Beruflich Dokumente
Kultur Dokumente
Economics
Michael Daniel
10/6/2006
Core A
There are no meaningful connections between John Locke’s epistemological
Considerations on the Consequences of the Lowering of Interest, and Raising the Value
These two works were written for different purposes, in different styles and to different
audiences. They do not share the same logic, structure or style. The only quality that the
two works share is that they were both groundbreaking documents in their respective
fields.
Locke’s economic ideas were heavily influenced by the economic realities of his time.1 It
John Locke lived in England from 1632 – 1704. His parents were staunch
Puritans and could be considered lesser gentry. He studied at Westminster and Christ
Church, Oxford. He is hailed as the co-founder of the Royal Society, along with Sir Isaac
Newton.2 The Royal Society was the academic organization that drove the enlightenment
in 17th century England. He was accepted into the household of The Earl of Shaftesbury
as Shaftesbury’s personal doctor and clerk. Shaftesbury founded the Whig party.3 Locke
became involved in politics and civil service by working for Shaftesbury, and as a result,
1
Screpanti, Ernesto and Zamagani, Stefano. An Outline of the History of Economic Thought 2nd ed.
Oxford, UK. Oxford University Press, 2005. 1-15
2
Pyle, Andrew. “John Locke.” The dictionary of Seventeenth-Century British Philosophers, Volume 2.
Bristol, UK: Thoemmes Press, 2000. 532
3
Kors, Alan. “John Locke.” Encyclopedia of the Enlightenment. Oxford, UK: Oxford University Press,
2003
2
he worked as a civil servant for most of his life. He was appointed to the position of
secretary to the Council of Trade and Foreign Relations and he was instrumental in
getting the Licensing Act passed, which is similar to America’s First Amendment. He
wrote the first Constitution for the Carolinas and his political writings inspired the
American and French revolutions. Locke traveled in both academic and political circles.
This is important because it is the underlying reason why his epistemology does not relate
to his economics.
It was in his capacity as the Earl of Shaftesbury’s secretary that Locke was first
exposed to Josiah Child’s work. Child was an economist who wrote a book titled Brief
Observations Concerning Trade and Interest of Money. Child’s tract compared Holland’s
legal interest rate in England of four percent, in 1692, Locke would publish Some
he would argue that the interest rate should be set at six percent instead of lowering it to
four percent because the ‘natural’ interest rate for credit was around six percent at the
time. While Some Considerations was groundbreaking in many respects, the work failed
to sway Parliament and the interest rate was set to four percent.5
The inspiration and intended audience for Brief Observations was clearly different
from that of An Essay, which was Locke’s epistemological work. An Essay was inspired
natural and revealed religion.6 Locke’s epistemological work was written for academics
4
Hutchison, Terence. Before Adam Smith. Cambridge, Mass: Blackwell, 1988. 58-64
5
Eatwell, John and Milgate, Murray and Peter, Newman. “John Locke.” The New Palgrave: A Dictionary
of Economics. London, UK: Macmillan Press, 1988. 229-230
6
Higgs, Henry. Palgrave’s Dictionary of Political Economy. “John Locke.” New York, NY: Sentry Press,
1963. 631
3
but his economic work was written for politicians. I believe that this accounts for much
The style and tone for ‘Brief Observations’ is casual and somewhat unstructured.
In the introduction to the work, Locke wrote, “I must desire you to remember, that you
must be answerable to the world for the style, which is such as a man writes carelessly to
his friend, when he seeks truth, not ornament…”7 Locke wrote in this manner on purpose
so that the work could compete with Child’s tract, which was written in a similar manner.
The style and tone for An Essay was far more structured and formal than that of Brief
Observations. An Essay began with two epistles followed by a 27 page outline. Locke
made it clear that it was not intended for the layman or the politician.
I will now give a general description of the contents of these two works. I will
begin with a more in-depth description of Some Considerations and the economic
realities surrounding it. Then I will describe An Essay in greater detail. I will then focus
mercantilism and Adam Smith’s Wealth of Nations. Mercantilism measured the wealth of
a country by how much gold it had in circulation as coinage. Locke did not break with
that tenant of mercantilism but he did discover such foundational concepts for economics
as supply, demand and market equilibrium.8 He made the breakthrough argument that
7
Locke, John. The Works of John Locke vol 5. London, UK: Scientia Verlag Aalen, 1963. pg. 3
8
“John Locke.” Wikipedia. Oct 12, 2006 http://en.wikipedia.org/wiki/John_Locke
9
Locke, John. The Works of John Locke vol 5. London, UK: Scientia Verlag Aalen, 1963. 38
4
Remember that in Some Considerations Locke argued that the interest rate should
be fixed at six percent. It is important to note that central banking had not been invented
yet which meant that this law affected each individual lender. Locke argued that if the
legal maximum interest rate were fixed at four percent the law would be ignored by
skillful bankers who could get away with charging more than four percent without getting
into trouble.10 The less skillful private lenders would be less inclined to loan money,
since they could receive only two thirds of what they used to receive before the law went
into effect. Locke argued that this would cause the bankruptcy of farmers, orphans,
widows, merchants and the tradesmen who ran the factories. Foreigners would run the
banks and the markets would collapse. The English trade deficit would grow, causing
England to grow poor because the country’s gold would be sent overseas to pay for the
balance-of-the-trade deficit.
