John Lockes Epistemology is Unrelated to his

Economics

Michael Daniel
10/6/2006
Core A
 There are no meaningful connections between John Locke’s epistemological

writings and his economic writings. An Essay Concerning Human Understanding

(hereafter referred to as An Essay) is his major epistemological work and Some

Considerations on the Consequences of the Lowering of Interest, and Raising the Value

of Money (hereafter referred to as Some Considerations) is his major economic work.

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.

All economists are heavily influenced by their current economic realities, so

Locke’s economic ideas were heavily influenced by the economic realities of his time.1 It

is important to understand the historical backdrop of Some Considerations before we can

provide any analysis of 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

economy to England’s economy in order to argue for a government-mandated maximum

legal interest rate in England of four percent, in 1692, Locke would publish Some

Considerations as a letter to Parliament to provide a counterpoint to Childs tract.4 In it

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

by a conversation at a cocktail party with academics that centered on the foundations of

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

of the disconnect between the two works.

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

on Locke’s descriptions of gold in both works in order to show that Locke’s

epistemological treatment of gold is not related to his economic treatment of gold.

Some Considerations is seen by economists as a transitional half step between

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

rent is usually a function of interest rates.9

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 two most important contributions to economics in Some Considerations were

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,

Lockes ‘natural rate’ is known as ‘equilibrium.’

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

Considerations is not as important as An Essay.12 In An Essay, Locke explored the limits

of human understanding. He wrote, “This, therefore, being my purpose to inquire into

the original, certainty, and extent of human knowledge, together with the grounds and

degrees of belief, opinion, and assent.”13

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

furnished?... To this I answer, in one word, from experience.”14

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

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which we create the complex idea of a red ball. Modes are a type of complex idea that

relates to morals and mathematics.

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

object but we cannot say for certain that we know it.

Locke’s description of knowledge does not hold up against the justified-true-

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.

There is no meaningful relationship between An Essay and Some Considerations.

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

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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

Locke’s treatment of gold. In An Essay he commonly used gold as an example of an

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.

In An Essay gold is identifiable by observation alone. Even with observation,

however, Locke shows that we can not truly know gold because we cannot know all of

the essential characteristics of gold.

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

the word, gold?16

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

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with wealth. “Riches do not consist in having more gold and silver, but in having more in

proportion than the rest of the world…”17

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

did he provide economic analysis in his epistemology.

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

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2. Screpanti, Ernesto and Zamagani, Stefano. An Outline of the History of Economic

Thought 2nd ed. Oxford, UK. Oxford University Press, 2005

3. Locke, John. The Works of John Locke vol 5. London, UK: Scientia Verlag Aalen,

1963

4. Kors, Alan. “John Locke.” Encyclopedia of the Enlightenment. Oxford, UK:

Oxford University Press, 2003

5. Eatwell, John and Milgate, Murray and Peter, Newman. “John Locke.” The New

Palgrave: A Dictionary of Economics. London, UK: Macmillan Press, 1988

6. Higgs, Henry. Palgrave’s Dictionary of Political Economy. “John Locke.” New

York, NY: Sentry Press, 1963

7. Pyle, Andrew. “John Locke.” The dictionary of Seventeenth-Century British

Philosophers, Volume 2. Bristol, UK: Thoemmes Press, 2000

8. Stanford University. “Stanford Encyclopedia of Philosophy.” 2006 John Locke.

Stanford University Sep 26, 2001 http://plato.stanford.edu/entries/locke/

9. Oregon State University. 2006 “An Essay Concerning Human Understanding”

Oct 6, 2006 http://oregonstate.edu/instruct/phl302/texts/locke/locke1/

Essay_contents.html

10. Smith, Adam and Cannan, Edwin, ed. An Inquiry Into the Nature and Causes of

the Wealth of Nations. New York, NY: Random House, 1994. 27

11. Sober, Elliott. Core Questions in Philosophy. Upper Saddle River, NJ: Pearson,

Prentice Hall, 2005. 154

12. Locke, John, Nidditch, Peter, ed. An Essay Concerning Human Understanding.

Oxford, UK: Clarendon Press 1975

10
13. “John Locke.” Wikipedia. Oct 12, 2006 http://en.wikipedia.org/wiki/John_Locke

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