WEBVTT NOTE Rothbard and Aristotle on Money: Aristotle Reconsidered 1 00:00:00.000 --> 00:00:08.000 So this afternoon, I'd just like to talk about a passage in Rothbard's History of Economic Thought, where he discusses Aristotle. 2 00:00:08.000 --> 00:00:14.000 And of course, he has some very positive things to say about some things Aristotle says, namely in private property. 3 00:00:14.000 --> 00:00:25.500 But when it comes to a praxeological analysis of exchange and money, Rothbard has some criticism, most notably, he writes, 4 00:00:25.500 --> 00:00:30.220 Aristotle's famous discussion of reciprocity and exchange in book five of his Nicomachean 5 00:00:30.220 --> 00:00:37.620 Ethics is a prime example of descent into gibberish. Aristotle talks of a builder exchanging 6 00:00:37.620 --> 00:00:42.700 a house for the shoes produced by a shoemaker. He then writes, this is quoting Aristotle, 7 00:00:42.700 --> 00:00:47.660 the number of shoes exchanged for a house must therefore correspond to the ratio of 8 00:00:47.660 --> 00:00:53.060 builder to shoemaker, for if this be not so, there will be no exchange and no intercourse. 9 00:00:53.060 --> 00:00:58.940 A. How can there possibly be a ratio of builder to shoemaker, much less an equating of that 10 00:00:58.940 --> 00:01:05.940 ratio to shoes, houses? In what units can men, like builders and shoemakers, be expressed? 11 00:01:08.860 --> 00:01:13.200 This comes from Book 5, Chapter 5 of the Ethics, and Rothbard's picked probably the most difficult 12 00:01:13.200 --> 00:01:17.780 sentence to interpret and has kind of put it in isolation here. So what I'd like to 13 00:01:17.780 --> 00:01:47.780 So what I'd like to do is two things. First, I'd like to give a little bit more context to this statement both in the immediate writing around the passage and then also in book five of the Nicomachean Ethics which is actually a book on justice which is kind of interesting that Aristotle would talk about money in exchange in a book on justice which I'll getivid to and then second after I hope to defend Aristotle's descent into gibberish I'd like to make some observations 14 00:01:47.780 --> 00:01:51.780 about the features of Book 5, Chapter 5 of the Ethics 15 00:01:51.780 --> 00:01:55.780 and argue that there's really a lot of Proto-Austrianism 16 00:01:55.780 --> 00:01:59.780 in there that's been overlooked and in fact 17 00:01:59.780 --> 00:02:03.780 could be mined for insights and to kind of strengthen the way 18 00:02:03.780 --> 00:02:07.780 Austrians view history and the continuity of Austrian thought in the Western tradition. 19 00:02:07.780 --> 00:02:11.780 So first, I'd like to look at the passage in question. These are the 20 00:02:11.780 --> 00:02:15.780 paragraphs immediately preceding the sentence Rothbard cites. 21 00:02:15.780 --> 00:02:21.780 So Aristotle says now proportionate return is secured by cross-conjunction. 22 00:02:21.780 --> 00:02:25.780 Let A be a builder, B a shoemaker, C a house, D a shoe. 23 00:02:25.780 --> 00:02:29.780 And I should note he's probably drawing on a chalkboard, you know, for students. 24 00:02:29.780 --> 00:02:32.780 He's very interested in ratios at this point in the book. 25 00:02:32.780 --> 00:02:37.780 The builder then must get from the shoemaker the latter's work and must himself give him in return his own. 26 00:02:37.780 --> 00:02:43.780 If then there is proportionate quality of goods and then reciprocal action takes place, 27 00:02:43.780 --> 00:02:46.780 The result we mention will be affected, that is ill exchange. 28 00:02:46.780 --> 00:02:53.780 If not, the bargain is not equal, and does not hold, but there is nothing to prevent the work of the one being better than that of the other. 29 00:02:53.780 --> 00:02:55.780 They must therefore be equated. 30 00:02:55.780 --> 00:03:04.780 For it is not two doctors that associate for exchange, but a doctor and a farmer, or in general people who are different and unequal, but these must be equated. 31 00:03:04.780 --> 00:03:08.780 This is why all things that are exchanged must be somehow comparable. 32 00:03:08.780 --> 00:03:22.780 It is for this end that money has been introduced, and it becomes, in a sense, an intermediate, for it measures all things, and therefore the excess and defect, how many shoes are equal to a house or to a given amount of food. 33 00:03:22.780 --> 00:03:37.780 The number of shoes exchanged for a house must therefore correspond to the ratio of builder to shoemaker, for, if this not be so, there will be no exchange and no intercourse, and this proportion will not be affected unless the goods are somehow equal. 