of Say and Ri cardo the cl assi cal economi sts have taught
that suppl y creates i ts own demand. . . . Keynes, General Theog+ p. 18.
6. Vi ckers, p. 12.
7. I bid., p. 11; cf. p. 35.
8. I bid., p. 12, emphasi s added; cf. p. 35.
Says Law 149
Why i s Dr. Vi ckers so i nterested i n thi s bi t of anci ent hi story?
Because Keynes supposed refutati on of Say was the very heart of
hi s supposed refutati on of cl assi cal economi cs. I f suppl y creates i ts
own demand, then why di d the great depressi on of the 1930s go
on for a decade? Why coul dnt the suppl y brought to market be
sol d?
The answer, of course, i s that the pri ces asked by sel l ers were
too hi gh. But why di d pri ces stay so hi gh? Why dont sel l ers even-
tual l y offer l ower pri ces? Why was Says Law nul l i fi ed duri ng
the Great Depressi on? Because government policy favored price Joors,
meaning cartel prices. The State puni shed sel l ers who adopted pol -
i ci es of cut-throat competi ti on. Thi s expl anati on of the fi rst four
years of the depressi on i n the Uni ted States was what l ed Keynes-
i an economi sts to di spatch Murray Rothbard i nto professi onal
outer darkness .9 Twenty years l ater, Rothbards economi cs-
based expl anati on was resurrected by popul ar (and el oquent) hi s-
tori an Paul Johnson, i n Modern Times (1983). The expl anati on
offered by Mi l ton Fri edman i n that same year, 1963, was that
pri ces were too hi gh as a resul t of Federal Reserve (central bank)
monetary pol i cy, 1929-33 10 a more acceptabl e theory to aca-
demi c economi sts who general l y favor monetary i nfl ati on.
What Say had argued i s that #pri ces are allowed to move upward
or downward, suppl y creates i ts own demand. More to the poi nt,
suppl y i s demand. Put bl untl y, i f you have nothi ng to offer i n ex-
change, you do not become a part of aggregate demand. Or, i n
words that Dr. Vi ckers woul d regard as styl i sti cal l y vul gar, I f you
ai nt got i t to start wi th, you cant buy nothi ng wi th i t.
Kgmes Strategy
I t was thi s expl anati on of how markets work both i n theory
and i n practi ce whi ch Keynes had to refute i n order to make way
9. Murray N. Rothbard, Ameriiah Great Depression (Pri nceton, New Jersey:
Van Nostrand, 1963).
10. Mi l ton Fri edman and Anna J. Schwartz, A MonetaV Histoy of the United
State~ (Pri nceton, New Jersey: Pri nceton Uni versi ty Press, for the Nati onal
Bureau of Economi c Research, 1963).
150 Baptized I njation
for the acceptance of hi s General Theoqv. Onl y i f he coul d show that
the di sastrous performance of the worl ds markets i n the 1930s
was the resul t of faul ty economi c practi ce, whi ch i n turn was
based on faul ty free market economi c theory, coul d he expect
economi sts to accept hi s revol uti onary prescri pti on. As Hazl i tt
and other cri ti cs have poi nted out, hi s revol uti on was a return to
mercanti l i sm, whi ch Adam Smi th had buri ed. Li ke Dracul a ri s-
i ng from the grave, Keynes mercanti l i sm coul d be stopped onl y
by that l egendary stake through the heart. Says Law was that
stake. Keynes had to remove i t from the hands of the markets de-
fenders. He had to convi nce the professi on that free market com-
peti ti on does not produce market-cl eari ng forces. He had to con-
vi nce them that the market can and has produced an equilibrium of
unemployed re~ources i n contrast to cl assi cal economi cs theo~ of
equi l i bri um pri ci ng, i n whi ch al l resources wi l l be ful l y empl oyed
at some price. He di d so by i gnori ng tari ffs, cartel s, and other
government-created i mpedi ments to pri ce competition. He di d so
al so by mi sstati ng Says Law and then refuti ng hi s newl y pro-
duced straw man.
The fact that Keynes di d not properl y understand Says Law
has been abl y exposed by Henry Hazl i tt and Ludwi g von Mi ses. 11
More recentl y, i t has been exposed by Thomas Sowel l and by
more recentl y, I mean several years before Dr. Vi ckers wrote Eco-
nomi cs and Man. 12 Says l aw never suggested that i ncomes woul d
automatical~ be spent. Agai n, we have an exampl e of how Dr.
Vi ckers di spl ays a tendency to mi sstate the posi ti on of those wi th
whom he di sagrees. He bui l ds a straw man to draw the readers
attenti on from the real facts of the case. I n thi s sense, he i s very
much l i ke hi s mentor. Sowel l has poi nted out: The cl assi cal
economi st descri bed i n Keynes General Theory was a straw man.13
11. Henry Hazl i tt, The Failure of the [New Economics (Pri nceton, New Jersey:
Van Nostrand, 1959), pp. 32-43. Ludwi g von Mi ses, Planning For Freedom (South
Hol l and, I l l i noi s: Li bertari an Press, [1952] 1980), pp. 64-71. Vi ckers contenti on
that Hazl i tts anal ysi s of Keynes i s shal l ow (p. 36) i s meani ngl ess wi thout sup-
porti ng evi dence.
12. Thomas Sowel l , Says Law: An Historic Ana@is, ch. 8.
13. I bid., p. 211.
Say% Law 151
Keynes never bothered to be honest enough i n hi s schol arshi p to
quote Say accuratel y, and i t i s somewhat surpri si ng to fi nd that a
Chri sti an economi st wants to fol l ow the same i ntel l ectual l y shoddy
route. Of course, Dr. Vi ckers may have a l egi ti mate excuse: he
may never have read J. B. Say, just as he seems never to have
read Thomas Sowel l s book on Says Law.
Goods for Goods
Says Law merel y stated that a general overproducti on of al l
commodi ti es i s i mpossi bl e because, i n economi c terms, goods
al ways exchange agai nst goods, money bei ng merel y an i nter-
medi ary acti ng as a common denomi nator showi ng the exchange
rati o whi ch exi sts between, for exampl e, cars and bi cycl es, shi rts
and trousers, or potatoes and ri ce. I n the words of Say, you wi l l
have bought, and every body must buy, the objects of want or
desi re, each wi th the val ue of hi s respecti ve products transformed
i nto money for the moment onl y.14 Money i s a medi um of ex-
change, a commodi ty whi ch faci l i tates the exchange of goods and
servi ces. But Says Law depends upon exchange rati os (pri ces) be-
tween goods and servi ces bei ng i n perfect bal ance that i s, i n
equi l i bri um a qual i fi cati on Dr. Vi ckers (and Keynes) conven-
i entl y chooses to i gnore.
Dr. Vi ckers wri tes: The l ogi c of thi s argument i mpl i ed that i f
suppl y created i ts own demand at any gi ven or speci fi ed l evel of
producti on and empl oyment, suppl y woul d si mi l arl y create i ts
own demand at al l concei vabl e l evel s of empl oyment. There coul d
not therefore exi st any obstacl es to the ful l empl oyment of the
total work force avai l abl e and wi l l i ng to work. 15 Here we fi nd the
great Keynesi an mi sstatement of Says Law. (Apparentl y Dr.
Vi ckers has made l i ttl e effort to check pri mary sources whi ch
Keynes quoted. Had he done so, he woul d have di scovered that
14. Jean Bapti ste Say, Of The Demand Or Market For Products , in Henry
Hazl i tt (cd.), The Critics of Kgnesian Economics (New Rochel l e, New York: Arl i ng-
ton House, [1960] 1977), p. 13.
15. Vi ckers, A Christian Approach to Economics and the Cultural Conditton, pp.
59-60.
152 Baptized I ntation
when Keynes quoted J. S. Mi l l s versi on of Says Law, he conven-
i entl y omi tted thi s i mportant qual i fi cati on. ) When pri ces are no
l onger i n equi l i bri um the resul t i s a relative overproducti on of sonze
goods (the ones out of bal ance), but the market can be cl eared of
any surpl us by a readjustment of the parti cul ar pri ces to refl ect the
changes i n peopl es subjecti ve val uati ons of those i tems. Legal~
fl exi bl e pri ces, both upward and downward, provi de the necessary
l egal framework to al l ow profi t-seeki ng, future-ori ented entrepre-
neurs to seek out those buyi ng and sel l i ng pri ces that wi l l cl ear the
market of a rel ati ve overproducti on of goods by restori ng the bal -
ance between the suppl y of such goods and the demand for them.
Note al so the di screpancy whi ch exi sts between Dr. Vi ckers
versi on of Says Law and the actual words of Say. Nowhere does
Say gi ve any i ndi cati on that money val ues, or money i ncomes,
earned from produci ng goods woul d automati cal l y be spent .
Here i s another fi ne exampl e of Dr. Vi ckers i nabi l i ty to accuratel y
represent those wi th whom he di sagrees.
Downward~ Flexible Przces
A fl exi bl e pri ce mechani sm, however, i s somethi ng Dr. Vi ckers
chooses to omi t fmm the di scussi on. Says Law di d not hol d i n fact ,
he asserts, and ci tes the twenty-fi ve percent unempl oyment rate i n
the Uni ted States duri ng the depressi on years as proof. What Dr.
Vi ckers negl ects to di scuss, however, i s whether downwardl y i nfl exi -
bl e wage rates l egal l y i nfl exi bl e, because of government i nterfer-
ence were a cause of thi s unempl oyment. Gi ven the si tuati on of
the 1930s, and the unwi l l i ngness of many government-protected
trade uni on members to take a reducti on i n wages, unempl oyment
woul d have been predi cted by any of the cl assi cal economi sts.
Dr. Vi ckers, by endeavori ng to refute Says Law, has to
adopt that form of argument whi ch he categori cal l y di sal l ows: the
fal l acy of composi ti on argument. Si nce there can be a temporary
overproducti on of some goods because of erroneous pri or forecast-
i ng by speci fi c producers, Dr. Vi ckers draws the concl usi on there
can be a general and continuing overproducti on, i mpl yi ng the gen-
eral mi sforecasti ng by most producers. But i s thi s not maki ng the
Baptized I nzation 153
mi stake of i magi ni ng that what was true of a part was necessari l y
. . . true of the whol e? 16 Apparentl y we are not al l owed to make
such deducti ons, accordi ng to Dr. Vi ckers. Yet now that i t i s con-
veni ent for hi s own presentati on, he i s perfectl y wi l l i ng to make
such deducti ons. I n thi s exampl e, though, Dr. Vi ckers has not
onl y contradi cted hi s own rul es of the game , but he al so made a
faul ty concl usi on. I t i s si mpl y not true to say that because over-
suppl y may exi st i n the case of one commodi ty that i t exi sts re-
gardi ng al l commodi ti es. 17 Thi s was what the cl assi cal economi sts
under stood, 18 and what Keynes and hi s di sci pl es refuse to
acknowl edge.
Long ago, Mi ses asked thi s cruci al questi on: Why shoul d i t be
that at one poi nt i n ti me, most of the pl ans of ski l l ed forecasters go
wrong and produce l osses? That a few wi l l be wrong i s i nescapa-
bl e, but competi ng forecasters wi l l make profi ts at thei r expense.
The probl em for the economi st i s to expl ai n the simultaneous ap-
pearance of l osses. Hi s concl usi on consti tutes the Austri an
theory of the trade cycl e. We must l ook for the one common bond
to every economi c transacti on i n order to l ocate the source of the
i ni ti al confusi on of the entrepreneurs. That common bond i s
rnong. Mi ses then bui l t hi s expl anati on of depressi on i n terms of
the erroneous economi c si gnal s that are generated by the pol i cy of
monetary i nfl ati on, and the i nescapabl e contracti on whi ch takes
pl ace after the publ i c begi ns to forecast accuratel y the conti nua-
ti on of pri ce i nfl ati on. 19 The depressi on i s the phase of the cycl e i n
whi ch the previ ous mi stakes of entrepreneurs are exposed as mi s-
takes. Onl y when these mi stakes are real i zed and responded to
can there be l ong-term, non-i nfl ati onary recovery.
Does Says Law hol d i n fact? I t i s obvi ous to any cl ear-thi nki ng
16. Vi ckers, Economi cs and Man, p. 33; cf. pp. 92, 269.
17. John Stuart Mi l l , Principles of Pohtwal Economy (London: Longmans, Green
and Co., 1902), Book I I I , XI V:l , p. 337.
18. Thomas Sowel l , Cl assi cal Economi cs Reconsidmed (Pri nceton, New Jersey:
Pri nceton Uni versi ty Press, 1974), p. 43.
19. Mi ses, Human Action: A Treatise on Economics (3rd ed.; Chi cago: Regnery,
1966), ch, 20.
154 Baptized I ry?ation
per son that we have nothing to trade until we jirst produce something,
whether i t i s some vi si bl e economi c good such as potatoes, or pro-
ducti ve ski l l s such as computer operati ng, or even ones personal
reputati on for repayi ng debt, whi ch enabl es a person to obtai n
credi t for present purchases. Unti l we actual l y possess these
thi ngs, we have nothi ng whi ch we can offer i n exchange for other
economi c i tems we desi re. Suppl y that i s, producti on does cre-
ate demand. Keynesi ans have mere] y reversed the theorem, say-
i ng demand creates suppl y, or that demand cal l s forth producti on,
but wi thout provi di ng cl ear evi dence for understandi ng how thi s
is so. Hence, they i nsi st, i f onl y everyone had more money (de-
mand), producti on (suppl y) woul d i ncrease.
They can hol d thi s vi ew onl y by i gnori ng fundamental ques-
ti ons rel ati ng to suppl y and demand, and they do thi s by denyi ng
rel ati onshi ps (economi c regul ari ti es) between suppl y and demand
that exi st i n al l ci rcumstances. (TANSTAAFL: There ai nt no
such thi ng as a free l unch.) I n addi ti on, they are wi l l i ng to over-
l ook empi ri cal evi dence whi ch refutes thei r theory. The 1970s oi l
cri si s resul ted i n reduced output coupl ed wi th hi gher pri ces. Ac-
cordi ng to Keynesi ans, hi gher pri ces shoul d mean more money i n
someones pocket, more spendi ng and a sti mul us to i ndustry. I n-
stead, there was l ess output and the onset of stagfl ati on i n the
West, that pai nful combi nati on of monetary i nfl ati on and fal l i ng
producti on. Keynesi an economi sts had no answer, other than
thei r tri ed-and-true one: morejiat mong. That was what we got i n
the l ate 1970s, but wi thout the promi sed mi racl e of hi gh empl oy-
ment. Thi s chai n of i nternati onal economi c events, perhaps more
than any other factor, has caused the present di ssati sfacti on wi th
Keynesi an theory amongst professi onal economi sts.
Competi ti on
The meani ng of capi tal i sm, wi th i ts freedom for men to com-
pete for l i mi ted resources, to compete for purchases of a si mi l ar
i tem, and to compete agai nst other l aborers sel l i ng thei r abi l i ti es,
i s somethi ng Keynesi ans woul d l i ke to see forgotten. They detest
cut-throat competi ti on, yet the y speak as i f they wanted to en-
Sayi Law 155
courage competi ti on. What they never want to admi t i s the poi nt
that Dr. North keeps hammeri ng away at: cut-throat competi -
ti on real l y means cut-throat o/@ortuni ti eN for consumers. ~
I n the Keynesi an system, however, competi ti on has a speci al
meani ng. Dr. Vi ckers i l l ustrates the theory whi ch favors government
economi c acti vi ty wi th thi s exampl e: the Austral i an governments
nati onal ai rl i ne and bank whi ch compete wi th pri vate compani es.
Ul ti matel y, though, thi s ki nd of i l l ustrati ve argument depends upon
how the word competi ti on i s defi ned. I n the case of the federal l y
owned ai rl i ne, i t i s worth noti ng that the Austral i an governments
ai rl i ne corporati on offers servi ces agai nst onl y one competi tor,
other compani es bei ng refused permi ssi on to enter the i ndustry to
offer competi ng servi ces. Unti l Jul y 1981, when some freedom was
al l owed the two ai rl i nes, al l fares were the same by government
decree, and nearl y al l fl i ghts were paral l el that i s, the respecti ve
fl i ghts to the same desti nati on departed and arri ved wi thi n a few
mi nutes of one another. (I suspect that had the ai rports been
equi pped wi th paral l el runways the fl i ghts woul d have been at ex-
actl y the same ti me!) Hence, the onl y competi ti on that exi sts be-
tween the two ai rl i nes i s i n areas such as ai rport faci l i ti es, qual i ty of
i n-fl i ght servi ces, and the attracti veness of the hostesses. For those
Austral i ans who woul d much prefer to bri ng thei r own meal s i n
sacks i f the fares were l ower, the government has l i mi ted thei r
choi ce. (I wi l l not even entertai n the possi bi l i ty of hi ri ng ugl y hos-
tesses: no Austral i an woul d ever admi t to preferri ng ugl y hostesses
and l ower fares. Except, of course, the mal e passengers wi ves. )
21
20. Gary North, Cut-Throat Opportuni ti es, The Freeman (J une 1983).
21. Dr. North argues pri vatel y that the deteri orati ng attracti veness of Ameri -
can hostesses si nce 1970 i s the product of three phenomena: 1 ) fast jets: thei r i n-
creased speed over propel l er-dri ven pl anes has reduced the ti me i n whi ch unmar-
ri ed hostesses can spot potenti al l y wel l -heel ed husband prospects, and then stri ke
up conversati ons wi th them; the speed al so i ncreases thei r work l oad per mi nute;
2) uni on contracts that al ways favor exi sti ng empl oyees to newcomers, and whi ch
keep wage rates hi gh, thereby encouragi ng mi ddl e-aged hostesses to stay on thei r
above-market wage jobs; and 3) pri ce competi ti on among ai rl i nes rather than
hostess attracti veness competi ti on, i tsel f a product of deregul ati on. He em-
phasi zes number 2 as the mai n reason.
156 Baptized I nzation
A si mi l ar si tuati on exi sts wi th the governments competi ng
bank. Si nce al l i nterest rates are determi ned by government pol -
i cy through the Reserve Bank, the competi ti on i s l i mi ted to ser-
vi ce and faci l i ti es. The Austral i an government has been abl e to
use the nati ons Post Offi ces as venue for Commonweal th Bank
customers to carry out l i mi ted banki ng transacti ons outsi de nor-
mal banki ng hours; therefore the competi ti on has been strongl y
bi ased i n the governments favor.
Competi ti on? Obvi ousl y i t i s competi ti on of a ki nd. But
whether i t i s proof that governments and pri vate i ndustry can
real l y compete on an open and equal basi s i s another questi on.
Dr. Vi ckers does not suggest that these exampl es are proof, but
Keynesi ans have a di sti nct tendency to use such compari sons to
support thei r thesi s that governmental parti ci pati on i n the econ-
omy wi l l have a benefi ci al effect. They are far l ess ready to em-
brace an al ternati ve suggesti on: that government parti ci pati on
causes many of the economi c di sharmoni es currentl y exhi bi ted i n
al l nati ons around the worl d.
Here we have further evi dence of the contradi cti ons i nherent
i n Dr. Vi ckers book and Keynesi ani sm i n general . Dr. Vi ckers
does not present a si ngl e cogent argument agai nst the cl assi cal
economi sts, nor has he proven hi s asserti on that a free market sys-
tem cannot work. Hi s arguments are mi sl eadi ng, and to refut> a
mi sstatement of someones posi ti on i s not to refute the i ssue at al l .
Dr. Vi ckers sol e achi evement i s to l ead the reader away from the
truth of the matter and to a di storti on of those vi ews wi th whi ch he
hol ds l i ttl e, i f any, agreement. By usi ng the devi ce of mi sstate-
ment, Dr. Vi ckers avoi ds confronti ng the actual theori es wi th
whi ch he di sagrees. As thi s i s the case, there i s every reason for
the reader to reconsi der the cl ai ms of cl assi cal and neo-cl assi cal
economi c theory.
Entrepreneurshi p
Suppl y does not automati cal l y create i ts own demand (Say),
any more than demand automati cal l y creates suppl y (Keynes).
Acti ng men pl an for the future. I n thei r capaci ty as producers,
Say5 Law 157
they attempt to produce for a future, uncertainp-jlled marketplace,
and as consumers, they pl an i n the present to be abl e to buy goods
on that same jxture, uncertain~-$lled market. The real i t y of uncer-
tai nty i s basi c to al l human pl anni ng. Men are not omni sci ent.
The key el ement whi ch i s mi ssi ng i n Dr. Vi ckers anal ysi s i s
the central economi c actor i n the Austri an School s anal ysi s: the
entrepreneur. The entrepreneurs task i s to predi ct future condi ti ons
of suppl y and demand. He competes agai nst other forecasters. He
may be correct i n hi s esti mates, i n whi ch case he wi l l reap a resi d-
ual : profi t. He may be i ncorrect, i n whi ch case he wi l l produce
l osses. But they key i dea here i s uncertain~. Every economi c order
must deal wi th i t.
I s the profi t-seeki ng, l oss-beari ng entrepreneur the best per-
son to deal wi th uncertai nty, or the government bureaucrat who
owns no shares of the bureaucracy he i s runni ng? I s the person
you thi nk shoul d act for you as your representati ve the entrepre-
neur (to whom you can say, No, I dont want to buy i t; and you
suffer the l oss) or the bureaucrat (who can say to you, Youl l take
i t; your taxes have al ready pai d for i t; and i f you dont l i ke i t, you
take the l oss)? The probl em of overproducti on i s al ways entre-
preneurshi p. As Mi ses summari zed Say:
Commodi ti es, says Say, are ul ti matel y pai d for not by money, but by
other commodi ti es. Money i s merel y the commonl y used medi um of
exchange; i t pl ays onl y an i ntermedi ary rol e. What the sel l er wants
ul ti matel y to recei ve i n exchange for the commodi ti es sol d i s other com-
modi ti es. Every commodi ty produced i s therefore a pri ce, as i t were, for
other commodi ti es produced. The si tuati on of the producer of any com-
modi ty i s i mproved by any i ncrease i n the producti on of other [non-
competi ti ve I . H.] commodi ti es. What may hurt the i nterests of the
producer of a defi ni te commodi ty i s hi s fai l ure to anti ci pate correctl y the
state of the market. He has overrated the publ i cs demand for hi s com-
modi t y and underrated i ts demand for other commodi ti es. Consumers
have no use for such a bungl i ng entrepreneur; they buy hi s products
onl y at pri ces whi ch make hi m i ncur l osses, and they force hi m, i f he
does not i n ti me correct hi s mi stakes, to go out of busi ness. On the other
hand, those entrepreneurs who have better succeeded i n anti ci pati ng the
publ i c demand earn profi ts and are i n a posi ti on to expand thei r busi ness
158 Baptized I nzation
acti vi ti es. Thi s, says Say, i s the truth behi nd the confused asserti ons of
busi nessmen that the mai n di ffi cul ty i s not i n produci ng but i n sel l i ng. I t
woul d be more appropri ate to decl are that the fi rst and mai n probl em of
busi ness i s to produce i n the best and cheapest way those commodi ti es
whi ch wi l l sati sfy the most urgent of the not yet sati sfi ed needs of the
publ i c.zz
Nothi ng i s automati c about any of thi s. Owners of goods must
make moment-to-moment deci si ons to sel l or not to sel l . They
bear the costs of maki ng a poor deci si on. But the possi bi l i ty that
an entrepreneur wi l l si t on a mountai n of unsol d goods that he
coul d at l east get something for i f he sol d hi s i nventory, and for
whi ch he may be payi ng i nterest on i nventory l oans, i s mi ni mal .
The possi bi l i ty that some bureaucrat wi l l si t on unsol d goods that
the taxpayers are fi nanci ng, and whi ch the ori gi nal producers
(e.g., farmers) want to see unsol d and i n storage, i s rel ati vel y
hi gh.
When you tal k about gl uts, you must al ways add the key
wor ds, at an above-market pri ce . These are the words that Dr.
Vi ckers si mpl y refuses to di scuss. Thi s i s why Dr. Vi ckers cannot
be taken seri ousl y.
Concl usi on
Keynes mi sstated Says Law. He therefore created a mythol og-
i cal pl ace for hi msel f as the schol ar who at l ast refuted Says
Law. There i s probabl y no i ntel l ectual myth so fi rml y i mpl anted
i n the mi nds of modern Keynesi an economi sts than thi s myth of
Keynes, the market-cl eari ng equi l i bri um sl ayer. That Dr. Vi ckers
returns to thi s theme agai n and agai n i ndi cates just how deepl y he
has been affected by thi s myth.
J. B. Say was no fool . He understood that i n a real worl d of
mi stakes, peopl e can and do produce i tems for whi ch there i s l i ttl e
demand, and al most none at the ori gi nal asked-for pri ce. The
poi nt i s, Say and the cl assi cal economi sts bel i eved, wi th good rea-
son, that busi nessmen recogni ze that somethi ng i s better than
22. Mi ses, LQrd Keynes and Says Lati (1950), i n P[anningfor Freedom, pp. 65-66.
Sayi Law 159
nothi ng, that some revenues are better than no revenues. They
bel i eved that busi nessmen wi l l l ower thei r aski ng pri ces when
they face si tuati ons i n whi ch they have few or no prospects of
unl oadi ng thei r i nventory. Thus, the market wi l l eventual l y cl ear
i tsel f of produced goods, assumi ng that sel l ers are profi t-seeki ng
and reasonabl y rati onal a not unreasonabl e assumpti on.
Keynes and the Keynesi ans have abandoned thi s fai th i n the
rati onal , l oss-mi ni mi zi ng, price-cutting acti vi ty of sel l ers. Keynes-
i ans have never succeeded i n putti ng any other expl anati on of
human acti on i n i ts pl ace, but they al ways deny Says Law. They
have never di sproven i t; they si mpl y deny i t endl essl y. Thi s i s not
argumentati on; i t i s rhetori c,
What the reader must understand i s that thi s deni al of pri ce-
cutti ng, market-cl eari ng acti ons on the part of sel l ers i s the very
heart and soul of Keynes cri ti que of free market economi cs. I f hi s
understandi ng of Says Law was wrong, then hi s understandi ng of
free market economi cs was al so wrong. Hi s understandi ng of the
way peopl e buy and sel l was wrong. Hi s recommended pol i ci es to
assi st the market are therefore very l i kel y to be wrong, or at the
very l east, i nconsi stent wi th hi s cri ti que of the free market. That,
of course, i s preci sel y what I am argui ng i n thi s book. Keynes got
everything wrong. He returned to the errors of mercanti l i sm the
same errors that Adam Smi th refuted, and then bui l t modern eco-
nomi cs. Peter Druckers anal ysi s i s on target: Keynes not onl y
went back to the Mercanti l i sts i n bei ng macroeconomi c. He stood
al l earl i er systems on thei r heads by bei ng demand-centered
rather than suppl y-centered. I n al l earl i er economi cs demand i s a
functi on of suppl y. I n Keynesi an economi cs suppl y i s a functi on
of demand and control l ed by i t. Above al l the greatest i nnova-
ti on Keynes redefi ned economi c real i ty. I nstead of goods, ser-
vi ces, and work real i ti es of the physi cal worl d and thi ngs
Keynes economi c real i ti es are symbol s: money and credi t. To the
Mercanti l i sts, too, money gave control but pol i ti cal rather than
economi c control . Keynes was the fi rst to postul ate that money
and credi t gi ve compl ete economi c control .2
3
23. Peter F. Drucker, Toward the Next Economi cs, The Public I nterest
(Speci al I ssue, 1980), p. 8.
160 Baptized I nJ ation
That i s what Keynes wanted: economi c control. He was a de-
fender of humani sms power rel i gi on, the power of State economi c
control . And Dougl as Vi ckers i s hi s prophet.
10
SOVEREI GNTY AND MONEY
This, howeue~ brings us to the second of the twopreliminay
points itwasdesired to make. This hastodo with theplaceofgoldin
themonetay economic system, and with what wenoticed earlier as the
claim by some Christian authors, GaV North and Rousas Rushdoony
in particular that unbacked paper money is immoral. . . . I t is un-
fortunate that at this point considerable confusion has been allowed to
enter economic argument from a purported~ Christian perspective. I t
was in order to contribute to a correction of that perspective that we
have developed the entire argument of this book in the manner and in
the order we haue adopted. ~
Money, as the song remi nds us, makes the worl d go around.
Some of us can at l east get qui te di zzy when tryi ng to wade
through the teachi ng of economi sts on thi s topi c. Agai n, however,
there i s nothi ng magi c about i t.
I f al l goods wer e to be offer ed for sal e i n terms of al l other
goods , ea ch i tem wou l d h a v e a h or r en dou s l y compl i ca ted pr i ce
l i s t. Th e pr i ce of a pl an e ti ck et fr om Sy dn ey to San Fr an ci s co, for
ex a mpl e, wou l d n eed to be ex pr es s ed i n a l l oth er commodi ti es .
Thi s mi ght mean that the r etur n ai r far e coul d be obtai ned for 700
pai r s of sock s, 100 shi r ts, two-tenths of an av er age smal l fami l y
sedan, 1500 k i l ogr ams of gr apes, or 200 bottl es of fi ne champagne.
Such a l i st woul d mak e l i fe di ffi cul t.
Wh a t h a s d e v e l op e d h i s t or i ca l l y i s th a t on e pa r ti cu l a r eco-
1. Vi ckers, Economics and Man, p. 241.
161
162 Baptized I ny?ation
nomi c good has been found to be most easi l y exchanged. Thi s has
become known as money, and al l ows al l goods and servi ces
offered for sal e to be expressed i n thi s one commodi ty onl y. I t i s an
economi c good whi ch peopl e wi l l readi l y accept, for the y know that
al l others i n the market pl ace wi l l al so readi l y accept thi s good.
The best defi ni ti on of money was gi ven by Ludwi g von Mi ses
as l ong ago as 1912. Mong h the most marketable commodi~. That i s al l
there i s to i t. No magi c, no secret formul as, nothi ng. Peopl e
through tradi ng begi n to sel ect over ti me certai n commodi ti es that
serve them as a voluntari~ accepted means of exchange. Usual l y,
these assets possess the fol l owi ng physi cal and economi c features,
to some degree or other: transportabi l i ty, durabi l i ty, di vi si bi l i ty,
rel ati ve scarci ty i n rel ati on to wei ght and vol ume, and recogni za-
bi l i ty. Money i s the commodi ty whi ch, apart from havi ng other
possi bl e uses such as jewel ry, i f money i s gol d and/or si l ver, al so
serves as a medi um of exchange.
Al l money i s ori gi nal l y commodity mon~. But i t doesnt stay
purel y commodi ty money for l ong. Eventual l y, counterfei ters take
over, unl ess governments pass l aws that requi re honest wei ghts
and measures, and most i mportant of al l , a l aw that requi res
100% reserves for every warehouse recei pt for gol d, si l ver, or what-
ever the money commodi ty i s.
Whi l e i t i s true that i n di fferent soci eti es i n di fferent peri ods of
hi story vari ous commodi ti es have served as money, f~om brass
and i ron to tobacco or barl ey, i t i s general l y found that the mone-
tary commodi ty has most often been gol d, wi th si l ver al so servi ng
a val uabl e servi ce as money for l ower-pri ced i tems. (The use of
si l ver avoi ds the di ffi cul ty of havi ng to di vi de the measurement of
gol d, i .e., i ts wei ght, i nto such a smal l si ze that i t i s practi cal l y un-
manageabl e.) I t i s onl y the present generati on whi ch does not
ful l y understand the pl ace gol d and si l ver have had i n thi s regard.
Legi sl ati on i n the 1930s i n the Uni ted States and Austral i a, for
exampl e, caused gol d to di sappear as money. The movement
agai nst gol d had started before thi s, but at thi s ti me the break was
fi nal i zed. I n the U. S., gol d served as the offi ci al basi s for the dol -
l ar i n i nternati onal transacti ons among central banks unti l the
Souereign~ and Money 163
fi nal ti e was cut by Presi dent Ni xon i n 1971, but the case agai nst
gol d had been deci ded l ong before thi s l egi sl ati ve act.
Warehouse Storage Recei pts (Banki ng)
The ri se of paper currency i n rel ati onshi p to gol d i s al so of
great i nterest . . . and I do mean i nterest. When gol d and si l ver
served as currency, gol dsmi ths and si l versmi ths often performed a
val uabl e servi ce of stori ng these commodi ti es for safe keepi ng.
They were the fi rst bankers who i ssued recei pts to the deposi tors.
The reci pi ents of these warehouse recei pts i n turn had a l egal
cl ai m on that amount of gol d or si l ver stock hel d by the banker.
Peopl e soon found, however, that i n transacti ons i t was not neces-
sary to go to the bank to get the metal to trade. Others were wi l l -
i ng to accept the bankers recei pt i n the transacti on knowi ng they
coul d present the recei pt at the bank and be pai d the ful l val ue of
the recei pt.
Thi s procedure operated exactl y i n the same manner as the
check does i n modern soci ety. A check i s nothi ng more than a
recei pt whi ch enti tl es the hol der to obtai n money from someones
account. There i s one essenti al di fference between modern check-
i ng accounts and the ol d system of warehouse recei pts: the ol d
recei pt was a recei pt for somethi ng whi ch had val ue as an eco-
nomi c good. I t was not necessary for ki ngs and governments to
l egi sl ate a val ue for gol d or si l ver, for i t was determi ned i n the
market pl ace by the free acti ons of human bei ngs.
Fractional Reserves
The bankers got greedy. They real i zed soon enough that peo-
pl e di d not keep comi ng to them i n order to redeem thei r ware-
house recei pts for the actual preci ous metal . The bankers began
i ssui ng more recei pts for gol d than they had gol d i n reserve. Thi s
was the ori gi n of J -actional reserve banking. They di d thi s because
they coul d l end out the newl y created money and gai n i nterest on
thei r money. Thi s was the ori gi n of the boom-bust economi c
cycl e. Fracti onal reserve banki ng i s a form of fraud. I t resul ts i n
pai nful depressi ons that are the resul t of euphori c, fi at-money-
164 Baptized I nzation
i nduced i nfl ati onary booms.
Pol i ti ci ans, unabl e to contai n thei r profl i gate promi ses to at-
tract votes, soon got i nto the money act. I n order to prevent di s-
honest bankers i ssui ng fraudul ent recei pts, whi ch may or may not
be actual l y backed by real gol d or si l ver i n the vaul ts, those i n au-
thori ty took over the i ssuance of warehouse recei pts. These
recei pts, known as pounds or dol l ars, dependi ng on the country of
ori gi n, were i ni ti al l y a pi ece of paper whi ch promi sed to pay the
bearer a certai n amount of gol d or si l ver. I t di d not take l ong for
the pol i ti ci ans to real i ze they were onto a good thi ng the same
good thi ng the bankers had spotted. Why, i f they coul d just i ssue
those pi eces of paper, wi thout the necessi ty of actual l y hol di ng the
speci e metal i n reserve, l i fe woul d be so much easi er. They coul d
i ncrease spendi ng wi thout i ncreasi ng taxes visible taxes, anyway.
I t was somethi ng for nothi ng. I n fact, once the i dea was accepted
that addi ti onal government spendi ng was good for the economy,
then those i n authori ty searched to fi nd ways they mi ght not be
hi ndered i n bei ng the benefactors to soci ety.
2
Prof. Benjami n Anderson has descri bed the economi c benefi ts
of gol d i n these unforgettabl e terms: Gol d needs no endorsement.
I t can be tested wi th scal es and aci ds. The reci pi ent of gol d does
not need to trust the government stamp upon i t, i f he does not
trust the government that stamped i t. No act of fai th i s cal l ed for
when gol d i s used i n payments, and no compul si on i s al l owed.
Why, i f gol d i s such a benefi t for the publ i c, do governments op-
pose i ts wi despread use? Anderson suppl i es the answer: politicians
hate the discipline it imposes.
