Callahan Versus Murphy Throwdown on Counterfeiting

I wrote this to Bob about a recent article of his:


In the case of counterfeiting, this charge against the Fed takes as the essential component of counterfeiting to be using a printing press to produce money, i.e., it is the physical means used to produce an object that are in question. So, if that's the case, let us look at counterfeiting a painting. Hmm, a counterfeiter used brushes, oil paints and a canvas to counterfeit the Mona Lisa... therefore, since Leonardo produced the original in the same way, he was a counterfeiter as well!

Something has gone horribly wrong here, and it was in step one -- the essence of counterfeiting has nothing to do with the physical process used -- in fact, that process will probably be as close to the one used to produce the original as possible. No, the essence of counterfeiting is to take an original item of value, try to copy it as closely as possible, and then fraudulently try to pass off your copy as the original -- and in the case of fiat money, every single piece of this essence is missing. There is no 'original', there is no copying process, and there is no attempt to pass off the end product as something other than it is.


Bob has allowed me to post his response here. His items are numbered and in quotes, and my snappy comebacks follow each numbered point, unquoted:

"1) On the very narrow point, is the Fed (or the US Treasury) a counterfeit operation, no, it's not, because, as Gene points out quite correctly, you could ask, "OK then, what is a $20 bill a counterfeit of?" I have in print disagreed with Walter Block on this very point (when I critiqued his defense of the "heroic" private counterfeiter), so point Callahan."

The crowd cheers!

"(2) OK for the purposes of a pop article in today's environment, I have no problem saying the Fed is a giant counterfeiting operation. And indeed, Jeff Hummel--hardly a wishy-washy guy who is fuzzy on the details--tells that to his students to get them to see the big picture."

Then Jeff is mistaken also. One does not get students to "see the big picture" by feeding them bad metaphors.

"(3) Why? Because when you go through the reasons that a two-bit counterfeiter of money is hurting society, you find that the exact same reasons apply to the Fed's operations."

So Bob wants to call this counterfeiting because of its effects. But this strikes me as a very bad idea. Because, if that is our criterion, then, for instance, in a commodity money world, someone who suddenly finds a huge amount of gold in his backyard is also a "sort of counterfeiter." And someone who skydives out of an airplane, has their chute fail to open, and lands on someone else, killing them, is a "sort of murderer," since they had the same effect as a murderer would have.

"(4) Gene is wrong when he thought I was looking at the physical operations and concluded, 'Hey, counterfeiter!!' The whole point of my article was that the complex open market operations to buy Treasury debt looks nothing like the monarch rolling out the printing press to pay his bills. I was saying that despite the superficial differences in mechanics, these two activities were equivalent economically."

I am glad I was wrong about the physical process being the key to Bob's metaphor.

However, the criterion actually being used is problematic as well, since "counterfeiting" is not an economic category -- it is a legal and moral category. The claim seems to be, "The Fed is morally a counterfeiter, and should legally be seen as one, since its activities have the same economic effects as those of a counterfeiter."

But, first of all, if counterfeiting were legal, its effects would be monstrously worse than the effects of Fed actions, because counterfeiters would simply print money without any restraint whatsoever, so long as the value of a bill was higher than the cost of printing it up, while Bob admits the Fed does not and has a motive not to do so. (The counterfeiters would, of course, put themselves out of business in doing so, but they'd be in a prisoner's dilemma here -- it would be better for all of them if all of them exercised restraint in printing money, but no one could count on anyone else to do so.)

And, secondly, as above, same effects != same action. I can drive up the value of one of Bob's books either by relentlessly promoting it, or by killing him. That would not make killing him a sort of marketing, or marketing a species of murder.

UPDATE: Bob had points 5 and 6, as he notes in a comment. I did not include them because, since I don't concede 2-4, they no longer have any relevance. (They were along the lines of, "So, Gene accepts X (2-4), but still objects Y.")


  1. Hey Gene, how about printing all of my reply! You left out the best parts. It's not my fault if you ran out of snappy comebacks.

  2. Well, because if I've handled 2-4, then 5 and 6 are no longer relevant, since they were "Well, if Gene still wants to insist on..." But since I don't concede on 2-4, then is no point handling 5 and 6!

    And, you'll note, I didn't include my whole e-mail either -- this was "edited for readability."

  3. Anonymous6:58 PM

    Gene wins.

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  5. Hi Gene,
    I agree with your analysis and the counterfeiting metaphor is not perfect. But no metaphor is perfect.

    Would you have a better one to offer?

    Btw, a good TED talk on metaphors and the cognitive process:

  6. Julien, I'm not saying the metaphor is not perfect -- I'm saying it's positively misleading. And, most often, it is not even presented as a metaphor.

    And no, one does not have to a better metaphor to say that one is bad.


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