Torah Economics: Austrian or Keynesian?

Most people today, even Jews (especially Jews) see Judaism as a religion rather than a national regime. The Jewish nation was not designed by God in order to roam the world and do strange rituals and not eat pork and take off Saturdays. We were designed to be a nation that lived in a certain place under a certain constitution. This constitution is the Torah, and it includes economic law as well as religious law. The question is, is Keynesianism, inflationism, and central bankism consistent with Torah Law?

The Mishnah, codified in the year 200 and the basis for the Jewish oral law, states in Perek HaZahav (the Gold chapter) of tractate Bava Metziah, in the very  first line of that chapter, “Gold buys silver. Silver does not buy gold.”

The statement if read on the surface is quite incomprehensible. Look at the commentaries through the centuries though, and it becomes clear. Gold buys silver means that if someone exchanges gold for silver, the silver becomes his once the gold leaves his hand and enters the hand of the other person. This is regardless of where the silver actually is at the time the gold changes hands. “Gold buys silver” means that the mere act of transferring gold from one hand to another automatically transfers the silver.

But silver does not buy gold. This does not mean that one cannot acquire gold by paying in silver for it. It means that silver does not automatically, by virtue of the fact that silver has changed hands, acquire gold. In order for silver to acquire gold, not only does the silver have to change hands. The gold does as well. The fact that the gold changed hands indicates that both parties agreed to the transfer.

In the case of gold buying silver, there was no need for a clear indication by both parties that they wanted the transfer. The fact that only gold was traded is enough. In the case of silver buying gold, both the parties must agree, and any one party can back out of the agreement before both metals transfer places.

Why is this? Because in Jewish law, there are two types of transactions. There is a barter transaction (Torat Chalifin – the law of exchange) and there is also a monetary transaction (Torat Damim – the law of money). Gold in Jewish law is not considered money. It is considered a commodity, which is higher than money and is more easily transacted. Silver, on the other hand, is considered “damim” or money. In order for a monetary transaction to be completed, both sides must agree by transferring the money for the commodity on both sides. In order for a barter transaction to be completed, the seller need only accept the commodity, and the transaction is completed even before the good is exchanged for the commodity.

This is the basis of Jewish monetary law. Where does paper money come in to the equation? In a Jewish economic regime, no king or president or political leader of the Jews would have the authority to demonetize silver, or de-commoditize gold. Fiat money would still be allowed to exist, but it would be forbidden by Jewish law to affect the status of gold as a commodity or silver as money.

If people chose to use fiat government money, they could. But if they didn’t want to, they wouldn’t have to. A Jewish economic regime would have competing moneys, and the money with the most value would be the one that was most used. If the government decided to print more bills, they could, but the citizens would be able to resist the theft lawfully.

This is how a Jewish state can and should function. This is how it will eventually function. And the world will follow our lead and free humanity from government fiat money Keynesian tyranny. After all, the power to print money is no power at all when the citizens are not under any compulsion to actually use it.

Competing currencies was first proposed by Hayek, one of the fathers of the Austrian School of Economics.

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