Compl ai nts ar e al ways made about gol d and the behavi or of gol d
when there i s i rredeemabl e paper money. Under Greshams Law, gol d i s
hoarded, or l eaves the country. I t ceases to ci rcul ate, l eavi ng the di shon-
or ed pr omi ssor y note i n possessi on of the fi el d. Gol d wi l l stay onl y i n
countri es whi ch submi t to i ts di sci pl i ne. Gol d i s an uni magi nati ve task-
master . I t demands that men and gover nments and centr al banks be
2. Murray N. Rothbard, What Has Governmat Done to Our Mong? (I rvi ngton,
New York: Foundati on for Economi c Educati on, [1964]).
Sovereign~ andkfomy 165
h on es t. I t deman ds th at th ey k eep th ei r pr omi s es on deman d or
at matur i ty. I t demands that they keep thei r demand l i abi l i ti es safel y
wi thi n the l i mi ts of thei r qui ck assets. I t demands that they create no
debts wi thout seei ng cl earl y how these debts can be pai d. I f a country
wi l l do these thi ngs, gol d wi l l stay wi th i t and wi l l come to i t from other
countri es whi ch are not meeti ng the requi rements. But when a country
creates debt l i ght-heartedl y, when a central bank makes rates of di scount
l ow and buys government securi ti es to feed i ts money market, and per-
mi ts an expansi on of credi t that goes i nto sl ow and i l l i qui d assets, then
gol d gr ows ner vous. Mobi l e capi tal funds of al l ki nds gr ow ner vous.
There comes a fl i ght of capi tal out of the country. Forei gners wi thdraw
thei r funds from i t, and i ts own ci ti zens send thei r l i qui d funds away for
safety.
3
The Resentment Agai nst Gol d
Governments l ove to i nfl ate. They hate to have thei r i nfl ati on-
ary pol i ci es exposed. Gol d movements expose these pol i ci es. Al l
thi s was goi ng on l ong before Keynes arri ved on the scene. Hi s
General Theoty, however, provi ded apparent i ntel l ectual justi fi ca-
ti on for these practi ces. Here, at l ong l ast, was a noted economi st
defendi ng al l that the pol i ti ci ans knew from i nsti nct: that i ncreas-
i ng the amount of money, sti mul ati ng the economy by govern-
ment expendi ture (monetary and fi scal pol i ci es, i n other words),
woul d i mpose great benefi ts on soci ety as a whol e, especi al l y i n-
cumbent pol i ti ci ans. There was onl y one hi tch. Peopl e sti l l
thought that these pi eces of paper coul d be redeemed for the metal
whi ch backed them. Si l l y peopl e.
The sol uti on to thi s probl em was to ban the conversi on of
paper money i nto gol d. I t was the abol i ti on of a true gol d coi n
standard and the substi tuti on of a so-cal l ed gol d-exchange stand-
ard. The abol i ti on of the gol d coi n standard took pl ace i n Worl d
3. Benjami n McAl i ster Anderson, Economics and the Public We~are: Fi nanci al and
Economic Histo~ of the United States, 1914-1946 (Pri nceton, New Jersey: Van Nos-
trand, 1949), p. 421. Thi s has been repri nted by Li berty Press i n I ndi anapol i s,
I ndi ana.
166 Baptized I njati on
War I , when al l the battl i ng nati ons temporari l y abandoned
converti bl e currenci es, so that they coul d i mpose a massi ve tax
through i nfl ati on on thei r own hel pl ess popul ati ons. The gol d ex-
change standard was establ i shed by i nternati onal agreement at
the Genoa Confer ence of 1922.4 Thi s conference recommended a
pol i cy of economi zi ng the use of gol d by mai ntai ni ng reserves i n
the form of forei gn bal ances. The words economi zi ng gol d
meant more fi at money i ssued than there i s gol d i n reserve , and
the words mai ntai ni ng forei gn reserves i n the form of forei gn bal -
ances meant that governments and central banks coul d buy
i nterest-beari ng nati onal debt securi ti es from Great Bri tai n and
l ater, the Uni ted States i nstead of hol di ng steri l e (non-i nterest-
payi ng) gol d. Al l nati ons coul d then pyrami d thei r own money
suppl i es on the basi s of a smal l central core of gol d hel d by one or
two major nati ons.
Thi s system l ed to worl d-wi de i nfl ati on. From then on, pi eces
of paper were now onl y pi eces of paper, except when governments
or central banks owned the paper; by government decree they
were now money. Gol d and si l ver were no l onger money, even
though for practi cal purposes they had not been i nvol ved di rectl y
i n every transacti on. By cutti ng the l egal ti es wi th gol d and si l ver,
governments were then abl e to pri nt as many pi eces of paper as
they deemed necessary to govern i n order that they mi ght achi eve
thei r pl ans for the Great Soci ety. I n other words, i t was the fact
that money was a preci ous metal whi ch hi ndered pl ans for the
usheri ng i n of heaven on earth. By cutti ng the l egal ti es between
gol d and paper currenci es, the central pl anners al so broke the
publ i cs awareness of what l ong-term money i s, and how cruci al
gol d converti bi l i ty i s as a means of restricting the conzscato~ practices
of central governments.
How despi cabl e! Gol d must be a terri bl e commodi ty. A bar-
barous rel i c! And what of these peopl e who i nsi sted that they
4. Jacques Rueff, The Age@Gold (Chi cago: Regner y Gateway, 1964), pp. 4-5,
47-48.
Sovereign@ and Money 167
wanted gol d? Why, they, too, must be the rascal s who are hi nder-
i ng the economi c wel l bei ng of others. What was needed was an
economi c defense of why gol d and si l ver were the great evi l s i n so-
ci ety. Keynes assi sted i n provi di ng that defense. Consequentl y,
we fi nd Dr. Vi ckers repeati ng these statements di sapprovi ng gol d
and si l ver as money.
5
But the questi on of gol d or si l ver as money i s not just an eco-
nomi c and phi l osophi c questi on. At i ts fundamental root i t i s a re-
ligious i ssue, for the questi on i s: Who has l egi ti mate, God-gi ven
authori ty to choose whi ch commodi ty shal l serve as money? The
State, as Gods del egated representati ve, or the free market, as the
i nsti tuti onal creati on of acti ng i ndi vi dual s? I s the States rol e crea-
tive (We al one create true money!) or negati ve (You have created
fraudul ent money!)? Does the State have a monopol y of money-
creati on, or does i t possess merel y a monopol y of l aw-enforcement
agai nst l aw-breakers (counterfei ters)? Therei n l i es the heart of the
matter. The i ssue i s pri mari l y an i ssue of ~overei gn~.
Thi s provi des the perspecti ve wi th whi ch we must vi ew Dr.
Vi ckers di sapprobati on of gol d and si l ver, not onl y from an eco-
nomi c poi nt of vi ew but al so a theol ogi cal perspecti ve, for Dr.
Vi ckers has gone to great l engths to argue agai nst the i dea that
Scri pture, as the reveal ed wi l l of God, gi ves such expl i ci t i nstruc-
ti on as to whi ch commodi ty shoul d be used as money. I have
al ready noted hi s defecti ve arguments agai nst the l aw of God as
the source of i nstructi on on how God shal l have hi s creatures l i ve.
Yet i t i s the l aw of God that al one provi des answers to the perpl ex-
i ng probl ems of l i fe. Agai n, we have noted Levi ti cus 19:35-36 and
i ts cal l for honest wei ghts and measures. The Scri ptures thus put
parameters around man. But modern man i s i n revol t agai nst the
God of Scri pture, as Rushdoony has argued:
The revol t, thus, i n the name of the freedom of man has been agai nst
the constrai nt of any l aw of God certai nl y, and al so the l aws of men. The
5. For a detai l ed anal ysi s of monetary theory, see Ludwi g Von Mi ses, T&
TheoT ofMong and Credit (I rvi ngton-on-Hudson, New York: Foundati on for Eco-
nomi c Educati on, [1912] 1971).
168 Baptized I n$ation
di sturbances of the second hal f of the twenti eth century shoul d therefore
be no sur pr i se to us. When the phi l osopher s and educator s of our er a
have requi red so radi cal a break wi th establ i shed l aw the consequences
are sure to be drasti c and/or revol uti onary. That mens i deas of money
shoul d be affected i s a natural consequence. I t was very common duri ng
the 1930s i n the Uni ted States to hear progressi ve educators ri di cul e the
i dea of a gol d standard. Anythi ng coul d be money, i t was sai d: hay,
wheat, l and, or goods coul d provi de a backi ng for a currency, but what
better backi ng coul d a paper currency have, ~one wer e needed, than the
credi t, producti vi ty, and taxi ng power of the Uni ted States?
Endl ess vari ati ons of thi s theme can be ci ted. Basi c to al l these funny
mone y concepts were two essenti al l y rel i gi ous premi ses. First, man was
seen as a creator, repl aci ng God. Mans decl arati on of i ndependence
from God means the suppl anti ng of God by man. Thi s i s how the Bi bl e
presents ori gi nal si n, the desi re of every man to be hi s own god, Know-
i ng or determi ni ng good and evi l i n terms of hi msel f (Genesi s 3:5). Just
as God created heaven and earth out of nothi ng, so man creates val ues
out of nothi ng. l n Chri>tian theolo~, values are what God declares them to be. I n
humani sm, val ues are what man decl ares them to be. . . .
Second, the l ogi cal corol l ary of thi s i s that man, as hi s own l awmaker
now, i s freed from past l aws. As the new god of bei ng, modern stati st
man i s no l onger bound by the word of the ol d God of Scri pture. . . .
Re-educated man, i t i s mai ntai ned, wi l l be free from past l aws and wi l l
be abl e to prosper under fi at money.b
Dr. Vi ckers vs. Gol d
Rebel l i ous man wants freedom from God to become hi s own
god, and Dr. Vi ckers pl ays strai ght i nto the rebel s hands. I t has
al ready been noted that Dr. Vi ckers makes no attempt to treat the
Scri ptural verses whi ch defend the i dea for a gol d an-d si l ver mon-
etary system. He argues that Gi ven an orderl y i nternati onal sys-
tem, i t can be sai d that gol d, i n spi te of mans l ong hi story of fasci -
nati on wi th i t, shoul d have no si gni fi cance at al l .T Such i nsi ght!
We coul d al so say:
6. R. J. Rushdoony, Hard Money and Society i n the Bi bl e, i n Hans F.
Sennhol z (cd.), Gold Z$ Mong (Westport, Connecti cut: Greenwood Press, 1975),
PP. 166-68, emphasi s added.
7. Vi ckers, Economics and Man, p. 237.
Sovereign andMonq 169
Gi ven perfecti on, men woul d not need ci vi l government.
Gi ven omni sci ence, ther e woul d no l onger be need for entr e-
preneuri al profi t or l oss.
Gi ven i mmortal i ty, we woul d no l onger need grave di ggers.
Gi ven basi c common sense, we woul d no l onger need Keynes-
i an economi cs.
Gi ven the abi l i ty to wri te i n a coherent fashi on, economi sts
woul d no l onger need edi tors.
I t i s true: given stabl e i nternati onal trade, we woul d no l onger
need gol d. But who i s goi ng to gi ve i t? Dr. Vi ckers knows: inter-
national planners. They are goi ng to gi ve us that just as they have
done si nce Worl d War 1, when the domesti c gol d standards were
abol i shed, and the i nternati onal gol d standard was destroyed. We
no l onger need gol d, he i s forced to assume (but never i s wi l l i ng to
admi t), because we have nearl y si n-free government l eaders who
no l onger need the consumer-i mposed restrai nts of gol d-coi n con-
verti bi l i ty y to keep them from confi scati ng thei r subjects weal th
through the i nvi si bl e tax of i nfl ati on. How has thi s age-ol d si n
been overcome? Through knowl edge of Keynesi an economi cs.
Why wi l l al l these government pl anners be smart enough to
achi eve thi s monetary stabi l i ty? Because they wi l l al l be di sci pl es
of Keynes. And why wi l l they al ways be di sci pl es of Keynes?
Why, because no one can thi nk l ogi cal l y about economi cs and not
be a di sci pl e of Keynes. How do I know? The Bi bl e tel l s me so.
(I mpl i ci tl y.)
I n short, Dr. Vi ckers has i mpl i ci tl y adopted the gnosti c
heresy: salvation through arcane knowledge.
I t i s of further i nterest to note, however, the manner i n whi ch
Dr. Vi ckers, argui ng agai nst North and Rushdoony, attempts to
show the i mpossi bi l i ty of havi ng such a monetary system.
Dr. Vi ckers agrees wi th the i dea that there is no absolute, jixed
value of gold and silver, and poi nts out that this is the conclusion that
North and Rushdoony make also. So far, so good. But he never knows
when to stop. He makes thi s deducti on: But then i t wi l l not do for
North and Rushdoony to embrace the magni fi cent i nconsi stency
and the sparkl i ng non sequitur of argui ng that the countrys money
170 Baptized I nzation
suppl y must, i n accordance wi th i magi ned scri ptural mandates,
be backed by somethi ng whi ch i s thus shown to have no neces-
sary or stabl e val ue i n i tsel f.a Wel l , at l east he thi nks thei r non-
sequiter sparkl es. Maybe thi s i s because i t i s gol d-based. Dr. Vi ck-
ers non-~equiters have a dul l green to them, ei ther because they
resembl e sl udge or paper U.S. dol l ars.
The poi nt i s, nothing in this created world has permanent, jixed value,
except the Bible, Gods word. The i dea i s not to search for an eco-
nomi c good wi th fi xed val ue, and to sel ect onl y thi s as money, as
Dr. North repeats agai n and agai n. The i dea i s tojnd a commodi~
which governments and bankers willjnd dt@ult and expensive to counter-
feit, But counterfei ti ng i s of the very essence of the Keynesi an
sol uti on. Dr. Vi ckers knows that Dr. North has sai d thi s,9 and he
resents i t so deepl y that he wi l l not ci te Dr. Norths arguments to
thi s effect.
A Phony Gold Standard
Dr. Vi ckers conti nues hi s l i ne of reasoni ng wi th the exampl e of
gol d bei ng val ued at $42 an ounce, and then concl udes that i f the
val ue of gol d changes to $84 an ounce, the money suppl y coul d, i n
thi s parti cul ar exampl e, be doubl ed. Accordi ng to Dr. Vi ckers,
the si tuati on may occur where market demand causes an i ncrease
i n the val uati on of the stock of the monetary gol d base, and an i n-
crease i n the amount of money i n ci rcul ati on. The i ncreased
amount of money i n ci rcul ati on may concei vabl y affect the mone-
tary demands for thi ngs i n such a way that the dol l ar val ue of gol d
agai n i ncreases. And thi s woul d permi t another i ncrease i n the
money suppl y. A sel f-rei nforci ng process of gol d val uati on and
vari ati ons i n the money suppl y can be envi saged.10 Therefore,
we must recogni ze that because there cannot be any such thi ng as
an absolute val ue for any commodi ty whi ch i t mi ght be desi red to
8. I bid., p. 251.
9. There ar e ten r efer ences to counter fei ti ng i n the i ndex of An Zntroduttion to
Christian Economics, and al l ten refer to the State as counterfei ter. The reference to
Keynes as a proponent of counterfei ti ng appears on page 135.
10. Economks and Man, p. 251.
Sovereign~ and Monty 171
use as a backi ng for the money suppl y, the argument about the
i mmoral i ty of unbacked paper money fal l s compl etel y to the
ground.11
I n our anal ysi s of Dr. Vi ckers reasoni ng at thi s poi nt, noti ce
shoul d be taken, jb-st, that Dr. Vi ckers has not, as observed ear-
l i er, deal t wi th the necessary verses of Scri pture to warrant the
statement about i magi ned scri ptural mandates. Unti l such a
ti me as he offers some expl anati on of texts such as Levi ti cus
19:35-36, Dr. Vi ckers cannot cl ai m to have refuted the North-
Rushdoony argument for a commodi ty-based, anti -government
counterfei ti ng, anti -banker counterfei ti ng monetary system.
Second, note Dr. Vi ckers unwarranted concl usi on concerni ng
gol ds val ue. He fi rst speaks about the absol ute val ue of gol d,
then states that because gol d has no necessa~ or stable value (em-
phasi s added), therefore the North-Rushdoony cal l for gol d and
si l ver as money fal l s to the ground. By thi s argument Dr. Vi ckers
i s i mpl yi ng that because gol d has no absol ute val ue, i t must there-
fore have no necessary or stabl e val ue . But thi s assumpti on i s
not necessari l y true, nor warranted from the arguments he offers.
Dr. Vi ckers woul d fi nd i t extremel y di ffi cul t to fi nd any evi dence
to support thi s contenti on that gol d has no stabl e val ue. The pri ce
of gol d has certai nl y fl uctuated throughout the centuri es. New
gol d di scoveri es must affect the val ue of gol d to some extent; but a
si tuati on i s possi bl e where there i s a tendency towards a stabl e
val ue, especial~ in comparison to jiat money monetaty systems. Thi s i s
wel l known to anyone who has studi ed economi c hi story. 12 Much
of the new gol d fi nds i ts way i nto manufacturi ng and other uses,
and not i nto the monetary stream. I n an i mperfect worl d, perfect
stabi l i ty i s a chi mera whi ch, l i ke the mi rage i n a desert, may l ead
the unsuspecti ng searcher to greater di saster.
11. I bid., p. 252, emphasi s added.
12. Roy W. Jastram, The Goldm Constant: The Enghkh and Ammcan Experience
(New York: Wi l ey, 1977). For a thorough revi ew of thi s book, and al so for a di s-
cussi on of why and how the revi ewers mi si nterpreted i ts concl usi ons, see Gary
Norths revi ew i n The J ournal of Christian Recomtmction, VI I (Summer 1980), pp.
206-12.
172 Baptized I nzation
Third, Dr. Vi ckers fai l s to grasp the proposi ti on that paper
cur r ency, bei ng a @omi ssor y note, or warehouse receipt, or what Mi ses
cal l s a money-substi tute , shoul d by Bi bl i cal defi ni ti on be strict~
control l ed by the quanti ty of gol d i n exi stence (i f the recei pts are
pl edges to pay gol d on demand). Thi s fai l ure of Dr. Vi ckers to un-
derstand the hi stori cal rel ati onshi p between paper currency and
gol d or si l ver i s seen where he speaks of an i ncrease i n the dol l ar
val ue of gol d. I n the North-Rushdoony theoreti cal model of gol d-
coi n converti bi l i ty and 1007o reserve banki ng, because a dol l ar i s
equi val ent to a certai n quanti ty of gol d, there can be no al terati on
i n the dol l ar val ue of gol d. There i s no way for gol d to jump from
$42 an ounce to $84 per ounce. The dol l ar i s, by legal dejnition, one
forty-second of an ounce of gol d (assumi ng that thi s i s what Con-
gress has determi ned), and changes i n the physi cal quanti ty of
gol d cannot al ter thi s fi xed, defi ni ti onal rel ati onshi p. Al l i t can per-
mi t i s the pri nti ng of addi ti onal dol l ar notes i n exchange for any
gol d whi ch i s deposi ted at the Treasury, on a $42 per ounce basi s.
Bri ng i n $42 and buy an ounce of gol d; bri ng i n an ounce of gol d
and recei ve (buy) $42. Take your pi ck.
The di fference between North and Rushdoony and Dr. Vi ck-
ers i s essenti al l y the fact that North and Rushdoony vi ew gol d and
paper currency as a si ngl e alternating commodi ty money wi th
paper currency bei ng a one-to-one substitute for gol d. The con-
sumer has a choi ce: to store the gol d (remove i t from the market
pl ace) and ci rcul ate the paper, or cash i n the paper and ci rcul ate
the gol d. Thi s i s not Dr. Vi ckers vi ew. He has i n mi nd two di ffer-
ent money commodi ti es, enabl i ng hi m to concl ude that the dol l ar
val ue of gol d i s al terabl e i n the same manner that the exchange
rati o (pri ce) of other commodi ti es i s changeabl e.
More to the poi nt, Dr. Vi ckers i s argui ng agai nst the present
fake gol d standard, where the U.S. government establ i shes a
whol l y mythi cal val ue for gol d ($42 per ounce) and then conducts
no transacti ons i n terms of thi s arti fi ci al pri ce. I t woul d be as i f
Dr. Vi ckers were to announce that Economics and Man i s now
worth $84 a copy, up from $42, at whi ch pri ce no copi es were ever
sol d ei ther.
Sovereignty andMon~ 173
I t i s true that under todays God-defyi ng central bank system,
i f the government announced such an i ncrease from $42 to $84,
the val ue of the gol d reserve of the Federal Reserve Bank woul d
i ncrease substanti al l y. Thi s i ncrease i n the val ue of Federal
Reserve asset hol di ngs woul d be moneti zed automati cal l y by the
commerci al banki ng system unl ess the Fed sol d hal f i ts hol di ngs of
gol d or an equi val ent amount of Treasury bi l l s (debt certi fi cates).
I f i t di d nei ther, then i t woul d have to rai se commerci al bank
reserve requi rements i n order to offset thi s i nfl ati onary effect. But
al l of thi s i s si mpl y transaction accounts i n a worl d of fracti onal
reserve banks. I f Dr. Vi ckers does not understand the di fference
between thi s sort of ri gged gol d standard and the 100~ redeemabilip
gold coin standard/ 100% reserve bank standard whi ch i s advocated by
Dr. North, then Dr. Vi ckers i s not a very bri ght fel l ow. But i f he
understands the di fference, yet neverthel ess went i nto pri nt wi th
such a speci ous (not speci e) argument, then he i s a knave.
As you may have noti ced, he suffers from thi s i ntel l ect-moral
defect di l emma throughout Economics and Man.
Overvalued Curren~
Dr. Vi ckers, i n hi s di sparagement of the gol d standard, en-
deavors to use Engl and after the Fi rst Worl d War as an exampl e
to prove that the gol d standard di d not work. True, Engl and di d
return to a gol d standard whi ch caused economi c upheaval , but
Dr. Vi ckers, al though admi tti ng that thi s was because of an incor-
rect ratio between the pound and gold, never comes to the most l ogi cal
concl usi on that the correcti on of the probl em was the restorati on of
a proper rati o between the pound and gol d. I nstead, Dr. Vi ckers
rai ses the fal se questi on: Shoul d the gol d pari ty be mai ntai ned
and the unempl oyment and poverty accepted as the l egi ti mate
cost of doi ng so?13 Of course unempl oyment and poverty shoul d
not be accepted t~ the cause i s some government mistake, but Dr.
Vi ckers i s mi sl eadi ng when he i mpl i es that ti nkeri ng wi th the
val ue of fi at money i s the onl y al ternati ve to a gol d standard. The
13. Vi ckers, Economics and Man, p. 247.
174 Baptized I njation
upheaval s coul d have been sol ved by a return to a more real i sti c
rati o between gol d and the pound. Engl and had merel y made the
error of restori ng the gol d-pound rati o to i ts pre-war pari ty, when
a new rati o, refl ecti ng the i ncrease i n the number of pounds dur-
i ng the war (i . e., monetary i nfl ati on) woul d have been the more
appropri ate course of acti on.
Dr. Vi ckers prefers to fol l ow Keynes and therefore conven-
i entl y i gnores the cause of Engl ands money di ffi cul ti es i n the
1920s: the governments l egi sl ated i nsi stence that the publ i c ac-
cept at face val ue an over-val ued pound. As Gal brai th observes,
The error . . . was i n restori ng the pound to i ts pre-war gol d
content of 123.27 grai ns of fi ne gol d, i ts ol d exchange rati o of
$4.87. I n 1920 the pound had fal l en to as l ow as $3.40 i n gol d-
based dol l ars. 14 The pound had been grossl y over-val ued. Sure
enough, Greshams Law asserted i tsel f the arti fi ci al l y overval ued
currency (the pound sterl i ng) drove out of ci rcul ati on the arti fi -
ci al l y underval ued currenci es (gol d and forei gn exchange). Thi s i s
why the head of the Bank of Engl and, Montague Norman, came
to New York Ci ty and convi nced the head of the Federal Reserve
Bank to i nfl ate the dol l ar. Norman wanted U.S. i nterest rates to
be kept arti fi ci al l y l ow so that peopl e woul d not sel l pounds and
buy dol l ars i n order to i nvest i n the U.S. at hi gher i nterest rates.
The Federal Reserve Bank accommodated Norman, and the
resul t was the i nfl ati on-fuel ed boom of the U.S. stock market and
the subsequent col l apse. 15 Who was responsi bl e? The respecti ve
governments and thei r agents, the central banks (or i s i t the other
way around?).
What I s the I ssue?
The i ssue here i s the i ssui ng of money. Whi ch agency i s l egal l y
soverei gn, the State or the market? I f the market i s soverei gn,
wi thi n the l i mi ts of the States responsi bi l i ty of moni tori ng and en-
14. J. K. Gal brai th, Mong: Whmce I t Came, Where I t Wmt (Har mondswor th,
Mi ddl esex: Pengui n Books, Ltd., 1976), p. 173, n.3.
15. Murray N. Rothbard, Amcak Great Depressi on (Pri nceton, New Jersey:
Van Nostrand, 1963), pp. 131-52.
Souereign~ and Monqv 175
forci ng just wei ghts and measures, then the State cannot l egal l y
become the i ssuer of money. I t i s at most the cert~er of honest
money (and thi s i s a dangerous precedent). What i s honest money?
Whatever consumers deci de to use. Hi stori cal l y, thi s has been
gol d and si l ver, but i t neednt be i n every case. I t i s up to consum-
ers to deci de, not State bureaucrats.
Thi s i s what Dr. Vi ckers refuses to acknowl edge. Why not?
Because Douglas Vickers hates the whole idea of the sovereign of the con-
sumers. The i dea that you and I , through our vol untary ex-
changes, coul d ever come to an agreement about the proper
means of exchange di sturbs hi m. That woul d mean that we are
free men. Dr. Vi ckers does not bel i eve that we are capabl e of exer-
ci si ng such freedom. We are i n si n, he keeps remi ndi ng us.
And just what was Keynes i n? Or whom?
The i dea that l ots of peopl e coul d come to an agreement over
the proper commodi ty to use as money, and that thi s deci si on-
maki ng process woul d actual l y produce resul ts that woul d el i m-
i nate the boom-bust cycl e, el i mi nate monetary i nfl ati on, and
reduce uncertai nty about the future val ue of the currency,
repul ses Dr. Vi ckers. That woul d mean that acti ng i ndi vi dual s
are more capabl e of produci ng a bal anced economy than State
pl anners. That woul d mean that the consumers were more capa-
bl e of assessi ng thei r own needs than Keynesi an economi sts. That
woul d mean the end of Dr. Vi ckers chosen l i ne of work. You can
i magi ne how he resents such an i dea.
Concl usi on
Economi c l ogi c i nforms us that money i s the most marketabl e
commodi ty. I t does not requi re a State decree i n order for i t to
come i nto exi stence. I t requi res 1007o reserve banki ng the en-
forcement of the Bi bl i cal l aw of honest wei ghts and measures,
There i s no need for the State to get i nvol ved i n the money busi -
ness. Whenever i t does, the pol i ti ci ans eventual l y begi n to debase
the currency, so that the State can buy more than i t col l ects i n
di rect taxes. The State i mposes the i nfl ati on tax. I t fool s the peo-
pl e who are supposed to be protected by ci vi l government.
176 Baptized I nJ ation
Gol d i s hated by the State offi ci al s who do not l i ke any restri c-
ti ons on thei r expansi on of power through spendi ng. They resent
the fact that i t i s so expensi ve to produce gol d, compared to how
cheap i t i s to i ssue paper money and create computer entri es.
Gol d restrai ns them, and they resent i t. Because peopl e can move
gol d from one nati on to another, pressuri ng governments to
reduce the creati on of money, the pol i ti ci ans hate i t. Gol d i s si m-
pl y too democrati c for thei r tastes. I t restri cts the el i ti st power of
the central economi c pl anners.
Here we have a great i rony. I n the name of Bi bl i cal justi ce,
Dr. Vi ckers woul d transfer enormous power to an el i te of central
pl anners. So fearful i s he of si n, that he woul d concentrate enor-
mous power i nto the hands of a techni cal el i te hi s i deol ogi cal
and sel f-certi fi ed academi c col l eagues and then al l ow them to
deci de what i s best for the economy. Thi s offi ci al l y neutral , offi ci -
al l y sci enti fi c, offi ci al l y God-i gnori ng el i te of economi sts a di sci -
pl i ne sel f-consci ousl y based on athei sm i s to deci de what i s best
for us l aymen. Who says thi s i s best? Dr. Vi ckers. I n whose name
does he attempt to speak? I n the name of Jesus. And who i s not
bel i eved i n by the el i te i nto whose hands he woul d del i ver us?
That same Jesus, who hi s peers attempt to cruci fy dai l y on a cross
of di fferenti al equati ons. I n short, Economics and Man is a l ong-
wi nded pl ea for a grotesque pagan i dea: that si n i s restrai ned by
the concentrati on of power i nto the hands of monopol i sti c el i ti st
pl anners who can fi ne or i mpri son anyone who fai l s to cooperate
wi th thei r pl ans.
But he i s not a soci al i st, you understand. Because he says so.
11
MUMBLE, MUMBLE
And we sha~~ argue, moreouq that ~the under~ing and environ-
mental economic conditions are such that a government budget deficit is
necessary in order to J uppoti the general economic health of the country,
and z~ there are both policy and ana~tical reasons why such a budget
deficit should be~nanced by government loans from the central bank
which inuolve the expansion of the money supp~, then an increase in
the money supp~ should most dg$nite~ be countenanced and encour-
aged. 2%0 much deperuh on under~ing con]unctures of economic forces to
conclude, as North apparent~ wishes to do, that there is a single cause
or a single cur e for inJ ation. 1
There i s, perhaps, no more controversi al topi c i n economi c
thi nki ng today than the meani ng of i nfl ati on. As someone has ob-
served, where there are fi ve economi sts you have si x opi ni ons.
The error that can be made at thi s poi nt, however, i s the concl u-
si on that because such di verse opi ni ons ari se, i t i s therefore i m-
possi bl e to make our way through the forest of i deas to ascertai n
what i s, and i s not, sound economi c reasoni ng. I f thi s i s true, then
the best thi ng to do i s nothi ng, unti l we understand more. When
we do not understand an economi c process, then we shoul d turn i t
over to the free market for resol uti on, not over to a bunch of bu-
reaucrats wi th guns.
1. Economics and Man, pp. 178-79.
177
178 Baptized lnzation
Defi ni ti ons
I n the l ong run, our understandi ng of any topi c depends on
the defi ni ti on we gi ve our termi nol ogy. Thi s seems so obvi ous that
such a statement shoul d not need to be made. Yet i t i s a major
aspect of our cri ti ci sm of Dr. Vi ckers i n parti cul ar, and Keynes-
i ani sm i n general , that he does not bother to l et the reader know
preci sel y how he i s usi ng parti cul ar termi nol ogy. I n thi s, however,
he i s the fi rst-born methodol ogi cal son of hi s mentor. The General
Theoy is notori ous for i ts unconventi onal and shi fti ng defi ni ti ons.
I nfl ati on can be defi ned i n di fferent ways; there i s no denyi ng
that fact. We need to ask: Whi ch i s the better defi ni ti on to use?
Whi ch defi ni ti on wi l l al l ow us to devel op our economi c theoy i n
such a way that i t i ncorporates the releuant phenomena under con-
si derati on. Thi s i s the manner i n whi ch theori es are devel oped.
Certai n happeni ngs i n the worl d are observed, and theori es to ex-
pl ai n those occurrences are devel oped. When an excepti on to the
theory i s found, the theory needs to be ei ther di scarded or modi fi ed.
Today, i nfl ati on has two basi c defi ni ti ons. Fi rst, there i s the
ol der and now l ess wel l -understood meani ng that i nfl ati on i s si m-
pl y an increase in the mong SUPPO. The modern and newer meani ng,
thanks to Keynes i nfl uence, i s that i nfl ati on means ri si ng Pnces.
There i s a reason for the di fference i n defi ni ti ons. Thi s di sagree-
ment has l ed to si ni ster i mpl i cati ons for us, the vi cti ms of econo-
mi sts defi ni ti ons.
An I ncrease in Momy
When i nfl ati on i s defi ned as an increase in the supp~ of mongy,
economi sts and voters al i ke are more l i kel y to focus thei r attenti on
on those agenci es that control the i ssue of currency, coi ns, and
checks. Anyone who wants to exami ne the q$ects of i nfl ati on wi l l
then have to begi n wi th the point of origin of new money. By defi n-
i ng i nfl ati on as the creati on of new money, the i nvesti gators atten-
ti on i s transferred to those who have the l egal ri ght to create
money. The money creators are put under cl oser scruti ny than
mi ght otherwi se be the case.
Mumble, Mumble 179
Furthermore, i f i nfl ati on i s the i ncrease of money, the i nvesti -
gator i s more l i kel y to ask hi msel f What happens to the money
after i t i s created? I t i s spent i nto ci rcul ati on. Who benefi ts from
the goods that are purchased by the spenders (or the votes that are
purchased)? Who are the recipients of thi s newl y created money?
What advantages accrue to them, i f any? Who are those who gai n
access to thi s new money l ater? What are the di sadvantages, i f
any, of standi ng toward the end of the l i ne? What happens to
which prices i n what sequence from the ti me the new money i s i ssued
to the ti me that i t no l onger has any measurabl e effects? I n short,
as Leni n so aptl y epi tomi zed the sci ence of pol i ti cs, who, whom?
Who wi ns, who l oses? I f the State has the l egal monopol y of i ssu-
i ng money, then i ni ti al l y the State and i ts benefi ci ari es wi n. At the
end of the process . . . ? Revol uti on?
The cruci al economi c i ssue of monetary theory therefore be-
comes the questi on of relative prices, not the aggregate price level. The
cruci al i ssue becomes the economi c effects of newl y created money
on parti cul ar segments of the economy, on certai n speci fi ed i nter-
est groups. Onl y at the tai l end of economi c anal ysi s does a per-
i pheral and subordi nate questi on appear: the effect of monetary
i nfl ati on on general pri ces, meani ng a statistical index number.
Those who defi ne i nfl ati on as an i ncrease i n the money suppl y
tend to be those who exami ne rel ati ve pri ces and thei r effects on
the way the economy functi ons. They exami ne the pri ces that you
and I exami ne as we go about our task of buyi ng and refrai ni ng
from buyi ng. Those economi sts who defi ne i nfl ati on i n thi s way
tend to be i n the Austri an School . The man who for hal f a century
has cal l ed hi s col l eagues to focus on rel ati ve pri ces rather than
aggregate pri ces i n thei r search for economi c understandi ng i s
Frederi ck A. Hayek. He has conti nual l y cri ti ci zed Keynes and the
Keynesi ans for thei r unsal utary negl ect of rel ati ve pri ces.z By i m-
pl i cati on, he al so cri ti ci zes the monetari sts and the Chi cago
School economi sts for thi s same negl ect.
2. 1?. A. I -I ayek, A Tiger By the Tail: A 40- NarsRunning CommentaT on Keynesi an-
i sm by Hayek, edi ted by Sudha R. Shenoy (London: I nsti tute of Economi c Affai rs,
1972).
180 Baptized I nzation
An I ncrease in the Price Level
I n contrast to thi s defi ni ti on of i nfl ati on i s the one general l y
accepted by the Keynesi ans and the Fri ed mani tes: i nfl ati on i s a
rising prance level. They do not worry about i nfl ati on so defi ned unti l
the i ndex numbers sel ected by the government stati sti ci ans begi n
to i ndi cate that selected pri ces i n general are ri si ng. I n thi s sense,
Fri edman was correct when he announced, We are al l Keynes-
i ans now.
