'The spirit of thrift' - 'For it is through actions that the mind and reality make contact.'

Posted by ProjectC 
<blockquote>"To suppose all consumers to be dupes, and all merchants and manufacturers to be cheats, has the effect of authorizing them to be so, and of degrading all the working members of the community."
- Anne Robert Jacques Turgot (1727 - 1781)</blockquote>

'The spirit of thrift, Turgot notes, has been steadily rising in Europe over several centuries, and hence interest rates have tended to fall.'

<blockquote>'Indeed, Turgot points out that, depending on how the spending-saving proportions are affected, a rise in the quantity of money could raise interest rates. Suppose, he says, that all wealthy people decide to spend their incomes and annual profits on consumption and spend their capital on foolish expenditures. The increased consumption spending will raise the prices of consumer goods, and there being far less money to lend or to spend on investments, interest rates will rise along with prices. In short, spending will accelerate and prices rise, while, at the same time, time-preference rates rise, people spend more and save less, and interest rates will increase. Thus, Turgot is over a century ahead of his time in working out the sophisticated Austrian relationship between what Mises would call the "money-relation"--the relation between the supply and demand for money, which determines prices or the price level--and the rates of time preference, which determine the spending-saving proportion and the rate of interest. Here, too, was the beginning of the rudiments of the Austrian theory of the business cycle, of the relationship between expansion of the money supply and the rate of interest.

As for the movements in the rate of time preference or interest, an increase in the spirit of thrift will lower interest rates and increase the amount of savings and the accumulation of capital; a rise in the spirit of luxury will do the opposite. The spirit of thrift, Turgot notes, has been steadily rising in Europe over several centuries, and hence interest rates have tended to fall. The various interest rates and rates of return on loans, investments, and land will tend to equilibrate throughout the market and tend toward a single rate of return. Capital, Turgot notes, will move out of lower-profit industries and regions and into higher-profit industries and regions.


While Turgot did not devote a great deal of attention to the theory of money, he had some important contributions to make. In addition to continuing the Hume model and integrating it with his analysis of interest, Turgot was emphatic in his opposition to the now dominant idea that money is purely a conventional token. In contrast, Turgot declared, "it is not at all by virtue of a convention that money is exchanged for all the other values: it is itself an object of commerce, a form of wealth, because it has value, and because of value exchanges in trade for an equal value."

In his unfinished dictionary article on "Value and Money," Turgot develops his monetary theory further. Drawing on his knowledge of linguistics, he declares that money is a kind of language, bringing forms of various conventional things into a "common term or standard." The common term of all currencies is the actual value, or prices, or the objects they try to measure. These "measures," however, are hardly perfect, Turgot acknowledges, since the values of gold and silver always vary in relation to commodities as well as each other. All moneys are made of the same materials, largely gold and silver, and differ only on the units of currency. And all these units are reducible to each other, as are other measures of length or volume, by expressions of weight in each standard currency. There are two kinds of money, Turgot notes, real money--coins, pieces of metal marked by inscriptions--and fictitious money, serving as units of account or numeraires. When real money units are defined in terms of the units of account, the various units are then linked to each other and to specific weights of gold or silver.

Problems arise, Turgot shows, because the real moneys in the world are not just one metal but two--gold and silver. The relative values of gold and silver on the market will then vary in accordance with the relative scarcity of gold and silver in the various nations.


One of the striking examples of injustice in the historiography of economic thought is the treatment accorded to Turgot's brilliant analysis of capital and interest by the great founder of Austrian capital-and-interest theory, Eugen von Böhm-Bawerk. In the 1880s, Böhm-Bawerk set out, in the first volume of his Capital and Interest, to clear the path for his own theory of interest by studying and demolishing previous, competing theories. Unfortunately, instead of acknowledging Turgot as his forerunner in the pioneering Austrian theory, Böhm-Bawerk brusquely dismissed the Frenchman as a mere physiocratic land-productivity theorist. This unfairness to Turgot is all the more heightened by recent information that Böhm-Bawerk, in his first evaluation of Turgot's theory of interest in a still-unpublished seminar paper in 1876, reveals the enormous influence of Turgot's views on his later developed thought. Perhaps we must conclude that, in this case as in others, Böhm-Bawerk's need to claim originality and to demolish all of his predecessors took precedence over the requirements of truth and justice.

In the light of Böhm-Bawerk's mistreatment, it is heart-warming to see Schumpeter's appreciative summation of Turgot's great contributions to economics. Concentrating almost exclusively on Turgot's "Reflections," Schumpeter declares that his theory of price formation is "almost faultless, and, barring explicit formulation of the marginal principle, within measurable distance of that of Böhm-Bawerk." The theory of saving, investment, and capital is "the first serious analysis of these matters" and "proved almost unbelievably hardy. It is doubtful whether Alfred Marshall had advanced beyond it, certain that J.S. Mill had not. Böhm-Bawerk no doubt added a new branch to it, but substantially he subscribed to Turgot's proposition." Turgot's interest theory is "not only by far the greatest performance . . . the eighteenth century produced but it clearly foreshadowed much of the best thought of the last decades of the nineteenth." '
- Murray N. Rothbard, Biography of A.R.J. TURGOT (1727-1781)</blockquote>

'...For it is through actions that the mind and reality make contact.'

<blockquote>'It is interesting to read Hayek's acceptance speech, which the Mises Institute published this year. It is a tribute to a profession to which he wanted closer ties. But it was not a loving presentation of the glories of academia. In fact, it was the opposite. He said that the most dangerous person on earth is an arrogant intellectual who lacks the humility necessary to see that society needs no masters and cannot be planned from the top down. An intellectual lacking humility can become a tyrant — and an accomplice in the destruction of civilization itself.