the ideas of equilibrium and that the speed at which currency trades hands is an important
consideration when measuring wealth. He wrote that as money circulates faster it creates
more wealth by creating more commodities with less money. “The very same shilling
may, at one time, pay twenty men in twenty days: at another, rest in the same hands one
hundred days together.”11 He also created the concept of a ‘natural rate,’ which is the
price of a good when both supply and demand are taken into account. On a modern
supply-demand curve chart this is where supply and demand curves intersect. Today,
10
Eatwell, John and Milgate, Murray and Peter, Newman. “John Locke.” The New Palgrave: A Dictionary
of Economics. London, UK: Macmillan Press, 1988. 229
11
Locke, John. The Works of John Locke vol 5. London, UK: Scientia Verlag Aalen, 1963. pg 23
5
While both works were groundbreaking in their respective fields, Some
the original, certainty, and extent of human knowledge, together with the grounds and
An Essay refuted the commonly held belief that we have universal knowledge
from birth. Locke argued that if something is imprinted upon the mind from birth then
even children and idiots know it. Children, idiots and even people of greater intelligence
can know only things from their experiences, therefore, only experience can give
knowledge. When We are born our minds are tabula rasa, or blank slates. Locke then
argued that all ideas are products of experience. “Let us then suppose the mind to be, as
we say, white paper, void of all characters, without any ideas: - How comes it to be
Ideas come from two kinds of experience: sensation and reflection. Sensation is
when we receive information through our five senses. Reflection is when we form our
own ideas from experience. Ideas can be broken down into the categories of simple ideas
and complex ideas. Simple ideas include things like hardness, coldness, whiteness, etc.
We cannot invent new simple ideas, we can experience them only. Complex ideas are
made up of simple ideas. We can associate a round shape, a certain hardness and the
color red with a red ball, for example. Round, hard and red are all simple ideas out of
12
Hutchison, Terence. Before Adam Smith. Cambridge, Mass: Blackwell, 1988. 72
13
Locke, John, Nidditch, Peter, ed. An Essay Concerning Human Understanding. Oxford, UK: Clarendon
Press 1975. 43
14
IBID, 105
6
which we create the complex idea of a red ball. Modes are a type of complex idea that
While we are not born with knowledge, we are born with certain mental abilities
that make knowledge possible. These abilities include the ability to combine simple
ideas to create complex ideas as well as the ability to relate simple or complex ideas
without combining them, which lets us create associations. We also can produce new
ideas from the abstractions of complex ideas and we have the ability to store ideas in our
memory. This was groundbreaking because it was the earliest attempt to apply
psychology to epistemology.
Locke defines “knowledge” as, “The perception of the connection and agreement
or disagreement and repugnancy of any of our ideas.”15 Locke argues that our knowledge
of god and self is reliable, which is reminiscent of Descartes. Our knowledge of objects
is unreliable because we can never know all of the essential characteristics of all objects
and therefore cannot compare an object to all other objects. If we could do that then we
would have knowledge of the object in question. We can say that we probably know an
belief theory of knowledge (JTB). We can justify that we know something because we
experience it and process it mentally into an idea. We generally believe what we sense.
Locke’s argument lacks truth because objects are more than just ideas.
A meaningful relationship between the two works would show that he used the same
15
Locke, John, Nidditch, Peter, ed. An Essay Concerning Human Understanding. Oxford, UK: Clarendon
Press 1975. pg 525
7
logic or made similar points in both works. A meaningful relationship would exist if he
used one work to justify the other. The fact that the two works are by the same author or
that in both works he uses numbered lists in order to make his points does not constitute a
meaningful relationship. These two essays do not build upon each other at all.
In order to show clearly the contrast between these two works I will analyze
object to describe. Gold itself was not important in that work. He could have described
anything but gold happened to be one of his favorite examples. Some Considerations
describes what we do with gold rather than how we know that something is gold.
however, Locke shows that we can not truly know gold because we cannot know all of
For, though in the substance of gold one satisfies himself with colour and weight,
yet another thinks solubility in aqua regia as necessary to be joined with that
colour in his idea of gold, as any one does its fusibility; solubility in aqua regia
being a quality as constantly joined with its colour and weight as fusibility or any
other; others put into it ductility or fixedness, &c., as they have been taught by
tradition or experience. Who of all these has established the right signification of
In Some Considerations, Locke describes gold as the thing that gives value to
currency. He does not believe in paper money at all. To Locke, the wealth of a nation is
defined by how much gold it has in comparison to its neighbors. In this he equates gold
16
Locke, John, Nidditch, Peter, ed. An Essay Concerning Human Understanding. Oxford, UK: Clarendon
Press 1975. 483
8
with wealth. “Riches do not consist in having more gold and silver, but in having more in
Any comparison between An Essay and Some Considerations will clearly show
that there are no meaningful connections between the two. An Essay is an academic
dissertation. Some Considerations is more of an editorial. One work will neither support
nor refute the other work. The most striking example of this lack of support between the
two works is gold. Gold is discussed in each book but the treatment of the subject is so
different in each book that we cannot connect his epistemological description of the
substance with his economic description of it. This is not to say that his economics are
not sound. He simply did not make any epistemological arguments in his economics, nor
WORKS CITED:
1. Hutchison, Terence. Before Adam Smith. Cambridge, Mass: Blackwell, 1988
17
Locke, John. The Works of John Locke vol 5. London, UK: Scientia Verlag Aalen, 1963. 13
9
2. Screpanti, Ernesto and Zamagani, Stefano. An Outline of the History of Economic
3. Locke, John. The Works of John Locke vol 5. London, UK: Scientia Verlag Aalen,
1963
5. Eatwell, John and Milgate, Murray and Peter, Newman. “John Locke.” The New
Essay_contents.html
10. Smith, Adam and Cannan, Edwin, ed. An Inquiry Into the Nature and Causes of
11. Sober, Elliott. Core Questions in Philosophy. Upper Saddle River, NJ: Pearson,
12. Locke, John, Nidditch, Peter, ed. An Essay Concerning Human Understanding.
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13. “John Locke.” Wikipedia. Oct 12, 2006 http://en.wikipedia.org/wiki/John_Locke
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