These economi sts do not bel i eve that the i ssue i s the i ssui ng of
money. The y bel i eve that the i ssue i s ri si ng pri ces. Thi s means
that onl y when monetary i nfl ati on has produced stati sti cal l y
measurabl e effects do mai nl i ne economi sts become i nterested i n
monetary pol i cy. They do not spend ti me and effort i n di scussi ng
the i mpl i cati ons of the spread of newl y created money through the
economy before this process a~ects the statisticians index number. They
do not bother anal yzi ng the possi bi l i ty that these effects mi ght cre-
ate the dreaded boom-bust cycl e of economi c expansi on and
depressi on. That a boom mi ght come wi thout bei ng observed i n
ri si ng pri ces general l y i s not taken seri ousl y by most economi sts,
for most economi sts rel y on thi s i ndex number defi ni ti on of i nfl a-
ti ons They rarel y di scuss the theoreti cal possi bi l i ty l et al one the
practi cal l i kel i hood that the effects of an i ncrease i n the money
suppl y mi ght be i nfl ati onary despi te a stabl e pri ce l evel , si nce
Pri ces that might have otherwise havefallen, due to i ncreased producti v-
i ty, remai n stabl e.
Thi s i s why defi ni ti ons do matter. I f we defi ne a phenomenon
i n a parti cul ar way, we may become bl i nd to cause-and-effect re-
l ati onshi ps that are deni ed by, or de-emphasi zed by, our chosen
defi ni ti on. And si nce thi s i s a book about Dr. Vi ckers and Keynes,
l et me put i t a di fferent way. I f peopl e become wi l l ful l y bl i nd to
cause-and-effect rel ati onshi ps that di spl ease them, they wi l l then
defi ne a phenomenon i n a way that makes i t easi er for them to i g-
nore these unpl easant rel ati onshi ps.
3. One who does not i s Murray Rothbard, Ammcas Great Depression (Pri nce-
ton, New Jersey: Van Nostrand, 1963).
Mumble, Mumble M
An I ncrease i n Velocity
Al l of the vari ous school s of economi c thought admi t that i f
there i s an i ncrease of vel oci ty of money, pri ces can ri se faster than
the rate of i ncrease i n the money suppl y. They al l recogni ze that
thi s happens i n the fi nal stages of a mass i nfl ati on, as i t di d i n Ger-
many i n l ate 1923. The Austri an School sel dom di scusses the
topi c, however, except i n these hi gh-i nfl ati on hi stori cal contexts.
I t i s a weakness whi ch deserves correcti ng.
One major qual i fi cati on needs to be m;de concerni ng the con-
cept of the vel oci ty of money. I f peopl e as buyers of goods (sel l ers
of money) are getti ng ri d of money more rapi dl y, sel l ers must al so
be getti ng ri d of goods just as rapi dl y as buyers of mong. Obvi ousl y,
someone i s l etti ng l oose of the goods and servi ces. So there has been
an i ncrease i n the vel oci ty of goods and servi ces, too. Shoul dnt
these two vel oci ti es offset each other? Why shoul d pri ces of
goods ri se (the val ue of money fal l ) as a resul t of i ncreased~el oci ty?
Thi s questi on was once rai sed by Henry Hazl i tt. I have seen
nothi ng i n pri nt to respond to i t, al though there must be some-
thi ng i n pri nt somewhere whi ch addresses the probl em.
I thi nk i t may be a purel y stati sti cal phenomenon. As mass
i nfl ati on hi ts an economy, owners of goods and servi ces i ncreas-
i ngl y refuse to sel l . They hoard durabl e goods because they expect
to be abl e to sel l them at even hi gher money pri ces for them l ater
on. Eventual l y, most peopl e refuse to sel l because they do not
trust the future val ue of money at al l . Thus, the pri ces recorded
for those few durable gooh that actual~ do get sold are very hi gh.
The government stati sti ci an then i mputes the pri ce recei ved
for the handful of actual sal es to the total number of goods of thi s
type that the stati sti ci an esti mates may exi st i n the overal l econ-
omy. Thi s i ndex number of pri ces i s hi ghl y mi sl eadi ng: very few
of these goods are bei ng offered for sal e for paper money. The hi gh
pri ce l evel whi ch i s attri buted to an i ncrease i n the vel oci ty of
money therefore overstates the real i ncrease i n money pri ces,
because i t wei ghs the effect of these few sal es i n the money econ-
omy as Z~ a l arge number of these goods were actual l y bei ng sol d.
Whi l e these goods are cruci al for the real economy the barter
182 Baptized I ny?ation
economy they are steadi l y l ess i mportant as a factor i n the fi at
money economy, where they are sel dom brought to market. I n
other words, the y are overweight stati sti cs. Fat stati sti cs get al l the
attenti on i n the press and economi c hi stori es.
Neverthel ess, Hazl i tts paradox rai ses an i nteresti ng probl em
whi ch deserves a l ot more attenti on from Ph.D.-hol di ng econo-
mi sts of al l school s. (Hazl i tt has conti nued to pop the economi sts
bal l oons si nce about 1920, probabl y because he never graduated
from col l ege and has never had hi s thought patterns restructured
by professi onal academi cs.)
I f I am correct i n my guess that the ri se i n the pri ce l evel whi ch
fol l ows an i ncrease i n the vel oci ty of money toward the end of
mass i nfl ati on i s pri mari l y a stati sti cal phenomenon, then such an
i ncrease i n vel oci ty i n the earl y stages of an i nfl ati on i s not the
cause of pri ce i nfl ati on, but onl y an i ndi cati on of a boom econ-
omy. Pri ces are ri si ng, not because of an i ncrease i n the vel oci ty of
money, but because of the i ncrease i n the suppl y of money. An i n-
crease i n the vel oci ty of money merel y records stati sti cal l y
peopl es i ncreased wi l l i ngness to enter i nto vol untary exchanges.
The Effects of Monetary I nfl ati on
As I have al ready menti oned, an i nteresti ng omi ssi on i n the
Keynesi an system i s a di scussi on of the economi c effects of i n-
creasi ng the money suppl y. Al though thei r vel oci ty of money con-
cept i s l i nked to the questi on of money suppl y i ncrease, Keynes-
i ans general l y avoi d a ri gorous anal ysi s of the spreadi ng economi c
effects of i ncreasi ng the amount of money i n ci rcul ati on. Thei r
pri mary reason for thi s i s that the Keynesi an system cal l s for an
i ncrease i n the money suppl y, and to anal yze thi s aspect of mone-
tary theory i n detai l woul d expose the i nherent di ffi cul ti es and ine-
quities that ari se from thi s practi ce. I t woul d al so expose the l osers
i n the economy, and l osers mi ght band together and cal l for a ces-
sati on of monetary i nfl ati on.
What i f certai n groups recogni zed what was goi ng on? What i f
they began to i nvest i n terms of taki ng advantage of the changes
i n relative pri ces created by the monetary i nfl ati on? What i f thei r
Mumble, Mumble 183
i nfl ati on-hedgi ng i nvestment acti vi ty i n, say, gol d, si l ver, and art
objects were to cal l attenti on to the economi c resul ts of the
Keynesi an i nfl ati on game? What i f workers then took note of thi s
and began demandi ng hi gher wages, thereby reduci ng the em-
pl oyment ki ck whi ch the Keynesi an pl anners hoped to achi eve
for the overal l economy? What, i n short, i f the vi cti ms shoul d
fi nal l y catch on to the essence of the Keynesi an revol uti on, whi ch
i s based on an i l l usi on: hi gher empl oyment as a resul t of l ower real
wages? That woul d be a dark day for the Keynesi an pl anners.
And so i t was, i n 1979 and 1980. So i t wi l l be agai n, when the des-
perate Keynesi an economi sts recommend mass i nfl ati on to bai l
out the banks. (Better put, when the desperate bankers cal l i n the
Keynesi an economi sts to justi fy the bankers cal l for the central
banks to i nfl ate the vari ous Western currenci es, especi al l y the
U.S. dol l ar.)
The essence of the di sci pl i ne of economi cs i s to study cause and
e~ect of di fferent economi c occurrences. Consi der an i ncrease i n
the money suppl y. What can cause i t, and what are i ts l i kel y
effects? The answer to the fi rst part of that questi on depends on
what money i s. I n our era, money i s regarded by most peopl e as
those pi eces of paper wi th pi ctures of vari ous pol i ti ci ans on them,
and token coi nage made up of metal s such as zi nc and copper. To
determi ne the cause of the suppl y of these uni ts we onl y need ask
who control s thei r i ssuance i n the fi rst pl ace. The answer to that i s
the State. Any i ncrease i n the money suppl y i s thus a deliberate act
on the part of those i n ci vi l government.
Banki ng
Unfortunatel y, i t i s not that si mpl e. Men have devi sed a sys-
tem whereby the money suppl y can be i ncreased wi thout physi cal l y
i ncreasi ng the quanti ty of pi eces of paper and coi nage whi ch
al ready exi sts. The method of doi ng thi s i s cal l ed fractional reserve
banking. There i s nothi ng especi al l y magi cal about thi s, for al l i t
i nvol ves i s certai n bookkeepi ng procedures. We are al l fami l i ar
wi th banks, and what they do. They take deposi tors money,
184 Ba@zed I nzation
promi se to pay them i nterest on i t, and then l end i t out at a hi gher
rate to borrowers, pocketi ng the di fference as reward for thei r ser-
vi ce. I f that were al l the bank di d, there woul d be no di ffi cul ty i n
understandi ng thei r pl ace i n the economi c l i fe of the communi ty.
I f they were merel y a storehouse for peopl es monetary weal th,
and i n addi ti on provi ded the val uabl e servi ce of bri ngi ng l enders
and borrowers together i n order that an ami cabl e transacti on
mi ght ensue, the pl ace of banks i n the economy woul d be hi ghl y
benefi ci al . On the one hand, the l ender woul d get a recei pt
acknowl edgi ng hi s deposi t, whi l e on the other hand, the borrower
woul d si gn a contract stati ng the terms and condi ti ons of hi s
repayment of the sum borrowed a si mpl e, strai ghtforward con-
tractual arrangement.
Some deposi tors mi ght not want to l end thei r money. They
may want i t i n the near future for some purpose, and therefore
they are onl y putti ng i t i n the bank for safe-keepi ng. Under nor-
mal commerci al condi ti ons, they woul d pay a fee for thi s safe-
keepi ng servi ce, for the banker i s not abl e to make any profi t by
l endi ng out that parti cul ar deposi t. The fact that all deposi tors get
i nterest, whether they i ntend to l end thei r savi ngs or not, shoul d
warn us that somethi ng i s ami ss. How can i nterest be pai d when
the money i s not on l oan to a borrower who i s payi ng for the pri vi -
l ege of usi ng that money?
We are back to the questi on of fracti onal reserve banki ng.
Bankers have determi ned that at any poi nt i n ti me, al l the depos-
i tors who have merel y stored thei r savi ngs for safety reasons wi l l
not turn up at the tel l ers cage to demand the return of thei r de-
posi ted funds. Bankers have thus percei ved the opportuni ty for
addi ti onal profi ts. I f i t i s known that on average onl y a certai n
percentage of deposi tors desi re the return of the fi nances, then the
r emai nder coul d be used provtied the depositor does not know that thfi
is being done without permission. So bankers have devi sed a scheme
whereby they can use even that porti on of deposi ts l eft wi th them
that was not i ntended to be l ent to borrowers. Thei r scheme runs
somethi ng l i ke thi s.
Mumble, Mumble 185
Fiat Mon~
When a deposi tor pl aces money i n the bank, the bank i ssues a
recei pt of some ki nd. I n essence thi s i s now a liabili~ to the bank.
But because the banker has worked out how to uti l i ze thi s money
for hi s own profi t, he now percei ves thi s deposi t not as a l i abi l i ty
but as an asset. Perhaps $100 has been deposi ted. He knows that at
any one ti me onl y twenty percent of deposi tors want thei r money
back, so he puts asi de thi s percentage ($20) i n hi s vaul t (non-
i nterest-payi ng), and then gl eeful l y searches for a borrower who
needs $80. (Actual l y, the central bank col l ects most of thi s vaul t
money. )
He coul d gi ve hi m the $80 cash strai ght out, but any ti me an
i nventory take i s done, hi s scheme woul d be exposed. Why not
use the banks good standi ng i n soci ety and i ssue another pi ece of
paper whi ch says the borrower has access to $80? He can si mpl y
use that pi ece of paper as money, the recei ver remai ni ng confi dent
that the bank wi l l honor the obl i gati on i nvol ved i n that document.
Thi s way, the banker gets to hang onto al l the money. Hi s i nven-
tory remai ns ful l , bal anci ng hi s l i abi l i ti es.
Cause
I f thi s was al l he di d, thi ngs woul d not be so bad. But there i s a
second banker i n town. When the fi rst banks cl i ent (borrower)
deposi ts the borrowed funds i n hi s own bank account, he can then
start wri ti ng checks. Someone el se gets thi s $80, and the new pos-
sessor of the $80 deposi ts i t. The second banker (or maybe i t i s the
fi rst one), rather than seei ng thi s as a return of the l oaned out cap-
i tal , i nstead vi ews i t as a new deposi t. He proceeds to retai n hi s
fami l i ar twenty percent securi ty, and determi nes to l end out the
remai ni ng $64. So the merry-go-round conti nues. The l oaned-out
money, each ti me i t i s returned to the bank by some reci pi ent
sel l er of goods or servi ces, i s deal t wi th by the banker as a new
deposi t. I n real i ty, of course, i t i s si mpl y a return of a porti on of
that ori gi nal $100.
Watch the money mul ti pl y: from $100 to $500. Here i s the de-
186 Baptized Iny?ation
scri pti on of the process whi ch appears i n a popul ar book publ i shed
by the Uni ted States central bank, I %e Federal Reseme System: Pur-
poses and Functions, publ i shed i n 1963 on the 50th anni versary of
the Federal Reserve System. Thi s hi ghl y reveal i ng descri pti on i s
no l onger publ i shed i n the more recent versi ons.
M U L TI PL YI N G C APACI TY OF R ESERVE MONE Y
THROUGH BANK TRANSACTI ONS
(i n dol l ars)
Deposi ted Set asi de
Tr ansacti ons i n checki ng Lent as
accounts r eser ves
Bankl . . . . . . . . . . . . . . . . . . . . . . .
2 . . . . . . . . . . . . . . . . . . . . . . .
3 . . . . . . . . . . . . . . . . . . . . . . .
4 . . . . . . . . . . . . . . . . . . . . . . .
5 . . . . . . . . . . . . . . . . . . . . . . .
6 . . . . . . . . . . . . . . . . . . . . . . .
7 . . . . . . . . . . . . . . . . . . . . . . .
8 . . . . . . . . . . . . . . . . . . . . . . .
9 . . . . . . . . . . . . . . . . . . . . . . .
10 . . . . . . . . . . . . . . . . . . . . . . .
100.00
80,00
64.00
51.20
40.96
32.77
26.22
20.98
16,78
13.42
80.00
64.00
51.20
40.96
32.77
26.22
20.98
16.78
13.42
10.74
20.00
16.00
12.80
10.24
8.19
6.55
5.24
4.20
3.36
2.68
Total for10 banks . . . . . . . . . . . 446.33 357.07 89.26
Addi ti onal banks . . . . . . . . . . . . 53.67 242.93 210.74
Grand total , al l banks . . . . . . 500.00 400.00 100.00
l Assumi ng an aver age member bank r eser ve r equi r ement of
20 per cent of demand deposi ts.
zAdjusted to offset roundi ng i n previ ous fi gures,
Thi s i s the heart of how the modern fracti onal reserve (a frac-
ti on of deposi ts i n reserve) banki ng system operates. Such a prac-
ti ce i ncreases the money suppl y i n i nverse proporti on to i ts frac-
ti onal reserve requi rement: the l ower the requi red percentage of
reserves, the more money can be created by the banki ng system as
a whol e. I n real i ty, nothi ng val uabl e has been created, but weal th i s
Mumble, Mumble 187
steadi l y transferred to those who gai n access to the new money
earl y, and who spend i t on goods and servi ces, from those who re-
cei ve i t l ater, and who face hi gher sel l i ng pri ces than woul d other-
wi se have been the case. I t i s al l done by fi cti onal bookkeepi ng,
and therefore deserves the descri pti on fi at money created out
of nothi ng.
An economi st who defi nes i nfl ati on to mean an i ncrease i n the
money suppl y i s thus tal ki ng about two phenomena i n modern so-
ci ety. On the one hand, he i s tal ki ng about the manufacture of
notes and coi ns by the government, and on the other hand, he i s
tal ki ng about fr acti onal r eser ve banki ng pol i cy whi ch al so
manufactures addi ti onal money. The fact that al l modern bank-
i ng systems are control l ed by the federal authori ti es through na-
ti onal reserve banks i s proof that even thi s method of i ncreasi ng
the money suppl y i s ul ti matel y control l ed by State offi ci al s.
Effect
We have seen the cause of i ncreasi ng the money suppl y, but
what i s i ts efect? The l aw of suppl y and demand, contrary to
Keynesi an opi ni on, sti l l operates. An i ncrease i n the suppl y of
any good, say potatoes, wi l l resul t other thi ngs remai ni ng un-
changed i n a l oweri ng of the money val ue of that parti cul ar
good. When we consi der that commodi ty i n terms of money, we
can say i ts (money) pri ce has decl i ned. We now need l ess money
to obtai n i t. Or, we coul d l ook at the same transacti on and say
that the val ue of money has increased because we can now purchase
a l arger quanti ty of that good wi th the same amount of money.
Sti l l another way we can put the same i dea i s to say that as com-
modity sellers, we now need to sel l more of that good i n order to ob-
tai n the same quanti ty of money (or any other economi c good we
wi sh to exchange for i t).
I f potatoes were money, that i s, the medi um of exchange i n so-
ci ety, we woul d now say that pri ces have ri sen; i t woul d now cost
more potatoes to obtai n any other good or servi ce. Li ke a coi n
whi ch can be l ooked at from ei ther si de or from i ts edge, so any
transacti on can be vi ewed from several vantage poi nts. Money i s
188 Baptized I ny?ation
an economi c commodi ty, just l i ke potatoes. I ncrease i ts suppl y,
and i ts val ue goes down (or fai l s to go up) i n rel ati on to other
goods and servi ces.
But there i s a di fference wi th respect to money a uni que
di fference. When more potatoes are produced, consumers of pota-
toes are benefi ted. There are more consumer goods avai l abl e than
before. But when addi ti onal money i s produced, there is no net bene-
$t to socie~. (Or more properl y put, a humani st economi st cannot
say that there has been any net i ncrease. )A Hol ders of money are
hurt, for the val ue of money fal l s. Spenders of money are bene-
fi ted; they get the goods.
Al though i t i s true that any economi c good or servi ce coul d
ri se i n pri ce owi ng to a change i n ei ther suppl y or demand, our
observati on here l eads us to concl ude that when al l pri ces ri se gen-
eral l y, what we are real l y observi ng i s a l oweri ng of the purchas-
i ng power of the monetary uni t. That i s, i ts suppl y has i ncreased
causi ng a decl i ne i n i ts val ue (i ts purchasi ng power) and thi s i n
turn creates a ri se i n pri ces. I nfl ati ng the monetary uni t, there-
fore, i s the cause of general pri ce ri ses.
Dr. Vi ckers Confusi on
I t i s worth noti ng that Dr. Vi ckers makes no attempt to di scuss
the effects of i ncreasi ng the money suppl y. He i s adamant that
fi scal and monetary pol i ci es are needed, and he i s certai n that i n-
jecti ons need to be made i nto the economy whenever those objec-
ti onabl e savers wi thdraw thei r money from the nati onal i ncome
stream. (Al l ri ght, al l ri ght: savers dont remove money from the
nati onal i ncome stream. The y put i t ri ght back i nto the i ncome
stream. They deposi t i t i n a bank, or a money market fund, or
whatever, and i t keeps on rol l i ng al ong. You know thi s. I know
thi s. Dr. Vi ckers honestl y doesnt understand thi s. He l i ves i n the
shadow of Keynes. ) But Dr. Vi ckers cal l for such pol i ci es i s
4. Thi s i s because of a cruci al probl em of the economi cs professi on: they can-
not, as neutral , val ue-free sci enti sts, make i nterpersonal compari son of subjec-
ti ve uti l i ti es. Dr. North surveys thi s probl em i n The Dominion Covenant: Gsnesis
(Tyl er, Texas: I nsti tute for Chri sti an Economi cs, 1982), ch. 4.
Mumble, Mumble 189
noti ceabl y si l ent on i ts anal ysi s of the l i kel y effects of such acti on.
To avoi d such confrontati on wi th the l aw of suppl y and demand,
Dr. Vi ckers, as we have seen, si mpl y tri es to argue that such a l aw
does not al ways exi st. On the other hand, he al so hi des hi s di scus-
si on of the topi c by re-defi ni ng the meani ng of i nfl ati on.
I ncreasi ng the money suppl y was once the meani ng of the
word i nfl ati on. To i nfl ate was to i nfl ate the amount of money i n
exi stence. Now, however, i nfl ati on means somethi ng al together
di fferent. I t i s usual l y understood to mean a ri se i n pri ces, and
that i s the popul ar understandi ng i n our day. To overcome thi s
dual defi ni ti on di ffi cul ty, i t i s necessary to speak of monetay i nfl a-
ti on and pri ce i nfl ati on. Such termi nol ogy al l ows us to cl ari fy our
words so that Dr. Vi ckers cannot accuse us of usi ng empty l ogo-
machy. Of more parti cul ar i mportance, though, i s our observa-
ti on that monetary i nfl ati on causes pri ce i nfl ati on.
Th@ Through I njation
Our anal ysi s here rai ses a fundamental moral questi on. I f l ow-
eri ng the val ue of the monetary uni t i s a deliberate act on the part of
someone, has he not ddiberately taken the val ue of the monetary
uni t away from the hol ders of that uni t? I n other words, has there
not been a del i berate act of stealing somethi ng from someone, i n
thi s case the val ue of thei r money? I f thi s i s the case, then as Chri s-
ti ans do we not have some obl i gati on not to defraud our nei ghbor?
The command i n Levi ti cus 19:35-36 contai ns the i dea of havi ng
just wei ghts and measures, money ori gi nal l y bei ng gol d and si l ve~
measured by wei ghts Cl earl y thi s command, an appl i cati on of
the ei ghth commandment forbi ddi ng theft, al so forbi ds defraud-
i ng our nei ghbor of the ualue of hi s monetary uni t, especi al l y when
i t i s wel l wi thi n our power to mai ntai n that val ue.
The Keynesi ans unwi l l i ngness to see the defi ci ency of thei r
anal ysi s at thi s poi nt, and thei r refusal to consi der the moral i m-
5. See Rousas John Rushdoony, Hard Money and Soci ety i n the Bi bl e; i n
Hans F. Sennhol z, (cd.), Gold 1s Mong (Westpor t, Connecti cut: Gr eenwood
Press, 1975), pp. 157-175,
190 Baptized I ny?ation
pl acati ons of thei r pol i ci es, i s the cause of part of our fundamental
di sagreement wi th thei r system. I t i s not that they have departed
from the ol der and tradi ti onal meani ng of i nfl ati on. That i s not
such a major i ssue. I f they were wi l l i ng to di scuss the cause and
effects of i nfl ati ng the money suppl y i n thei r overal l theory, there
woul d be l ess reason to be cri ti cal of thei r system. But by re-defi ni ng
i nfl ati on to mean pri ce i ncreases, thi s provi des opportuni ty for
them to appear as i f they di scuss these economi c phenomena thor-
oughl y. I t bui l ds a veneer of apparent thoroughness, but thei r sys-
tem i s devoi d of any di scussi on on the l i kel y effects of monetary
i nfl ati on and what are the causes of general pri ce i ncreases. I n
fact, because of the weakness of thei r anal ysi s, they are i ncapabl e
of descri bi ng the economi c phenomena that we wi tness today, the
conti nual but errati c i ncrease of al l pri ces. Havi ng deni ed the l aw
of suppl y and demand i n order to justi fy thei r fi scal and monetary
pol i ci es, they have deni ed one of the fundamental tool s of eco-
nomi c anal ysi s.6
Darwinian I mpersonalism
Evol uti onary Darwi ni sm has pervaded twenti eth-century
thought to a greater degree than we often real i ze. We are, to some
extent, i nfl uenced by the cul ture whi ch surrounds us, and a major
factor i n contemporary thought i s the concept of evol uti on, whi ch
teaches we l i ve i n a worl d of chance, of brute factual i ty, where
nothi ng necessari l y stands i n rel ati onshi p to anythi ng el se. The
uni verse i s a meani ngl ess l ump of pri meval matter whi ch has, for
some unknown reason, ori gi nated out of the yl em7 (or some such
6. The pseudo-economi c Soci zd Credi t theori es of C. H. Dougl as, whi ch have
some support i n Chri sti an ci rcl es, al so fal l i nto thi s category. They si mi l arl y
refuse to anal yze the effects of i ncreasi ng the money suppl y. Thei r di sl i ke i s for
the bankers whose creati on of fi at money i nvol ves a debt burden on those who
recei ve i t. That i s, i t has to be repai d wi th i nterest. Soci al Credi tors woul d merel y
l i ke to see the creati on of weal th (i n thei r termi nol ogy soci al credi ts) i n the
hands of the State to be i ssued to al l wi thout obl i gati on. The ej)i ect~ of such a pol i cy
they conveni entl y i gnore. The effects woul d be bad.
7. Robert Jastrow, Red Gi ants and Whi& Dwa@: A4ank Descent from the Stars
(New York: Si gnet, 1969), pp. 68-69.
Mumble, Mumble 191
ori gi nal uni versal stuff). Thi s l eads to the unfortunate con-
cl usi on that the worl d i s i mpersonal , that there are i mpersonal
forces that bri ng about whatsoever comes to pass. By denyi ng
the al l -control l i ng God of Scri pture who determi nes whatsoever
comes to pass, men transfer predesti nati on to some other force or
object. I n the mi nd of twenti eth-century man, chance control s
whatsoever comes to pass. Conveni entl y, thi s ul ti matel y deni es,
unl i ke Bi bl i cal predesti nati on, the val i di ty of human choi ce. We
are not responsi bl e, says modern man, for our acti ons. (The ran-
dom, i mpersonal uni verse whi ch chance gave unto me bath made
me to si n.) Thi s has had di sastrous effects i n the study of econom-
i cs.
s
The deni al of the l aw of suppl y and demand has rei nforced the
popul ar noti on of evol uti onary Darwi ni sm: that whatever happens
i s caused by chance, not del i berate human acti on. Consequentl y,
pri ce i nfl ati on i s seen as the product of chance. Someti mes we
have i t, and someti mes we dont. After al l , dont our pol i ti ci ans
say they are doi ng thei r best to control pri ce i nfl ati on? Dont we
hear thei r sel f-adul ati on at bri ngi ng present (earl y 1986) pri ce i n-
fl ati on rates down to tol erabl e l evel s of around fi ve percent? Are
we not promi sed, especi al l y at el ecti on ti me, that thei r utmost
efforts wi l l be gi ven to control pri ce i nfl ati on?
Evol uti onary thought thus pl ays i nto the hands of power-
hungry pol i ti ci ans who, commi tted to the Keynesi an fal l aci es,
woul d rather i mpose thei r ri di cul ous fi scal and monetary pol i ci es
on an i gnorant and gul l i bl e publ i c. But as Peter Drucker notes, I t
i s si mpl y not true, as i s often asserted, that economi sts do not
know how to stop i nfl ati on. Every economi st si nce the l ate 16th
century has known how to do i t: Cut government expenses and
wi th them the creati on of money. What economi sts l ack i s not
theoreti cal knowl edge, i t i s pol i ti cal wi l l or pol i ti cal power. So far
al l i nfl ati ons have been ended by pol i ti ci ans who had the wi l l
8. The best defense, and the most del i ghtful readi ng, of bi bl i cal predesti na-
ti on i s Marti n Luthers Bondage of the Will (vari ous transl ati ons).
192 Baptized I nzation
rather than by economi sts who had the knowl edge .9
Mumbl e, Mumbl e
To be an economi st today i s not an easy l i fe. As Dr. Vi ckers
remi nds us, economi cs i s no l onger sure of i tsel f. What he real l y
means i s, We Keynesi ans have predi cted i naccuratel y for so l ong
that our younger col l eagues, commi tted to Mi l ton Fri edman, are
begi nni ng to ri di cul e us. We have been bl amed for i nfl ati on, and
we have al so been bl amed for recessi on. Just because we have
been i n charge, and just because that fl amboyant bi g-mouth
Hel l er sai d the new age of Keynesi an bl i ss had arri ved back i n
1966, we are now bei ng asked unfai rl y to take responsi bi l i ty for
the bad si de of the economy, as i f i t were the faul t of Keynesi an
pl anni ng rather than chance, or Ri chard Ni xon, or economi cs i n
general , or somethi ng. Furthermore, our pensi on benefi ts are not
l ooki ng very rel i abl e, and we are al l getti ng cl ose to reti rement. So
I guess we economi sts are al l to bl ame. I guess al l economi sts are
wrong. I guess I m off the hook.
What of Hayek, who began predi cti ng preci sel y these bad
resul ts i n the l ate 1930s? What of Mi ses, who di d the same? What
of the Austri an School i n general ? They dont count. To prove i t,
Dr. Vi ckers wrote hi s book.
For the average hard-worki ng economi st, Dr. Vi ckers admi s-
si ons (l i ke Mi l ton Fri edmans i n 1971) l o are not so encouragi ng.
After al l , i f the whol e professi on i s not sure of i tsel f, then what can
the poor, humbl e economi st do and say? I f he i s no l onger sure of
anythi ng that he mi ght propose, there seems l i ttl e el se the modern
economi st can do but mumbl e. To al l ow the di cti onary to en-
l i ghten us, the meani ng of mumbl e i s to speak i ndi sti nctl y.
9. Peter F. Drucker, Toward the Next Economi cs i n The Public I nterest,
Speci al Edi ti on, 1980, p. 12. Thi s i s currentl y bei ng proven to be true i n Great
Bri tai n where two phi l osophers rather than economi sts, Dr. Madsen Pi ri e and
Dr. Eamonn Butl er of the Adam Smi th I nsti tute, have been i nfl uenti al i n turni ng
the ti de agai nst the Bri ti sh dri ft i nto soci al i sm, They have effecti vel y brought
about the pri vati zati on program whi ch the Thatcher Government i s pursui ng.
10. Ci ted at the begi nni ng of the I ntroducti on.
Mumble, Mumble 193
Maybe thi s appears a l i ttl e harsh to some. Wel l , before maki ng
fi nal judgment, l et us take a tour of Dr. Vi ckers understandi ng
and theori es on i nfl ati on. A surpri se may be i n store.
Douglas Vickers, I nJ ation Fighter?
A superfi ci al readi ng of Dr. Vi ckers Economics and Man coul d
l ead to the concl usi on that there i s agreement wi th the North-
Rushdoony thesi s that an i ncrease i n the money suppl y that i s,
monetary i nfl ati on causes a deval uati on i n the purchasi ng power
of money whi ch, i n Bi bl i cal terms, i s theft and fraud. [ W]e shoul d
avoi d the theft and i mmoral i ty of i nfl ati on, says Dr. Vi ckers. 11
I nfl ati on, i t ought to be sai d, i s i mmoral , and the i mmoral i ty i s
chargeabl e to those whose economi c acti ons gi ve ri se to i t, or to those
who, bei ng responsi bl e for the ri ght admi ni strati on of the economi c
affai rs of the nati on, ei ther adopt pol i ci es whi ch exacerbate the i nfl ati on
rate or fai l to take acti on more reasonabl y desi gned to correct i t. 12
A cl oser exami nati on of the sentence quoted wi l l reveal , how-
ever, that Dr. Vi ckers has a vastl y di fferent i dea of the meani ng of
i nfl ati on from that of North and Rushdoony. (We shal l see that he
has a di fferent defi ni ti on al together than those menti oned earl i er
i n thi s chapter. ) Noti ce that he says the failure to take economi c ac-
ti on can cause i nfl ati on. Now, fai l ure to act cannot cause i nfl ati on
i n the North-Rushdoony sense (except the governments fai l ure to
enforce the l aw of honest wei ghts and measures), si nce they defi ne
i nfl ati on as any i ncrease i n the money suppl y. J How coul d i nac-
ti on cause an i ncrease i n the money suppl y? Obvi ousl y, Dr. Vi ck-
ers empl oys thi s word i n a di fferent sense from those he opposes.
What he refuses to accept i s the defi ni ti on of i nfl ati on as an i n-
crease i n the money suppl y. No Keynesi an wi l l . I f he di d, he
woul d have to abandon hi s enti re methodol ogy. Thus, al l Keynes-
i ans cl i ng rel i gi ousl y to any defi ni ti on of i nfl ati on except the
11. Vi ckers, Economics and Man, p. 36.
12. I bid., p. 98; cf. pp. 175, 242, 243, 253-254.
13. North, An I ntroduction to Christian Economics, p. 20
194 Baptized I nzation
Austri an one. 14
I n fl ati on, Dr. Vi ckers says, i s a condi ti on of dynami c di s-
equi l i bri um.
J>l S Thi s means preci sel y nothi ng or better Put) t
means i mpreci sel y nothi ng. Evey economy i s al ways i n a condi -
ti on of dynami c di sequi l i bri um. There never can be equi l i bri um
i n the real worl d. Equi l i bri um for economi c anal ysi s i s what the
phi l osophers cal l a limiting concept a mental backdrop or hypo-
theti cal model by whi ch to eval uate the real worl d. Once agai n, at
a cruci al poi nt i n economi c anal ysi s, Dr. Vi ckers i s offeri ng us
another verbal smoke screen. I t i s another attempt to substi tute
meani ngl ess phrases i n order to remai n safel y on the si del i nes
whi l e Keynesi an pol i cy-makers debauch the currency just as surel y
as Keynes debauched Tuni si an boys.
Dynamic Muddle
But l et us take hi m at hi s muddl ed word. What about equi l i b-
ri um? First, i f i nfl ati on i s defi ned as a condi ti on of dynami c di s-
equi l i bri um, the recurri ng phrase i nfl ati onary di sequi l i bri um i s
a meani ngl ess tautol ogy. 16 Dr. Vi ckers i s sayi ng there i s such a
thi ng as a dynami c di sequi l i bri um di sequi l i bri um, a phrase
whi ch does not make sense.
Second, the i mmoral i ty of i nfl ati on whi ch Dr. Vi ckers tal ks
about i s therefore the i mmoral i ty of a dynami c di sequi l i bri um.
Thi s must mean that any change whi ch occurs to upset the
Keynesi an concept of equi l i bri um i s i mmoral . I n other words,
Dr. Vi ckers wants an economy that i s compl etel y unchangi ng to
sati sfy hi s demands for moral i ty.
14. A Chri sti an economi cs teacher who adhered to the Keynesi an theori es,
and favored the i deas of Vi ckers, i nsi sted to me that i nfl ati on coul d not be defi ned
as an i ncrease i n the money suppl y. He just woul d not al l ow i t. Even though I
conceded to cal l i t somethi ng eke, he sti l l woul d not di scuss the crux of the mat-
ter, that i ncreasi ng the money suppl y causes pri ces to ri se, effecti vel y defraudi ng
some peopl e i n the communi ty of the purchasi ng power of thei r money. I gnori ng
the real i ssues i s an i ntegral part of the Keynesi an system.
1.5. Vi ckers, Economics and Man, p. 277.
16. I bid., pp. 15, 129, 264, 273
3
27
4
, 277, 278, 280, 281, 321, 335, 336, 340.