It was an amazing speech for a Nobel Prize winner to give, an implicit condemnation of a century of intellectual and social trends, and a real tribute to Mises, who had stuck by his principles and never given in to the academic trends of his time.


Just as Mises needed Fertig and Hazlitt, economists with moral courage need supporters and institutions to back them up and give them voice. We must all bear this burden. As Mises said, the only way to fight bad ideas is with good ones. And in the end, no one is safe if civilization is sweeping to destruction.'
- Llewellyn H. Rockwell Jr., (Source)

'The way in which the philosophy of logical positivism depicts the universe is defective. It comprehends only what can be recognized by the experimental methods of the natural sciences. It ignores the human mind as well as human action.'
- Ludwig von Mises, The Misinterpretation of the Universe (Positivism and the Crisis of Western Civilization)

'The mathematical method, like so many other fallacies, has entered and dominated present-day economic thought because of the pervading epistemology of positivism. Positivism is essentially an interpretation of the methodology of physics ballooned into a general theory of knowledge for all fields.

The reasoning runs like this: Physics is the only really successful science. The "social sciences" are backward because they cannot measure, predict exactly, etc. Therefore, they must adopt the method of physics in order to become successful. And one of the keystones of physics, of course, is the use of mathematics.


The use of the calculus, for example, that has been endemic in mathematical economics assumes infinitely small steps. Infinitely small steps may be fine in physics where particles travel along a certain path; but they are completely inappropriate in a science of human action, where individuals only consider matter precisely when it becomes large enough to be visible and important. Human action takes place in discrete steps, not in infinitely small ones.


The best readers' guide to the jungle of mathematical economics is to ignore the fancy welter of equations and look for the assumptions underneath. Invariably they are few in number, simple, and wrong. They are wrong precisely because mathematical economists are positivists, who do not know that economics rests on true axioms.

The mathematical economists are therefore framing assumptions which are admittedly false or partly false, but which they hope can serve as useful approximations, as they would in physics. The important thing is not to be intimidated by the mathematical trappings.'
- Murray N. Rothbard (Source)

'The Universe is not an abstract mathematical construct of dark matter halos, black hole singularities or geometrically perfect neutron stars. It is filled with electric currents flowing through chaotically beautiful Birkeland filaments. These chaotic filaments are notoriously difficult to squeeze into linear differential equations, but they’re there just the same...'
- Tom Wilson (Source)

'When research groups are faced with a lack of evidence for their theories (the "confession"), they too resort to circumstantial investigations. One such case is magnetic reconnection—one of the best examples in modern physics of ad hoc theorizing when there are no witnesses.'
- Stephen Smith (Source)

'The intellectual hubris of big bang theorists is shocking when we find that science cannot explain the simplest phenomena associated with matter. Mass, gravity, magnetism, and light are a mystery. We have equations that describe what happens when a charged particle is accelerated; you drop something from a height; a current passes down a wire; and light strikes a surface. But mathematical descriptions do not constitute a physical explanation.

Meanwhile, the last century has seen great progress in understanding the phenomena of electricity in vacuum tubes, arc lamps, arc welders, industrial electric discharge machining and ultra high-energy experiments at Los Alamos National Laboratories and Sandia Laboratories. Electrical engineers were the first to see striking parallels with astronomical phenomena, beginning with the Earth’s aurorae.'
- Wal Thornhill (Source)

'Electrical connections exist throughout the Universe. From the smallest scale atomic interactions to the largest scale cosmic conglomerations, electricity provides the power and demonstrates its activity in plain sight.'
- Stephen Smith (Source)

'Francis Eagle Heart Cree (1920/1921-2007), elder and song keeper of the Ojibwe, North Dakota, often used to tell about the northern lights – that his people referred to them as the ‘ancestors’; that our day corresponds to their night and vice versa; and that many ancestors had been literally drawn up into the sky in order to live on in the lights.

In June 2003, during the preparations for the so-called ‘Thirsty Dance’ performed in the Turtle Mountains, Francis revealed that there had been a time when the northern lights were all over, much larger and all-encompassing, and would come closer to the ground, touching it frequently. According to him, today’s thunders, lightning and northern lights are what remain from a time “when the Thunderbirds hovered overhead and carried away the ancestors if you threatened or got too close to them. … the earliest songs came from them, not the animals. The pulsing, reverberant, humming, chanting Ooowwwmmm, hiii, heyyy, . . . is the sound the Thunderbird auroras made.”

During this era, the whole atmosphere was active and animate, and the few plasma phenomena we see today are mere remnants of the “Sky Dancers” of olden times. Coming from a man who was never exposed to formal western education and stood in an age-old, unbroken lineage of cultural continuity, this testimony forms a striking parallel to the Australian belief that the polar lights used to be much more powerful in the past.'
- Rens Van der Sluijs (Source)

'A science for humans is a science of questions, of learning, of possibilities and opportunities. Its aim is not to fold the unquestioned into the envelope of the given but to learn new words and to write new narratives.'
- Mel Acheson (Source)

'Civilization is not "just there," it is not self-supporting. It is artificial and requires the artist or the artisan. If you want to make use of the advantages of civilization, but are not prepared to concern yourself with the upholding of civilization — you are done...'
- Ortega y Gasset (Source)

'...those who accept both praxeological and ethical absolutism, and recognize that both are vitally necessary for a complete philosophical view, as well as for the achievement of liberty.'
- Murray N. Rothbard (Source)

'...For it is through actions that the mind and reality make contact.'
- Hans-Herman Hoppe, Praxeology and Economic Science</blockquote>