34 00:03:37.780 --> 00:03:48.780 So we can see just looking at the passage, it's not so much Aristotle is trying to talk about proportions in different men just for the sake of it, but he's really analyzing a complex set of phenomena. 35 00:03:48.780 --> 00:03:56.780 You've got different people who do different things, have different products, have different needs and wants, and they exchange. 36 00:03:56.780 --> 00:04:01.780 And so how is it that all these different things can really be brought together in a coherent sense? 37 00:04:01.780 --> 00:04:12.260 The larger context is that this book is actually a treatise on justice. For Aristotle, justice 38 00:04:12.260 --> 00:04:21.540 is one of the virtues. We like to think of justice as a characteristic of institutions 39 00:04:21.540 --> 00:04:30.140 or an abstract description dealing with relations. For Aristotle, justice is actually most properly 40 00:04:30.140 --> 00:04:37.100 embodied in an individual dealing with excess and deficiency and finding a mean between them. 41 00:04:37.100 --> 00:04:44.100 And so we can talk about just laws, just institutions, but most properly he's talking about individuals, 42 00:04:44.100 --> 00:04:51.220 really the virtuous person is just. And the just man is one who transcends his own desires 43 00:04:51.220 --> 00:04:56.240 for personal gain and see things from a more objective point of view when he's deciding 44 00:04:56.240 --> 00:05:00.720 and how to act. That is, he's not going to benefit himself or his friends. He's able 45 00:05:00.720 --> 00:05:05.600 to kind of look at things the way they are and make the kind of judgment that we'd all 46 00:05:05.600 --> 00:05:11.860 like to have made if someone else was deciding for us. So a just judge, for example, is going 47 00:05:11.860 --> 00:05:17.160 to hand out fair punishment and rewards. A just politician, now I doubt there's such 48 00:05:17.160 --> 00:05:22.400 a thing, but for Aristotle, if there is a just politician, then he is going to only 49 00:05:22.400 --> 00:05:28.120 We legislate fair laws that do not harm one person to help another, but it's not just 50 00:05:28.120 --> 00:05:32.760 in judgments and in legislating that justice comes into play. You can be just or unjust 51 00:05:32.760 --> 00:05:41.040 towards a friend, just or unjust towards yourself, just or unjust in the marketplace. 52 00:05:41.040 --> 00:05:47.600 So material exchanges require justice because, as I said, he's looking at complex phenomena. 53 00:05:47.600 --> 00:05:55.600 There's different people, products, skills, and just by the very nature that's going to imply excess and deficiency. 54 00:05:55.600 --> 00:05:59.600 If I'm thirsty, it's because I have a deficiency of water. 55 00:05:59.600 --> 00:06:04.600 If I'm a shoemaker and I've spent all day building, you know, putting together shoes and I have a big pile of shoes, 56 00:06:04.600 --> 00:06:10.600 well, that's an excess, you know, and I've only done it so that I can use the shoes for some other purpose, 57 00:06:10.600 --> 00:06:14.600 as he says in the politics, actually exchanging shoes for food. 58 00:06:14.600 --> 00:06:19.800 Now, why would people exchange? Well, demand is what he says. Demand underlies everything. 59 00:06:19.800 --> 00:06:27.700 A Greek word, kreia, or need, is the principle for what makes things excessive or equal or deficient. 60 00:06:27.700 --> 00:06:33.100 And it's not an arbitrary thing, but it arises from the nature of the people in question. 61 00:06:33.100 --> 00:06:41.600 So, the doctor, being a human being is going to get hungry, but the doctor being a doctor doesn't grow food. 62 00:06:41.600 --> 00:06:56.600 So, out of that natural activity of his, he's going to have an excess of services to offer as a doctor, he's going to have a deficiency of food, and those need to be brought into a kind of equality. 