Mumble, Mumble 195
Thi s i s seen i n hi s cal l read: cal l for the government to do
somethi ng for stabl e pri ces. One of hi s stated economi c objec-
ti ves i s a stabl e l evel of domesti c pri ces, or the preservati on of the
i nternal purchasi ng power of the economys money suppl y. I T
Consequentl y, the nature of thi s worl d as i t i s, wi th i ts changes
and fl uctuati ons, must be i mmoral as far as Dr. Vi ckers i s con-
cerned. But thi s i dea of moral i ty i s far removed from the Bi bl i cal
concept that moral i ty and i mmoral i ty are i n terms of the l aw of
God.
Third, why woul d anyone cal l for stabl e pri ces? Fi rst, i n a pro-
ducti ve economy, pri ces shoul d be fal l i ng. Do you real l y thi nk the
consumer has been hurt by el ectroni c cal cul ators that sol d i n 1985
for fi ve percent of what they sol d for i n 1975? Are we dead set
agai nst a hi gher real i ncome? The government does have the
power to keep the money suppl y very cl ose to constant. But to do
thi s woul d be to al l ow pri ces to fal l , as producers compete to sel l
us ever-i ncreasi ng quanti ti es of the goods and servi ces we want.
But Dr. Vi ckers i s unwi l l i ng to cal l for monetary stabili~. That
woul d i nvol ve no teams of central pl anners. That woul d i nvol ve
no col l ecti ng of reams of pri ce data. That woul d not al l ow the gov-
ernment to i mpose the i nvi si bl e tax of monetary i nfl ati on on the
publ i c. No, he cal l s i nstead for somethi ng whi ch the government
has proven compl etel y i ncapabl e of provi di ng, stabl e pri ces.
Does he want pri ce and wage control s? Does he want an i n-
crease i n the money suppl y to match the i ncrease of a stati sti cal
average he woul d cal l the pri ce l evel ? Yes, he i s wi l l i ng to accept
ei ther, though preferabl y the l atter pol i cy. The monetari sts are
wi l l i ng to accept an annual 370 to 5Yco i ncrease of the money sup-
pl y, too. So are the suppl y-si de economi sts. So are the Soci al
Credi t cranks. Onl y two groups forthri ghtl y cal l for stabl e money
a}er a return to a ful l gol d coi n standard wi th 1007o reserve
banki ng wi th pri ces adjusted sol e~ by free market competi ti on,
whether up, down or si deways: the Austri an School and the re-
17. I bid., p. 173.
196 Baptized I ntation
constructi oni sts. 18 These are Dr. Vi ckers decl ared i ntel l ectual
enemi es, the peopl e agai nst whom he wrote hi s book.
Fourth, wi th Dr. Vi ckers defi ni ti on i n mi nd, hi s concl usi on
agai nst Gary North that there i s no si ngl e cause or a si ngl e cure
for i n fl ati on, i s an i nference that Dr. Norths economi c concl u-
si ons are i ncorrect. 19 I t i s, however, si mpl y a matter of defi ni ti on.
Concl usi ons are onl y as good as thei r foundi ng premi ses, and
from hi s premi se that i nfl ati on i s a dynami c di sequi l i bri um, Dr.
Vi ckers cl ai m that North i s i ncorrect i s a l ogi cal deducti on. But
understand: i t i s a l ogi cal deducti on from a defi ni ti on whi ch can-
not possi bl y have any economi c meani ng. I t has no speci fi c con-
tent to gi ve i t predi cti ve or anal yti c val ue. Dynami c di sequi l i b-
ri um tel l s us nothi ng, except that Dr. Vi ckers has chosen not to
present a l ogi cal al ternati ve to Dr. Norths anal ysi s.
On the other hand, i f Norths defi ni ti on of i nfl ati on i s the start-
i ng premi se, Dr. Vi ckers concl usi on i s i ncorrect. Combi ne the
i dea that i nfl ati on i s an i ncrease i n the money suppl y wi th the i n-
escapabl e fact that current monetary uni ts are control l ed by State
authori ti es, and there can onl y be one cause, and therefore one
cure, of i nfl ati on, accordi ng Dr. Norths defi ni ti on.
Why I mmoral?
To del i beratel y l ower the val ue of money i s to del i beratel y take
away someones purchasi ng power. I t i s theft and fraud i n every
sense of the word, al though when conducted on the scal e whi ch i s
18. What i s real l y needed i s several decades of monetary defl ati on. Wi thout
the creati on of 100% reserve banki ng, the worl d wi l l forever be at the mercy of
the money mani pul ators. To return to a worl d of stabl e money and fl exi bl e pri c-
i ng, we wi l l have to go through the defl ati onary wri nger. Once the vari ous gov-
ernment banki ng i nsurance schemes are offi ci al l y abandoned, and the thri ft i n-
sti tuti ons are l eft on thei r own, there i s no known way to prevent a toppl i ng of the
banks, i f the central banks sl owl y i ncrease reserve requi rements. Thi s defl ati on-
ary pol i cy i s revol uti onary, but so i s the comi ng mass i nfl ati on (the onl Y possi bl e
al ternati ve to a return to sound money), whi ch wi l l i nevi tabl y be fol l owed by un-
control l ed defl ati on, or el se a total destructi on of todays currency, wi th a new
currency substi tuted for the dead one. Thi s i s the more l i kel y scenari o, however.
19. I bid., p. 179.
Mumble, Mumble 197
currentl y exhi bi ted worl dwi de thanks to Keynes i t i s probabl y
better to cal l i t grand l arceny. Yet i t i s thi s preci se pol i cy whi ch
Keynesi ans offer as sound and moral economi c theory. Bi bl i cal
moral i ty and Keynesi ani sm are thus i n radi cal opposi ti on to one
another at thi s poi nt. How Dr. Vi ckers can cal l monetary i nfl ati on
benefi ci al i s beyond comprehensi on. He i s aware that monetary
pol i ci es cause economi c recessi on and expansi on, yet i t appar-
entl y does not occur to Dr. Vi ckers that an obvi ous way to reduce
expansi onary-recessi onary tendenci es, whi ch cause the di shar-
moni es Dr. Vi ckers i s so keen to el i mi nate, woul d be to do away
wi th the Keynesi an pol i ci es i mposed by a central pl anni ng
authori ty.
Monetary i nfl ati on al so encourages pol i ti cal favori ti sm. When
governments pri nt money, i t i s gi ven to some peopl e who are now
abl e to buy goods whi ch were previ ousl y beyond thei r means.
Thi s i ncreased demand tends to dri ve up the pri ces for those
goods, thereby putti ng at a di sadvantage those who di d not get the
new money earl y enough. Even i f fracti onal reserve banki ng i s
used as the means of money creati on, those who can borrow most
wi l l benefi t at the expense of those who borrow l i ttl e or nothi ng.
Some gai n, some l ose. The wi nners i n the i nfl ati on game gai n at
the l osers expense.
Tragi c Consequences
Perhaps the most tragi c consequence of monetary i nfl ati on, at
l east from an economi c perspecti ve, i s the misallocation of resources
whi ch i t i nduces. When some members of the communi ty have
thei r purchasi ng power i ncreased, they ei ther cal l for addi ti onal
producti on i n exi sti ng goods and servi ces or for new goods and
servi ces. As thi s new money i s spent, those recei vi ng i t are abl e to
buy addi ti onal goods. As the new money ci rcul ates throughout
the economy, however, there i s a tendency for pri ces to ri se.
Once the general pri ce l evel (however compi l ed and wei ghted)
has i ncreased, the economy i s not back to where i t was before the
new money was i njected i nto i t. Expectati ons were i nduced by the
pri or ri se i n pri ces. The boom phase of the cycl e was i nduced. The
198 Baptized I nJ ation
mi sl eadi ng pri ce si gnal s produced by the monetary i nfl ati on
especi al l y, temporari l y l ower i nterest rates l ed entrepreneurs to
mi sforecast comi ng economi c events. The new condi ti ons surpri se
entrepreneurs. They shut down projects. They sl ow thei r spend-
i ng. They stop bor r owi ng to bui l d new pr ojects. They fi r e
empl oyees. A recessi on i s the resul t.
Monetary i nfl ati on has thus caused a mi sal l ocati on of re-
sources, i ncl udi ng l abor, resul ti ng i n a waste of some of those
resources. zo Possi bl y some producers purchased pl ant and equi p-
ment whi ch now si ts i dl e, or perhaps others i ncreased thei r l abor
force whi ch i s no l onger requi red. Gi ven Dr. Vi ckers requi rement
that economi cs shoul d concern conservati on, devel opment and
equi ty, nothi ng woul d appear more contrary to these i deal s than
monetar y and fi scal pol i ci es whi ch cr eate such economi c upheaval . 21
I t i s not onl y thei r monetary theory whi ch creates a drasti c
waste of resources; thei r other pol i ci es have si mi l ar effects. For ex-
ampl e, the attempts to i ntroduce a ~ust progressi ve tax system
have resul ted i n massi ve tax evasi on and avoi dance schemes.
Each ti me the tax l aws are al tered, there i s a tremendous effort i n
the communi ty to understand thei r effects and to fi nd ways
around them i n order to mi ni mi ze any tax l i abi l i ti es. How much
better off woul d we be i f thi s enormous quanti ty of human
resources, expended i n fi ndi ng l oophol es i n the tax l egi sl ati on,
coul d i nstead be put to producti ve use for the benefi t of al l ? How
much better woul d i t be i f free men were al l owed to compete and
i nnovate wi thout bureaucrati c ti nkeri ng?
Concl usi on
Agai nst thi s background, i t i s easy to see that Dr. Vi ckers i s
mumbl i ng. He i s speaki ng qui te i ndi sti nctl y. I f he cannot defi ne
i nfl ati on i n such a manner that there i s some sembl ance of coher-
20. Ludwi g von Mi ses, Human Actmn. A Treatise on Economics (3rd ed.; Chi cago:
Regnery, 1966), ch. 20.
21. For a comprehensi ve anal ysi s of monetary i nfl ati on and i ts effects, see
Henry Hazl i tt, The I nzation Cniis, And How To Resolve I t (New Rochel l e, New
York: Arl i ngton House, 1978).
Mumble, Mumble 199
ence i n the message he i s attempti ng to get across to the reader, we
may readi l y concl ude he i s mumbl i ng. But Keynes mumbl ed, too,
and a l ot of very hi ghl y pl aced peopl e thought they heard some-
thi ng profound. What they heard was pure pragmati c bal derdash.
What they heard was a cry for more State i nterventi on. They l oved
to hear that. Hi s mumbl i ng di dnt matter at al l .
Am I exaggerati ng? Consi der Keynes wri tten repl y to speci fi c
questi ons asked by the Bri ti sh governments Economi c Advi sory
Counci l i n Jul y of 1930. They wanted hi s opi ni on on what shoul d
be done to counteract the growi ng depressi on. Thi s i s the advi ce
he gave them:
When we come to the questi on of remedi es for the l ocal si tuati on as
di sti nct fr om the i nter nati onal , the pecul i ar i ty of my posi ti on l i es,
perhaps i n the fact that I am i n favour of practi cal l y al l the remedi es
whi ch have been suggested i n any quarter. Some of them are better than
other s. But near l y al l of them seem to tend i n one di r ecti on. The un-
forgi vabl e atti tude i s, therefore for me the negati ve one, the repel l i ng
of each of these remedi es i n turn.
Accordi ngl y, I favour an ecl ecti c programme, maki ng use of sugges-
ti ons from al l quarters, not expecti ng too much from the appl i cati on of
any one of them, but hopi ng that they may do somethi ng i n the aggre-
gate .
22
Mumbl e, mumbl e. Spend and spend, tax and tax, i nfl ate and
i nfl ate, el ect and el ect. For i n the l ong run, we are al l dead. And
some of us wi l l l eave no progeny.
On the other hand, others of us wi l l .
22. Ci ted by D. E. Moggri dge, The Return to Gold, 1925: The Formulation of Eco-
nomic PoliU and Zt~ Critic$ (Cambri dge: At the Uni versi ty Press, 1969), p. 90.
12
THE GREAT UNMENTI ONABLE: UNEMPLOYMENT
There are no inherent reasons in a modern capitalist or quasi-
capitalist economy why the system will automatical~ equilibrate at a
situation offull employment. 1
I n hi s cruci al l y i mportant book, The Structure of Scient@ Resolu-
tions (1962), Thomas Kuhn descri bes the way i n whi ch a parti cu-
l ar academi c di sci pl i ne changes i ts col l ecti ve mi nd. These i nfre-
quent major revol uti ons i nvol ve an academi c gui l ds rejecti on of
many of the truths of an earl i er era, and the adopti on of new i n-
si ghts that were consi dered taboo, or preposterous, by the masters
of the gui l d pri or to the revol uti on. Thi s transformati on, he says,
sel dom i nvol ves l arge numbers of the exi sti ng members
change thei r mi nds. I nstead, they reti re or di e, and younger
who have adopted the new vi ewpoi nt repl ace them.
Why do these revol uti ons occur? Kuhn says that they
who
m e n
tak e
pl ace w-hen bri ght peopl e, who are ei ther outsi de the gui l d or are
too young to have i nvested very much i n devel opi ng i nsi ghts (or
professi onal papers) that favor the exi sti ng outl ook, begi n to take
noti ce of certai n anomal i es that the gui l d chooses to i gnore. Per-
haps i t i s a theoreti cal i nconsi stency. More l i kel y i t i s some resul t
of experi mental i nqui ry whi ch cannot be expl ai ned wel l by the ex-
i sti ng worl d-and-l i fe vi ew of the gui l d, what Kuhn cal l s i ts para-
di gm. As more and more bri ght peopl e focus attenti on on the
anomal i es, the ol der masters get upset. They charge younger men
1. Vi ckers, Economics and Man, p. 136.
201
202 Baptued I nJ ation
wi th heresy. They poi nt to the outsi der status of some the i nno-
vators. But i f the skepti ci sm of younger men grows, the gui l d i s
ri pe for a revol uti on.
Then, seemi ngl y overni ght, someone puts forth a new expl a-
nati on of the anomal i es. He reconstructs the gui l ds paradi gms. A
successful theory wi l l retai n as much as possi bl e of the recei ved
wi sdom, but the essence of the revol uti on i s the new paradi gm i t-
sel f. The transformati on takes about a generati on. Then the gui l d
settl es down to do normal sci ence the drudgery, putteri ng, and
cl eari ng up the doubts about the new paradi gm whi ch character-
i zes most sci enti fi c acti vi ty most of the ti me. *
Establ i shed economi sts are no di fferent from other gui l d mas-
ters. They too have thei r favori te theori es whi ch they do not l i ke
to have chal l enged, and wi l l therefore avoi d any di scussi on on
that parti cul ar area whi ch mi ght di sprove thei r theory. Soci al i sts,
for exampl e, have yet to answer Mi ses cri ti ci sm that rational eco-
nomi c cal cul ati on i s i mpossi bl e i n a pure soci al i st State. Wi thout
pri vate ownershi p, there i s no entrepreneurshi p; wi thout a com-
peti ti ve pri vate market for capi tal goods, there i s no way for cen-
tral pl anners to i mpute accurate pri ces to capi tal goods. Cal cul a-
ti ons made by soci al i st pl anners are rati onal onl y because they
borrow from soci eti es where pri ces ari se i n the market pl ace.
Once they have obtai ned pri ces from outsi de the soci al i st system,
the y are abl e to make thei r cal cul ati ons, but wi thout such para-
si ti c acti vi ty, rati onal cal cul ati ons are i mpossi bl e.3
The cri si s i n economi cs whi ch has been underway si nce about
1970 i s cl osel y ti ed to thi s l oss of fai th i n the prevai l i ng Keynesi an
methodol ogi es. I have al ready ci ted Mi l ton Fri edmans 1971
2. Thomas Kuhn, The Structure of Scient#ic Revolutions (2nd ed.; Chi cago: Uni -
versi ty of Chi cago Press, 1970).
3. Ludwi g von Mi ses, Soci al i sm (I ndi anapol i s, I ndi ana: Li berty Press, [1922]
1981), pp. 97-105 (pp. 113-122 i n the Yal e Uni versi ty Press edi ti on of 1951). There
was an attempt by Oscar Lange i n the l ate 1930s to answer Mi ses, but i t di d not
succeed, and hi s proposed sol uti on was so i mpracti cal from the standpoi nt of so-
ci al i sm that i t has never been adopted by any soci al i st pl anni ng agency. Textbook
accounts, however, al most al ways cl ai m that Lange answered M i ses, i n those
rare i nstances where the textbooks even menti on Mi ses.
The Gr eat Unmentionable: Unemployment 203
admi ssi on at the begi nni ng of the I ntroducti on. Thi ngs have not
i mproved si nce 1971. I n 1982, the New Ybrk Times ti tl ed an arti cl e
on the presi dent of the Ameri can Economi cs Associ ati on, The
Hi gh Pri est of a Troubl ed Church (Jan. 3, 1982). Thi ngs were no
better three years l ater at the annual meeti ng. Boston Uni versi tys
Paul Steeton sai d i n 1985, Economi cs i s i n a state of di sarray,
more so than si nce Keynes . Marti n Wei tzman of the Massachu-
setts I nsti tute of Technol ogy (Paul Samuel sons uni versi ty) sai d,
Theres no consensus on what to do. I n Europe theyre total l y
paral yzed.A Yet i n the cl assroom, l i ttl e has changed. Wri tes
Robert Kuttner:
Today there are two qui te opposi te trends i n economi cs. One i s cen-
tr i fu gal ; th er e i s a fl ower i n g of epi stemol ogi cal dou bt. Th er e a r e
angui shed essays . . . i n the Journal of Economic Literature (whi ch, though
publ i shed by the AEA, has served as a tol erant outl et for hereti cs) and
even an occasi onal one i n The Amencan Economic Review i tsel f. And there
are those presi denti al addresses at AEA conventi ons. At the same ti me,
there i s a strong centri petal i mpul se. Economi cs as practiced i s unchanged,
and the resi stance to real di versi ty wi thi n facul ty ranks and cl assroom
curri cul a i s fi ercer than ever. The debates are for the col l ege of cardi nal s,
not for the pari sh fl ocks
Here i s a textbook exampl e of the condi ti ons that prel ude a
sci enti fi c revol uti on: sel f-doubt at the top of the gui l ds l eadershi p,
and ful l -ti me bl i ndness at the l evel of normal sci ence. Dr. Vi ck-
ers i s representati ve of Kuhns hard-worki ng and uncreati ve nor-
mal sci enti st, who i s al ways the l ast to fi nd out that the revol uti on
has come, and that he mi ssed i t.
The Keynesi an Suppressi on
The Keynesi an system, to whi ch Dr. Vi ckers ri gi dl y adheres,
adopts a si mi l ar method of suppressi on. Thi s system of anal ysi s i s
mai ntai ned i ntel l ectual l y by i ts academi c defenders by thei r
4. Wuhington Times (J an. 2, 1985).
5. Robert Kuttner, The Poverty of Economi cs, Atl anti c Month~ (Feb. 1985),
p. 83.
204 Baptized Iny7ation
refusal to di scuss certai n aspects of market phenomena that mi ght
mi ti gate agai nst thei r theori es. Henry Hazl i tt made the observa-
ti on, I n the Keynesi an system, the l evel of wage-rates and thei r
effect on empl oyment, i s The Gr eat Unmenti onabl e.
G
I t i s un-
menti onabl e because i t i s cl osel y connected to the questi on of
wage rates i n a fr ee soci ety. Keynesi an economi sts despi se the
topi c of the pri ce mechani sm, except as somethi ng to cr i ti ci ze.
On the sur face, thi s seems l i ke un unwar r anted char ge. Of
course the pri ce mechani sm i s menti oned i n Keynesi an l i terature.
why, i t i s even l i sted i n the i ndex of Dr. Vi ckers Economics and
Man. Agai n we are back to the probl em of defi ni ti on. We need to
defi ne exactl y what we mean by the phrase pri ce mechani sm.
Mor e to the poi nt, we need a theoretical explanation of how it~nctions,
and we al so need cogent evi dence from the worl d of real human
acti on that the theory fai thful l y expl ai ns the events.
O~ective Results of Sulyectiue Valuations
Pri ces perform an essenti al functi on i n the economy. They are
the result of the subjecti ve val uati ons of peopl e acti ng i n the mar -
ket pl ace. More parti cul arl y, pri ces are what buyers are ul ti matel y
wi l l i ng and abl e to pay for a par ti cul ar good or ser vi ce. A pr i ce
hel ps to i nform the sel l er whether he i s sel l i ng hi s goods rati onal l y.
What i s an economi cal l y rati onal pri ce from the poi nt of vi ew of
the sel l er? A pri ce whi ch enabl es hi m to sel l al l the goods he offers
for sal e at a pr ofi t mar gi n whi ch then enabl es hi m to stay i n busi -
n es s a n d a ch i ev e h i s oth er goa l s , i n cl u di n g n on -econ omi c goa l s .
I nsuffi ci ent net r ev enues mean fi nanci al l oss or har dshi p, wher eas
pr ofi ts i n di cate th at h e h as cor r ectl y for ecas t wh at en ou gh bu y er s
ar e wi l l i ng to pay i n or der for hi m to r emai n i n busi ness.
Pr i ces ar e the r esul t of su~ectiue val uati on. Human bei ngs have
a habi t, though, of changi ng thei r mi nds and opi ni ons on a host of
thi ngs , and on a fr equent bas i s . Someone i s wi l l i ng to pay $So for
a good book today . Tomor r ow h e i s on l y pr epar ed to s pen d $15 on
th e book , a n d obta i n a n ew Pi er r e Ca r di n ti e wi th th e mon ey
6. Hazl i tt, The Failure of the New Economics, p. 331.
The Great Unmentionable: Unemployment 205
whi ch i s l eft over. Peopl e change, they grow ol der, thei r l i kes and
di sl i k es al ter ; l i mi ted r esour ces and not so l i mi ted wants means a
cons tant j uggl i ng of al l des i r es on a s cal e of v al ues . Today a new
auto i s on the top of a r i ch mans val uati on scal e, tomor r ow a wor l d
cr ui se. Al though a cer tai n pri ce wi l l be pai d for a commodi t y today,
tomor r ow ma y bri ng another pr i ce. I t coul d go l ower i f somethi ng
el s e becomes mor e i mpor tan t, or i f that i tem cl i mbs the l adder of
ou r wan ts , wh at we ar e pr epar ed to pay for i t wi l l i n cr eas e.
Market Continui~
Consequentl y, there can be no such thi ng as unchangi ng
pri ces. Surpri si ngl y, though, i n a free market pri ces tend to be
rather stabl e. For mass-produced i tems, there i s a tendency for
pri ces to fal l , especi al l y for products that have been i ntroduced re-
centl y, and whi ch are now the focus of i ntense competi ti on from
new producers who have entered the market. Where there are a
number of peopl e acti ng i n accordance wi th thei r scal e of prefer-
ences, the pri ce resul ts of the very often marked changes wi thi n
each i ndi vi dual s preference scal e are l evel l ed out across the mar-
ket as a resul t of the l arge number of peopl e i n the market. There
i s a ki nd of averagi ng process goi ng on. Buyers drop out of one
market, and may be repl aced by others who have si mi l ar, i f not
i denti cal , preferences. Whi l e one buyer omi ts or l owers auto-
mobi l es on hi s scal e of desi res, another rai ses autos on hi s l i st,
thus mi ti gati ng agai nst the choi ce of the former. I n al l thi s, the
market possesses rel ati ve stabi l i ty. Parti ci pants can form general l y
accurate expectati ons about what wi l l be avai l abl e tomorrow, and
at what pri ce.
Thi s does not mean that the market cannot be subject to wi l d
fl uctuati ons. Anyone who fol l ows the stock markets knows that
markets can, and do, change qui te dramati cal l y and often qui te
rapi dl y. But thi s i s because there has been a fundamental shi ft i n
val uati ons by a l arge number of peopl e at one ti me. A parti cul ar
gol d stock pl ummets, possi bl y because the l atest mi ni ng report
has i ndi cated that expected yi el ds wi l l not be achi eved. I nvestors
have been overl y opti mi sti c on thei r anti ci pated profi ts, and now
206 Baptized InJation
have cause to be more conservati ve i n thei r expectati ons. Perhaps
the grape harvest thi s year i s super-abundant, so grapes are a l i t-
tl e easi er to come by. Meanwhi l e, beef pri ces are soari ng because
the suppl y of beef had been overesti mated, and there wi l l be some
shortage of pri me beef thi s season. Al l these factors contri bute to
the val uati ons whi ch each person makes about the commodi ti es
and servi ces on hi s or her scal e of preferences, and a free market i s
one where these changi ng deci si ons are regi stered i n the market
pl ace as peopl e transact thei r busi ness.
Authoritarian Continui~
Suppose, though, someone were to object to these changi ng
val uati ons. He di sl i kes thi s worl d of changi ng pri ces and fl uctuat-
i ng condi ti ons. I nstead, he thi nks that pri ces shoul d be hel d con-
stant. Suppose al so that he i s a government offi ci al wi th the au-
thori ty to i ssue a mi ni mum pri ce order. Starti ng today, al l buyers
wi l l pay $5 a pound for pri me beef i rrespecti ve of market condi -
ti ons or changi ng val uati ons whi ch buyers and sel l ers may make.
Such a decree l ooks good at fi rst gl ance, at l east to buyers who
were wi l l i ng to pay over $5 a pound and sel l ers who were unabl e
to compete at pri ces under $5. Pri ces are regul ated. Now we al l
know where we are goi ng. How much si mpl er budgeti ng wi l l be
from now on! Ri ght?
There i s a mi ssi ng factor i n thi s equati on. Our benefactor may
have nobl e i deas, but he i s beggi ng the questi on. What about
those w~ective val uati ons whi ch i ndi vi dual human bei ngs make?
I t may appear al l very wel l to decree beef wi l l be sol d at $5 a
pound, but what happens i f prospecti ve buyers are wi l l i ng to pay
onl y $4? What wi l l happen i s qui te si mpl e: they wi l l not buy the
beef unti l i ts pri ce goes down to the l evel they are wi l l i ng to pay.
Each of us has hi s own mi nd, hi s own opi ni ons, hi s own scal e of
preferences for al l those thi ngs whi ch are desi red. Human bei ngs,
made i n the i mage of God, thi nk and act i n such a way as to refl ect
thei r personal i t~ thei r i ndi vi dual i ty, and thei r uni queness i n the
uni verse whi ch God has created. But our mysteri ous benefactor
wants to do away wi th al l that. I nstead, his val uati ons, his scale
The Great Unmentionable: Unemployment
207
of preferences shal l be adopted by everyone el se. Beef i s worth
$5 a pound because he says i t i s; therefore i t must be worth that
much.
Here, i n i ts essence, i s the Keynesi an system. I n the chapter
on soci al i sm, I noted how that Dr. Vi ckers woul d have the State
i ntervene and i mpose one persons val uati ons or at l east the val -
uati ons arri ved at by a commi ttee on the remai nder of soci ety.
To recal l just one exampl e, Dr. Vi ckers has suggested that wage
i ncreases mi ght be taxed to the ful l extent they exceed nati onal l y
establ i shed norms.T Thi s ki nd of system i s, of course, i nherentl y
authori tari an. I t woul d appear to the thi nki ng person an act of
gross arrogance for another to tel l hi m how he shoul d act, what
pri ces he shoul d pay for commodi ti es, and so on. Yet arrogance is
the psychological center of the Keynesian system. I f we do not questi on
Key n es i an s too deepl y , an d do n ot pr es s u r e th em to an s wer qu es -
ti ons whi ch ul ti matel y mi ti gate agai nst thei r sy stem, they r emai n
con t e n t . Th e y wi l l n ot r a i s e s u ch q u e s t i on s i f we don t. L i k e
sheep, we ar e l ed to the sl aughter , but as Gar y Nor th r emi nds us,
s heep hav e a habi t of bei ng s hor n on the way to the s l aughter -
h ou s e .
Vi ckers on Unempl oyment
Take, for exampl e, Dr. Vi ckers approach to the unempl oy-
ment probl em. I t i s i mportant to remember that, from an eco-
nomi c vi ewpoi nt, wages are mere~ another price. Wages and sal ari es
are the pri ce for l abor, an economi c commodi ty. Therefore, wages
need to be consi dered wi thi n the context of the overal l pri ce mech-
ani sm, wi thi n the context that, i f l eft to themsel ves, peopl e wi l l
make certai n economi c cal cul ati ons and deci si ons whi ch they per-
cei ve are the best for them at that parti cul ar moment.
As he devel ops hi s theori es, he has thi s to say about wages and
thei r rel ati onshi p to unempl oyment. [I ]f al l empl oyers acti ng
together, or i f, that i s, the economy as a whol e, shoul d reduce the
wage rate i t i s proposed to pay to l abor, then rather than there
7. Vi ckers, Economics and Man, p. 340.
208 Baptized Inzation
occurri ng an i ncrease i n the amount of l abor demanded by em-
pl oyers, there may actual l y be a si gni fi cant decrease. . . . For the
reducti on i n the prospecti ve l evel of i ncome-generati ng expendi -
ture whi ch we have seen the proposed reducti on i n wage rates to
i nvol ve wi l l have worsened, rather than i mproved, the market
prospects confronti ng producers, and wi l l l ower the prospecti ve
demand for thei r output. The onl y course of acti on whi ch economi c
reason then suggests i s for them to reduce thei r l evel of producti on.
And thi s, of course, i mpl i es a l ower l evel of empl oyment .8 (Dont
feel embarrassed i f you need to reread thi s paragraph four ti mes;
the wri ti ng i s at faul t, not your brai n. )
Dr. Vi ckers i s sayi ng that a general wage reducti on wi l l cause
peopl e to have l ess money to spend. Thi s, i n turn, resul ts i n fewer
purchases, producers make fewer sal es, thei r profi ts decl i ne, so
they wi l l therefore empl oy l ess l abor. A wel l -reasoned argument
. . . provided you accept hi s concl usi on that l ower sal es and there-
fore more unempl oyment i s the on~ (Dr. Vi ckers word) possi bl e
resul t.
Cause and Efect
What we real l y want to know i s thi s: Why was there thi s over-
ni ght reducti on i n nati onal wage rates? Sure, any empl oyer woul d
l ove to be abl e to cut wage rates, but none of them wants to have
hi s workers qui t and go work for hi s competi tors. So each
empl oyer i s forced to pay a competi ti ve wage. (Yes, Dr. Vi ckers,
these empl oyers may be greedy. But thei r greed l eads them to pay
the goi ng wage to l aborers. They are greedy not onl y i n rel ati on to
thei r workers, but even more so, i n rel ati on to thei r competi tors.
An empl oyer dreads heari ng someone who has had too much to
dri nk tel l hi m at the next trade associ ati on meeti ng: Say, Fred, I
hear you got too greedy wi th your work force, and they al l wal ked
off the job. I hear you had to hi re a whol e new crew, and your
companys output dropped, and the banks di dnt renew your
l oans, and your company i s about to be swal l owed up by Amal ga-
8. I bid., pp. 269-270.
The Great Unmentionable: Unemployment 209
mated. What do you say to that, Fred? Ha, ha, ha. We al ways
knew you were a l oser!)
Why, then, di d wage rates of an enti re economy drop? A col -
l apse of the Keynesi an-operated banki ng system? A recessi on i n-
duced by Keynesi an-approved tari ffs? (Keynes di d approve tari ffs
i n the earl y years of the Great Depressi on. Perhaps he was just try-
i ng to l engthen i t and make i t worse, the better to l aunch the
Keynesi an Revol uti on i n 1936.) The two mai n reasons why the
wage rates of a nati on drop are these: a fal l i n demand for that na-
ti ons producti on, or a fal l i n producti vi ty by the nati ons work
force. An overni ght drop i n wages i s hi stori cal l y rare, except as a
resul t of a pri or monetary i nfl ati on whi ch at l ast comes to a hal t
duri ng a bank pani c. Short of war, or short of physi cal catastrophe
(e.g., a vol cano erupti on or hurri cane) i n a very ti ny nati on, there
are no overni ght nati onal wage reducti ons.
So, i t i s not the fal l i n wage rates whi ch has reduced everyones
i ncome. I t i s rather the drop in demand for the output of the l abor
force. To sol ve the probl em of uni versal l y fal l i ng wage rates, we
must anal yze the causes of the drop i n demand for l abors output.
We must get economi c cause and effect strai ght i n our mi nds;
otherwi se, we mi ght become Keynesi ans.
Price Competition
But, just for the sake of argui ng, l et us propose an al ternati ve.
Let us agree wi th Dr. Vi ckers that a general l oweri ng of wages re-
sul ts i n a decl i ne i n sal es. Peopl e now have l ess spendi ng money.
They wi l l re-eval uate thei r scal e of preferences, real l ocati ng thei r
l i mi ted resources to those i tems deemed most i mportant. Food,
cl othi ng, and shel ter are far more i mportant to most peopl e than
obtai ni ng a new tel evi si on set. Wel l make do wi th the one we
have, unti l thi ngs get better. So tel evi si on manufacturers sel l l ess,
and they dont need as much l abor for thei r reduced producti on
l evel s, and unempl oyment grows, accordi ng to Dr. Vi ckers.
But suppose just suppose that the tel evi si on manufacturer
has recogni zed that because there has been a general decl i ne i n
wages, he i s now payi ng l ess for hi s l abor, so hi s producti on costs
210 Baptized I nzation
have been cut somewhat, and he can therefore reduce sel l i ng
pri ces a l i ttl e, yet sti l l mai ntai n hi s profi t margi n. What has he to
l ose by tryi ng such a tacti c? Absol utel y nothi ng. Hi s sal es are
al ready down. Hi s wages and sal ari es bi l l i s down. He has noth-
i ng to l ose, and euaything to gain, by reduci ng hi s pri ces. Perhaps
that pri ce reducti on wi l l be the temptati on needed to i nduce pros-
pecti ve buyers to reconsi der the purchase of a tel evi si on. So we
must di sagree most strongl y wi th Dr. Vi ckers when he asserts
there i s onl y one course of acti on whi ch economi c reason sug-
gests. What we need to ask i s whose economi c reasoni ng i s suggest-
i ng what. The manufacturers reasoni ng tel l s hi m to l ower hi s
pri ces i f he wants to sel l the goods.
Thi s may not al ways work. I f there i s si mpl y no demand for
the good at any pri ce, i t has ceased to be an economi c good. Per -
h a ps th e pr odu cer h a s n o pos s i bi l i ty of l ower i n g th e pr i ce f a r
en ou gh to i n du ce r eta i l cu s tomer s to bu y . As a n ex a mpl e, con -
si der Economi cs and Man. After ten years, the publ i sher has yet to
sel l out the i ni ti al run of 2,000 copi es, even at the l ow, l ow pri ce of
$6.95. What shoul d he do? Sel l al l copi es at once for a few cents
each to a remai ndef book di stri butor? Gi ve i t away as a pr em-
i um for buyi ng fi ve (or four, or even two) other books? Or wai t for
Baptized I nflation to create enough controversy to get the l ast 250
copi es sol d? Entrepreneurs have di ffi cul t deci si ons i n thi s l i fe. But
that i s the pri ce they pay for remai ni ng entrepreneurs.
I n Dr. Vi ckers hypotheti cal exampl e, we can see that a l ower-
i ng of the wage rate i s not necessari~ a cause of unempl oyment.
