Preface

It has been a long-standing project of mine to give a concise exposition of monetary theory, with special emphasis on the ethical and institutional aspects of money production. Money and banking have been covered more than any other subject in economics. Still there is reason to hope that the following pages will not be superfluous, for they combine three elements that have not previously been integrated into a single work.

First, this book applies the tradition of philosophical realism to the analysis of money and banking. The great pioneer of this approach was the fourteenth century mathematician, physicist, economist, and bishop, Nicholas Oresme, who wrote the first treatise ever on inflation and, in fact, the very first treatise on an economic problem. Oresme exclusively dealt with the debasement of coins, a form of inflation that is unimportant in our age. But the principles he brought to bear on his subject are still up to date and have by and large remained unsurpassed. In modern times, Oresme’s work has found its vindication in the writings of the Austrian School.

The Austrian theory of banking and fiat money is the second element of our analysis. The Austrian School is justly famous as a standard-bearer of the realist tradition in economics, and also as a champion of free-market policies. Seven generations of Austrian economists have explained why private property rights provide a fundamental framework for social cooperation in a truly humane economy. They have stressed the counterproductive effects that result when property rights are violated by private individuals and governments. And they have granted no exception in the field of money and banking, demonstrating that without private initiative and its correlate—personal responsibility—the production of money is perverted into an instrument of exploitation. Only the free and responsible initiatives of private individuals, associations, and firms can create monetary institutions of the sort that truly benefit society and its members.

The third element characterizing our approach is the analysis of the ethics of money and banking in line with the scholastic tradition of St. Thomas Aquinas and Nicholas Oresme. Scholasticism sought to integrate Aristotelian insights into the intellectual tradition of Christianity, under the conviction that science and ethics—and the projects of reason and faith generally—can be considered distinct branches of a unified system of knowledge. Murray Rothbard credits Thomism with a critical development in the field of ethics, for it

demonstrated that the laws of nature, including the nature of mankind, provided the means for man’s reason to discover a rational ethics. To be sure, God created the natural laws of the universe, but the apprehension of these natural laws was possible whether or not one believed in God as creator. In this way, a rational ethic for man was provided on a truly scientific rather than on a supernatural foundation.^[1]

It was this scholastic line of thought that gave rise to economics as a science. As Joseph Schumpeter wrote:

It is within [the scholastics’] systems of moral theology and law that economics gained definite if not separate existence, and it is they who come nearer than does any other group to having been the “founders” of scientific economics.^[2]

Thus the scholastic approach seems to be an appropriate starting point for an examination of the ethics of money production as well, both from the point of view of the history of ideas and for their contemporary application.

The aforementioned three elements might at first seem to be odd bedfellows. I hope to show, however, that there is a reason why these three strains of thought have grown up alongside each other. We will see how, when they are applied to this one area, they serve as complementary aspects of a general realist theory of money—an ontology of money, as it were—and that all these aspects lead to the conclusion that a free market in money production is ethically superior to its logical alternative: money production based on legal exemptions and privileges.

My special thanks go to Professor Jeffrey Herbener and Dr. Emmanuel Polioudakis for extensive commentary on the first draft of the manuscript and to Mr. Joseph Potts for revising and commenting on the final version. I am also indebted to Professor Larry Sechrest, Professor Roderick Long, Dr. Nikolay Gertchev, Dr. Jan Havel, Dr. Arnaud-Pellissier-Tanon, Dr. Lawrence Vance, and Mr. Robert Grözinger for their helpful comments, and to the Professors Thomas Woods, Joseph Salerno, William Barnett, Robert Higgs, and Christoph Strohm, as well as to Mssrs. Reinhard Stiebler, Brad Barlow, and Philipp Bagus for generous assistance in unearthing relevant literature. Many years ago my teacher Hans H. Lechner awakened my interest in the study of monetary policy, as I gratefully acknowledge. While writing the present book, I have been blessed with encouragement from Mr. Llewellyn Rockwell and my colleagues Hans-Hermann Hoppe, Mark Thornton, Jesús Huerta de Soto, Marco Bassani, Pascal Salin, Bertrand Lemennicier, and Philippe Nemo. Finally, I am grateful to Mr. Jeffrey Tucker for his unflagging support, as well as to my dear wife Nathalie for love and friendship while writing this book.

Jörg Guido Hülsmann
Angers, France
August 2007