63 00:06:56.600 --> 00:07:08.600 Now, in the rest of Book 5, Chapter 5, if you overlook for a moment, or at least set to the side, the troubling sentence on equating shoemakers and house builders in some kind of proportion, 64 00:07:08.600 --> 00:07:18.600 There is actually a lot of Proto-Austrian thought, I think, and so I've sort of strung together the various sentences throughout that chapter into a short narrative here. 65 00:07:18.600 --> 00:07:28.600 It is by exchange that men hold together. Now proportionate return is secured by cross-conjunction. 66 00:07:28.600 --> 00:07:33.600 The builder must get from the shoemaker his work and must himself give the shoemaker his own work. 67 00:07:33.600 --> 00:07:37.600 This is why all things that are exchanged must somehow be comparable. 68 00:07:37.600 --> 00:07:40.600 And it is for this end that money has been introduced. 69 00:07:40.600 --> 00:07:43.600 And it becomes, in a sense, an intermediate, for it measures all things. 70 00:07:43.600 --> 00:07:46.600 A very Austrian-friendly phrase there. 71 00:07:46.600 --> 00:07:49.600 Money as price signals or as information. 72 00:07:49.600 --> 00:07:52.600 And therefore the excess and the defect. 73 00:07:52.600 --> 00:07:55.600 How many shoes are equal to a house or to a given amount of food. 74 00:07:55.600 --> 00:07:59.600 All goods, therefore, must be measured by some one thing. 75 00:07:59.600 --> 00:08:04.800 on one thing. Now this unit, the thing that's measuring everything, is in truth demand, 76 00:08:04.800 --> 00:08:09.680 which holds all things together. But money has become by convention a sort of representative 77 00:08:09.680 --> 00:08:15.960 of demand. Money then, acting as a measure, makes goods commensurate and equates them. 78 00:08:15.960 --> 00:08:20.800 Now in truth it is impossible that things differing so much should become commensurate, 79 00:08:20.800 --> 00:08:25.560 but with reference to demand, and therefore money, they may become so sufficiently, that 80 00:08:25.560 --> 00:08:27.800 is sufficiently for exchange. 81 00:08:27.800 --> 00:08:31.040 So if a house is worth five menai and a bed one, 82 00:08:31.040 --> 00:08:34.280 it is plain how many beds are equal to a house, five. 83 00:08:34.280 --> 00:08:36.720 And that exchange took place before there was money 84 00:08:36.720 --> 00:08:39.560 because it makes no difference whether it is five beds 85 00:08:39.560 --> 00:08:43.560 that exchange for a house or the money value of five beds. 86 00:08:43.560 --> 00:08:45.840 Now, if any of that sounds familiar, 87 00:08:45.840 --> 00:08:48.900 it might be because recently you've read a little known work 88 00:08:48.900 --> 00:08:52.080 called What Has the Government Done to Our Money? 89 00:08:52.080 --> 00:08:54.320 And in this work, Rothbard says, 90 00:08:54.320 --> 00:09:00.840 Exchanges are all made in terms of money prices. If a television exchanges for 3 gold ounces, 91 00:09:00.840 --> 00:09:05.080 we say that the price of the television set is 3 ounces, and at any one time, all goods 92 00:09:05.080 --> 00:09:10.320 in the economy will exchange at certain gold ratios or prices. But what of money itself? 93 00:09:10.320 --> 00:09:15.800 Does it have a price? Since the price is simply an exchange ratio, it clearly does. But in 94 00:09:15.800 --> 00:09:20.360 this case, the price of money is an array of the infinite number of exchange ratios 95 00:09:20.360 --> 00:09:28.360 Thus, suppose that a television set costs three gold ounces, an auto of sixty, a loaf 96 00:09:28.360 --> 00:09:33.640 of bread one one-hundredth, and an hour of Mr. Jones Legal Services one ounce. The price 97 00:09:33.640 --> 00:09:39.000 of money will then be an array of alternative exchanges. One ounce of gold will be worth 98 00:09:39.000 --> 00:09:43.320 either one-third of a television set, a sixtieth of an auto, a hundred loaves of bread, or 99 00:09:43.320 --> 00:09:47.480 an hour of Jones Legal Service, and so on down the line. 100 00:09:47.480 --> 00:09:52.840 This passage from Rothbard I would argue implies, and I think this is also clear from the early 101 00:09:52.840 --> 00:09:59.920 discussion in this book, that one-third of a television set is in fact, would in fact 102 00:09:59.920 --> 00:10:03.960 be the price of one-sixtieth of an auto or a hundred loaves of bread. The problem is 103 00:10:03.960 --> 00:10:08.480 that we can't chop TVs into thirds and walk around with them and exchange. And so what 104 00:10:08.480 --> 00:10:13.580 money does is it makes these disparate goods that really have nothing in common, it makes 105 00:10:13.580 --> 00:10:17.260 makes them commensurate and makes the exchange possible. 