(Economi c anal ysi s tel l s us that fal l i ng wage rates are al most
never the cause of unempl oyment, and never the cause of permanent
unempl oyment. Fal l i ng wage rates are the economi cal l y rati onal
response of empl oyers and empl oyees to fal l i ng demand for thei r
output. Fal l i ng wage rates are a rati onal attempt to maintain em-
pl oyment. They are a way to keep from goi ng bankrupt or getti ng
fi red. ) There may be some tempora~ unempl oyment i f manufac-
turers and producers are sl ow to real i ze that sal es wi l l decl i ne,
si nce workers now have l ess spendi ng money due to the general
wage decl i ne. But not al l busi nessmen are that sl ow i n under-
The Great Unmentionable: Unemploymmt 211
standi ng economi c real i ty. Some of them, i n fact, are qui te smart
when i t comes to maki ng busi ness cal cul ati ons. (I n other words,
they are not al l Keynesi ans. ) Thi s i s why the al ert ones make
hi gher-than-average profi ts. The entrepreneur who fi rst l owers
hi s pri ces i n the case of a general wage decl i ne wi l l be at the head
of the l i ne to reap the possi bl e benefi ts, assumi ng there i s no
change i n consumers wi l l i ngness to buy hi s goods. And even i f
they wont buy hi s goods at todays pri ces, they may buy them at
tomorrow%.
Raising Wages the Keynesian Way
So far, we have seen Dr. Vi ckers make the startl i ng and i nac-
curate cl ai m that hi s hypotheti cal general wage decl i ne must re-
sul t i n greater unempl oyment. What i s the resul t, though, i f we
change the si tuati on sl i ghtl y and suggest another scene? Suppose
that i nstead of a general wage decl i ne, a general wage rise occur s.
Let us assume that thi s i ncrease i s not the resul t of tremendous
new demand for l abors output. Let us return to our pri ce-setti ng
bureaucrat. Perhaps our benevol ent State benefactor deci des that
i f l oweri ng wages causes unempl oyment, rai si ng al l wages and
sal ari es wi l l gi ve i ncreased spendi ng power to the workers, so they
wi l l purchase more, and thi s wi l l , i n turn, sti mul ate producti on,
resul ti ng i n a demand for more l abor. Here, i t i s argued, i s the
possi bl e sol uti on to the unempl oyment probl em. I n i ts essence,
thi s i s the concl usi on that Dr. Vi ckers reasoni ng warrants. I t
shoul d be obvi ous that i f a l oweri ng of wages resul ts i n unempl oy-
ment (whi ch i s what Dr. Vi ckers argues), the sol uti on must be to
rai se wages: more money i n the i ncome-generati ng stream, more
demand, more producti vi ty. Utopi a, here we come.
I f that were our concl usi on, we woul d have fal l en i nto the trap
whi ch Dr. Vi ckers has set for hi msel f. (No, come to thi nk of i t, he
has been caught for hi s whol e career i n that anal yti cal trap. So
have al l hi s Keynesi an peers. He just wants the rest of us to fal l i n
wi th hi m. ) Agai n, there i s another possi bl e al ternati ve resul t to
the one deduced above. A general wage and sal ary i ncrease woul d
resul t i n greater expenses for empl oyers. They woul d be forced to
212 Baptized @lation
rai se thei r pri ces at l east as much as the wage i ncreases i n order to
mai ntai n profi tabi l i ty.
But wai t a mi nute. How coul d they al l rai se thei r pri ces? Yes,
yes, Dr. Vi ckers, we know: they are ai l i ncredi bl y greedy. But
the y were al l i ncredi bl y greedy yesterday, too, i n your vi ew. So
why di dnt they al l rai se thei r pri ces yesterday? Because we consum-
em would not have bought all of those higher pnced goods they brought to
market. We wi l l not buy them today, ei ther . . . unless the government
creates suficient $at money to let us do it. And thi s, my fri end, i s why
we are back to the Keynesi an sol uti on. Pri nt money.
So the government pri nts the money (or al l ows the fracti onal
reserve banki ng system to create i t). How wi l l the workers be bet-
ter off? The producers are sti l l produci ng the same quanti ty, but i t
i s bei ng sol d at hi gher pri ces. Workers have recei ved hi gher
wages, but they now pay hi gher pri ces on average for goods and
servi ces. How are they better off? The answer i s, of course, they
are no better off at al l . Nothi ng has changed i n thi s si tuati on ex-
cept that the dol l ar amounts bei ng transacted are at hi gher l evel s
than before the general wage i ncrease was granted.
Oh, yes, now that I thi nk of i t, somethi ng has changed. I for-
got about Dr. Vi ckers enthusi asti c recommendati on: the gradu-
ated i ncome tax. The hi gher a workers money-denomi nated i n-
come, the l arger the percentage of hi s i ncome i s taken off the top
by the tax col l ector. So I was i ncorrect. Almost all workers are worse
ofl. They wi l l suffer a reducti on of thei r after-tax real i ncome.
I t i s the ol d doubl e whammy: Keynesi an-recommended mon-
etary i nfl ati on produces Keynesi an-created pri ce i nfl ati on, whi ch
opens the door to the Keynesi an-approved graduated i ncome tax to
achi eve i ts confi scatory mi ssi on more effi ci entl y than ever. .Ke ynes-
i ani sm i ncreases effi ci ency . . . of the State to destroy freedom.
Price Controk
But our Great Benefactor may real i ze that pri ces wi l l go up i n
response to hi s monetary pol i ci es. He knows that producers wi l l
rai se thei r pri ces, thereby destroyi ng the effects of wage i ncreases.
The obvi ous sol uti on to the probl em i s to prevent pri ces from
The Great Unmentionable: Unemployment 213
bei ng rai sed by sel l ers. Lets have wages i ncreased, but al l other
pri ces remai n unchanged. Make i t i l l egal to rai se pri ces.
Now what i s the si tuati on? Wages and sal ari es are up, but the
producers cannot rai se thei r pri ces to recoup costs, so they fi nd al -
ternati ves to the now-overpri ced l abor. They mechani ze produc-
ti on (i f they can buy the equi pment before the manufacturers go
out of busi ness), thereby empl oyi ng l ess l abor, or they demand i n-
creased producti vi ty to pay for the i ncreased wages. They start fi r-
i ng workers who do not i mprove producti vi ty. Whi chever choi ce
empl oyers make, i t i nvol ves a fundamental cal cul ati on that the
present labor rates are too high.
So what i s the resul t? Unemploymcmt. We are ri ght back where
we started. So much for the Keynesi an mi racl es.
Cause and EJ ect (Again)
Perhaps now we are i n a posi ti on to i nqui re what causes un-
empl oyment. I s i t wage reducti ons? Yes, i t coul d wel l be, i f pro-
ducers do not l ower pri ces to i nduce sal es. But to get sal es, they
wi l l l ower pri ces. So unempl oyment goes away.
I s i t wage i ncreases? Agai n, i t coul d be, i f producers are not
abl e to i ncrease thei r pri ces to recoup producti on costs. So they
fi re workers, and unempl oyed workers drop thei r wage demands,
and they get hi red agai n, and unempl oyment goes away.
I n real i ty (though perhaps not i n the academi c departments of
tax-supported uni versi ti es), wages are paid out of productiuip. When
wages l evel s are greater than the val ue of l abors output, l abor i s
overpri ced and wi l l not be purchased.
Todays Unempl oyment: Compl i ments of Keynes
Then what i s the cause of the persi stentl y hi gh unempl oyment
whi ch i s affl i cti ng the U. S., Great Bri tai n, Western Europe, and
Austral i a? I t i s not just l i mi ted to these countri es, but these exam-
pl es wi l l serve our purpose here. Very si mpl y, the cause of unemploy-
ment is the politicians re@al to consider the efects wage rates have within
the overall context of the price mechanism. They l egi sl ate mi ni mum
wage l aws, thereby denyi ng the empl oyer the prerogati ve of deter-
214 Baptized I ny7ation
mi ni ng whether l abor i s worth that parti cul ar pri ce. Furthermore,
trade uni ons are al l owed to i mpose thei r demands upon empl oy-
ers, i n order for uni on members to extract above-market wages
from empl oyers. These above-market wages are possi bl e onl y
because of State-permi tted excl usi on of non-union potential employ-
ees. I f he hi res some of these State-excl uded workers, the empl oyer
mi ght wel l have to face a government tri bunal . The empl oyer i s
tol d to deal wi th uni on members; he cannot l egal l y repl ace them
wi th non-uni on members. Thi s penal i zes non-uni on workers, and
i t forces them i nto l ower-payi ng jobs that are made avai l abl e by
non-uni on empl oyers. Pro-union legislation is therefore an indirect eco-
nomic subsidy to non-unionized business owners. The new wage rates
means a l oss i n profi ts for uni on-domi nated empl oyers. I t mi ght
wel l force some out of busi ness al together. But i t al l adds up to one
thi ng: l ess l abor bei ng empl oyed than what an unhampered free
market woul d support.
Keynesi an economi sts tel l us they are for the worki ng man.
They may be for hi m, but thei r recommended pol i ci es are reduc-
i ng the l egal empl oyment opportuni ti es of most of them. Most
peopl e (about 7570 of them) are not empl oyed by uni oni zed busi -
nesses i n the U.S. But they are not al l owed to bi d agai nst uni on
members i n major i ndustri es. So they are forced to seek empl oy-
ment i n non-uni on sectors of the economy. Non-uni on empl oyers
can then offer l ower wages than they coul d otherwi se have
offered, had there been no compul sory uni oni zati on of thei r com-
peti tors busi nesses. Here i s a cl assi c exampl e of what Basti at
cal l ed the fallacy of the thing unseen. We can see the above-market
wages of uni on members at l east of those whose compani es have
not yet been bankrupted. But we cannot see that these above-
market wages are bei ng pai d for by the l oss of freedom to bi d for
these hi gh-payi ng jobs on the part of the average worki ng man.
Market-Created Unemployment
We do not l i ve i n a perfect worl d. Unempl oyment can never
be el i mi nated. There are those who woul d rather be unempl oyed
and col l ect soci al wel fare benefi ts than take on the responsi bi l i ty
The Great Unmentionable: Unemployment 215
of a job. Perhaps the preference some peopl e have for some eco-
nomi c goods di sappears, causi ng certai n i ndustri es to cl ose, there-
by creati ng unempl oyment. But i f peopl e are now purchasi ng
other goods, demandi ng producti on i n other areas, thi s has the
potenti al of absorbi ng some of that unempl oyment. A pri me ex-
ampl e of thi s i s that those unempl oyed who were maki ng horse-
drawn vehi cl es at the turn of the century had the opportuni ty to
be empl oyed i n the newl y emergi ng horsel ess carri age i ndustry as
the horse carri age went out of demand. But thi s requi res ti me.
There woul d be a period of ac$ustment, meani ng a period of unempl oy-
ment. A more recent exampl e of thi s aspect of economi c l i fe i s the
di sappearance of the mechani cal typewri ter as el ectroni c word
processors take thei r pl ace. Modern busi nessmen have l earned a
hard l esson, though. Many are no l onger so sl ow i n adapti ng to
i nnovati ve changes and l osi ng busi ness to smarter competi tors.
Consequentl y, some typewri ter manufacturers have become man-
ufacturers of computers and retai ned thei r staff.
Unempl oyment short-term unempl oyment, at l east, for
those wi l l i ng to work can be a si gn of a healthy economy, one
whi ch i s growi ng and prosperi ng as new i ndustri es come i nto ex-
i stence and ol d ones di e away. Peopl e are qui tti ng, searchi ng for
new opportuni ti es, tryi ng to make a better l i fe for themsel ves.
There is low unemployment in jails. There is low unemployment in Com-
munist concentration camps. Thi s i s not to say that every form of un-
empl oyment i s a del i ght, for i t produces obvi ous di ffi cul ti es for
those who have been put out of work. Provi ded there are the
growth i ndustri es to absorb the unempl oyed, i n the l ong run we
are al l a l i ttl e better off, even the unempl oyed who may now have
the choi ce of new goods and servi ces. Bui l ders of horse coaches
can now go pl aces i n automobi l es that ti me and di stance may
have prevented pri or to the advent of the car.
But what we are descri bi ng here i s not the ki nd of unempl oy-
ment we see today. Our descri pti on i s of temporary unempl oyment
duri ng that peri od of adjustment. (Excl uded from thi s are those
who prefer to remai n unempl oyed by choi ce. ) What we see today i s
l onger term unempl oyment of those who want to work. And there
216 Baptized I nglation
can onl y be two ci rcumstances whi ch produce thi s. Ei ther produc-
ers cannot l ower thei r pri ces to meet l ower wage rates (demand)
or el se they cannot rai se thei r pri ces to cover the l abor factor i n
producti on costs to mai ntai n producti on (suppl y). What woul d
prevent them from doi ng ei ther of these? Legislation i ntroduced by
pol i ti ci ans i nfl uenced by the Keynesi an economi sts i n thei r em-
pl oy, whose shal l ow reasoni ng demands that wages be rai sed
whi l e pri ces are kept l ow, i n order to sti mul ate ag~egate de-
mand. Thi s i s the stupi di ty of Keynesi ani sm whi ch apparentl y
escapes Dr. Vi ckers. But Dr. Vi ckers has not escaped thi s stupi d-
i ty. As Van Ti l woul d say, i t i s not a questi on of i ntel l i gence; i t i s a
questi on ofprewppositions. I t i s more a moral fl aw than an i ntel l ec-
tual fl aw. He who despi ses the l aw of God wi l l soon fi nd hi msel f
doi ng stupi d thi ngs and sayi ng stupi d thi ngs.
Concl usi on
Dr. Vi ckers, fol l owi ng Keynes, does not tel l us what we need
to know about the pri ce system. He therefore does not tel l us what
we need to know about the probl em of unempl oyed resources,
especi al l y unempl oyed peopl e. He does not recogni ze how compe-
ti ti on among al l those greedy busi nessmen l eads to wage rates
for l aborers that tend toward equal i ty wi th the val ue of l abors
output. Empl oyers do not want to pay hi gh wages, but they want
even l ess to l ose the servi ces of l aborers who make the empl oyers
busi ness profi tabl e. Thi s i s why hi gh wages, hi gh profi ts, and l ow
pri ces go together i n a free market economy. Thi s i s why Keynes
never understood ei ther economi c reasoni ng or the free market
economy. Thi s i s why young, hi ghl y ski l l ed, mathemati cal l y
adept rati onal expectati ons economi sts can barel y di sgui se thei r
contempt for the gray-hai red revol uti onari es of the 1930s and
1940s as they dodder toward reti rement and the grave.9 The gray
heads are now reapi ng what they sowed: a revol uti on by the peo-
pl e they once taught.
We have seen that Henry Hazl i tts accusati on i s correct: I n
9. Susan Lee, The un-managed economy; Forbes (Dec. 17, 1984).
The Great Unmentionable: Unemployment 217
the Keynesi an system, the l evel of wage-rates and thei r effect on
empl oyment, i s The Great Unmenti onabl e.10 Regardi ng Dr.
Vi ckers contri buti on to Keynesi an thought, the pri ce mechani sm
i n general , of whi ch wage rates and thei r effect form a part, i s the
Great Unmenti onabl e. Such schol arshi p, rather than enl i ghten-
i ng the reader, has i nstead a propensi ty to confuse. And that i n i t-
sel f requi res another chapter.
10. Hazl i tt, The Failure of the New Economics, p. 331.
13
THE MARGI NAL PROPENSI TY TO CONFUSE
,.. it is the economists task so to understand the deeper deter-
mi nants of economi c conjunctures and afairs that his policy prescrip-
tions can be intelligent~ and proper~ shaped toward their proper
ordering, oq where it is considered necessary, their correction and reso-
lution. This should be done i n such a way as to accord with the
demands of both those deeper causal complexes now perceived in the
light of Go#s Word and purpose, and the requirements and basic
desiderata of economic thought and administration. I
You wi l l not be abl e to understand the economi cs of Keynes. I
know: you are wai ti ng for me to add: unl ess you fi rst recogni ze
that. . . . But I add nothi ng of the sort. I am sayi ng si mpl y that
you wi l l not be abl e to understand the economi cs of Keynes. The
reason for thi s i s that i t i s uni ntel l i gi bl e. I t has the worl d back-
ward. Hi s vi ew of economi c cause and effect was as twi sted as hi s
vi ew of sexual moral i ty. The economi cs of Keynes i s hokum, pure
but not very si mpl e. I t i s, qui te frankl y, perverse.
I f you have not recogni zed thi s yet, then thi s i s why you have
had so much troubl e i n readi ng thi s book. You have assumed, i n-
correctl y, that Keynesi an economi cs was never meant to be under-
stood. On the contrary, i t was meant to confuse. Thi s was basi c to
Keynes strategy. Hi s ardent admi rers admi t that The General
Theoy is exasperati ngl y confusi ng. We shoul d not be surpri sed,
then, to di scover doctri ne after doctri ne whi ch seems to make no
1. Vi ckers, Economics and Man, p. 90.
219
220 Baptized I nJ ation
sense. He bombards us wi th such sensel ess doctri nes. So does hi s
di sci pl e, Dr. Vi ckers. Sadl y, we have to consi der several of them,
just to prove to oursel ves that they are nonsensi cal .
Thi s i s one reason why Dougl as Vi ckers has fai l ed to convi nce
Chri sti ans of the essenti al correctness of Keynes economi c theor-
i es. Chri sti ans expect thi ngs to be cl ear. They woul d agree wi th
Eva Etzi oni -Hal evys observati on that i deas that cannot be ex-
pressed cl earl y are themsel ves muddl ed and therefore not worth
expressi ng at al l .z I f we are responsi bl e before God and men to
promote a parti cul ar pol i cy recommendati on, we expect to be
abl e to understand i t before we i mpose i t. Chri sti ans recogni ze
thi s, so they have pai d zero attenti on to Dr. Vi ckers (except for a
handful of schol ars who teach courses other than economi cs i n
semi nari es or Chri sti an col l eges). We do not fi nd Dr. Vi ckers ci ted
by Chri sti an authors. (We al so do not fi nd hi m ci ted by secul ar
authors. ) We do not fi nd anyone argui ng al ong the l i nes Dr. Vi ck-
ers l ai d down i n Economics and Man. The mai n reason for thi s i s
that Economics and Man i s even more uni ntel l i gi bl e than Keynes
General TheoV.
Keynes was attempti ng onl y to refute the cl assi cal economi sts.
Dr. Vi ckers i s attempti ng to refute cl assi cal economi cs, pl us con-
vi nce hi s readers that Keynes posi ti on i s i n essenti al agreement
wi th Bi bl i cal moral i ty. I n short, he has assi gned hi msel f the unen-
vi abl e task of promoti ng as essenti al l y Chri sti an the i ncoherent
economi c theori es of a homosexual pervert. You may sympathi ze
wi th Dr. Vi ckers. I dont, si nce I recogni ze the perversi ty of hi s
sel f-appoi nted task, but at l east I understand hi s probl em.
So dedi cated i s Dr. Vi ckers to the i ncoherence of The General
Theoy that he has l ost the abi l i ty to communi cate. Hi s styl e i s
stodgy at best. Usual l y, however, hi s l anguage i s so convol uted
that the reader i s l eft i n the dark. This is where he is supposed to be
le~. He i s supposed to read al l thi s gobbl edygook, and then thi nk
to hi msel f, My, thi s i s al l very compl ex, al l very sci enti fi c, and al l
2. Eva Etzi oni -Hal evy, Bureama~ and Demooaqy: A Political Dilemma (London:
Routl edge & Kegan Paul , 1983), p. i x.
The Marginal Propensi~ to ConJ xse
221
beyond me. But a Ph.D. i n economi cs has wri tten i t, so I guess i t
must be true. I guess I wi l l have to concl ude that North and Rush-
doony have mi sunderstood everythi ng, si nce I understand them,
and that means they must not be any more sci enti fi c than I am.
What do they know, compared wi th Dr. Vi ckers?
John Kenneth Gal brai th, whose l i beral credenti al s are fl aw-
l ess, wri tes cl earl y. Hi s peers someti mes resent hi m for i t, and
especi al l y for becomi ng a best-sel l i ng author. Gal brai th under-
stands the way the professi onal academi c economi sts pl ay the
game. Onl y someone who i s decentl y confusi ng can be respectedT3
Thi s i s why we are supposed to respect Dr. Vi ckers.
The Evi l s of Thri ft
Savi ng, under the Keynesi an system, i s a potenti al threat to
economi c growth and progress. Not al ways nothi ng i s al ways
i n Keynesi ani sm but often, especi al l y duri ng a depressi on. Dr.
Vi ckers wri tes: Does thi s mean, then, that savi ng, notwi thstand-
i ng al l that the Protestant ethi c may have l ed us to bel i eve about
i t,-i s not neces s ar i l y a good thi ng at al l ? The ans wer undoubtedl y
i s y es. That i s pr eci sel y what our anal y si s means .4
But how can thi s be? Why i s th e Pr otes ta n t eth i c s o wr on g,
and the Keynesi an ethi c so correct? Because, Keynesi an theory
i nforms us, those future-ori ented peopl e who refuse to spend thei r
money i ncomes are depl eti ng the i ncome-generati ng fl ow of money.
Because one persons expendi ture i s anothers i ncome, accordi ng
to Dr. Vi ckers, any ti me one person wi thhol ds expendi ture, he i s
thereby denyi ng someone el se thei r i ncome. Savers are therefore
the cause of the economi c di sharmoni es i n soci ety, Savi ng i s to be
despi sed for the hardshi p i t creates others.
Keynesi an economi cs teaches a pecul i ar (and utterl y i naccur-
ate) vi ew of what they cal l the i ncome stream. They argue that
i n a free market economy, when peopl e stop spendi ng money,
they break the stream of i ncome. Peopl es i ncomes fal l , so they
3. Ci ted by Adam Smi th i n The NeuJ York Times (Sept. 30, 1979).
4. Vi ckers, I bid., p. 20.
222 Baptized I nzation
hoard addi ti onal cash, whi ch breaks the i ncome stream more,
whi ch l eads i nto a downward spi ral of defl ati onary depressi on.
Thi s i s utter nonsense. I n a capi tal i st economy, the stream of
i ncome never stops fl owi ng so l ong as peopl e conti nue to make
offers of vol untary exchange that other peopl e fi nd benefi ci al . I n
thi s sense, the ktream is simp~ a series of uolunta~ transactions. Peopl e
exchange goods and servi ces because they expect to deri ve more
benefi t from owni ng the other persons good or servi ce compared
to the good or servi ce they now possess.
Why do the Keynesi ans i gnore thi s? Because they do not
bel i eve that ordi nary peopl e you and I , to be bl unt about i t
understand that by l oweri ng the pri ce of the good or servi ce that
they are tryi ng to sel l , they wi l l eventual l y be abl e to sel l i t. Peopl e
supposedl y do not understand that somethi ng i s better than
nothi ng, and therefore they stubbornl y refuse to l ower thei r
pri ces and get the stream of i ncome fl owi ng agai n . Actual l y, the
Keynesi ans are even crazi er than thi s. They actual l y refuse to
bel i eve that l ower pri ces wi l l get peopl e to buy a scarce resource.
I n short, not unti l the good becomes free of charge or maybe
unti l the sel l er pays the buyer to take i t away wi l l the stream of
i ncome start fl owi ng agai n. Thus, the Keynesi an says, the State
must tax away peopl es money, or borrow i t, or pri nt i t, i n order to
spend money, thereby getti ng 01 Man Ri ver movi ng agai n.
Momy Seldom Disappears
I t needs to be recogni zed earl y that thi s enti re argument of the
Keynesi ans i s preposterous. When someone saves money, he
transfers i t to someone el se to a capi tal i st, or to a bank, or
whomever. Guess what thi s reci pi ent does wi th the borrowed
money? He spends it. I ncredi bl e. Fantasti c. Why di dnt Keynes
thi nk of thi s?
Let us pursue the Keynesi an cri ti que of savi ng. We know that
hardl y anybody has bought a copy of Economics and Man: about
200 copi es a year si nce 1976. We can be fai rl y confi dent that the
very peopl e who mi ght have bought a copy al l had savi ngs ac-
counts at the bank. Thi s has depri ved Dr. Vi ckers of i ncome. I n
The Marginal Propensi~ to Confuse 223
fact, we mi ght even argue that the recessi on of1980-82 mi ght have
been avoi ded i f two bi l l i on peopl e had just bought a hundred
copi es each of Economics and Man. Dr. Vi ckers woul d then have
spent thi s money after al l , he does not bel i eve i n savi ng duri ng a
recessi on, al though your average person does, si nce he mi ght l ose
hi s job, or suffer a l oss i n i ncome, etc. and the worl d economy
woul d have recei ved hi s personal shot i n the arm.
Or, even more true to Keynesi an pol i cy, the federal govern-
ment woul d have taxed hal f hi s i ncome away, and then the bu-
reaucrats woul d have spent i t on l ots and l ots of boondoggl es.
Thi s i s the Chri sti an approach to economi cs, accordi ng to Dr.
Vi ckers, so he woul d have been happy to see thi s money go to the
State. The State can be trusted. Wi thout the State l ooki ng over
hi s shoul der, he, too, mi ght have been tempted to hoard money
i n a bank account, or even worse, i n a money-market fund,
especi al l y wi th the 1870 rates they were payi ng bri efl y back then.
There bath no temptati on taken a Chri sti an Keynesi an econo-
mi st such as i s common to man, but God i s fai thful and wi l l not
suffer hi m to be tempted above what the economi st i s abl e, but
wi l l , wi th the temptati on, i mpose a progressi ve i ncome tax, so
that he may be abl e to bear i t.
Thra~t and Future-Orientation
Why thi s Keynesi an hosti l i ty to thri ft? Why thi s hosti l i ty to
the formati on of capi tal , wi thout whi ch there can be no l ong-term
economi c growth? Most peopl e i n the West have l ong understood
that thri ft i s basi c both to personal and cul tural economi c
advancement. The more future-ori ented that peopl e become,
especi al l y under the i nfl uence of Chri sti an preachi ng, the more
they are wi l l i ng to save at any prevai l i ng rate of i nterest. Cl assi cal
economi c thought, havi ng been heavi l y i nfl uenced by Chri sti an
moral i ty and tradi ti ons, was bui l t around the i dea that savi ng i s
good, meani ng that future-orientation is good. Why di d Keynes thi nk
i t necessary to refute thi s nai ve i dea wi th hi s new vi si on of see-
i ng thi ngs.
One very good reason was offered by Lewi s Lehrman, the
224 Baptized InJation
Ameri can mi l l i onai re-schol ar-pol i ti ci an and advocate of the gol d
standard. I have fi ve chi l dren. I have a vi si on of the future.
Keynes had no chi l dren and no i nterest i n getti ng i nvol ved i n any
rel ati onshi p whi ch mi ght make possi bl e thei r procreati on. He was
i nherentl y short-run i n hi s vi ewpoi nt. Keynes was famous for hi s
di ctum, used agai nst anyone who argued i n terms of economi c
l aw, I n the l ong run, we are al l dead. Very cl ever. I n short, there
i s a reason why Keynes homosexual i ty i s rel ated to hi s economi c
doctri nes. There i s a reason why hi s moral perversi ty produced
i ntel l ectual perversi ty. Hi s vi ew of ti me was affected.
Keynesi an economi sts are suffi ci entl y pragmati c to real i ze that
peopl e cannot be changed total l y, at l east not overni ght. There-
fore they have an answer to the probl em of savi ng. Let there be
many i njecti ons i nto the economys i ncome-generati ng stream of
State-confi scated, State-borrowed, or State-pri nted money, i n
order to compensate for those mi sgui ded, profi t-seeki ng pri vate
savers whose funds were (somehow, we are never tol d how) taken
out of the stream of exchange. But l et us expl ore a l i ttl e further
how the Keynesi an economi st twi sts hi s fal se theory i n order to
justi fy other proposal s.
The Margi nal Propensi ty to Consume
One of the more el aborate Keynesi an theori es i s the Margi nal
Propensi ty to Consume. Rel ated to thi s i s the mul ti pl i er process.
As usual , these concepts i n turn rel y on the Keynesi an theory of
the ci rcul ar fl ow of money. Our earl i er anal ysi s of the ci rcul ar
nature of the fl ow of i ncome-generati ng expendi ture streams i n
the economy now enabl es us to make si gni fi cant use of these rel a-
ti onshi ps to exhi bi t one of the pri nci pl e characteri sti cs of mul ti pl i -
cati ve vari ati ons i n i ncome and empl oyment l evel s i n the econ-
omy.s We have had cause al ready to questi on the soundness of
that parti cul ar concept. I f the government spends a dol l ar (where
di d the bureaucrats get i t?), the resul ts wi l l be a four-fol d or
fi ve-fol d i ncrease i n economi c output. I t shoul d be of no surpri se
5. I bid., p. 201.
The Marginal Propensip to Confuse 225
by now to fi nd there are i nsurmountabl e probl ems wi th Keynes
theori zi ng at thi s poi nt, too.
The margi nal propensi ty to consume and the mul ti pl i er proc-
ess arguments are not so much economi c theory as justi fi cati on for
why there shoul d be i njecti ons of new (or taxed, or borrowed)
money i nto the monetary stream. Keynesi ans, after al l , do not
want to be too vague about thei r proposal s, or el se pol i ti ci ans
mi ght not expand the power of the State wi th sci enti fi c preci si on;
therefore, they bri ng mathemati cal preci si on to bear i n order to i l -
l ustrate the benefi ts of thei r i deas. We al l know that mathemati cs
i s a preci se sci ence, so i f the Keynesi an can use ri gorous mathe-
mati cs to defend hi s pol i cy prescri pti ons, he must be on the ri ght
track. The publ i c i s i mpressed. Thi s appears to be one rati onal e
behi nd thei r use of mathemati cal formul ae. Certai nl y, thei r use of
mathemati cs l oses most of thei r potenti al readers. (But, Grand-
ma, you have such forebodi ng formul ae ! The better to create an
el i te pri esthood of tenured ce-ntral pl anners, my dear.)
I t has been known to any observant person that as peopl es i n-
come ri ses, they have a tendency to save a hi gher percentage of
that i ncome other thi ngs (such as moral i ty, rel i gi ous presupposi -
ti ons, and l ust for more toys) remai ni ng equal . Another way of
putti ng the same thi ng i s to say that as di sposabl e i ncome i ncreases
that i s, i ncome recei ved after taxes peopl e are i ncl i ned to
spend a smal l er percentage of i t on consumpti on. (These are
merel y two ways of sayi ng the same thi ng, just as we may descri be
a coi n from ei ther i ts obverse or reverse si de. Al though my
descri pti on appears di fferent, i n real i ty I am merel y depi cti ng the
same process. ) Thi s phenomenon i s cal l ed by Dr. Vi ckers, fol l ow-
i ng Keynes, the margi nal propensi ty to consume. Why i t shoul d
be gi ven that parti cul ar ti tl e, when i t coul d equal l y have been
cal l ed the margi nal propensi ty to save, i s a questi on Dr. Vi ckers
does not di scuss, whi ch i s a real pi ty. He mi ght otherwi se have
shed some l i ght on a rather obscure passage of Keynesi an l i ter-
ature. Ei ther ti tl e coul d be used to descri be the same observati on;
that peopl e save and spend some of thei r i ncome, and as i ncomes
ri se, there i s a tendency for peopl e to save more and spend l ess.
226 Baptized Inzation
Dr. Vi ckers does not di sti ngui sh between savi ngs i nvested and
savi ngs hoarded, perhaps buri ed i n the back yard for safe keep-
i ng. Agai n, Dr. Vi ckers refuses to make the di sti ncti on between
money whi ch i s taken out of the expendi ture stream through hoard-
i ng, and money whi ch, al though i t i s not spent on i mmedi ate con-
sumpti on goods, remai ns i n the expendi ture stream because i t i s
i nvested i n capi tal projects. Such a major omi ssi on i s of l i ttl e i n-
terest to Dr. Vi ckers. (I t mi ght expose the whol e Keynesi an sys-
tem as fraudul ent, or worse, bei ng onl y i n parti al equi l i bri um.
Dr. Vi ckers puts a mi nus on one si de of the hypotheti cal savi ngs
transacti on, but no pl us on the other.)
Were the Keynesi ans to stop at thi s poi nt l i fe woul d not be so
di ffi cul t for us. But they do not stop. Not onl y do they percei ve that
there i s some propensi ty to consume (as wel l as save), but they
al so decl are that thi s propensi ty can be measured wi th mathemat-
i cal preci si on. Moreover, they are wi l l i ng to accept the i dea that
any i ncrease i n expendi ture has a mul ti pl i er effect i n the economy.
Mul ti pl yi ng the Confusi on
What i s the mul ti pl i er effect ? Keynes descr i bed i t i n hi s
fami l i ar sty l e. You wi l l need a tr ansl ator . (So wi l l Dr . Vi ckers.)
For i n gi ven ci rcumstances a defi ni te rati o, to be cal l ed the Multiplier,
can be establ i shed between i ncome and i nvestment and, subject to cer-
tai n si mpl i fi cati ons, between the total empl oyment and the empl oyment
di r ectl y empl oyed on i nvestment. . . . thi s fur ther step i s an i ntegr al
part of our theory of empl oyment, si nce i t establ i shes a preci se rel ati on-
shi p, gi ven the propensi ty to consume, between aggregate empl oyment
and i ncome and the rate of i nvestment.G
Pl ease, dont feel di scouraged. I t wasnt meant to be under-
stood. I t was meant to confuse.
What di d he mean? He meant that as someones i ncome goes
up, hi s margi nal propensi ty to save (or consume) al so goes up at a
mathemati cal l y fi xed rate. Lets see; i f I dont get more i ncome, i t
6. John Maynard Keynes, General Theog+ p. 113.
The Marginal Propensi~ to Confuse 227
wi l l be harder for me to save more. That seems correct. i f I dont
get more, I cant consume more wi thout reduci ng my savi ngs. So
far, so good. Not too bri l l i ant, but not crazy.
Then i t gets crazy. The mul ti pl i er tel l s us that, when there i s
an i ncrement of aggregate i nvestment, i ncome wi l l i ncrease by an
amount whi ch i s k ti mes the i ncrement of i nvestment. What
does thi s prove? I t fol l ows, therefore, that, i f the consumpti on
psychol o~ of the communi ty i s such that they wi l l choose to-con-
sume, e.g., ni ne-tenths of an i ncrement of i ncome, then the
mul ti pl i er k is 10; and the total empl oyment caused by (e. g.) i n-
creased publ i c works wi l l be ten ti mes the pri mary empl oyment
provi ded by the publ i c works themsel ves. . . .8 Do not be fool ed:
nothi ng fol l ows therefore. Thi s i s sheer nonsense.
Now we have found the secret. Hazl i tt (of whom Dr. Vi ckers
i s contemptuous) summari zes: What Keynes i s sayi ng, among
other thi ngs, i s that the more a communi ty spends of i ts i ncome,
and the l ess i t saves, the faster wi l l i ts real i ncome grow!g Not onl y
are pyrami ds (publ i c works) great thi ngs i n the Keynesi an sys-
tem, but the more peopl e spend on pyrami ds rather than save, the
ri cher they become. Furthermore, thri fty soci eti es wi l l not benefi t
from pyrami ds as much as spendth~ft soci eti es wi l l . Waste
becomes producti ve; consumer spendi ng becomes producti ve;
even earthquakes become producti ve, i n the l and of Keynes:
Pyrami d-bui l di ng, earthquakes, even wars may serve to i ncrease
weal th, i f the educati on of our statesmen on the pri nci pl es of the
cl assi cal economi cs stands i n the way of anythi ng better .1
I f Keynes had majored i n physi cs, he woul d have wri tten a
book provi ng the possi bi l i ty of government-funded perpetual
moti on.
Thi s, you understand, i s what Dr. Vi ckers thi nks we shoul d accept
i n the name of Chri sti an moral i ty and sound economi c reasoni ng.
7. I bid., p. 115.
8. I bid., pp. 116-17.
9. Henry Hazl i tt, The Failure of the New Economws: An Ana@is of the Keynesian
Fallacies (Pri nceton, New Jersey: Van Nostrand, 1959), p. 137.
