Thursday, July 24, 2025

A postliberal middle ground on trade

In my latest article at Postliberal Order, I defend a postliberal middle ground position between free trade dogmatism and rigid protectionism, and argue that sound trade policy depends more on circumstances and prudential judgment than appeal to abstract principle.

Posted by at

10 comments:

  1. AnonymousJuly 26, 2025 at 11:21 AM

    Dr. Feser,

    What are your thoughts on the morality of fiat currency? Is it subject to prudence as well or is it intrinsically evil insofar as it is tantamount to mass deception by having something that is meant to represent wealth that is totally untethered to reality and can thus be inflated by the whims of the government.

    I lean towards it being intrinsically evil. I know some of the Scholastics said devaluing coins was tantamount to stealing.

    ReplyDelete
    Replies
    1. TonyJuly 27, 2025 at 2:00 PM

      I tend to think it's a horrible idea too, but only because it can't actually work well, not because it's intrinsically evil.

      If you imagine a situation where you started a local economy from scratch with something issued as fiat money, (say, starting a new moon base), so that it wasn't in any way connected to an older monetary system, and you made all of the parameters of the fiat system known to all, I don't think it would be intrinsically evil. I think the fact that typical fiat money in our current system is always borrowing off of a prior system of "real" money, i.e. money from stuff that real value of itself, is what makes it tend toward being unjust, in that people are fooled into thinking of it along the lines of the old money, and the fiat money-issuers (in part) rely on that ignorance. If people weren't thinking of the fiat money the way they used to think about real money, they wouldn't be fooled into the shortcomings of the fiat arrangement. But by that very token, (under my estimation), the fiat money wouldn't work precisely because people recognize it a having no inherent value, would recognize it's flaws, and would naturally not trust the money to retain its value - thus making it a poor option for a medium of exchange.

      So, Feser has arguments for both options in front of him to pick between, bad prudentially or intrinsically evil. (Hint: by saying "both options" I left out the possibility that fiat money is actually good. "cause, you know, that's not a real option, is it? :-) )

      Delete
    2. The Great Thurible of DarknessJuly 27, 2025 at 3:58 PM

      How is the value we assign to fiat currency more arbitrary than the value we assign to hard currency? Both are products of market forces. I don't see how a dollar is any less "tethered to reality" than a denarius if both can buy me a loaf of bread. The idea that gold or silver are inherently valuable simply because they're rare is no more rational that the idea that government-issued paper is valuable just because there's a finite supply. If the government were to suddenly discover a massive silver mine and use it to issue thousands of new coins, it would have the same inflationary effect as printing new money. The conquest of the New World ruined the Spanish economy.

      Also, I would hazard to guess that by "devaluing," the Scholastics meant "debasement;" that is, diluting the silver content of coins while keeping the face value the same. This is something which literally can't be done to modern fiat currency, and you could even argue that this makes modern currency *more* honest than ancient currency, since there's no need to worry about debased coins or crooked scales. A dollar is a dollar. A denarius isn't always a denarius.

      Delete
    3. Raffaele AquiloneJuly 28, 2025 at 6:51 AM

      Money is credit. It's the promise of goods and services. In the case of hard currency: it's the promise of gold and silver. In the case of fiat currency: it's the promise of whatever goods and services are available in the economy. If we decide that fiat currency is intrinsecally evil, then we decide that credit is intrinsecally evil and that only bartering is morally admissible.

      Money is generated by using assets as collateral. In the case of fiat currency the main collateral used in the process is "government bonds", i.e. a promise of goods and services issued by the government. Is it intrinsecally evil for the government to decide how goods and services are distributed in the economy? If taxation is not intrinsecally evil and government spending is not intrinsecally evil, then government's promises of goods and services are not intrinsecally evil. I agree that overpromising may be a problem, but not promising per se.

      Of course we are free to argue about the advantages and disadvantages of these two monetary systems, but it seems to me that declaring fiat currency to be intrinsecally evil leads to serious implications about how many things should be declared to be intrinsecally evil as a result.

