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Does Gresham's Law tell us anything about the optimal organization for a society?

Comments on another topic led to this discussion, which I believe is important enough that it deserves its own topic. See first comment below.

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    Much of the political disagreement in this country stems from a disagreement about the nature of government, and because we see government differently, we also tend to interpret the design of the Constitution differently.

    Those who believe in a narrow Constitutional interpretation tend to recognize that there actually is no such thing as government. Meaning, government is not an entity. it is a mindless, soulless, thoughtless machine that we humans put together, whose gears consist of rules and definitions and procedures and standards. But, those gears are simply agreements with other citizens, made and maintained through the medium of government, but are not agreements with government itself, because again, government is not an entity. Government simply houses and executes the agreements made between citizens.

    Thus the system of monopoly government control is only one of several ways to choose to interact with our fellow citizens. Another is free and voluntary cooperation, which is the normal mode of interaction, and is how all societies start in the beginning. Eventually a society based on free and voluntary cooperation produces enough stored wealth and becomes large enough that face to face interactions between everyone become inconvenient. At this point such societies begin to consider formalizing some interactions between themselves in order to reduce uncertainty and conflict. In this sense, the organic emergence of law is to the societal sphere what the organic emergence of money is to the economic one. Standards emerge because most people tend to find similarities in their value systems.

    However, whenever we choose to restrict certain interactions with our fellow citizens such that they can only occur through the medium of government, we cede some of our own freedom to this cooperative endeavor. This is the way that government works because it is the way that ultimate authority works. Ultimate authority is not capable of sharing or coexisting. It does not play well with others by its very design. It is either in charge or it has no say. It either exerts its monopoly privilege or it stands mute. Ultimate authority always resides with the individual until the individual decides to give it away.

    But, once freedom has been donated to another holder of monopoly privilege, this freedom cannot be easily reclaimed. If you live by the sword then you die by the sword, as the saying goes, and if you choose to surrender your individual freedom to group consensus in order to gain some safety and predictability, then you no longer control that portion of your own life, because you have surrendered control over that aspect of your life to the group will. And from that point forward, your perception that surrendering freedom to the group consensus increases your safety is only an accurate perception as long as the group continues to make decisions that benefit rather than harm you. But it is out of your hands from that point forward, because it is very difficult to bring that freedom back under your own individual control.

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    Those who favor a narrow Constitutional interpretation tend to be somewhat suspicious of human nature. We tend to see that human nature is inherently selfish, and prone to rationalizations and urges that lead us to impose on the lives of others. We see that the natural feedback loop that tends to limit this self destructive behavior is the restraint imposed by voluntary cooperation. Again, there are parallels with the economic sphere here, because the economic sphere is an outgrowth of human nature just as the social one is, and thus they operate by the same rules. Free markets remain efficient because if someone tries to introduce goods at too high a price or too low a quality, no one buys them. Thus the freedom to decline to engage in a purchase is the mechanism by which the market keeps itself clean and efficient.

    But, because of misconceptions, markets aren't always left alone to be free. In the market for money, for example, we have the phenomenon of Gresham's law. This is commonly understood as the phrase "bad money drives out good." If the law forces us all to pretend that bad money and good money are worth the same amount, then everyone hordes the good money and tries to foist the bad money off on everyone else. Interestingly, many believe that good money is such an important part of society that it cannot be left to the vagaries of the free market, but must be put under the monopoly control of government in order to protect its value.

    This viewpoint demonstrates an incomplete understanding of Gresham's law, however, because what is often forgotten is that bad money can only drive out good when the bad money is given the monopoly protection of legal tender laws. Deprived of this monopoly, Gresham's law runs in reverse, such that if an individual has the freedom to decline to accept bad money, good money instead drives out bad. Why would you ever accept bad money if you knew that the next person could decline to accept it from you?

    The presence of monopoly by force rather than monopoly by choice is thus what transforms Gresham's law and makes it run in the direction of being destructive rather than constructive. Once Gresham's law is understood, it becomes clear that if government really wants to protect the value of money, then it needs to ensure that no one has a monopoly on money, including the government itself, by removing any legal tender laws.