10. Keynes, General Theory, p. 129.
228 Baptized InJation
I thi nk Deacon i s correct: Keyness hatred of Puri tani sm i s
i mportant i n the l i ght of hi s economi c theori es. He was to become
the man who has gone down i n hi story as the most outstandi ng
economi st and archi tect of soci al progress of the past seventy
years, though some woul d di spute such an assessment. But i t was
hi s hosti l i ty to the puri tan ethi c whi ch sti mul ated and l ay behi nd
hi s economi c theori es spend to create work, spend ones way out
of depressi on, sti mul ate growth. I t was al so hi s hatred of Puri tan-
i sm whi ch caused hi m i n earl y l i fe to devote rather more ti me to
pursui ng homosexual conquests than to economi cs.11
The Vi ckers Versi on
Here i s how the worl d works i n the l and of Keynes. Someone
gets some addi ti onal money, spends a porti on of i t, and the reci -
pi ent makes a si mi l ar deci si on to spend a porti on, and so the proc-
ess conti nues, wi th the porti on bei ng spent bei ng reduced each
ti me i t goes through the ci rcul ar fl ow. Fortunatel y for the sake of
our abi l i ty to spot hi s errors i n l ogi c, Dr. Vi ckers omi ts the
al gebrai c formul a contai ned i n Keynes General TheoT to descri be
thi s phenomena, 12 but he i s more than wi l l i ng to agree wi th the
concl usi ons Keynes makes. Dr. Vi ckers descri bes thi s for us.
l et us sts~pose . . . . . . that di sposabl e i ncome i ncreases . . . by
$100. Now thi s wi l l generate an i ncrease i n consumpti on expendi tures,
the magni tude of the i nduced effect dependi ng on the si ze of what we
have just defi ned as the margi nal propensi ty to consume. Suppose that
thi s margi nal propensi ty i s equal to, say, ei ghty percent, i ndi cati ng that
the economy i n general wi l l spend on consumpti on goods ei ghty cents of
every dol l ar added to i ts di sposabl e i ncome, and wi l l save twenty cents.
. . . As a resul t, the GNP, and therefore di sposabl e i ncome, ri ses by a
further $80. But agai n the ci rcul ar process repeats i tsel f, and wi th the
MPC at ei ghty percent the next i nduced i ncrease i n consumpti on expen-
di ture wi l l be ei ghty percent of $80, or $64. Si mi l arl y, at the next round
11. Ri chard Deacon, The Cambridge Apostles: A history of Cam bndge Universi~%
ilite intellectual secret socti~ (London: Robert Royce Ltd., 1985), p. 64.
12. Keynes, Gsneral T/ wory, p. 115.
The Marginal Propmsi~ to Confuse 229
i t wi l l be ei ghty percent of $64, or $51.20. What i s happeni ng i s that we
are wi tnessi ng here what has become known as a mul ti pl i er process.l s
Perhaps i t shoul d not be drawn to attenti on, but he has sai d %up-
pose. So far, i n other words, we have supposi ti ons, not concl usi ons,
drawn from ei ther i nducti ve or deducti ve reasoni ng. (We mi ght
even cal l Dr. Vi ckers l i ne of reasoni ng supposi tory.) Dr. Vi ckers
i s not deterred, however, for the overal l i ncrease i n i ncome whi ch
wi l l resul t from the mul ti pl i er process can be si mpl y cal cul ated.l A
The growth rate i n our case was the MPC, assumed to be equal to
four-fi fths. What we now have, ther efor e, i s the concl usi on that what we
shal l defi ne as the overal l nati onal i ncome mul ti pl i er i s fi ve. Or to put i t
i n more techni cal terms whi ch we can now use comfortabl y, the nati onal
i ncome mul ti pl i er i s equal to the r eci pr ocal of one mi nus the mar gi nal
propensi ty to consume. I n the present case thi s was equal to fi ve. We can
say, therefore, that i n thi s case the mul ti pl i er i s equal to fi ve, and the
fi nal and overal l i ncrease i n i ncome that resul ts from the deci si on to i n-
crease the annual rate of i nvestment expendi tures by $100 wi l l be fi ve
ti mes that amount, or $500. i s
I f you bel i eve al l thi s, then how can you argue wi th the cartoon?
THE WALL STREET J OURNAL
Believe me, the whole economy profits, we
rob someone of five grand. Then we buy some
stuff from a fence. He gi ves hi s cut b the mob.
They P8Y Of f t h e COPS. . . .
13. Vi ckers, p. 202, emphasi s added.
14. I bid., p. 203,
15. I dem., emphasi s added.
230 Baptized Inzation
The Biblical Response: Stewardsh@
Keynes argues that consumers onl y benefi t others i n the econ-
omy when they spend money, but savi ng i snt spendi ng, so i t
doesnt count as an i ncome-mul ti pl i er. The obvi ous i mpl i cati on i s
that the whol e concept of the mul ti pl i er rests on the assumpti on
that peopl e do not put to effecti ve, soci ety-i mprovi ng, empl oyment-
generati ng use 1007I o of thei r i ncome. But they do. They must.
God owns al l the worl d. Peopl e are Hi s stewards. He hol ds them
accountabl e for everythi ng they do wi th thei r l i ves and assets.
Thus, everythi ng whi ch comes to man i s a gi ft of God, and each
man i s responsi bl e for the God-honori ng management of every
asset he owns.
The Chri sti an economi st who begi ns wi th (and adheres to)
thi s fundamental presupposi ti on coul d not possi bl y accept the
preposterous theory of the mul ti pl i er. The person recei ves money,
goods, and servi ces. He then spends i t, barters i t, consumes i t,
gi ves i t away, rents i t out, hoards i t, or l oses i t. Onl y i n the l ast
case has soci etys weal th been reduced. But l osi ng i t i s an error,
and these errors are not that common. Wi th respect to consci ous
pl anni ng, the i ndi vi dual must do somethi ng wi th hi s assets. He
cannot escape thi s responsi bi l i ty before God. He must put it to use.
There i s no escape. I t i s basi c to al l creati on, to mans domi ni on
covenant wi th God.
Any God-feari ng Chri sti an shoul d i mmedi atel y recogni ze the
perversi ty of Keynes economi cs. I t does not take a Ph.D. i n eco-
nomi cs to recogni ze such nonsense. I n fact, i t takes a Ph.D. i n
economi cs not to recogni ze i t. All the money spent on saving, tithing,
investing, or anything else re-enters the income stream. Ther e i s no 80-20
mul ti pl i er, or a 90-10 mul ti pl i er, or any other sort of mul ti pl i er.
There i s onl y the Keynesi an multiplication of confusion.
Even hoarded money can be producti ve: the hoarder i ncreases
hi s sense of securi ty, whi l e the money i s taken out of ci rcul ati on,
thereby reduci ng competi ti on for other buyers or i nvestors.
(When I go to an aucti on as a buyer, I prefer smal l crowds. But,
then agai n, I am not a Keynesi an economi st. )
Kgmes on His Own Perverse Tms
The Marginal Propensip to Confuse 231
Now, for the sake of argument, l et us not begi n wi th the Bi bl es
answer to Keynes, or even common senses answer to Keynes. Let
us just exami ne the l ogi c of Keynes own arguments. What can we
say about hi s l ogi c?
First, we must note careful l y that thi s i l l ustrati on rests on the
hypotheti cal assumpti on that peopl e wi l l spend ei ghty percent of
thei r i ncreased i ncome. No factual stati sti c i s offered, perhaps for
the fol l owi ng reason. Let us accept the proposi ti on at i ts face
val ue, that there i s a mul ti pl i er whi ch can be determi ned to have
an effect. Now l et us ask: How i s that mul ti pl i er determi ned? We
can agree that peopl e wi l l spend onl y a porti on of any i ncome i n-
crease, but how do we determine with some degree of accuracy just what
that propensi~ is? The onl y possi bl e way i s to get stati sti cs from peo-
pl e when they recei ve that i ncome. We must fol l ow them, moment
by moment, day by day, week by week, month by month, year by
year, to see how they mi ght use i t.
Oh, no, says the l i beral -mi nded I am not a soci al i st Keynes-
i an, we woul d not want to do that. That woul d be l i ke havi ng Bi g
Brother conti nual l y peeri ng over your shoul der. True, but how
el se i s thi s magi c mul ti pl i er to be determi ned i f we do not
attempt to obtai n an accurate account of how peopl e are spendi ng
i ncome? Probabl y the same way Dr. Vi ckers arri ved at hi s sup-
posi ti on of ei ghty percent: @l l thejgure out of thin air. Thi nk of a
number; that wi l l do just fi ne. I f you prefer, ask the offi ce secre-
tary for a number whi ch wi l l become the mul ti pl i er. And i f thi s
sl i ght parody of the Keynesi an system offends, I woul d ask: I n
what manner does a number arbi trari l y arri ved at by the offi ce
secretary di ffer from that i nvented by the Keynesi an economi st?
The economi st, you say, i s a l i ttl e more sci enti fi c. He assumes
that i f he can take a few representati ve sampl es, thi s wi l l be
enough to make judgments concerni ng the whol e economy. How
does he know these few representati ve exampl es have any rel ati on-
shi p to what i s happeni ng i n the economy as a whol e? He does not
know, of course. He merel y makes the assumption that i t does.
232 Baptized I njati on
(Mi l ton Fri edman made hi s academi c reputati on by an empi ri cal
study of the consumpti on functi on. Sadl y for the Keynesi ans, the
evi dence di d not poi nt to a stabl e consumpti on functi on i n soci ety.
There went the sci enti fi c handl e that Keynesi ans need i n order
to pl an the economy.)
Second, what woul d happen to thi s mul ti pl i er effect i f pri ces
were to i ncrease whi l e thi s new i ncome i s mul ti pl yi ng i ts way
through the economy? Several thi ngs mi ght happen. Peopl e mi ght
deci de to save more of thei r i ncome, thus al teri ng the mul ti pl i er
effect. Today, the y may prefer to spend onl y seventy-fi ve percent
of that i ncome, and save twenty-fi ve. Gi ven the fact of the l aw of
suppl y and demand, whi ch Dr. Vi ckers i s not prepared to accept
as operati onal i n al l cases, any i ncrease i n the vol ume of money i n
ci rcul ati on (monetary i nfl ati on) has a tendency to i ncrease pri ces,
other thi ngs remai ni ng equal . We woul d now have the si tuati on
where an i ncreased monetary demand i s bei ng made on the same
quanti ty of goods, and thi s tends to bi d up pri ces.
So what happens to our mul ti pl i er effect? I t woul d not remai n
constant. Therefore, i f the economi st wi shes to see accurate~ how
i ncreases i n i ncome wi l l be used, he must mai ntai n a constant
watch on the economy. Even i f i t were possi bl e to obtai n a com-
pl ete stati sti cal anal ysi s of every concei vabl e transacti on at one
moment i n ti me to ascertai n what happens wi th any monetary i n-
crease, to assume l i fe wi l l go on unchanged from that moment i s
an assumpti on of the greatest magni tude, and fl i es i n the face of
economi c real i ty. Peopl e change, thei r val uati ons change, and
therefore stati sti cs change.
Third, we must agai n draw attenti on to the fact that Dr. Vi ck-
ers i s unwi l l i ng to grant any di sti ncti on between savi ngs i nvested
and savi ngs whi ch are merel y hoarded. Hi s si mpl e i l l ustrati on of
the margi nal propensi ty to consume i s not so si mpl e after al l .
Why i nvestment savi ngs i s not consi dered a val i d consumpti on
expendi ture i s not stated. The money has not l eft the i ncome-
generati ng stream. I t i s sti l l ci rcul ati ng, but rather than bei ng
spent i mmedi atel y on present consumpti on i t has gone i nto i n-
vestment for future consumpti on. I t i s then used to hi re workers,
The Marginal Propensip to Con@e 233
buy equi pment, rent space, etc. Thi s i s what savi ng i s al l about:
foregoi ng my own present consumpti on so that greater future
consumpti on may be possi bl e. I t creates jobs. But such a mi nor
detai l i s
-
not pafi of the Keynesi an system.
Fourth, what i f al l savi ngs were hoarded? What effects woul d
thi s have on the economy? I f peopl e store cash i n a mattress, we
assume that they have thei r reasons. The obvi ous one i s that they
expect fal l i ng pri ces i n the future, and they dont trust the banks.
(Thi s real l y doesnt sound al l that stupi d these days. Let us hope,
however, that the mattress owners dont read Economics and Man
whi l e smoki ng i n bed. )
I f l ots of peopl e start hoardi ng cash, sel l ers of goods and ser-
vi ces wi l l have to drop thei r pri ces i n order to get enough sal es to
reduce i nventori es. Thi s i s exactl y what the hoarders expected, so
one by one, they start spendi ng thei r money agai n, their expectations
having been achieved. Nobody except a utopi an soci al i st real l y
bel i eves that al l pri ces can fal l to zero. At some poi nt, peopl e wi l l
start spendi ng money agai n. I n other words, hoarded money has a
legitimate economic fimction under certain economic conditions preci sel y
those condi ti ons (depressi on) that Keynesi ans are al ways wri ng-
i ng thei r hands over. Hoarded money provi des fearful peopl e wi th
economi c reserves. I t i s not i dl e money; i t i s rati onal l y al l ocated
money, given the existence of peoples fears of economic uncertainty, or thezr
expectation of lower pnces z% the future. 16
F~th, the great fal l acy i n thi s theory resi des i n the i dea that i t i s
by spending that nati onal i ncome i s i ncreased (and nati onal i ncome
i s, to the Keynesi an, the measure of weal th). A proper under-
standi ng of Says Law i nforms us that suppl y (i f i t i s the product of
accurate entrepreneuri al forecasts and pl anni ng) creates demand,
for the si mpl e reason that i t i s onl y the frui ts of ones producti on
that enabl e a person to make demands i n the market pl ace. As a
persons producti vi ty i ncreases, so too does hi s abi l i ty to i ncrease
hi s demand. Therefore, it is through prodution that national income is
16. W. H. Hutt, The TheoV of I dle Resourca (2nd ed.; I ndi anapol i s, I ndi ana:
Li berty Press, 1977).
234 Baptized I nJ ation
generated and increased. I n short, I f i t ai nt produced, you cant con-
sume i t .
The mi stake Keynesi ans make here i s to confuse what weal th
real l y i s. A soci ety i s not ri ch because i t has more money than i t
di d earl i er. Addi ng money to the i ncome stream redi stri butes
weal th, but i t cannot be sai d (sci enti fi cal l y y, anyway) that an i n-
crease of money i ncreases soci al weal th. (Dr. North argued thi s i n
hi s book, 17 and Dr. Vi ckers fai l s to respond.) Money i s, i n the
fi nal anal ysi s, just another commodi ty whi ch serves a parti cul ar
purpose i n soci ety, namel y, to faci l i tate the di vi si on of l abor.
Weal th shoul d be defi ned as al l moral l y l egi ti mate goods and
servi ces (especi al l y i ncl udi ng knowledge) that members of a soci ety
can put to use to achi eve thei r ends. As these assets are i ncreased,
so the nati on may say that i ts real weal th i s i ncreasi ng. But pro-
ducti on requi res capi tal , and capi tal i s made avai l abl e onl y when
peopl e forgo present consumption i n order to make i nvestment possi -
bl e. Long-term projects, such as bui l di ng of rai l ways, and re-
source expl orati on and di scovery, are possi bl e because peopl e wi l l
put asi de some of thei r present producti on i n the form of i nvest-
ment to make such projects a real i ty. When they reach frui ti on,
then peopl e may or may not deci de to consume thei r capi tal . But
one thi ng i s certai n: without sauing, capital growth is not possible. As
Rothbard has l ong mai ntai ned, the great i deas that exi st i n any
soci ety at any poi nt i n ti me cannot be i mpl emented except by
means of capi tal . Technol ogy does, of course, set a l i mi t on pro-
ducti on; no producti on process coul d be used at al l wi thout techno-
l ogi cal knowl edge of how to put i t i nto operati on. But whi l e knowl -
edge i s a l i mi t, capital i s a narrower l i mi t. . . . [Technol ogy, whi l e
i mportant, must al ways work through an i nvestment of capi tal . l a
Sixth, ther e i s no reason gi ven to substanti ate that the reci procal
i s the actual mul ti pl i er. Look agai n at Dr. Vi ckers words. After
stati ng the reci procal i s fi ve he concl udes: We can say, therefore,
that i n thi s case the mul ti pl i er i s equal to fi ve (emphasi s added).
17. An I ntroduction to Christian Economics, p. 45.
18. Murray N. Rothbard, Man, Econom~ and State (New York: New York Uni -
versi ty Press, [1962] 1975), p. 490.
The Marginal Propensity to Con@e 23.5
Why can we therefod say the mul ti pl i er i s fi ve? Dr. Vi ckers gi ves
no reason. There i s no process of reasoni ng from the fact gi ven
(the reci procal i s fi ve) to the concl usi on (the mul ti pl i er i s the reci p-
rocal ). We wi l l si mpl y have to take Dr. Vi ckers word that i t i s so.
Spend your way to weal th! Thi s i s the Keynesi an message;
the onl y thi ng hi nderi ng our economi c wel fare i s i nsuffi ci ent
spendi ng power. I f spendi ng power coul d si mpl y be created eco-
nomi c utopi a woul d be on i ts way. The Keynesi an system i s noth-
i ng more than i ntel l ectual baggage to defend such a si mpl e and
futi l e i dea.
Concl usi on
Keynesi an economi cs i s si mpl y one l ong attempt to confuse
peopl e. I t i s an attempt to make peopl e bel i eve that thri ft i s a l i a-
bi l i ty, that spendi ng on consumer goods i s more producti ve than
savi ng, and that the future-ori entati on of the Protestant ethi c i s
mi sgui ded.
The theory rests on the preposterous assumpti on that for no
reason i n parti cul ar, peopl e stop spendi ng money. Not that they
stop spendi ng on consumer goods, but that they si mpl y stop
spendi ng money at al l . They break the stream of i ncome. Peopl e
hardl y ever do thi s, and even i f they di d, sel l ers woul d respond by
l oweri ng thei r pri ces. Even money i n hoards tends to reduce
pri ces for other consumers. The economy can readjust to the new
condi ti ons and recover.
Keynes i nvented the mul ti pl i er as a means of defendi ng hi s at-
tack on thri ft. I t i s nothi ng but a sham, yet the enti re Keynesi an
system of spend oursel ves ri ch rests on thi s foundati on of sand.
Dr. Vi ckers accepts the noti on, even though he i s unabl e to ex-
pl ai n i t.
The Bi bl i cal answer i s stewardshi p. We are to put al l our
assets to work for the gl ory of God. God has created a worl d i n
whi ch there can be no ownershi p wi thout responsi bi l i ty. Every-
thi ng we own i s put to some use, unl ess we have l ost i t or forgotten
about i t. We put our assets to the best use we can thi nk of. The
search for a mul ti pl i er between consumpti on, savi ng, and eco-
236 Baptized hy?ation
nomi c growth a mul ti pl i er whi ch mul ti pl i es weal th faster as the
rate of savi ng drops i s about as sensi bl e as a search for perpetual
moti on.
The astoundi ng thi ng i s that Dr. Vi ckers expects Chri sti ans to
take hi s arguments, and therefore Keynes arguments, qui te seri -
ousl y. He expects us to fol l ow hi s l ogi c, i gnore the obvi ous, and
jump on board the bandwagon and fol l ow the yel l ow bri ck road to
the l and of Keynes. He ri di cul es Henry Hazl i tt, ri di cul es the cl as-
si cal economi sts, and ri di cul es the reacti onary economi c conser-
vati sm 19 of hi s i ntel l ectual opponents. The reader shoul d ask
hi msel f But what has Dr. Vi ckers offered as an al ternati ve?
Confusi on.
19. Vi ckers, Economics and Man, p. 180.
14
THE KEYNESIAN DISASTER
O what a tangled web we weave,
When @t we practise to deceive.
But when weve practised quite a while,
How vast~ we improve our s~le.
J. R. Pope
The one thi ng about Dr. Vi ckers whi ch i s not hi dden from
anyone i s hi s i ncomparabl y abomi nabl e styl e not hi s styl e of
decepti on (Pope-l i ke), but of communi cati on. Hi s abysmal wri t-
i ng styl e i s neverthel ess basi c to hi s program of decepti on, just as
Keynes styl e i n the General TheoV was basi c to hi s decepti on, as
we have al ready seen.
We have seen enough of the Keynesi an system to know that i t
contai ns i nherent contradi cti ons and di ffi cul ti es. These are not
mere mi nor faul ts i n the thi nki ng of Keynes, but are major fl aws
i n economi c rati onal i ty. I t i s somewhat surpri si ng to fi nd Dr.
Vi ckers repeati ng most of these fal l aci ous proposi ti ons wi thout
addi ng any si gni fi cant thought to them. There appears to be some
truth i n Gal brai ths observati on that economi sts are economi cal ,
among other thi ngs, of i deas. They make those they acqui re as
graduate students do for a l i feti me.
Had Dr. Vi ckers taken the ti me to anal yze more careful l y the
Keynesi an system he mi ght have been abl e to contri bute some-
thi ng of val ue towards sol vi ng the current worl ds Keynesi an-
desi gned and Keynesi an-admi ni stered fi nanci al fi asco over a
tri l l i on dol l ars i n worl d debt, a l arge proporti on of whi ch i s owed
237
238 Bapttied Inzation
to Ameri can banks by countri es unabl e and unwi l l i ng to under-
take the necessary cut i n l i fe styl e requi red to pay off those debts.
The Keynesi an system, as we have seen, i s bui l t on the fal l acy
that demand creates suppl y, i .e., that monetay demand creates
economic suppl i es. I f onl y there coul d be more monetary demand
i n the worl d, then al l our empl oyment probl ems woul d be sol ved.
More goods woul d be purchased, i ndustri es woul d grow, more
peopl e woul d be empl oyed utopi a r estor ed.
The error here i s the fai l ure of Keynesi ans to di sti ngui sh be-
t ween the desire whi ch peopl e have for goods and servi ces, and
thei r abilip to pay for such i tems wi th productive assets. I n addi ti on,
Keynesi an monetary theory i s defi ci ent at thi s poi nt. I t fai l s to
understand the economi c si gni fi cance of money as a medi um of
exchange and as an economi c good. Consequentl y we are l ed to
bel i eve we can spend our way to prosperi ty.
I f we defi ne demand as the present exi stence of market-
desi red weal th at market-cl eari ng pri ces, as J. B. Say and the
cl assi cal economi sts di d, then of course thi s Keynesi an trui sm i s,
wel l , true enough. Demand i ndeed creates suppl y, just as suppl y
creates demand. Suppl y and demand are reci procal s. For every
buyer there i s a sel l er; i n fact, they are both buyers and sel l ers
si mul taneousl y. They are exchangers.
What the Chri sti an economi st ought to say, however, i s that
onl y once i n hi story di d pure, unadul terated, jiat demand create
suppl y: when God spoke Hi s worl d i nto exi stence by fi at com-
mand duri ng the fi rst fi ve days. He spoke, Let there be, and
there was.
Humans must act re-creati vel y; onl y God i s ori gi nal l y crea-
ti ve. We do not speak thi ngs i nto exi stence. We do not demand
thi ngs i nto exi stence. We restructure the world, just as Adam was to
care for the garden, by means of our mi nds, our bodi es, and our
earthl y possessi ons. We recreate. We thi nk Gods thoughts after
hi m. We do not create demand by suppl y, or create suppl y by
demand. We recreate as best we can on the assumpti on that other
peopl e are doi ng the same. We plan our producti on for a jlture
market. We ai m producti on at that expected future market. So do
The Kgnesian Disaster 239
other producers. We forecast the economi c future as best we can.
We deal wi th i nescapabl e uncertain~.
I n thi s sense, and i n thi s sense onl y, does suppl y consti tute de-
mand, or vi ce versa. I t i s not that al l thi ngs produced are desi red
by others. The ten-year fl op of Economics and-Man i s proof enough
of that real i ty. I t coul d easi l y be descri bed as a Keynesi an
pyrami d. I t di d not create i ts own demand (contrary to Say), nor
di d anyones demand for i t create i ts producti on. I t was an
-
entr e-
preneuri al venture whi ch cost both author and publ i sher more
than they bargai ned for. The publ i sher sat on a pi l e of unsal abl e
books (at the l ow, l ow pri ce of $6.95) for a decade, and the author
attracted few or no di sci pl es. The onl y benefi ci ary was Exposi ti on
Press, the vani ty publ i sher that got Dr. Vi ckers to fork over
thousands of dol l ars to pri nt hi s subsequent unsal abl e book. I
woul d esti mate that even at zero pri ce, for A Christian Approach to
Economics and the Cultural Condition, there woul d be greater suppl y
than demand. Dr. Vi ckers created a non-economi c good.
The Debt Bomb
Coupl e thi s i dea that i f onl y we had more money we coul d
become weal thy wi th the wi l l i ngness of peopl e to borrow agai nst
the future i n order to obtai n present temporary consumer sati sfac-
ti ons, and you have produced a reci pe for an i mpendi ng di saster.
On the one hand, there i s one group of peopl e, the haves, who
are l ooki ng for opportuni ti es to l end out thei r weal th i n order to
make more profi ts, whi l e on the other there i s another group, the
have-nots~ whose desi re i s just as strong to get that money. Once
thi s i s combi ned wi th the Keynesi an fal l acy of spending to create
wealth, both groups are wi l l i ng to i gnore common sense and
undertake projects whi ch, by any stretch of the i magi nati on, have
l i ttl e chance of success. For exampl e, to l end money on govern-
ment projects that have no basi s for generati ng the abi l i ty to make
the repayments, i s an exerci se i n futi l i ty. I t i s the constructi on of
pyrami ds. To l end money to bankrupt nati ons i n order for them
to pay i nterest charges to New York banks, rather than fi nance the
devel opment of a vi abl e economi c project, produces a resul t si mi l ar
240 Baptized InJation
to a store-owner (taxpayers) gi vi ng hi s customers money to spend
i n hi s store, but whi ch they go and spend somewhere el se i nstead
(New York banks). I t makes economi c sense onl y for the mul ti na-
ti onal bankers and thei r hi red l ackeys: economi sts, pol i ti ci ans,
and medi a spokesmen.
Dr. Vi ckers fai l ure to understand both monetary theory and
Bi bl i cal teachi ng concerni ng debt causes hi m to assert that debt i s
not such a bad i dea, and that nati onal budget defi ci ts are accept-
abl e when rel ated to the nati ons producti vi ty and abi l i ty to pay.
He ci tes comparati ve stati sti cs to defend thi s vi ew. 1
Howard Ruff poi nted i n 1979 to the manner i n whi ch nati onal
fi gures are mani pul ated to produce a resul t whi ch i s not, i n fact,
anywhere near the truth of the si tuati on. Quoti ng from the Sep-
tember 30, 1976 Treasury Department hi -annual report State-
ment of Li abi l i ti es and Other Fi nanci al Commi tments of the
Uni ted States Government: whi ch tabl es the l i abi l i ti es of the
U.S. Government (whi ch shoul d more accuratel y be cal l ed a l i a-
bi l i ty of the U.S. peopl e, for they must eventual l y pay the bi l l ),
Ruff observes that the total debt for that year was cl oser to $6 tri l -
l i on than the more commonl y referred to fi gure of $650 bi l l i on. I n
addi ti on, Arthur Anderson, the l argest accounti ng fi rm i n the
worl d, recentl y compl eted a study of the U.S. Governments
accounti ng methods. They urged the government to do just l i ke
corporati ons do use an accrual system that matches assets wi th
l i abi l i ti es. Accordi ng to Anderson, i f they used standard corporate
accounti ng fi gures for fi scal 1974, i t woul d show that the U.S.
Government real l y ran a budget defi ci t of $95 bi l l i on, not the $3.5
bi l l i on they reported. Thi s ki nd of accounti ng woul d hi ghl i ght for
the publ i c and our l egi sl atures, parti cul arl y the free-spenders, just
how horri bl e the si tuati on real l y i s. . . . By no stretch of the
i magi nati on can the Uni ted States government be cal l ed sol vent.
The bi g questi on i s: How l ong can i t conti nue to get away wi th i t?
Onl y unti l such ti me as the publ i c refuses to gi ve them any more
money, havi ng di scovered Uncl e Sam i s a dead-beat who has
1, Vi ckers, Economics and Man, p. 329-30.
The Kgmesian Disaster 241
al ready borrowed several ti mes more than he can ever repay.z
Dr. Vi ckers defence of the nati ons abi l i ty to pay the nati onal debt
rests on sl ei ght-of-hand accounti ng procedures. That i s the
essence of the Keynesi an system.
There has been a tremendous acceptance of debt as a way of
l i fe, not onl y on a personal l evel , wi th an average home mortgage
now extendi ng to 25 or 30 years, but al so on a nati onal and i nter-
nati onal l evel . I n the l i ght of thi s, i nvestors are heard to demand
securi ty for thei r i nvestments, and to obtai n thi s they often pur-
chase government bonds. But woul d the average person gi ve hi s
money so wi l l i ngl y to an i ndi vi dual i f that debtor owed as much as
the U.S. government? Woul d an i nvestor vol untari l y i nvest i n
General Motors i f that company had equal l y l i ttl e prospect of pay-
i ng off any outstandi ng l i abi l i ti es? Not l i kel y, but that i s preci sel y
what peopl e are prepared to do when i t comes to buyi ng govern-
ment bonds. They are ready to gi ve thei r fi nances to a government
whi ch has proved i tsel f i ncapabl e of money management, and ex-
pect some ki nd of mi racl e that because i t i s their money whi ch the
pol i ti ci ans now have, they wi l l somehow manage to hang onto i t.
One can perhaps understand that most peopl e are not profes-
si onal l enders and therefore have some i nexperi ence i n determi n-
i ng who i s a worthwhi l e debtor. But what about the professi onal
money-l enders, those i n the banks who have gi ven the savi ngs of
mi l l i ons of smal l i nvestors to forei gn countri es that have no appar-
ent abi l i ty to repay? I t i s one thi ng to l oan to someone wi thi n ones
own nati on, where col l ateral of some ki nd may be secured. But
when i nternati onal boundari es are concerned, where no l egal jur-
i sdi cti on i s enjoyed, i t woul d appear to be a rather nai ve vi ew of
human nature to expect forei gn debtors to be wi l l i ng to honor
debts to Yankee i mperi al i sts when money gets ti ght. Gi ven the
hi story of forei gn fi nanci al deal i ngs and the propensi ty for forei gn
nati ons to repudi ate thei r obl i gati ons, there seems no great reason
to expect the huge l oans of the 1970s that were granted to Thi rd
2. Howard J. Ruff, How To Prospw During The Coming Bad Years (New York:
Ti mes Books, 1979), pp. 100-1.
242 Baptized I nJ ation
Worl d countri es wi l l be treated any di fferentl y by those nati ons.
What fool i shness, for exampl e, prompted Ci ti bank to l end up to
100 percent of i ts net assets to Brazi l al one?s I n addi ti on,
The $37 bi l l i on that the si x l argest U.S. banks had l ent to fi ve vol ati l e
Lati n Ameri can states represented an average of 190 percent of thei r net
assets. A bank that l oses 100 percent of i ts net assets i s bankrupt, or i n-
sol vent , to use the more steri l e and l ess descri pti ve term preferred by
fi nanci al speci al i sts. These numbers mean that i f 52 percent of the l oans
to these fi ve countri es [Mexi co, Brazi l , Venezuel a, Argenti na, and Chi l e
I . H.] were to go bad, the si x l argest banks i n the Uni ted States woul d
be ban k r u pt an d, bar r i n g s ome maj or r es cu e effor t, wou l d ceas e to
exi st.4
How are the l argest mul ti nati onal U.S. banks doi ng as a
gr oup? Ver i banc, an or gani zati on whi ch moni tor s Feder al
Reserve data on U. S. banks, has compi l ed the fol l owi ng stati sti cs,
as of mi d-1985. Seven of the ten l argest mul ti nati onal banks were
i n worse shape i n 1985 than i n 1984.
Probl em Loans at the Nati ons 10 Largest Banks
June 85 June 84
Ci ti bank 2.61b 2.65b
Bank of Amer i ca 3.61b 3.55b
Chase Manhattan 2.48b 2.30b
Morgan Guaranty 1.05b 998m
Manufactur er s Hanover 1.88b 1.80b
Chemi cal Bank 1.42b 1.09b
Bankers Ti -ust 709m 598m
Securi ty Paci fi c 1.34b l .10b
Fi rst Nat. Ci ty (Chi cago) 644m 862m
Conti nental I l l i noi s 936m 2.98b
The total on these probl em l oans i s an unheal thy $16.7 bi l l i on.5
3. John H. Maki n, The Global Debt Crisis (New York: Basi c Books, 1984), p.
134.
4. I bid., p. 136.
5. Ci ted by Dan Dorfman i n New l br k (Nov. 4, 1985).
The Kgnesian Disaster 243
These are the banks, you understand, that are taki ng advantage
of the deregul ati on of U.S. i nterstate banki ng and the regi onal
bank cri si s to rush i n and gobbl e up l ocal probl em banks. These
are the banks that the U.S. government regards as the systems
l ong-term hope, the l enders of next-to-l ast resort. After that l i es
onl y the Federal Reserve Systems money creati on machi ne.
These debts amount to more than just economi c theory. I t i s
not si mpl y that the economi cs professi on teaches that debt i s the
road to prosperi ty, the manner i n whi ch stones wi l l be turned i nto
bread, to use Mi ses apt descri pti on. There were other contri but-
i ng factors. Debt became a way of l i fe i n the West, especi al l y i n
the Uni ted States.
Fi rst, there was the i ncredi bl e post-war boom i n producti vi ty.
The pent-up demand after fi ve years of monetary i nfl ati on, coupl ed
wi th the l i fti ng of pri ce control s (repressed i nfl ati on, Ropke cal l ed
i t), expl oded i n a wave of consumer buyi ng. Now that manufac-
turi ng was for consumpti on rather than war purposes, the quan-
ti ty and vari ety of goods i ncreased si gni fi cantl y. The opti mi sm of
the post-War peri od made Ameri cans future-ori ented i n a new
way: they pl anned to become more producti ve i n the future, so
they borrowed to buy that dream house, hopi ng to pay off the
l oan. I t worked, too. As a resul t, the weal th of Ameri can ci ti zens,
i n compari son to other nati onal i ti es, i ncreased qui te dramati cal l y.
Uni ted States ci ti zens had more spendabl e i ncome, more abi l i ty
to save, more reasons to l ook for opportuni ti es to turn those sav-
i ngs i nto profi ts. So they taught thei r chi l dren the same l esson.
And so l ong as producti vi ty i ncreases per capi ta can conti nue to
grow faster than the debt burden, the program can conti nue. But
producti vi ty takes capi tal and entrepreneurshi p, and debt-based
consumer buyi ng as a way of l i fe has begun to erode the thri ft
i mpul se. So di d the l oss of Chri sti an fai th. So di d Keynesi an eco-
nomi cs.
The resul t can be seen i n the fol l owi ng chart. The rati o be-
tween after-tax i ncome (droppi ng because taxes are ri si ng) and
total debt payments has more than doubl ed, 1950-1985. Thi s chart
graphs a revol uti on i n Ameri cans thi nki ng about debt.
244 Baptized I nzation
HOUSEHOLD DEBT OUTSTANDING
PERCENT OF DISPOSABLE PERSONAL INCOME
AMOUNT OUTSTANO!Nm ENO OF YEAR, 10.S0-51; SEASONALLY AOJU27E0, ENOOFWARTER, 1952-
RAT!O SCALE
I I I I 1 I I I I I i I I I 1 I I I I I 1 I I I I I I I I I Illllwmmr
100

TOTAL LIABILITIES

80

30
CONSUMER
INSTALLMENT CREDIT
20
.