      Delete
    4. TonyJuly 28, 2025 at 3:40 PM

      How is the value we assign to fiat currency more arbitrary than the value we assign to hard currency? Both are products of market forces. I don't see how a dollar is any less "tethered to reality" than a denarius if both can buy me a loaf of bread. The idea that gold or silver are inherently valuable simply because they're rare is no more rational that the idea that government-issued paper is valuable just because there's a finite supply.

      It might seem so at first glance, but I think when we peer under the hood the difference is there: commodity money (like gold & silver, or pearls, or shells) consists of a commodity that has a use and some level of desire/demand in the marketplace, because they have uses and thus there is demand for them even apart from whether anyone uses them for money. For example, gold is (and has been) used in jewelry because it is beautiful, and it had that use before people decided to trade with it as money. Gold also now has several uses in scientific and industrial applications, as well as electronics, so even if people chose to simply stop wearing buying jewelry, there would be demand for it in those other uses. Those uses establish some levels of market demand, and therefore some levels of its exchange rate with respect to other goods, without regard to anyone using it for money.

      It seems that fiat money is exactly the opposite: nobody would have a demand for a piece of paper with the words "Euro" on it other than because, by fiat, it was decided that it represents money. Thus it's demand is wholly taken up by the extent by which people continue to respect the claim that it's "money", and as soon as enough people stop so respecting it, it's exchange value will plummet toward 0 value against other goods.

      One of the causes of the Whiskey Rebellion is that a commodity with a couple of highly important uses OTHER than as money was being used as money, and then being taxed in exchange. But the point is that it's exchange rate when it was being used as money was intrinsically related to the values it had in its commodity use: to drink, or to cleanse wounds, etc. Those values aren't simply arbitrary even though they vary over time and conditions, no more than food's value is arbitrary (and it's value varies over time and conditions too).

      Delete
    5. TonyJuly 28, 2025 at 4:09 PM

      Money is credit. It's the promise of goods and services.

      It seems to me that it would be clearer, and probably more accurate, to say that money HAS these uses and functions, than to say money IS these things. Gold and silver coin, as it was first made and used, was not exchanged by way of a promise of a further, later fulfillment. It was exchanged as a commodity of known value, now presented in specified UNITS of that quantity. It's value initially in those units, coins, was originally much the same as its value as gold bangles, or its similar value in gold talents or other weights. It became widespread in use because of the usefulness of its unit size/value, of known value against other things, and when widespread enough (i.e. many people using it reliably), people felt they could rely on the gold coins as reasonable store of value for when they needed future goods and services. But even then, the person from whom they accepted the coins in a sale was not themselves making a promise of a future transfer of some other good or service, it was "society" from whom the recipient expected to be able to redeem (exchange) the coin later.

      Much later, bank notes initially came into being as markers of deposit (with the banker), for which the banker himself WAS making a promise that HE would redeem the marker for the gold deposited. It was only after that initial relationship with banker and depositor became reliable that OTHERS got into the act, by the depositor exchanging the bank notes with other sellers who accepted the bank notes in lieu of either bartered goods or the actual physical gold coins. When the bank notes were thus exchanged repeatedly in the marketplace without any of the recipients bothering to visit the banker to redeem the notes for the promised gold, THAT's when the bank notes were being used as money. Modern-era federal notes - until we went entirely off the gold standard - sprung off of this origin, even if indirectly. That's why I suggest that modern fiat money systems borrow social and political capital from prior, non-fiat money systems.

      In the case of fiat currency the main collateral used in the process is "government bonds", i.e. a promise of goods and services issued by the government. Is it intrinsecally evil for the government to decide how goods and services are distributed in the economy? If taxation is not intrinsecally evil and government spending is not intrinsecally evil

      It might be inherently imprudent for a government to found it's monetary system on the bond cycle as if bonds were a "promise of goods and services from the government." In the main, the money the government uses to RE-PAY its bonds can be used by recipients for anything in the economy, but the source of value of the "money" it uses is (a) the social capital derived from the money it used back in the day it wasn't fiat money (though we still under the same name "dollars" as if they represented the same thing), and (b) the bare willingness of people to continue to redeem it for something close to the values as it had a few months ago. Neither of those foundations is reliable, though they differ somewhat.