106 00:10:17.260 --> 00:10:19.980 Well I think that's a lot of what's going on in Aristotle. 107 00:10:19.980 --> 00:10:25.220 It's different, it's not so much that there's, that a shoemaker and a house builder have 108 00:10:25.220 --> 00:10:28.580 certain proportions by nature that have to be brought into a line. 109 00:10:28.580 --> 00:10:32.780 It's because he's a shoemaker, because he's a house maker, they're going to have certain 110 00:10:32.780 --> 00:10:33.780 demands. 111 00:10:33.780 --> 00:10:34.940 That's what's underlying everything. 112 00:10:34.940 --> 00:10:41.700 And so money is the thing that allows those demands to kind of meet each other, so to 113 00:10:41.700 --> 00:10:45.700 Which might be one reason why Rothbard has worth in scare quotes. 114 00:10:45.700 --> 00:10:50.700 So the question is, I mean, how Rothbardian is Aristotle? 115 00:10:50.700 --> 00:10:54.700 Or how much Austrianism is Aristotle? Are they commensurate? 116 00:10:54.700 --> 00:10:58.700 I would say yes and no. Yes. 117 00:10:58.700 --> 00:11:03.700 And I think that this is where Aristotle's been a little bit overlooked by Rothbard. 118 00:11:03.700 --> 00:11:07.700 The thrust of his discussion isn't to equate shoemakerness to house builderness. 119 00:11:07.700 --> 00:11:12.700 It's to show that exchanges across the board have to take place in accordance with some kind of equality. 120 00:11:12.700 --> 00:11:15.700 Again, that's all justice is, is a kind of equality. 121 00:11:15.700 --> 00:11:17.700 In other words, a common denominator. 122 00:11:17.700 --> 00:11:23.700 Now, while this common denominator is in fact demand, it can be represented by money. 123 00:11:23.700 --> 00:11:28.700 And I think that this is sort of implied in Rothbard's discussion of the same. 124 00:11:28.700 --> 00:11:34.700 However, while Aristotle seems to be on the right track, he doesn't get to a subjective theory of value. 125 00:11:34.700 --> 00:11:38.580 So I don't know that he gets deep enough to really get at the reason why all these exchanges 126 00:11:38.580 --> 00:11:43.660 are taking place. And he does maintain elsewhere, as Rothbard points out, that exchanges occur 127 00:11:43.660 --> 00:11:49.740 because the actors view the goods as equal in all respects. That is, he doesn't have 128 00:11:49.740 --> 00:11:54.620 the account that when I give money for a cheeseburger, I'm valuing the cheeseburger more than my 129 00:11:54.620 --> 00:11:59.860 money and vice versa for the other person. Now in reading Aristotle, in order to kind 130 00:11:59.860 --> 00:12:05.660 to get the most out of it. I think it's helpful to keep in mind that as he says in many places 131 00:12:05.660 --> 00:12:12.060 but in the ethics, his main goal is to take observations about commonly held beliefs, 132 00:12:12.060 --> 00:12:18.560 refute, pull out errors from them, refute objections to them and Aristotle thinks that 133 00:12:18.560 --> 00:12:24.300 if he does that, that's sufficient to show that these are not just opinions but really 134 00:12:24.300 --> 00:12:31.300 knowledge, things you can hold to be true. And he does so by making distinctions. And 135 00:12:31.300 --> 00:12:37.500 this is precisely how the scholastics, and especially St. Thomas Aquinas, took Aristotle. 136 00:12:37.500 --> 00:12:43.900 And in my view, it's certainly no coincidence that the moment Aristotle's works become available 137 00:12:43.900 --> 00:12:49.900 widely in the Latin West, the medieval men, all of a sudden there's a huge flowering of 138 00:12:49.900 --> 00:12:53.900 and the conversation about economic principles, the development of economic theory 139 00:12:53.900 --> 00:12:57.900 and it really all starts with commentaries on the ethics 140 00:12:57.900 --> 00:13:01.900 as well as the first book of the politics. So I think that by 141 00:13:01.900 --> 00:13:05.900 extending our understanding of the Proto-Austrian elements in Aristotle 142 00:13:05.900 --> 00:13:09.900 not only are we going to be able to read him a little bit better, but we're also going to see 143 00:13:09.900 --> 00:13:13.900 that there's a continuity in Austrian thought that is 144 00:13:13.900 --> 00:13:17.900 very deeply rooted in the Western tradition all the way to our 145 00:13:17.900 --> 00:13:24.900 for most ancient sources. Thank you.