John Locke: 2nd Treatise Civil Govt


A book much talked about (sometimes maligned) but rarely read. There are several good reasons to read this book: namely, Locke articulates a rather clear and logically coherent theory of resistance–but more on that later.

Like Hobbes and Rousseau, albeit with different and more godly conclusions, Locke analyzes man in his state of nature. What is this state of nature? It is men living together in reason without a common superior (III.19). If that is so, then why would anyone surrender a portion of his liberty and authority to incorporate into a state? Locke gives a clear, if not entirely consistent answer: men incorporate together because of the precariousness of solitary existence. Agreed, but if the state of nature is what it is, then why do men have to worry?

Labour as Distinction and Valuation: Labour creates a distinction between “his” and “common.” Labour begins the distinction of property.

Whatever a man cannot use for himself returns to the realm of “common” (V.29). Locke argues, contra later libertarians, that things have an intrinsic value, though not absolutely so (V.37). Their value depends on their usefulness to the life of man. Labour puts the difference of value on everything (V.40). Labour puts the value on land. Labour gives the right of property (V.45).

Money, however, has subjective value (V.47). It Has value from the consent of men. I think Locke has struck a good balance here. His emphasis on labour and the land maintains a healthy work ethic (a point Adam Smith capitalized on, much to the anger and ire of the Misesian School, though the Austrian school’s understanding of marginal utility far superior).

He ends his treatise with a discussion of representative government and the right and limits of resistance.  Below is an outline:

  1. State of Nature
    1. equality; reciprocity; men living together in reason without a common superior (III.19).
    2. Natural Rights
      1. Punish crime (every man in the state of nature has the right to kill a murderer).
      2. reparation
    3. All men are naturally in this state and remain so, until by their own consent they make themselves members of a political society (II.15).
  2. State of War
  3. Slavery
    1. “Nobody can give more power than he has himself,” and since we cannot take away our own lives, we cannot give our lives to others (IV.22)
    2. Slavery is the continuation of the state of war
  4. Property
    1. Mankind living in State of Nature has all things in common.
      1. Yet this is not an absolute commonality.
      2. Every man has property in his own person.
        1. His “labour” is an extension of that person.  
    2. Labour creates a distinction between “his” and “common.”
      1. Labour begins the distinction of property.
      2. Whatever a man cannot use for himself returns to the realm of “common” (V.29).  
      3. God commanded men to be industrious.  
    3. Labour as Valuation
      1. things have an intrinsic value, though not absolutely so (V.37)
        1. Their value depends on their usefulness to the life of man.
        2. Labour puts the difference of value on everything (V.40).
          1. Labour puts the value on land.
          2. Labour gives the right of property (V.45).
      2. Money, however, has subjective value (V.47).
        1. Has value from the consent of men.
  5. Paternal Power
    1. Law is not the limitation of freedom, but its direction to the proper interest (VI.57).
    2. Liberty is to be free from restraint and violence.
  6. Political and Civil Society

Salvation through Inflation (Gary North)

North, Gary. Salvation through Inflation.  Institute for Christian Economics.

This book has an autobiographical element for me.  While I cut my teeth as a student of the Austrian school–and am today a free market proponent–I did have a “fling” with Social Credit, though I didn’t call it that at the time.  Many of us, seeing some Enlightenment presuppositions with what we called “capitalism,” and knowing that Marxism and State Socialism were off limits, found in movements like Social Credit and Guild Socialism something of an alternative.  It can’t work, though. It can’t account for pricing. It’s also theft.

Image result for salvation through inflation

There might be another attraction to this movement.  I think some in the Alt Right will go to it. The Alt Right, like Major Douglas, is Darwinian and Nietzschean.  North responds that while there are legitimate concerns to global banking schemes and “The Elite,” any such plan of action cannot come at the expense of biblical, worldview-level analysis.

Social Credit: the claim that capitalism does not “create sufficient bank credit that allows consumers to buy the entire output of industry” (North xv). The State replaces the bankers. As North nicely summarizes, it is a conservative movement that relies on a left-wing critique of capitalism (2).  It’s goal is for the state to create fiat money so that the economy won’t be underconsumed.

Basic tenets of social credit:

* Nature is inherently bountiful
* Human institutions are the cause of scarcity (Social Credit, 77-79).
* The community creates credit (North 59).
* No distinction between public and private property (Douglas, Social Credit, 205).
* You can’t buy or sell real estate (206).
* Falling prices are bad for the economy (Douglas, The Monopoly of Credit, 28). The money supply is never sufficient to clear the market.

Scarcity and Wealth

Biblical view of wealth: Scarcity is an example of negative sanctions in history (Genesis 3:17-19).  Scarcity is defined as “At zero price there is greater demand for something than there is available supply to meet all the demand” (North 45).  Economic growth, accordingly, is when we increase the number of our options.

Biblical view of money: surprisingly, the bible doesn’t mandate that silver and gold be the only kind of money.  It just acknowledges them as valuable. And scarce. And durable and portable and divisible. Nevertheless, the Bible condemns debased metals (Isaiah 1.22).

Debasing money is counterfeiting it, plain and simple.  God condemns this (since it is deception). If it is easy to counterfeit gold, how much more so paper and credit?  You see where this argument is going, don’t you? Social Credit relies at heart on a system of counterfeiting. Counterfeiting then inflates the prices.

Interest is related to time.  One of the problems with anti-interest policies is that they try to escape the reality of time.  That is Gnosticism. Interest doesn’t have to be nefarious. Indeed, it’s unavoidable. North notes that paying is simply paying “an extra quantity of future goods to gain access to the lender’s supply of present goods” (North 179).

Problems with Social Credit:

+ Profit and loss are sanctions that guide production.  This is inevitable since men have imperfect knowledge about the future (Mises, Human Action, 291).

+ If the government issues paper money on the basis of this statistical number, the new money will” raise prices. When prices rise, the value of the “community’s” capital rises (North 63).

+ Douglas’s injunction against falling prices is refuted by the computer revolution.

+ Douglas thinks money disappears (“a week after”) but it doesn’t.  It either remains with the consumer in his hand, under his mattress, or in the form of credit. I guess it could disappear if the Joker burns it all, like in The Dark Knight Rises.

+ It is possible to cut prices below the costs of production and increase profits, which is what Henry Ford did. If it leads to more output, then it works.

+ How do you explain the historic productivity of capitalism precisely when Social Credit problems have never been adopted?
+ Tito’s Yugoslavia adopted something similar in the sense of work tickets.  While it functioned better than the USSR, it had the opposite effect of Douglas’s proposals: the time needed to work multiplied exponentially.

+ The main problem is the most obvious one: Social Credit wants to replace Bankers’ control over credit with the State’s control.  In other words, Congress. Yet both Republicans and Democrats hate Congress.

+ Per Douglas’s A + B theorem, the money paid to B (organizations) is always paid to peopled organizations. He seemed to think they were paid to empty organizations.  This means, pace Douglas, that A can buy back the product. North destroys his argument in one sentence: every unit of money is owned by someone at all times, unless someone has inadvertently lost it (253).