\e---------~
ALL OTHER

s
1950 1955 1960 f%s 1970 1975 1980 19s5
Second, the dramati c effects of the 1970s oi l pri ce i ncreases, and
the growi ng bel i ef that natural resources were about to run out,
caused peopl e to l ook i n areas where new resources mi ght be
found. What better source to i nvest i n, and make l oans to, than
formerl y backward nati ons that had known oi l reserves, whi ch
woul d serve as a base for servi ci ng the borrowed money? Then i n
earl y 1986, the spot (cash) pri ce of oi l fel l to under $12 per barrel .
The l oans had been made on the assumpti on that $20 was the
rock-bottom, and that $30 was l i kel y. There i s not a mul ti nati onal
bank i n the Uni ted States that i snt i n deep troubl e because of i t.
Third, the compl ete break from the defacto gol d standard whi ch
Ni xon achi eved i n 1971 al l owed the free producti on of fi at money
to fi nance defi ci t spendi ng. The euphori a of the earl y part of the
1970s i s hard to recal l a decade l ater, but i t had a dramati c i mpact
on worl d trade.
The KVnesian Disaster 245
The worl d was i n for a shock. Producti vi ty l evel s decl i ned. Oi l
pri ces, contrary to the desi res of OPEC, began to drop. Those
who borrowed on the basi s of bei ng abl e to sel l thei r oi l at $30 a
barrel or more, and who were dependent on that pri ce range to ser-
vi ce fi nanci al borrowi ngs, now fi nd they can get si gni fi cantl y l ess
than that amount. I n addi ti on, the general producti vi ty decl i ne
has meant that anti ci pated markets no l onger exi st, or at l east ex-
i st on a reduced scal e. Expected sal es are si mpl y not there. The
resul t? The gl obal debt cri si s.
A defl ati on caused by a run on the banks today woul d bri ng to
Dr. Vi ckers attenti on what real l y sti cky pri ces are al l about. I f
he thi nks that pri ces were i nfl exi bl e on the down si de i n 1933, wai t
unti l he sees what happens i n todays worl d of massi ve debt ser-
vi ce requi rements, l abor uni on monopol i es, pri ce fl oors, and the
predi ctabl e tari ffs that woul d be passed i n a recessi on.
The Greatest Di saster of Al l
But the greatest di saster of al l i n the Keynesi an system i s the
loss of moral values that i t causes. (What woul d you expect from an
economi c system desi gned by a homosexual ?) Not onl y i s there a
casual atti tude towards the use of debt, but more i mportantl y, i t
l eads pol i ti ci ans to be decei tful about the true state of affai rs. As
Hutt observed, Keynesi ans commi t themsel ves to the persi stent
decepti on of the publ i c regardi ng monetary i ntenti ons or to di s-
gui sed total i tari ani sm; these are the i nevi tabl e al ternati ves under
conti nuous i n fl ati on.c
Not by any str etch of the i magi nati on can the Less-
Devel oped-Countr i es (LDCS) repay thei r huge borrowi ngs wi th-
out the peopl e i n those countri es sufferi ng a dramati c decrease i n
l i vi ng standards. When an i ndi vi dual or a nati on has to borrow i n
order to meet i nterest payments wi thout any return of capi tal , a
cri si s of the fi rst magni tude exi sts. What i s i t that al l ows l enders,
wi th government acqui escence, to conti nue l endi ng to those who
have no hope of repayi ng? Why not face the real i ty of the matter
6. Hutt, The Kqynesian Episode, p. 164.
246 Baptized I ny7ation
and admit a cri si s exi sts? Why not tel l the i nvesti ng publ i c that
thei r hard-earned funds are gone forever! (The funds can be
pri nted, of course, but the asse~s represented by those funds the
val uabl e resources that the LDC debtors have l ong-si nce consumed
wi l l not return. )
Why dont we face the musi c, cal l dead l oans dead l oans, and
start over? There i s an answer, of course: mul ti nati onal banks.
They desperatel y need the l egal fi cti on of book-val ue l oans. They
need to keep those l oans l i sted as assets i n thei r portfol i os assets
val ued at what they pai d (l oaned) for them, not what they are
worth i n the free market. Depri ve them of thi s l egal fi cti on by ad-
mi tti ng that the l oans are dead, and thei r l oan portfol i os wi l l fal l
cl ose to zero perhaps even negati ve capi tal for the banks. A l ot
of bankers wi l l go bankrupt. So wi l l mi l l i ons of ci ti zens who are i n
hock up to thei r eyebal l s. So the debt game goes on. For a whi l e
l onger.
Monetary i nfl ati on i s i tsel f an i mmoral act. I t perverts the
fi nanci al stabi l i ty of soci ety. (And speaki ng of perverts. . . .) I t
al l ows one group i n the communi ty to profi t at the expense of
others. I t i s a del i berate act of taki ng the purchasi ng power out of
someones pocket, just as a common thi ef achi eves a si mi l ar effect.
I f Dr. Vi ckers, i n the name of Chri sti ani ty, i s so sure that i n-
fl ati on and debt are moral attri butes, then the onus of proof is on him
to demonstrate that Keynesi ani sm has not l ed strai ght i nto thi s
l oomi ng catastrophe. I f he cannot, then he ought to provi de a
sol uti on to the current i nternati onal monetary fi asco. Possi bl y the
rest of the worl d has mi sunderstood Keynes. Perhaps the present
cri si s i s onl y the resul t of not spendi ng enough, of not putti ng
Keynes theori es i nto practi ce to the degree that i s necessary. I f
thi s i s the case, wi l l Dr. Vi ckers have the courage to cal l for more
i nfl ati on, and more forei gn and domesti c l oans? The answer to that
questi on i s somewhat obvi ous, at l east to those who have never
had the pl easure of havi ng thei r economi c reasoni ng destroyed by
graduate courses i n Keynesi an stupi di ty. Unfortunatel y, we have
modern publ i c educati on to thank for the fact that al though peo-
pl e may have been taught to read (and there i s some di spute even
The Kqmesi an Disaster 247
on that fact) i t has defi ni tel y not taught them to think. And i f you
cant think, youre not educated! (Then agai n, once you get a grad-
uate educati on i n Keynesi an economi cs, you cant thi nk ei ther. )
More Lies, Higher Tues
What other reason i s there for the wi l l i ngness of a nai ve publ i c
to bel i eve the l i es they are tol d about monetary and fi scal pol i cy?
At the ti me of wri ti ng thi s manuscri pt, the governments i n both
the Uni ted States and Austral i a are undertaki ng a major sal es
program to convi nce the voters of the need for tax reform. The
reasons they put forward i ncl ude the need for a more equi tabl e
system, a more even spreadi ng of the tax burden across the strata
of soci ety.
How do they pl an to do thi s? What the pol i ti ci ans i n Austral i a
are suggesti ng i s the greatest sel l i ng campai gn of al l : a Tax Sum-
mi t. What voters are not tol d i s the fact that the government has
onl y one i nterest i n tax reform, getting more money. Austral i as
accumul ated forei gn debt has grown from around $7 bi l l i on i n
1980 to the vi ci ni ty of $107 bi l l i on i n 1985. (Anyone want to guess
why the Austral i an dol l ar took such a downturn i n earl y 1985?)
The expected nati onal defi ci t for 1985-86 fi scal year has grown
from a projected $9 bi l l i on to an anti ci pated $13-14 bi l l i on. Wi th
such a l arge accumul ati on of debt, do peopl e r eal @ bel i eve the tax
reform program i s desi gned to l ower thei r tax burden? Kangaroos
mi ght devel op wi ngs and fl y, too. The reform i s more l i kel y to
i ncrease taxes as wel l as cl ose current l egal l oophol es i n the l egi s-
l ati on whi ch deny the government untol d mi l l i ons i n taxpayers
earni ngs.
The Keynesi an Legacy
I f a rel i gi ous revi val does not occur i n the i mmedi ate future,
there are two possi bl e al ternati ves for the future course of events.
First, there coul d be a return to sound economi c theory and be-
havi or. Of al l possi bi l i ti es, thi s seems the most unl i kel y. Pol i ti -
ci ans are not about to gi ve up those powers that woul d be neces-
248 Baptized I nzation
sary to re-establ i sh the free market. Pri de, human ambi ti on,
power, greed the evi l s that Dr. Vi ckers says precl udes free
market economi cs are al l factors that must be overcome by pol -
i ti ci ans and Keynesi an economi sts who have the arrogance, l i ke
Dr. Vi ckers, to bel i eve they are capabl e of getti ng us out of thi s
mess. The truth i s that they got us i nto thi s mess by tryi ng to get
us out of one whi ch di d not have the magni tude of the present
cri si s. So there seems no real reason to bel i eve thi s al ternati ve a
return to Bi bl i cal economi cs, or even the cl assi cal economi sts
i mi tati on i s about to happen. I n addi ti on, to return to sound
monetary pol i ci es, to stop monetary i nfl ati on, woul d produce an
i mmedi ate depressi on whi l e the economy readjusts i tsel f to the
real i ty of the zero-i nfl ati on si tuati on. There i s no country on earth
whose voters wi l l accept such a scenari o. They prefer to be fool ed
for a whi l e l onger, unti l the i nescapabl e monetary cri si s overtakes
them.
Second, the remai ni ng al ternati ve i s to conti nue the present
pol i ci es, al bei t wi th some fear and trepi dati on. As thi s seems the
most l i kel y course of acti on i n the i mmedi ate future, i t i s worth
consi deri ng the l i kel y effects of such a possi bi l i ty. I n passi ng i t i s
rel evant that Federal Reserve chai rman Paul Vol cker has sur-
pri sed most peopl e for the past seven years and has kept rei ns on
the money suppl y. He of al l the Federal Reserves staff seems most
aware of the si tuati on and the need for a check on the money sup-
pl y growth. Consequentl y, 1980-85 produced a recessi onary cycl e
i n the market, al bei t wi th some tendency at ti mes to show si gns of
growth. Wi th the 1980 el ecti on of Ronal d Reagan, there was rhet-
ori c to the effect that monetari sm was the new pol i cy, and that
there woul d be severe control over monetary growth. How much
l onger that wi l l l ast i s anyones guess. But as i t was more rhetori c
than substance, any fi nanci al responsi bi l i ty practi ced i s bound to
be short l i ved.
A recent arti cl e i n The Economtit by professor James Tobi n of
Yal e Uni versi ty, wi nner of the 1981 Nobel Pri ze for economi cs, has
announced the death of monetari sm and the resurgence of Keynes-
The Kgnesian Disaster 249
i an monetary and fi scal pol i ci es. T (Gray-headed tenured sci enti sts
desperatel y want to bel i eve that the next sci enti fi c revol uti on has
not al ready passed them by, and that they are not i rrel evant after
al l . The y al ways are as i rrel evant as those gray-heads they re-
pl aced so merci l essl y i n thei r youth.) Ti me wi l l i ndi cate the out-
come of thi s predi cti ons I f i t i s as accurate as other Keynesi an
predi cti ons, Dr. Tobi n woul d be wi se not to expect hi s hei rs to
benefi t from any book royal ti es that he may now be recei vi ng.
Concl usi on
Gi ven the assumpti on that monetary i nfl ati on i s goi ng to con-
ti nue, i f not for the academi c reasons of economi sts, then at l east
for the pragmati c deci si ons of those after pol i ti cal votes, there are
two possi bl e outcomes for the future. Ei ther i nfl ati on wi l l be
al l owed to conti nue i ts course, whi ch i s eventual l y to reach the
hyperi nfl ati on stage where compl ete economi c chaos occurs, or
there wi l l be attempts to mi ti gate agai nst thi s tendency by the i m-
posi ti on of government regul ati ons. Where monetary i nfl ati on
l eads to pri ce i nfl ati on, thi s wi l l be hel d i n check by pri ce control s.
Si nce the former al ternati ve, hyperi nfl ati on, i s pol i ti cal l y unac-
ceptabl e, we may safel y predi ct that the control l ed economy i s the
future state of affai rs.
Thi s bei ng the case you mi ght wel l l i ke to prepare yoursel f now
7. James Tobi n, Monetari sms Costl y Legacy, The Weekend A u.rtralian (May
4-5, 1985), p. 26, repri nted from The Economist. See especi al l y Marc A. Mi l es,
BgondMonetari sm: Fi ndi ng the Road to Stuble Mon~ (New York: Basi c Books, 1984).
8. I nteresti ngl y, former head of the Austral i an Treasury John Stone, who
resi gned l ate i n 1984 over reported di sagreements wi th the present Labor govern-
ment over monetary pol i cy, i s a monetari st. I t i s probabl y no coi nci dence that
duri ng hi s peri od as head of thi s department money suppl y growth was hel d to
around 11-12 percent per annum. Agai n, i t i s no coi nci dence that si nce hi s depar-
ture from offi ce l ate i n 1984, M3 i n Austral i a has suddenl y ri sen to 19.6 percent
per annum (l ast quarter 1985). I nterest rates have skyrocketed. Coupl ed wi th the
recent decl i ne of the Austral i an dol l ar agai nst the rapi dl y decl i ni ng U.S. dol l ar,
from 90 cents to about 65 cents over a four-month peri od, we maybe certai n that
pri ces wi l l ri se. Austral i ans are taki ng a si gni fi cant drop i n thei r standard of
l i vi ng.
250 Baptized I nJ ation
to survi ve i n that ki nd of soci ety.g How l ong i t wi l l l ast, and to
what degree i t wi l l occur, i s a matter for conjecture. I t depends
upon a number of vari abl es. Perhaps there wi l l be a rel i gi ous
(i .e., Chri sti an) revi val and a return to the just and ri ghteous eco-
nomi c standards of Scri pture, at l east to some degree. Those wi th
an opti mi sti c postmi l l enni al eschatol ogy wi l l no doubt agree thi s i s
more than possi bi l i ty thi nki ng.l What i s not known i s how l ong
i t wi l l take and what must be endured before i t occurs. Meanwhi l e
we l i ve under the threat of a humani sti c, total i tari an government.
That i s the l egacy of Keynesi ani sm whi ch Dr. Vi ckers woul d l i ke
us to embrace i n the name of Chri sti ani ty.
The wi l l i ngness of the publ i c to bel i eve the l i es i s, of course, a
rel i gi ous phenomena. Because that, when they knew God, they
gl ori fi ed hi m not as God, nei ther were thankful ; but became vai n
i n thei r i magi nati ons, and thei r fool i sh heart was darkened. Pro-
fessi ng themsel ves to be wi se they became fool s (Rem. 1:21,22).
Then Paul tel l s us what happens next when peopl e do thi s: @
become homosexuals (Rem. 1:24-2 7). What i s requi red i s a return to
fai th and obedi ence to the God of Scri pture because He al one i s
the way, the truth, and the l i fe (John 14:6).
I t i s unfortunate that fal l en human nature, i n i ts stubborn re-
bel l i on agai nst Gods reveal ed truth, requi res external ci rcum-
stances to encourage i t to l i sten to the Word of God. Wi th al l the
mi racl es performed i n Egypt as they wandered the desert, sti l l
most of the I srael i tes murmured agai nst God and woul d not obey
Hi s Word. The seventy years capti vi ty i s another exampl e of the
necessi ty for external cursi ng before there i s a wi l l i ngness for peo-
pl e to l i sten to and obey the Word of the Lord (cf. Neh. 8:1-9:38).
9. There i s no better pl ace to begi n than by obtai ni ng Gaty Norths The Last
Trai n Out and Government By Emergen~ (Fort Worth, Texas: Ameri can Bureau of
Economi c Research, 1983).
10. See Davi d Chi l ton, Paradise Restored (Tyl er, Texas: Reconstructi on Press,
1985).
15
BEHOLD, OUR SAVI OR!
At the present moment people are unusually expectant of a more
fundamental diagnosis; more particularly rea~ to receive it; eager to
t~ it out, tf it should be even plausible. But apart from this contem-
pora~ mood, the ideas of economists and political philosophers, both
when they are right and when they are wrong, are more powerful than
is common~ understood. I ndeed the world is ruled by little else. Prac-
tical men, who believe themselves to be quite exempt from any intellec-
tual injuences, are usual~ the slaves of some defunct economist. Mad-
men in authori~, who hear voices in the aiq are distilling their frenzy
from some academic scribbler of a few years back. . . . Not, indeed,
immediately, but after a certain interval; for in the field of economic
and political philosophy there are not many who are in.uenced by new
theories after they are twenp-j$ve or thir~years of age, so that the ideas
which civil servants and politicians and even agitators apply to current
events are not like~ to be the newest. But, soon or late, it is ideas, not
vested interests, which are dangerous for good or evil.
John Maynard Keynes
Keynesi ani sm i s a fact of l i fe, i f not by name, then at l east i n
practi ce. Governments everywhere are enamored wi th the i dea
that they can spend our way to prosperi ty. Thi s worl d i s, i n
Cl arence Carsons descri pti on, i n the gri p of an i dea. The i dea
i s thi s: 2% achieve human felicity on this earth by concerting all eforts to-
1. The General TheoV, pp. 383-84.
251
252 Baptized In@ation
ward its realization .2
Thi s i s to be achi eved, accordi ng to Dr. Vi ckers, by the
proper regul atory functi on of the government. . . . s New
gui del i nes are to be l ai d down ci rcumscri bi ng the acti ons of i ndi -
vi dual s, those nasty vi l l ai ns who keep maki ng l i fe di ffi cul t for
everyone el se.4 Fai l ure to act woul d be economi cal l y cri mi nal ,
and agai nst the basi c objecti ves of conservati on, devel opment,
and equi ty, as we have seen these adequatel y sustai ned and con-
fi rmed by scri ptural data. . . . s
What we have here i s capi tul ati on to the i dea that mans eco-
nomi c probl ems can be sol ved by government acti on, by control and
regul ati on of the marketpl ace. There i s i mpl i ci t fai th that al l prob-
l ems, and especi al l y those of an economi c nature, are political
probl ems and can therefore be sol ved by political acti on.6 I exper-
i enced a vi vi d i l l ustrati on of thi s i n a di scussi on wi th the pri nci pal
of a Reformed theol ogi cal col l ege who acknowl edged that there
were empl oyers payi ng unjust (by that he meant l ow) wages,
and therefore there shoul d be l egi sl ati on establ i shi ng a mi ni mum
wage. I gnori ng for the moment the i nherent di ffi cul ty of defi ni ng
what i s a just wage, hi s suggesti on i s that the sol uti on to the
probl em i s government acti on. An economi c probl em i s autornatic-
a@ percei ved to have i ts answer i n the domai n of pol i ti cs and l eg-
i sl ati ve decrees. But l et us grant for a moment that there i s an el e-
ment of truth i n thi s i l l ustrati on. We can readi l y admi t there are
empl oyers payi ng l ow wages. However, are mi ni mum wage l aws
the sol uti on to the probl em? And what, real l y, i s the probl em i n
the fi rst pl ace?
2. Cl arence B. Carson, The Wodd in the Grip of an I dea (New Rochel l e, New
York: Arl i ngton House, 1979), p. 9, emphasi s i n ori gi nal .
3. Vi ckers, Economics and Man, p. 343.
4. I bid., p. 337.
5. I bid., p. 322.
6. See Jacques El l ul , Pol i ti ci zati on and Pol i ti cal Sol uti ons i n Kenneth S.
Templ eton, Jr. (cd.), T/ u Politicization of Socie~ (I ndi anapol i s, I ndi ana: Li berty
Press, 1977), p. 209ff.; cf. Cl arence B. Carson, The Flight From Reali~ (I rvi ngton-
on-Hudson, New York: Foundati on for Economi c Educati on, 1969), p. 351ff.
Behold, Our Savior! 253
The Things Unseen
Orthodox Chri sti ani ty teaches l i fe i s more than what i s ob-
served. Fundamental real i ty has an unseen aspect, that whi ch i s
beyond more than just the physi cal senses of man. The i nspi red
Word of God i nsi sts that i t i s out of the heart of man, the i nner
recess of the human bei ng, that al l thi ngs fl ow. For as he thi nketh
i n hi s heart, so i s he (Prov. 23:7). Scri pture thus puts a di fferent
perspecti ve on thi ngs. I t says that l i fe i s not just those surface
thi ngs we see but there are far deeper and more basi c and funda-
mental real i ti es.
I t i s these truths that modern man wants to deny. Thi s has
been descri bed as a fl i ght from real i ty. Modern man, i n denyi ng
the fundamental trtths of Bi bl i cal Chri sti ani ty, has deni ed the real i ty
of l i fe. He now manufactures a worl d accordi ng to hi s own vai n i m-
agi ni ngs. I n thi s l and of fantasy, al l the probl ems of l i fe are percei ved
to have a merel y physi cal ori gi n. Scarci ty i s no l onger percei ved as
the fundamental cause of poverty. Apparentl y there i s now an
abundance of thi ngs behol d the seemi ngl y endl ess suppl i es at
the supermarket. Poverty must therefore exi st because some peo-
pl e are getti ng al l the produce. Some are ri ch at the expense of
those who do not get the goods, the poor. Empl oyers are payi ng
unjust wages and getti ng ri ch at the expense of empl oyees; un-
empl oyment exi sts because some peopl e refuse to spend thei r i n-
comes depri vi ng someone el se of thei r l i vel i hood. The whol e eco-
nomi c worl d i s i nterpreted i n terms of an anci ent fal l acy: you win;
therefore, I lose. There has, then, been a fl i ght from economi cs, a
fl i ght from economi cs as a di sci pl i ne for study and exposi ti on to
economi cs as a tool for soci al reform, a fl i ght from economi cs to
pol i ti cs. Thi s has been, al so, a fl i ght from real i ty.T
The Biblical View
Scri pture does not agree, however, wi th the vi ew that the eco-
nomi c probl em i s one of mere mani pul ati on of physi cal real i ty.
7. Carson, The Flight From Reality, p. 370.
2.54 Baptized I nJ ation
Thi s i s why, for exampl e, there are materi al bl essi ngs offered to
those who are obedi ent to the God of Scri pture (Deut. 28:1-14). I t
i s al so why there are materi al depri vati ons promi sed to those who
rebel agai nst the Creator.
The Bi bl i cal perspecti ve i s that man has deni ed the true God
i n order to pl ace hi msel f at the center of the uni verse. Man i s the
new god who creates real i ty, deci des what i s ri ght or wrong, good
or evi l , just or unjust (Gen. 3:5). As Schl ossberg has poi nted out,
Western soci ety, i n turni ng away from Chri sti an fai th, has turned
to other thi ngs. Thi s process i s commonl y cal l ed secularization, but
that conveys onl y the negati ve aspect. The word connotes the
turni ng away from the worshi p of God whi l e i gnori ng the fact that
somethi ng i s bei ng turned to i n i ts pl ace. . . . Al l such pri nci pl es
that substi tute for God exempl i fy the bi bl i cal concept of i dol .B
Modern man i s i dol atrous. He manufactures new gods to wor-
shi p. But he al so seeks sal vati on by these gods. Twenti eth-century
man i s onl y too aware the worl d i s not perfect. Deep down, he has
a l ongi ng for utopi a, a l and of perfecti on, where worry, i l l ness,
and death no l onger exi st. Paradi se l ost remai ns i n hi s bei ng, and
he seeks to return to i t by any and every means except one: fai th
and obedi ence to the God of Scri pture.
Man i s the new god who wi l l create heaven on earth gi ven
suffi ci ent ti me and l ots of taxpayers money. What i s surpri si ng i s
to fi nd Dr. Vi ckers endorsi ng such a vi ew. Recal l our col l ege pri n-
ci pal who wanted fai f wages pai d. I s l egi sl ati ve acti on the on~
course of acti on to get the empl oyer to pay more? Orthodox
Chri sti ani ty i nsi sts there i s an al ternati ve. I t i nvol ves a funda-
mental change i n the way peopl e thi nk. I n Bi bl i cal termi nol ogy, i t
i nvol ves the necessi ty of regenerati on. From thi s fundamental
change i n nature, the empl oyer mi ght then willing~ pay addi -
ti onal wages to hi s empl oyees, to encourage greater l oyal ty and
greater producti vi ty. And i f he does not do so i mmedi atel y, who
are we to compl ai n to God that He has not moti vated Hi s new
8. Herbert Schl ossberg, I dols For Destruction (Nashvi l l e, Tennessee: Thomas
Nel son, 1983), p. 6.
Behold, Our Savior! 255
subject to fi t i n wi th our i deas of just wages?
Arbitra~ Humanist Definitions
Humani st man i s the new god, determi ni ng for hi msel f good
and evi l , ri ght and wrong, just and unjust. To the extent that
Chri sti ans adopt the conclusions of humani st man regardi ng eco-
nomi cs, they have thereby adopted the presuppositions of humani st
man. Dr. Vi ckers i s a pri me exampl e of thi s sel f-decepti on. Con-
si der hi s moral i sti c l anguage. Hi s wri ti ngs abound wi th descri p-
ti ve terms such as justi ce, equi ty, expl oi tati on, excessi ve,
desi rabl e; suffi ci entl y meani ngful : or l egi ti mate. Pri vate enter-
pri se i nvestment, for exampl e, i s i ncapabl e, accordi ng to Dr.
Vi ckers, of setti ng a scal e of charges adequate to provi de a reason-
able or acceptable rate of return on capi tal .g Monetary and fi scal
pol i cy i s necessary to ensure a satisfacto~ rate and direction of
growth i n the economy. 10
The di ffi cul ty ari ses when we ask who i s to defi ne what justi ce
means; who has the wi sdom to determi ne what a reasonabl e and
acceptabl e rate of return on capi tal i s? I f one person wants ten
percent return but someone el se wants fi fteen, i s there anythi ng
i nherent i n ei ther fi gure whi ch makes one more equi tabl e than
the other? I f one empl oyer pays $300 per week to l abor, whi l e
another pays $350 for the same ki nd, i s there somethi ng funda-
mental l y unjust i n the former case? And w/zo shal l be the one to
deci de questi ons such as these?
Biblical De&itions
The essence of Chri sti ani ty i s that it is God through His inspired
Word, the Bible, who dg$nes what is just and unzust. God, bei ng the
sol e possessor of omni sci ence,
i s al one capabl e of determi ni ng
these thi ngs. Man, wi thout such di vi ne revel ati on, i s incapable of
defi ni ng the meani ng of words such as expl oi tati on. Man i s onl y
abl e to offer an opi ni on. Thus, when Dr. Vi ckers i s cal l i ng for
9. Vi ckers, Economics and Man, p. 77, emphasi s added.
10. I bid., p. 294, emphasi s added.
256 Baptized I nzation
State acti on to ensure equi ty and sati sfactory growth i n the
economy, he has departed from Bi bl i cal premi ses, for the Bi bl e
does not tel l us what a sati sfactory rate of growth i n the economy
shoul d be. Dr. Vi ckers woul d i mpose his opi ni on, or the opi ni ons
of a bureaucrati c commi ttee, on the rest of manki nd. To do i t i n
the name of economi c equi ty and justi ce i s to grossl y mi sl ead us
away from the truth of the matter. I t i s to i mpose hi s moral i ty on
the rest of soci ety, rather than to adhere to Bi bl i cal moral i ty.
Bi bl i cal moral i ty i s di fferent from that whi ch Dr. Vi ckers, or
our col l ege pri nci pal , wants. For some reason, the Bi bl e i s si l ent
on whether ei ther $300 or $350 i s a just wage. There i s si mpl y
no verse i n Scri pture whi ch gi ves the answer to such a perpl exi ng
questi on. Thi s i s why the search for a defi ni ti on of the just wage
stymi ed schol asti c theol ogi ans, and l ater the fi rst generati on of
col oni al Puri tans i n New Engl and. No matter, says Dr. Vi ckers,
For the economi st, of al l peopl e, i s, by vi rtue of the i nsi ght hi s
professi onal trai ni ng gi ves hi m, uni quel y equi pped to expl ai n to
soci ety the manner i n whi ch the producti on of certai n more desirable
outputs coul d be achi eved i f resources were di verted away from
the producti on of l ess desi rabl e commodi ti es. 11 The moral i ty of
the uni quel y equi pped economi st must take precedence over
that of other i ndi vi dual s or the moral i ty of God. I f you thi nk that
Dr. Vi ckers i s tal ki ng about a tenured, se~-certt$edpkm.ning elite, you
are thi nki ng what I am thi nki ng, too.
Bi bl i cal fai th fi nds l i ttl e agreement wi th the Keynesi an eco-
nomi c theori es Dr. Vi ckers woul d have us accept as Chri sti an.
Where the former i nsi sts al l probl ems, i ncl udi ng economi c prob-
l ems, have thei r fundamental ori gi n i n the spi ri tual state of man,
the l atter says i t i s a matter of l ack of spendi ng power, or some
other nonsense. Dr. Vi ckers woul d seek to sol ve the economi c
probl ems by State decree rather than spi ri tual regenerati on of the
i ndi vi dual who then l i ves i n obedi ence to the l aw of God.
Vickers on Poverty
There i s one further i l l ustrati on we mi ght use to substanti ate
the cl ai m that Dr. Vi ckers i s preachi ng another fai th than that of
11. Z6i d., p. 171, emphasi s added.
Behold, Our Savior!
257
Bi bl i cal Chri sti ani ty. On more than one occasi on, Dr. Vi ckers ac-
cepts the fal l acy that poverty i s merel y the resul t of mal di stri bu-
ti on of the economi c resources currentl y avai l abl e. The abject
poverty and the scandal of human di stress i n I ndi a cannot be
evaded. And there can be no doubt that the questi on of the i nter-
nati onal di stri buti on of the producti on of thi s worl ds goods . . .
shoul d engage the economi sts thought and pol i cy recommenda-
ti ons very di rectl y. 12
We can r ecal l al so that consi der ati ons of mor al i ty must i nfor m our
atti tudes to a stati sti cal i ncrease i n Gross or Net Nati onal Product when
we confront the patent obl i gati on of an affl uent soci ety (we spoke of the
Uni ted States as an exampl e) to consi der the economi c condi ti on of the
wr etchedl y i mpover i shed peopl e of the under devel oped countr i es, tak-
i ng, i n the same context, I ndi a as a pri me exampl e. 13
There i s a strong i nference that i t i s i mmoral for peopl e i n
weal thy countri es to be ri ch whi l e the poverty of I ndi a exi sts. We
mi ght have l ess troubl e agreei ng wi th Dr. Vi ckers had he bothered
to contextual l y argue from Scri ptural passages that i t i s somehow
i mmoral for some to be ri ch whi l e others are poor. But as on so
many occasi ons, we are tol d by Dr. Vi ckers that hi s i deas are
Chri sti an wi thout any proof. We are supposed to accept hi s
word that i t i s. We mi ght have l ess di sagreement wi th Dr. Vi ckers
i f he coul d substanti ate the i nference that I ndi as poverty i s at the
expense of weal thy nati ons. Hi s wri ti ngs are si ngul arl y si l ent on
the causes of poverty i n that country, whi ch real l y i s the basi s for
any charge of i mmoral i ty. There i s no anal ysi s of the causes of
weal th i n countri es such as the U.S. That rel ati ve freedom has
been granted to the i ndi vi dual to freel y trade wi th hi s nei ghbor, a
fact that has i ts foundati ons i n the rel i gi ous revi val s of recent cen-
turi es and the i nfl uence of a Bi bl i cal moral i ty that i s forei gn to Dr.
Vi ckers, and the devel opment of the market economy, provi ded
the i mpetus to producti vi ty and the growth of materi al weal th.
That I ndi a has not had such an i nfl uence i s conveni entl y omi tted
12. I bid., p, 151.
13. I bid., p. 187.
258 Baptized I nzation
by Dr. Vi ckers. Thi s essenti al di fference has been vi vi dl y descri bed
by Edmund Opi tz.
How can a soci ety whose worl dvi ew i ncl udes such doctri nes as Maya
[ i l l us or y wor l d] , k ar ma [ r ei ncar nati on] and cas te pr oduce the s oci al
structure upon whi ch the market economy i s based? Accept the i dea of
Maya and you excl ude the i dea of a r ati onal l y str uctur ed, cause and
effect uni verse. The doctri ne of karma makes i t vi rtual l y i mpossi bl e for
i ndi vi dual s to have the necessary sel f-responsi bi l i ty and wi l l to succeed
whi ch are essenti al s for a goi ng-concern economy. And caste di vi si ons i n
a soci ety are i ncompati bl e wi th the i dea of i nherent ri ghts and equal i ty
before the l aw. Capi tal i sm i s rooted i n the cul tural heri tage of the West,
Chri stendom, and you cant have the frui ts wi thout the roots; you can-
not merel y wi sh an end resul t to will the end is to will the means. 14
Keynesi ani sm Offers a Pl an of Sal vati on
The State l oves you, and has a wonderful pl an for your l i fe.
I n an earl i er chapter, I suggested that Keynesi ani sm i s soci al -
i sti c and authori tari an i n nature. There i s an i nherent reason for
thi s, and thi s i s why there i s an i nexorabl e move towards total i tar-
i ani sm whenever Keynesi an theory i s adopted.
The essence of free market economi c theory i s thi s: the econ-
omy i s control l ed by i ndi vi dual s who make w!yectiue val uati ons.
For exampl e, a person who deci des to save some of hi s assets does
so because he prefers to forgo present consumpti on i n order to par-
ti ci pate i n consumpti on at some poi nt of ti me i n the future. Thi s i s
the basi s of the capi tal process. Wi thout peopl es wi l l i ngness to
forgo present consumpti on there can be no capi tal projects whi ch
provi de goods i n the future, for exampl e, mi neral expl orati on.
What causes peopl e to make the ki nd of deci si ons such as sav-
i ng? Obvi ousl y there are a number of factors. There are perhaps
more obvi ous moti ves such as savi ng for somethi ng whi ch i s
14. Edmund A. Opi tz, The Phi l osophy of Ludwi g von Mi ses i n The Freeman,
(Jul y 1980), p, 440. Publ i shed by the Foundati on for Economi c Educati on,
I rvi ngton-on-Hudson, New York 10533. See al so P. T. Bauer, Equalip, the Third
World, and Economic Delusion (Cambri dge, Massachusetts: Hamard Uni versi ty
Press, 1981),
Behold, Our Savior! 259
beyond the present abi l i ty of the person to obtai n. But there are
al so deeper psychol ogi cal moti ves whi ch cannot be so easi l y ex-
pl ai ned, and i n fact defy expl anati on because human knowl edge
at thi s poi nt i n ti me cannot properl y understand them. As Scri p-
ture decl ares, For now we see through a gl ass, darkl y (I Cor.
13:12). I n a very real sense we may say that peopl es economi c de-
ci si ons are a product of what they themsel ves are. Thi s i s why
Chri sti ans, those made new by the Spi ri t of the Li vi ng God, often
make vastl y di fferent economi c deci si ons than those who are unre-
gener ate.
The free market economy l i ves wi th thi s fundamental real i ty
and adjusts i tsel f i n terms of i t. I f peopl e begi n to save more than
previ ousl y, others i n the market pl ace must adjust thei r busi ness
acti vi ti es accordi ngl y. Perhaps there are those whose goods suffer
a di mi ni shed demand as consumpti on i n the present i s postponed
for the future. At the same ti me, there are others i n the economy
who wi l l benefi t and take advantage of the new avai l abi l i ty of
funds for capi tal i nvestment.
The Keynesi an system, however, does not permi t thi s ki nd of
worl d. I nstead, Keynesianism wants a world which must conform to the
expert plannen wishes and desires. How terri bl e that peopl e shoul d
save and deny someone a present i ncome (or so they thi nk).
Peopl e, therefore, must be forced to conform to the Keynesi an vi ew
of what real i ty shoul d be. I f peopl e save, there must be pol i cy
to overcome thi s propensi ty i n human bei ngs. The economy must
be made to operate the way Keynesi ans think it ought to oper-
ate. Legi sl ati on must be passed to coerce conformi ty from the
popul ati on.
