26 December 2008

Strictly speaking, post-modernism was not subjected to any test; nor can it be

Curtis Schweitzer responds to this post:

[E]ven granting that fiat currency is a proposition that uses language to define value..., doesn't this mean that the overall system is itself a kind of experiment? .... In other words, if in a fiat currency system, language constructs economic reality, then can't we "test" such a belief from a rational standpoint by seeing how well it works in whatever "reality" it is we're disputing? If rationalism and science aren't valid ontologies, but the deconstructionist post-modernist framework is, shouldn't we be able to define our own reality in words? And if we've been doing that with money, doesn't that strengthen, rather than weaken, the argument that the current economic crisis is evidence...that post-modernism simply doesn't explain reality (whatever we take that to mean) sufficiently?

In fact, no the overall system itself is not a kind of experiment; it's a kind of fraud. Frauds don't set out to test; they set out to get something of value in exchange for nothing of value. Besides, to be precise, you can't have an experiment of something you didn't set out to to test. The fiat money system was not set up as a test of anything. And there is no point in testing the belief that in a fiat money system language constructs economic reality: we know this to be the case from the simple observation that we trade worthless pieces of paper back and forth in exchange for goods and services. The case is prima facie. Moreover, imperative-mood sentences are not subject to verification or falsification. When the government commands us to exchange these worthless pieces of paper, there is nothing to test, except what happens if we refuse to comply. "You shall exchange this note for x amount of goods and services," is not a proposition; it has no truth-value. It is not an empirical claim; there is no probablility to calculate.

I think the post-modernist will likely look at the situation and see the role of the government here as one of strong-poet. The government, as strong-poet, says of worthless pieces of paper, "This is money" and the worthless pieces of paper are treated like money. The economic crisis, your argument that it's a test notwithstanding, is still discussed in terms of how much (in pieces of worthless paper) has been lost, and by whom.

You want to say, in reply to post-modernist assertions that reality is language-constructed, that it is falsified by the market's failure. I think a post-modernist would say that claiming that reality is a construct is not the same as saying the construct will "work". The post-modernist does not assert that it is, or would be, a great idea with limitless salutary benefits, if we constructed reality with language; he asserts that we do so, whether it's a good idea, or a successful one.

(The problem with seeing the present crisis as a falsification of post-modernism is that looking at it that way diverts our attention from the real failure. Post-modernism is small potatoes compared to the real problem. But I'm getting ahead of myself.)

The post-modernist claim is not that we should be able to define our own reality in words; neither is it that these constructs are successful. The claim is simply that we do. Not only that, but in order to have a test against reality there must be a reality to test against. You have not overcome post-modernism: you're begging the question. In asserting that post-modernism has been submitted to a test which it has failed, you have begun by assuming the falsity of post-modernist claims. You have been assuming throughout that reality is not language-constructed.

But more importantly, especially as it regards the post-modernist preoccupation with coercion, the claim is not that we've been constructing reality with words by the fiat money system. The claim is that the government has done. And the market failure is irrelevant because, again, we continue to discuss the crisis in terms of money lost -- fiat money lost.

The fact is, post-modernism will fall not because it will be, or has been, empirically weighed in the balance and found wanting. Post-modernism is a speculative and interpretive act of the mind, not a set of testable empirical claims. Post-modernism should be rejected because of its internal contradictions. It is untenable on its own terms.

The real failure is not the failure of post-modernist claims about the nature of reality. The real failure is the failure of command economics. Our economy is a failure for the same reason the Soviet economy was a failure: government interference in the market obscures price, which makes calculation difficult, if not impossible. Because price cannot properly be taken into account capital is mis-allocated. Interest is the price of borrowed money. Artificially low interest rates tell entrepreneurs there is much money to borrow; it also tells them consumers are saving more, putting off consumption today with the idea of consuming later on down the road. But what will they be consuming down the road? In fact, it doesn't really matter: that artificially low interest rate is lying to the entrepreneur. People aren't saving, they're spending like crazy. There isn't a lot of money to borrow; it looks that way only because the rate was lowered. And why was the rate lowered? To "spur" the economy, which means to "spur" market participants. Spur them to do what? Spend, of course, but on what? And why?

The 'why' is the easy part: to achieve full employment. Now to the 'what'.

Enter the government. The government has all sorts of objectives, depending upon the administration. But we can use a recent example: housing. The government wants to increase home-ownership. To do this it needs people who want to own homes (as opposed to renting or leasing). It also needs people to build homes. Builders don't build for free, so the people who want homes will need money for those homes, which they don't have because they're poor. And because they're poor they won't be seeking home loans which with to pay builders to build these homes. Also, because they are poor, they are settling for renting or leasing. But we don't want them renting and leasing; we want them owning.

If the government is going to increase home-ownership it must increase the amount of money available for borrowing, specifically, for new homes. It can lower the interest rate, and artificially increase the amount of available money. But banks aren't going to lend to high-risk (i.e., poor) creditors (and if they do, they will do so at a higher interest rate, given the risk involved), so that newly-available money will go to the less-risky (i.e., the rich and upper-middle class), unless, of course, the government can somehow motivate (i.e., coerce) banks into loaning that money to someone else, like the poor. Now, how might they do that?

We know how the government really works. It commands businesses to do various things, not in pursuit of commercial ends, but in pursuit of political ends. The government commanded banks to loan money by requiring them to make a certain percentage of loans to certain percentages of certain classes of people.

We have had yet another test of the command economy. It doesn't work. And what is our government's response? More command economics. Preoccupation with post-modernism diverts attention from this important fact.

Besides, post-modernism is an attack on modernism. I'm a Christian, working intellectually on the basis of Christian pre-suppositions. I'm not a modernist; so post-modernism can attack away. Modernism needs a bucket of cold water thrown at its face.

Indeed, one could say that our current market system, which has never been laissez-faire, is a product of modernism. And since that is what a post-modernist would say, I don't think we have here a test of post-modernism. Post-modernism doesn't assert that we can define reality for ourselves successfully; it claims, simply, that we do. We create interpretations of reality and then pursuade (or coerce) others into accepting these interpretations of reality. Furthermore, postmodernism asserts these acts of creation and pursuasion are acts of the will, not of the mind.

When it comes to our "free" market, and the undeniably coercive role our government plays in the market, I'll give post-modernism that argument.


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James Frank Solís
Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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