      Particularly UNreliable is a monetary system where these features apply to drive the value of the money, and the government has perverse incentives toward negating these foundations. I suspect that the debt ceiling was an attempt to restrain the effect of those perverse incentives, but since the primary agent who is acted upon by those incentives (Congress) is also capable of changing the debt ceiling, it doesn't work very well. Surprise.

      Delete
    6. Raffaele AquiloneJuly 29, 2025 at 2:30 AM

      Tony, I don't know how historically accurate your narrative is: Marco Polo went to China at the end of the XIII century and found out that "paper money" had been legal tender for centuries over there! I reckon that systems based on "money as credit" are pretty old in historical terms and originating from a variety of reasons, including government credibility and demand for credit by the wider economy.

      But aside from that, even without moving to a fiat currency, the critical point is when people accept banknotes instead of gold and silver: that's where "credit" replaces "bartering a commodity", as you rightly point out. Is that step intrinsecally evil for you? If yes, then credit seems to be evil in pretty much all of its forms. If not, then you admit that "money as credit" is not intrinsecally evil, and if that is the case then the issue stops being about objective morality and becomes a debate about economics, where we can discuss pros and cons of monetary systems without them being "intrinsecally good" or "intrinsecally evil".

      Delete
    7. TonyJuly 29, 2025 at 1:07 PM

      ut aside from that, even without moving to a fiat currency, the critical point is when people accept banknotes instead of gold and silver: that's where "credit" replaces "bartering a commodity", as you rightly point out. Is that step intrinsecally evil for you?

      Well, I think that there are 2 or 3 steps in the middle there that got passed over: It is after banks issue notes merely as receipts of deposit for redemption, that banks eventually notice that people are "bartering" the notes instead of redeeming them. THEN the banks start issuing new notes that don't have existing deposits backing them up, as loans to borrowers, and this becomes fractional reserve banking. I don't think this is intrinsically evil, but I would note that (historically) tended toward deception, in that at least at first people thought ALL of the bank notes represented ACTUAL deposits on hand at the bank, and acted that way. Then there is the step of a government stepping in and either formalizing the production of such notes, or taking over issuing them lock, stock and barrel. And then (usually, later in time) the government dissociating the notes issued from any connection to actual reserves held - i.e. discarding even the modest constraint of the fractional reserves - to get true fiat money.

      As I suggested, these steps need not be intrinsically evil in order for them to be - at least in some situations - imprudent. To the extent that the steps could only take place because people thought that the system was the old system (direct dependence on deposits or reserves), to that extent the new steps were deceptive by intention (and such deception/ignorance would tend to generate bad market signals). To the extent that the new methods (especially the fiat system) entice policy-makers toward creation of money not reflective of the balance of new wealth, to that extent the system encourages imprudent behavior by encouraging debt for which there is no good confidence of repayment, not just "debt" but a "debt crisis".

      I am not opposed to debt, but I am cautious about the idea of money being nothing but an offshoot of debt. And about a system of money-based-on-debt that doesn't have an intrinsic constraint of a cap.

      Delete
  2. WOLF BRONSKYJuly 28, 2025 at 1:08 PM

    Just my two cents (well, five bucks actually) but if I’m going to pay for a subscription I’d rather it all go to you (even if it meant I’d only get one extra essay a month instead of the other stuff Postliberal Order puts out).

    ReplyDelete
  3. AnonymousJuly 30, 2025 at 8:38 AM

    Speaking of trade and tariffs, Trump has achieved a superb result in the latest agreement with the EU. I used to attend weekly meetings in London discussing developments in the European Community (before it became the EU). They largely viewed America as the enemy. Unfortunately, Presidents Obama and Biden largely viewed America as the enemy too, hence our policy toward the EU and other nations was ridiculous.

    ReplyDelete

Subscribe to: Post Comments (Atom)