Keynesi ani sm i s therefore very much a rel i gi on. I t has a
theory of moral i ty. I t offers a defi ni ti on of ri ght and wrong, and
offers a concrete pl an to sol ve those wrongs. I n other words,
Keynesi ani sm has a pl an of sal vati on. But i ts pl an of sal vati on i s
vastl y di fferent from that of the Li vi ng God who has decreed that
sal vati on may onl y be obtai ned by fai th i n the atoni ng work of
Jesus Chri st and obedi ence to Hi s reveal ed wi l l .
260 Baptized In$ation
To cal l for bureaucrati c control of the i ndi vi dual i s to deny
somethi ng to man whi ch hi s Creator has decreed. Man has been
endowed wi th reason and the abi l i ty to make choi ces. To deny a
man those choi ces i s to deny hi s fundamental humani ty and hi s
i nherent ri ghts gi ven by hi s Creator. To i nsi st that uni quel y
equi pped economi sts must make deci si ons for the rest of soci ety
i s to say that knowl edge ori gi nates i n man; and that i s to gi ve
credence to the serpents l i e. As the Psal mi st decl ared, i t i s God
who teaches man (Ps. 94:10) and God i s therefore mans ul ti mate
source of sal vati on not the vague and nonsensi cal theori es of
those enl i ghtened by the study of economi cs especi al l y the non-
Bi bl i cal economi cs of a perverted homosexual .
Conclusion
Man i s not saved by secret arcane knowl edge, even knowl edge
wi th equati ons. Man i s not saved by State power. Man i s not saved
by l aw, especi al l y stati st l aw. The Bi bl e tel l s us that man i s saved by
grace through fai th (Eph. 2:8-9), i n order that he mi ght wal k i n
the ways God has pl anned for hi m (Eph. 2:10).
Dr. Vi ckers has adopted the fi rst two vi ews of sal vati on: sal va-
ti on by arcane knowl edge and sal vati on by stati st l aw. He sees no
way for redeemed Chri sti ans to reconstruct soci ety al ong Bi bl i cal
l i nes. We wi l l never have a Chri sti an soci ety, he says. 15 That
l eaves onl y one other ki nd: a non-Chri sti an soci ety. He has there-
fore adopted hi s favori te brand of non-Chri sti an soci ety, the
brand of hi s youth, the equati on-fi l l ed, jargon-fi l l ed soci ety of
Keynesi an pl anni ng. He woul d have us joi n hi m on the yel l ow
bri ck road to the l and of Keynes.
Forgi ve me i f I try some other path. I see where thi s one i s
headed.
15. Vi ckers, Economics and Man, p. 45.
CONCLUSION
First, economics ina Christian p~spective mustaccord~ll recog-
nitionto therights of theindividual andindividual responsibility, but
it cannot condone those concentrations ofeconomic power in the hands
of individuals which make it possible for the interests of others to be ex-
ploited. And fullrecognition isalsoaccorded tothefact that, fl~tto
itself, there is no inherent reason why thea~regative economic system
will achieve a complete and automatic harmony of interests. Second,
some intervention by the state in economic afairs is necessary, to some
extent regulatory andinother instances moredirect~ participator. But
at the same time, a Christian economist cannot countenance the ex-
ploitation by the state, or by state agencies or personnel, of the rights of
individuals and the broader interests of sociep. And it is dz@cult to
conceive, under scriptural mandate, of the propriety of the usurpation
by the state of those economic finctions and prerogatives which lie
properly within the province of individual action. ~
We have had the opportuni ty to pursue Dr. Vi ckers i deas on
the meani ng of both capi tal i sm and soci al i sm. I n both i nstances,
we must concl ude that there i s a seri ous l ack of understandi ng on
Dr. Vi ckers part about what these words mean. Hi s defi ni ti ons are
ei ther i naccurate (e. g., capi tal i sm) or non-exi stent (e. g., soci al i sm).
How, then, shoul d we vi ew hi s cl ai m that there i s a thi rd way,
an al ternati ve to both capi tal i sm and soci al i sm? Essenti al l y we
shoul d vi ew thi s cl ai m as the meanderi ng of a mi nd whi ch has
made l i ttl e effort to come to gri ps wi th economi c hi story and
1. Economics and Man, p. 78.
261
262 Baptized I ny?ation
theory or whi ch has made the effort, and fai l ed mi serabl y to
communi cate i ts fi ndi ngs i n l anguage that any reasonabl y al ert
person can comprehend.
Deliberately Ignoring His Strongest Opponents
Take, for exampl e, the cl ai m i n hi s book that the reader wi l l
fi nd i n my treatment of the rel evant i ntel l ectual hi story the fami l -
i ar names of Smi th, Mal thus, Ri cardo, Mi l l , Chal mers, Jevons,
Si dgwi ck, Marshal l , Vi ner, Keynes, and others .2 For one thi ng,
he barel y menti ons any of these major economi sts i n hi s book.
More i mportant, here i s taci t admi ssi on that he i s not goi ng to
make reference to at l east one school of economi c thought, what
has became known as the Austri an School of economi cs. Through-
out hi s work Dr. Vi ckers makes no reference, for exampl e, to the
wri ti ngs of Carl Menger, Eugen von Bohm-Bawerk, or Ludwi g
von Mi ses, the l atter havi ng presented some of the most ri gorous
economi c anal ysi s of soci al i sm to be found i n economi c l i terature.
Mi ses thoroughl y anal yzes al l opposi ng vi ewpoi nts to hi s own i n
demonstrati ng thei r i nherent weaknesses. But thi s i s somethi ng
we do not fi nd i n Dr. Vi ckers (nor i n Keynes, for that matter). I s
i t si mpl y that he chose not to make reference to them? Si nce he
knows that Dr. North and Rev. Rushdoony rel y on the i nsi ghts of
the Austri an School , we mi ght expect that Dr. Vi ckers woul d
openl y and wi thout del ay confront the fundamental tenets of the
Austri an School . He does not do so. The reader i s not even gi ven
an i naccurate summary of thei r vi ews, l et al one a fai r and judi -
ci ous summary.
Why not? Because Dr. Vi ckers knows that thei r vi ews are
cl ear and presented i n Engl i sh, whi l e Keynes vi ews are garbl ed.
Gi ve an i nexperi enced reader the choi ce, and he wi l l remember
the Austri an arguments a l ot better and easi er than he wi l l
remember the convol uted detai l s of the Keynesi an system. The
Keynesi ans wi l l l ose the debate far too often. So they i gnore the
Austri an School . They pretend i t i snt there. Thi s maybe i ntel l ec-
2. I bid., p. vii.
Conclusion 263
tual cowardi ce, but that i s the way the academi c game i s pl ayed.
The truth of the matter i s Keynesi ani sm has been refuted a
thousand ti mes over i n the past 200 years. (Thats ri ght, for
Keynesi ani sm i s nothi ng but a rehash of the ol d mercanti l e theor-
i es whi ch the earl y cl assi cal economi sts demol i shed wi th consi der-
abl e abi l i ty. )3 The fact that Samuel son coul d honestl y admi t the
l anguage i n Keynes General Theo~ does not al ways seem to make
sense i s evi dence of preci sel y that poi nt: i t i s a nonsensi cal book.
Yet now we have Dr. Vi ckers presenti ng Keynesi ani sm to us fi rst,
on the pretext that i t i s sound economi c theory, and second, that i t
i s Chri sti an economi c theory.
The fact i s, however, that hi s book does not make any seri ous
use of any of these famous pre-Keynesi an economi sts. He men-
ti ons a few of them occasi onal l y, but hi s book i s i n no sense rel i ant
upon the cl assi cs. We fi nd more footnotes to an obscure and un-
i denti fi ed wri ter named H. F. R. Catherwood than to Adam
Smi th and the other economi sts Dr. Vi ckers parades around i n hi s
Preface. I n fact, he hardl y even ci tes Keynes General Theoy, whi ch
i s understandabl e, si nce there i s very l i ttl e evi dence that he has
read i t. Li ke most post-Keynesi ans, Dr. Vi ckers does not rel y on
i ts convol uted arguments and pecul i ar defi ni ti ons when i t comes
down to wri ti ng hi s own book. I t i s a l ot easi er to quote from the
post-Keynesi an crowd than to struggl e wi th The General Theory. I
dont bl ame hi m a bi t.
My anal ysi s of Dr. Vi ckers has concentrated on establ i shi ng
two thi ngs. Fi rst, he i s prepared to mi sstate hi s opponents i n order
to score debate poi nts. (Fortunatel y for hi s opponents, hi s styl e i s
so muddl ed that he never qui te scores, ) Thi s i s i ntel l ectual l y di s-
honest and poor schol arshi p. Second, we have seen that he tri es to
argue for a supposed thi rd way i n economi cs by denyi ng that eco-
nomi cs i s an ei ther-or choi ce between soci al i sm and capi tal i sm.
We have seen, however, that he fai l s i n thi s regard, for he categor-
i cal l y rejects the use of Ol d Testament l aw and hi story to gui de us
3. L. Al bert Hahn, The Economics of I llusion: A Cri ti cal Ana@s of Contemporary
Economic Theoy and Practice (Wel l s, Vermont: Fraser, [1949] 1977), ch. 10: Mer-
canti l i sm and Keynesi ani sm.
264 Baptized I ng?ation
al ong the onl y concei vabl e and workabl e thi rd way. No matter
what di scl ai mers he makes, what he i s cal l i ng for are the i ni ti al
steps down the road to soci al i sm. To descri be i t otherwi se woul d
be grossl y mi sl eadi ng.
A Pile of Errors
Our survey of the Keynesi an system i s compl eted. Thi s anal y-
si s of some of the basi c theori es of the Keynesi an economi c sys-
tem, as wel l as parti cul ar arguments put forward by Dougl as
Vi ckers, shoul d serve as an ai d i n deci di ng whether Chri sti ani ty
and Keynesi ani sm are compati bl e. As a resul t of thi s anal ysi s, i t
shoul d be possi bl e for most readers to agree wi th Henry Hazl i tt
that the Keynesi an system contai ns an i ncredi bl e number of fal -
l aci es, i nconsi stenci es, vaguenesses, shi fti ng defi ni ti ons and
usages of words, and pl ai n errors of fact.a
Al though Dr. Vi ckers contends that Hazl i tts work i s a %hal -
10W anal ysi s,s i t i s worth noti ng that no Keynesi an economi st has
ever attempted a systematic refutati on of Hazl i tts devastati ng cri -
ti que, probabl y because they cannot refute i t, and certai nl y be-
cause they cannot refute i t i n pl ai n l anguage. On the other hand,
perhaps Dr. Vi ckers, i n hi s promi sed l onger work on economi c
anal ysi s, wi l l make the ti me and effort for such a refutati on. Just as
Marx fi nal l y gave us hi s defi ni ti on of cl ass.G Just as Darwi n fi nal l y
gave us hi s defi ni ti on of speci es.T That i s to say, fat chance. EGO-
nonzics and Man is al ready a decade ol d. I t has not aged wel l .
4. Henry Hazl i tt, The Failure of the New Economics
m
, p. 7,
5. Economics and Man, p. 36.
6. I n the posthumousl y publ i shed thi rd edi ti on of Capi tal , on the next to the
l ast page, Marx wrote: The fi rst questi on to be answered i s thi s: What consti -
tutes a cl ass? Two paragraphs I ater , the manuscri pt breaks off, Marx, Capi tal : A
Critique of Political Economy (Chi cago: Charl es H. Kerr, 1909), p. 1031. He bui l t hi s
whol e theory of hi story on the basi s of the cl ass struggl e i n hi story, yet he never
got around to defi ni ng what a cl ass i s. The joke i s on us. The joke i s especi al l y on
the i ntel l ectual s who sti l l fol l ow Marx.
7. Nor shal l I here di scuss the vari ous defi ni ti ons whi ch have been gi ven of
the term speci es. No one defi ni ti on has sati sfi ed al l the natural i sts; yet every
natural i st knows vaguel y what he means when he speaks of a speci es. Darwi n,
Ori gi n of Species (Modern Li brary edi ti on), p. 38.
Conclusion 265
Keynes General Theoy was a book desi gned to confuse. We
fi nd i n Dr. Vi ckers a si mi l ar propensi ty to confuse. Hi s prel ude
has been orchestrated as a cacophony of uni ntel l i gi bl e, i l l ogi cal ,
and meani ngl ess arguments. I n real i ty, hi s prel ude i s more l i ke a
theme wi th vari ati ons the theme bei ng nonsense and the vari a-
ti ons refl ecti ng the perverted subject. I , for one, havi ng heard the
prel ude and pai d Dr. Vi ckers the courtesy of attempti ng to un-
derstand hi s work, do not thi nk i t i s worth the effort to remai n for
the mai n performance and the curtai n cal l . The words of Marti n
Luther, al though gi ven i n another context, are emi nentl y ap-
pl i cabl e here. And, si nce you cannot overthrow i t by any argu-
ment, you try meanti me to ti re the reader wi th a fl ow of empty
verbi age .8 Or, as Howard Katz has observed, The Keynesi an
economi sts are not true experts. They cannot do anythi ng.
Al though they stake thei r presti ge on thei r abi l i ty to predi ct (as
part of thei r fraud of i mi tati ng the sci enti st), thei r predi cti ons are
a standi ng joke and a conti nual embarrassment. Nei ther can they
expl ai n thei r theori es i n terms that make sense. I f you have had
the experi ence of l i steni ng to one of todays economi sts and have
come away thi nki ng, I cannot make head or tai l of what that
fel l ow i s sayi ng; then do not be al armed. That i s the response of a
properl y functi oni ng mi nd.g
Why i s i t that Dr. Vi ckers can embrace such i ntel l ectual non-
sense and do such vi ol ence to the Scri ptures whi ch he says he be-
l i eves? The answer to that i s i l l ustrated i n the joke whi ch asks:
Why are Pol i sh cows deformed? Answer: Because theyre rai sed
i n Pol and and mi l ked i n Russi a. Why i s Dr. Vi ckers thi nki ng de-
formed? Because al though he was rai sed i n the Chri sti an fai th, he
recei ved hi s educati on i n the school s and uni versi ti es of apostate
humani sm. Thi s i s a di sease common i n too much of the Chri s-
8. J. I . Packer and O. R. Johnston, trans., Marti n Luther, The Bondage of the
Will (Cambri dge, Engl and: James Cl arke, 1957), p. 87. Or use the transl ati on i n
the Li brary of Chri sti an Cl assi cs: Luther and Era~mus: Free Will and Sal vati on (Phi l a-
del phi a: Westmi nster Press, 1969).
9. Howard S. Katz, The Warmongers (New York: Books I n Focus, 1979), p.
259, emphasi s i n ori gi nal .
266 Baptized I nzation
ti an communi ty. (Of course, i t real l y i snt a di sease; i t i s a moral
fai l ure.) And Dr. Vi ckers i s a very good exampl e of what can hap-
pen when we rai se our chi l dren i n the school s of Egypt.
I f you want a good reason for Chri sti an school s, read Econom-
ics and Man.
The Legacy of Keynes
We are now i n a posi ti on to answer the questi ons rai sed i n the
i ntroducti on to thi s study. Di d Keynes gi ve us a si gni fi cant l ogi -
cal and methodol ogi cal reconstructi on of economi c theory? Has
he achi eved a more compl ete understandi ng of the structure and
functi oni ng of the economi c system? We have found no evi dence
to substanti ate these arguments. On the contrary, we have found
substanti al evi dence to i ndi cate what wi l l happen to the present
fi nanci al system, thanks to the justi fi cati on Keynes gave to eco-
nomi c theori es whi ch have brought upon the West i ts greatest ever
fi nanci al cri si s: a mountai n of Thi rd Worl d debt whi ch the Wests
banks are unl i kel y ever to see repai d at l east not i n dol l ars that
are worth anythi ng; a $200 bi l l i on annual defi ci t by the govern-
ment of the Uni ted States; endl ess i nfl ati on; endl ess busi ness
cycl es; and al l of thi s accompani ed by cri es from grayi ng Keynes-
i an economi sts that they ought to be gi ven more power to make
other mens economi c deci si ons for them, that next time all their ideas
will work. Real l y. Trust them. Thei r promi ses are a l ot better than
gol d, whi ch Keynes cal l ed a barbarous rel i c. Thei r promi ses are
as good as an I MF bond. Thei r word i s thei r bond, and thei r word
i~ bond. More debt, more debt; l et us spend oursel ves ri ch.
Nor can we agree wi th Dr. Vi ckers that Keynes gave us a new
way of seei ng thi ngs. Keynes new way i s i n fact an ol d way. I t
dates back to the Garden of Eden and mans ori gi nal rebel l i on
agai nst hi s Creator. Keynes economi cs i s the economi cs of a rebel
who made no effort to submi t hi msel f to the God who made hi m.
I t i s an exampl e of man bei ng as God (Gen. 3:5) i n the real m of
economi cs, wi th catastrophi c resul ts.
What about the cl ai ms of Dr. Vi ckers? Has he redi rected the
thi nki ng of Bi bl i cal economi cs? Agai n we can fi nd no evi dence
Conclusion 267
that he has. To the contrary, i t i s Dr. Vi ckers who has contri buted
consi derabl e confusi on to the economi c debate.
The real i ssue, however, i s not economi c theory, as Dr. Vi ck-
ers wel l understands. I t i s ul ti matel y a matter of i deol ogi cal pre -
ferences.l o Al l the arguments concerni ng mul ti pl i ers, GNP,
MPC, NNP, l eakages, i njecti ons and so forth are i rrel evant to the
di scussi on. They are merel y whi tewash to gi ve the Keynesi an sys-
tem apparent i ntel l ectual justi fi cati on. Yet Dr. Vi ckers knows that
what i s at stake here i s a matter of i deol ogy. I t i s Chr i sti an thought
and speci fi c Bi bl i cal pr i nci pl es and gui del i nes ver sus the i deas of
a u ton omou s a n d r ebel l i ou s ma n .
The Question of Sovereign
Keynesi ans, general l y speaki ng, have not arri ved at the real i -
zati on of thi s poi nt (and nei ther have many Chri sti ans for that
matter). Ul ti matel y al l economi c theori es turn upon the questi on
of soverei gnty. Whose word is law? Gods or mans? There are no
thi rd, fourth, or fi fth choi ces. I t i s that si mpl e. Keynesi ans en-
deavor to be fence-si tters on a fence that does not exi st. There is no
neutral ground. Hence, Keynesi ans, and one Chri sti an
)
Keynesi an
i n parti cul ar, osci l l ate from one si de to the other. Wi tness Dr.
Vi ckers: at one ti me he i s qui te vocal about the need for Bi bl i cal
l aw, whi l e on other pages he does hi s best to convi nce the reader
that we cannot have Scri ptural pri nci pl es because we l i ve i n a
fal l en worl d.
I n a more l i mi ted sense al l economi c theori es revol ve on the
questi on of property ownershi p, as Mi ses understood so wel l . Wi l l
property be pri vate or publ i c? Agai n the Keynesi ans conti nual l y
shi ft thei r base. One moment they are ardent defenders of pri vate
property, and i n the next i nstance they wi l l become the most el o-
quent advocates of publ i c control of property. Keynesi ans are not
epi stemol ogi cal l y sel f-consci ous. They have not real i zed, as di d
Marx, that by denyi ng pri vate property, they are at war wi th God
and Hi s Law, whi ch establ i shes pri vate property ri ghts.
10. Vi ckers, Economics and Man, p. 334.
268 Baptized I nJ ation
One of the probl ems of our age, as observed by Katz, has been
that by granti ng fame to evi l men, hi stori ans have encouraged
the spread of evi l . . . . What i s wrong wi th hi story as currentl y
taught i s that i t gi ves pri mary i mportance to the destroyers of val -
ues and onl y secondary i mportance to the creators.11
Keynesi an theori es are destructi ve of val ues Chri sti an val ues
as found i n the Word of God. Therefore, l et us hope that the ti me
wi l l soon come when Keynes . . . wi l l be recogni zed as one of the
great i ntel l ectual mi ners of hi story l i ke Rousseau and Marx.nl z
Keynes and Vickers
We know what Dr. Vi ckers thi nks of Mr. Keynes. But what
woul d Keynes, the professi onal skepti c and ful l -ti me pervert,
have thought of Dr. Vi ckers? What woul d he have thought of a
sel f-professed Chri sti an schol ar who has devoted hi s l i fe as a ki nd
of acol yte to Keynes, even to the extent of wri ti ng a book fusi ng
Keynes and the Bi bl e? He woul d have been astounded, just as
Charl es Darwi n was endl essl y astounded at the stream of l etters
from cl eri cs who tol d hi m that i t was onl y Origin of Species whi ch at
l ast made sense of Chri sti ani ty for them.
But woul d he have appreci ated the effort? I t i s doubtful . I n
fact, the attempt woul d probabl y have angered hi m. Of what earthl y
use to Keynes woul d Economics and Man have been an attempted
fusi on of God and revol uti onary economi cs? Keynes bi ographer
Harrod descri bes Keynes: Hi s mi nd was hi ghl y i ntol erant of any-
thi ng ambi guous or makeshi ft. Confronted wi th an i ntel l ectual
patchwork, wi th an ol d i dea and a new i dea i ncongruousl y hel d
together, he coul d not fai l to detect the i ncongrui ty wi th hi s qui ck
penetrati on, and was l eft wi th a feel i ng of i rri tati on and di sgust.
He, l i ke Strachey, craved for the cl ean sweep, the bol d new i dea,
the cri sp and l uci d .13
11. Katz, op. cit., pp. 271, 272.
12. Wi l hel m Ropke, A Humane Economy: The Social Framework of thz Free Market
(South Bend, I ndi ana: Gateway Edi ti ons, 1960), p. 219.
13. Roy Harrod, The Lye of J ohn Maynard K~nes (New York: Norton, [1951]
1982), p. 88.
Conclusion 269
I f ever there was a book whi ch coul d not concei vabl y be
descri bed as cri sp and l uci d: i t i s Economics and Man. I f ever there
was an i ncongruous i ntel l ectual patchwork, i t i s Dougl as Vi ckers
attempt to fuse the Bi bl e and Keynes. Keynes woul d have been
appal l ed i ndeed, as I am, but for di fferent reasons: he for the
stai n of the Bi bl e, and I for the stai n of Keynes.
Final Remarks
Economics and Man never gai ned any i nfl uence. Conservati ve
Chri sti ans had no use for bapti zed Keynesi ani sm, and l i beral s
had no use for Dr. Vi ckers affi rmati on of Van Ti l s anti -humani st
epi stemol ogy. The book i s a cl assi c exampl e of a desperate at-
tempt by an i ntel l ectual l y compromi sed Chri sti an academi c to
synthesi ze opposi tes: hi s rel i gi ous fai th and hi s academi c fai th. As
al ways, the academi c fai th won out. We have seen thi s story
repeated endl essl y i n every l i ttl e Chri sti an col l ege i n the l and,
wi th thei r offi ci al l y certi fi ed Ph.D.-hol di ng schol ars, and thei r
vai n quest for academi c respectabi l i ty. Facul ty members have sol d
thei r theol ogi cal bi rthri ght for a mess of pottage, just as Dr. Vi ck-
ers sol d hi s.
Economics and Man is notabl e onl y for i ts fai l ure i ntel l ectual l y,
styl i sti cal l y, and above al l economi cal l y. I t sank wi thout a trace,
except for a l ecture or two at Dr. Norths ol d al ma mater, West-
mi nster Theol ogi cal Semi nary. That publ i c appearance di d noth-
i ng noti ceabl e for the sal es of Economics and Man.
Dr. Vi ckers devoted hi s academi c career to becomi ng a front
man for an academi cal l y successful rel i gi on. The founder of that
rel i gi on was a homosexual who had a very short-run vi ew of l i fe.
(Gi ven the Bi bl i cal doctri ne of fi nal judgment, he was certai nl y
enti tl ed to such a vi ew. ) He began hi s career as a l ogi ci an and a
bri l l i ant essayi st and pol emi ci st. The more he wrote, the l ess co-
herent he became. We can see i n hi s wri ti ngs the earthl y judgment
of God. There was a progressi ve deteri orati on i n hi s abi l i ty to
communi cate hi s i deas not i n maki ng converts i n an i ncreas-
i ngl y perverse i ntel l ectual and pol i ti cal worl d, but i n setti ng forth
hi s i deas i n a way that hi s fol l owers coul d repeat them, predi ct the
270 Baptized I nzation
economi c future wi th them, and act i n terms of them. The General
TheoU is a book fi l l ed wi th i ncoherent l ogi c, fal se anal ogi es, use-
l ess formul as, and State-enhanci ng concl usi ons. He was success-
ful i n attracti ng a generati on of academi c economi sts who be-
l i eved that hi s economi c system was the road to a New Worl d
Order. They joi ned together on a quest to the Emeral d Ci ty of
Keynes, where spendi ng creates producti on, where money fl ows
forever, where downward pri ce fl exi bi l i ty i s a myth, where gov-
ernment spendi ng can cure just about anythi ng.
And hardl y anyone bel i eves hi m any more. . . . Marti n Fel d-
stei n, the counci l [of Economi c Advi sors] chi ef recentl y chased
back to Harvard, observes that duri ng the 1982 recessi on there
was hardl y a cal l from ei ther professi onal economi sts or el ected
offi ci al s for the government to do somethi ng. So, too, despi te hi gh
unempl oyment, there was very l i ttl e sai d about pol i ci es to bri ng i t
down duri ng the presi denti al campai gn. I ts amazi ng how far
weve come, says ratexi an [rati onal expectati ons economi st] Nei l
Wal l ace. That hasnt happened i n any of the previ ous presi denti al
el ecti ons of the past 20 years. 14 I t i s not that they have al l ac-
cepted free enterpri se; i t i s that they no l onger have any bel i evabl e
rabbi ts to pul l out of the States hat.
Next ti me they may si mpl y i mpose raw power. They wi l l not
need any sophi sti cated economi c theori es to justi fy thei r acti ons.
They wi l l certai nl y not need i ncoherent, l ackl uster, unsal abl e
books al ong the l i nes of Economi cs and Man.
I n the Chri sti an worl d, Dougl as Vi ckers serves as the pri me
exampl e of how a man can take the wrong path and become a
propagandi st for the enemi es of Hi s heavenl y Savi or. How coul d
he have been so fool i sh? Van Ti l gi ves us the answer: the epi ste-
mol ogi cal probl em i s not ul ti matel y i ntel l ectual ; the probl em i s
ethi cal . Dr. Vi ckers probl em i s not pri mari l y i ntel l ectual . Dr.
Vi ckers pri mary probl em i s moral : he woul d ensl ave men to the
State i n the name of Chri sti an ethi cs.
14. Susan Lee, The un-managed economy; Forbes (Dec. 1984), p. 158.
Abor ti on, 100
Anabapti st, 70
Anderson, Benjami n McAl i ster,
164-165
Anti nomi an, 83, 104
Arrogance, 207
Authori tari an, 207
Automati c, 39-42, 107-108, 158 .
Autonomous, 267
Bahnsen, Greg L., 98, 100
Banki ng, 163, 183, 209
Banks, 1, 238
central , 3, 162
Bapti zed, 23, 147, 269
Basti at, Frederi c, 39, 45, 107, 214
Bel gi c Confessi on, 70
Bi bl i cal Law, 16, 85-86, 88, 97, 103,
108, 122, 175
Bi l l i ngton, James, 28
Budget, 91
Cal vi n, John, 71
Cambri dge Apostl es, i x-x, 20
Capi tal i sm, 6, 33, 35-36, 39, 50, 60,
75, 117
Carson, Cl arence B., 251, 253
Cartel , 149-150
Cause-and-effect, 9, 183, 208-209,
213, 219, 258
Chi l ton, Davi d, xxi v, 36, 250
Chri sti an Reconstructi on, xxi i i , 41,
84, 90
Cl assi cal economi cs, 40ff, 61, 107,
147, 149, 156, 220
Communi sm, 65, 83
Competi ti on, 155-156
Counterfei ti ng, 135, 137
Darwi n, Charl es, 264
Darwi ni sm, 190-191
Davi s, John Jefferson, 5
Deacon, Ri chard, x, 228
Decentral i zed, 51, 53
Demand, 148-149, 154, 187, 191
Democracy, 93
Depressi on, 4, 75, 134, 147, 153, 233,
248
Descartes, Ren6, 31
Di etze, Gottfri ed, 70-71
Di sequi l i bri um, 95, 104-105, 194
Drucker, Peter, 4-5, 191
Economi c l aw, 103, 110, 116, 120
Educati on, 77, 247, 265
Empl oyment, 73, 140, 151, 214
Entrepreneur, 141, 152, 157, 198,
210
Entrepreneurshi p, 156
Equi l i bri um, 40, 105, 108, 140,
151-152, 194
Ethi cs, 20, 33, 46, 270
Exchange rates, 9, 78
Expl oi tati on, 36, 59-60
Facts, 13, 59, 114
Fasci sm, 77
Federal Reserve, 173, 243, 248
Fi scal pol i cy, 132, 138, 165, 188
Fracti onal reserves, 163, 183
271
272 Baptized lny?ation
Fraud, 196
Keynes, John Maynard, i x-x, xxvi i , 2,
Free market, 6, 34-35, 47, 51, 73, 76,
8, 12, 17,20,30,33,62, 109,222,
108, 116, 140,259 226
Fr i edman. Mi l ton. 149.192.202.232
General Theory, 17, 24, 26, 34, 59,
.,, ,
Gal brai th, John Kenneth, 65, 174,
221, 237
Genoa Conference, 166
Gi ffen Paradox, 113, 117
Gol d Coi n Standard, 165
Gol d, 89, 93, 162, 170, 245
exchange standard, 166
Great Depressi on, 130
Greed, 41, 59-60, 116, 248
Greshams Law, 174
Gri ffi ths, Bri an, 6
Gross Nati onal Product, 141
Harmony of i nterests, 39, 46, 89
Harrod, Roy, 19, 268
Hayek, F. A., 16, 22, 26, 52, 75, 80,
179, 192
Hazl i tt, Henry, 150, 227, 264
Hegel , G. W. F., 32
Hoardi ng, 128, 233
Hol royd, Mi chael , 19
Homosexual , x, 19, 23, 220, 269
Hutt, W. H., 23, 76, 245
I dol atxy, 254
I ncome, 221
I nfl ati on, 2-3, 9, 79, 138, 143, 177,
179, 189, 193, 195, 197, 246
I nheri tance, 77-78
I nterest rates, 54-55, 57-58
I nvestment, 62
I nvi si bl e hand, 40, 42, 89
I srael , 84, 94, 99, 104-105
Justi ce, 255
Kant, I mmanuel , 31-32
Katz, Howard S., 265, 268
62, 110, 135; 150, 165, 178, 219,
228, 265
Keynes, John Nevi l l e, 6
Keynesi an Sol uti on, 212
Keynesi ani sm, 7, 28, 64, 246, 250,
258-259, 269
Knowl edge, Theory of, 33
Kuhn, Thomas, 27, 147, 201
Kuttner, Robert, 203
Labor , 118
L&sez-Fai re, 6, 35, 39, 41-42, 50-51,
59, 120, 135, 143
Lawl ess, 104
Lei jonhufvud, Axel , 125
Less-Devel oped-Countri es, 245
Luther, Marti n, 71, 191, 265
Macroeconomi c, 34, 54, 75
Maki n, John H., 242
Margi nal Propensi ty to Consume,
224E
Market, 205
Marx, Karl , 9, 52, 74, 76, 78, 264,
267
Mathemati cs, 226
Mi ses, Ludwi g von, 16, 26, 58, 64,
69, 130, 150, 153, 157, 162, 192,
202, 267
Monetari sm, 248
Monetary demand, 128
Money, 64,85,88, 128, 134, 137, 153,
179, 187, 221
fi at, 154, 185
SU@y, 166, 170, 178, 180, 193, 195
theor y of, 161ff, 179
Monopol y, 41
Moore, E. G., xi , 20
Moral val ues, 245
I ndex 273
Moral i ty, 194-195, 219-220, 223, 256 Rothbard, Murray, 149, 174, 234
Mul ti pl i er, 226
Rueff, Jacques, 166
Murder, 100
Ruff, Howard J., 240
Rushdoony, R.J., xxvi i i , 5, 10, 16,
Nati onal I ncome, 57-58, 233
45, 50, 81, 86, 97, 167, 221
North, Gary, xxvi i , 5, 10, 16, 41, 44,
53.86.155.169.196.207. 221.234 Sal vati on, 254, 258
,., , ,,,
Oppressi on, 89
Overproducti on, 151-152, 157
Ownershi p, 63-65, 69, 76, 84, 235
Perverse, 219
Pervert, x, 2, 92, 220, 268
Poverty, 250
Predesti nati on, 191
Presupposi ti ons, 16, 18, 35, 73, 90,
255
Pri ce mechani sm, 152, 213, 217
Pri ce competi ti on, 209
Pri ces, 1, 77-78, 80, 129, 148, 151,
178, 180, 195, 210, 222
Producti on, 1, 117, 140, 154
Profi t moti ve, 43, 108, 157
Profi ts, 204
Property, 47, 63, 65, 69-70, 73, 81
Protestant ethi c, 221
Puri tan, xi i , 228
Quota, 77
Rati onal expectati ons, 26-27, 270
Rati onal , 202
Recessi on, 1, 75, 133, 140
Reci procal , 234
Regenerati on, 254
Rel ati vi sm, 31
Repentance, 99
Resources, 75-76, 140, 198
i dl e, 76
mi sal l ocati on of, 197
Ropke, Wi l hel m, 35, 44, 268
Rose, Tom, 5
Samuel son, Paul , 21
Savi ngs, 62, 221-222
Savi or, 251ff
Say, Jean Bapti ste, 148
Says Law, xv, 76, 147
Schl ossberg, Herbert, xxi i , xxv, 254
Secul ar, 23, 50
Sel f-i nterest, 39
Si der, Ronal d, xxi v, xxvi i
Si l ver, 89, 162
Si n, 17, 21, 39, 84, 87, 89, 94, 109,
169, 175-176, 191
Ski del sky, Robert, 19
Sl avery, 3
Smi th, Adam, 39, 42, 46, 60, 107
Soci al Credi t, 3, 190, 195
Soci al i sm, 33, 35-36, 65, 73, 78, 81,
83, 121, 264
Sowel l , Thomas, 148, 150
State, The, 47, 72-74, 77, 98, 108,
112, 120, 142, 167, 175, 183, 196,
207, 212, 222-223, 225, 270
Steeton, Paul , 203
Stewardshi p, 63, 230, 235
Strachey, Lytton, i x-x, xi i , 19
Subjecti ve val ue, 51, 56, 58, 204, 206
Suppl y and Demand, Law of, 232
&Jpfiy, 148-149, 154, 187, 191
Tari ff, 78, 131, 150, 209
Taxati on, 85
Taxes, 78, 122, 142, 198, 212, 222
Tayl or, E.L. Hebden, 5, 11
Ten Commandments, 84
Theft, 189, 196
Theocracy, 84, 93, 97
274 Baptized I nzation
Theonomy, 96
Thi rty-Ni ne Arti cl es, 70
Thri ft, 221-223
Ti me preference, 56, 58
Ti the, 142
Total i tari an, 80, 250
Trade unions, 214
Trade cycl e, 153
Truth, 23, 31-33
Unempl oyment, 1, 77, 79, 114, 133,
140, 147, 152, 201, 207, 209-210,
213, 215
Van Ti l , Cornelius, 15, 18, 29-30,
73, 90, 270
Vickers, Douglas, ix, xiii, xvi, xxii,
xxvii, 9-10, 16, 29, 30, 39, 43,
56-59, 71, 80, 86, 103, 120, 125,
150, 175, 188, 192-194, 207, 209,
211-212, 220, 228, 246, 252,
255-257, 261, 264, 266, 268-270
Wage rates, 204, 210, 214
Wages, 77, 80, 115, 117, 152, 195, 207
Weitzman, Martin, 203
Welfare, 77
Westminster Theological Journaf, 11