    Society functions the same way. Absent the force of monopoly, good and mutually beneficial interactions tend to drive out manipulative and exploitative interactions because individuals have the freedom to decline an interaction that is not to their benefit. And therein lies the rub of the concept of good government, because all government power stems from its being declared the ultimate authority, and thus government is inherently a monopoly.

    Due to this inherent nature of Government, I and those who adhere to a narrow interpretation of the Constitution tend to believe that government is a tool very similar to fire. We agree that it has potential to be a useful tool, but only when bottled up and carefully contained, because its primary nature is a destructive one. It is thus only useful when it is carefully contained inside the equivalent of fire rings or stoves, or inside engines or boilers. If it escapes its enclosure, it is destructive, not constructive. It must be respected because it is a fearfully dangerous thing, and has the capacity to burn a society to the ground, leaving little of use behind.

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    Continued from above....


    Those who think of government this way recognize that for the most part, what society generally needs protection from is government itself. We certainly need protection from the governments of other countries who don't share our social or economic environment, but also from our own government if we are foolish enough to let it escape its enclosure. Thus we do not see government as the source of our rights, and certainly not as the protector of them. Government to us is like a fire we have built at night, and we sleep around it because its light will keep other dangerous foreign governments away. And that's about all we expect it to do. If we ask it to do anything else, we are pretty sure the eventual outcome will be worse than what we could achieve through voluntary cooperation.

    Thus when I look at the Constitution, I don't see a process whereby we created a national unified agreement about what rights we all expect the Federal government to protect. Instead, the Bill of Rights was supposed to be a partial and incomplete list of the types of things the Federal Government was not allowed to interfere with, and if the preamble to the Bill of Rights isn't enough to make this crystal clear, then the 9th and 10th amendments certainly should be, and taken all together the clear import is unassailable. The Constitution denies the Federal Government the freedom to interfere with these things, and simultaneously this also denies the Federal Government the responsibility of guaranteeing them.

    It was only after the meaning of the Constitution was inverted to a broad interpretation, such that the Federal government ceased to be viewed as a dangerous fire and instead was envisioned to be a comfortable building, that the thought process emerged in which the Federal Government was supposed to be the caretaker of us all. But this new vision of government does not necessarily move us in the direction of a more healthy society. My suspicion is that it accomplishes the opposite.



    Long before Sir Gresham, the ancient Greeks figured this out, and they applied it to politics. Aristophanes, in his play "The Frogs", pokes fun at the upper and (rising) lower classes, using the analogy of coins. "The precious gold coins of Athens are set aside whilst the common brass coins are passed hand to hand". His audience understood the analogy and probably roared in laughter.
    Democracy is cheap and feeds on the lowest common denominator, while true power is hidden and lies in wait. Is it stored in gold? No, it's asset is our children, as long as they remember why this country was founded and don't fall for The Big Bail Out that will make everyone slaves to the evil we call government.

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  • One example: when crony capitalism is regarded as capitalism, then capitalism is devalued, and over time, all that is left is crony capitalism. It wasn't just the left that sold out freedom in this nation.

    Another example: when instruction is regarded as education, then education degrades to mere instruction, and over time, all that is left is instruction. It was also the left that sold out freedom in this nation.

    A related example: when education given (a downhill event) is regarded equivalently with education taken(an uphill event), then over time, more expect education to be given, and it is thus seldom taken. Politicians sell 'solutions' to the 'problem of education' couched in terms of what they can do; commit OPM to solutions that 'give' education. But education, at its core, is primarily always taken, not given; it is at most well offered, and once our political leaders have ascertained that education has been well offered in America, the responsibilities for failures in education fall on the shoulders of the unequal takers of education. Shuffling into public schools and slouching in seats, from where the Golden Education Funnel is expected to painlessly deliver something called 'education' into the barely open maws of students who may or may not on their best days do approximately only what is asked of them, is a systematic failure of education where it is allowed to fester. This mindset is the result of equating education that is given with education that is taken, and when a lower value is equated with a higher value, folks will remain gathered at the bottom of every hill.

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