Does Money Matter?

A Response to Criticisms by Mr. Wasicki

Edward C. Harwood

[Reprinted from the Henry George News, June, 1956]

To the Editor:

I appreciate the trouble that Mr. Wasicki took to comment (April HGN) on my article 'Does Money Matter?" in the March issue. Perhaps this reply to his questions will further clarify some of the points under discussion.

He began by suggesting that I had misunderstood George, and such indeed seems to be the case if Henry George meant what Mr. Wasicki suggests by his interpretation of George's statement, ". . . the depositor in a hank cannot draw money out until he has put money in. If I correctly understand Mr. Wasicki's interpretation, he thinks that George used the word 'depositor" as a name or label for someone who has put money in a bank. In that event, by substituting the longer phrase in the quotation from George, we have ". . . someone who has put money in a bank cannot draw money out until he has put money in."

As it happens, however, even thus reducing George's statement to an apparent tautology does not prove Mr. Wasicki's point. In order for Mr. Wasicki to be correct, the statement would have to read something like this, "If a depositor is someone who has put money in a bank and is limited in his withdrawals to what he has put in, then it is true that a depositor in a bank cannot draw money out until he has put money in." Now if this is what Wasicki thinks George meant by the sentence first quoted above, that is Mr. Wasicki's privilege, of course; but I have never had the impression heretofore that Henry George would have wasted his time in making such assertions. Not only from the sentence quoted but also from various other portions of George's writings I had assumed that he simply never had the opportunity to inform himself regarding the functioning of a money-credit system. That George saw the desirability of doing so is apparent from the unfinished portions of his Science of Political Economy, but that he never had the opportunity to complete the task is equally apparent.

Mr. Wasicki asserts that "most of the confusion regarding money arises from the inclusion of credit in the discussion." However, he nowhere makes specific his own use of the label "money." Precisely what is he referring to when he uses that name? Jn his closing paragraph, he says "Money is not a measure of value. It is the market place where values are measured." Here we have a seemingly definite referent, "market place," but when we substitute that phrase for "money" in his next sentence, we have "Inflate the market place and the market quickly adjusts by rising prices."


1. Do the labels "market place" and "market" refer to the same thing?

2. Or is Mr. Wasicki saying, "Increase the quantity of purchasing media in the hands of potential buyers without correspondingly in-creasing the quantity of things offered for sale and in due course prices generally will rise?"

3. If Mr. Wasicki is saying what is indicated in 2, above, is he not using "money" as a label for the same things I have called "purchasing media?"

4. If the answer to 3, above, is yes, how much purchasing media will Mr. Wasicki have left for use if he discards from the sphere of political economy all credit? (He has earlier asserted, "Now credit does not properly belong in the sphere of political economy.") The answer is, about one-sixth of the purchasing media in use.

Mr. Wasicki notes that I have claimed that "the commercial banking system creates huge totals of purchasing media," and he asks could they do it without the aid of the government?". The answer is "yes" rather than the "no" he supplies. For many decades commercial banks have been creating purchasing media in the forms both of notes or paper currency and demand deposits or checking accounts with and without the aid of governments. Anyone who does not know this to be the case simply has not had occasion to study the readily available records. I hope Mr. Wasicki understands that there is no intention on my part to imply he would have any difficulty in understanding the facts whenever he may have an opportunity to study them. For anyone who has thought about the subject as much as he has, such understanding should be easily achieved.

In closing, I should like to emphasize that the word "money" seems to be one of the slipperiest and hardest to control in the field of economics. We here have abandoned all hope of using it for scientific discussion, and in spite of wide study over a long period of years, I have yet to find a single author able to achieve consistency and coherence in using the label "money." No doubt, therefore, it is to Mr. Wasicki's credit that we have understood each other as well as I hope we have.