LaRouche Explained ‘Physical Economy’: ‘The American System of Political Economy’

Jan. 1, 2022: This section of a paper written by Lyndon LaRouche near the opening of this century (Oct. 7, 2002), made clear to all who would open their mind and reason, the gulf between the science of physical economy, and mere monetary economics. Let this century see the former, using LaRouche’s teachings and writings, extinguish the latter.

Piercing the Veil of Sense-Certainty

Now, I come to the issue of economics as such, by which I signify physical economy, not financial accounting.

On this point, the pivotal, systemic quality of difference between Classical and Romantic cultures, is their contrasted views of the matter of sense-certainty. In contrast to both the Classical Greeks since Pythagoras, and the greatest scientific minds of modern European science, the relatively inferior cultures are gripped by the delusion that what is real is that which the senses imagine that they see, hear, taste, smell, and touch. When that childish error of assumption by relatively brutish cultures, such as the Roman Empire’s, is taken into account, it should [not -ED] be difficult to pin-point those pivotal accomplishments of the superior Classical Greek scientific thought, which are summed up in Plato’s Republic, notably, on this account, in his use of the allegory of the Cave.

Such an understanding of this problem, is the indispensable starting-point for any scientifically competent body of thought respecting economy.

The senses are living organs of our bodies, which reflect, about as faithfully as shadows do, the impact of the experiences which the senses as such can never “see” directly. Science is the practiced accumulation of discovery of what are practically provable to be universal physical principles, principles which can not be seen directly by the senses, but which correspond to those efficiently existing forms of action which increase man’s power in and over the universe, yet are acting from beyond the veil of sense-certainty.

Take as an example, the matter of gravitation. Consider, as an obvious choice of illustration, the uniquely successful method of the only original discovery of a principle of universal gravitation, by Johannes Kepler.

The continuation of that erroneous Aristotelean method revived and dictated by the decadent Roman Empire, prompted not only Claudius Ptolemy, but also Copernicus and Tycho Brahe, to devise schemes which sought to explain sense-perception of the astronomical heavens (normalized sensual observations) according to Aristotelean principles.

Kepler, adding more precise measurements to those of Brahe, showed empirically that the planetary orbits were elliptical, not circular, and did not represent uniform motion. Both the entire system of Aristotle, and also the empiricist hoaxster Galileo, were forever discredited by that single discovery of Kepler’s. This paradox discredited, in fact, all astronomy based on the simplistic view of sense-perception, and led to Kepler’s discovery of universal gravitation, and thus to the founding of the first comprehensive approach to constructing a mathematical physics.

Kepler showed, thus, the existence of a universally efficient principle of action, operating as if from behind the shadow-world’s veil of mere sense-perception. Gravitation, like all universally efficient physical principles, is not an object of sense-perception. It is not something which can be merely “learned,” as learning and symbolism are associated with sense-certainty; it can only be known, as an universal hypothesis validated by appropriate experimental methods of proof. As Plato emphasized in his dialogue on the doubling of the square, and as Leibniz and Gauss, among others, showed, our knowledge of these principles is dependent upon proof of their unique power to enable us to change willfully the real world, such as that of nuclear microphysics, which is acting from beyond the mere shadows that real world projects upon our sensorium.

This same view of physical science was already characteristic of Classical Greek scientific thought, as from Archytas and Plato through Archimedes and Eratosthenes. Typical are the Classical Greek topics of constructing a square double another square, doubling a cube by construction, and the powerful implications of the series of the five Platonic solids. This was a conception which became temporarily lost to European civilization wherever the relatively brutish, corrosive influence of Romanticism prevailed. These are the same points on which Carl Gauss caused a revolution in modern mathematical physics, founding the concept of the complex domain, in his 1799 report of his discovery of the first valid form of a fundamental theorem of algebra. Plato, in his Theaetetus dialogue, associated this complex domain with the domain of the physical powers, beyond sense-perception, by which things impossible within sense-certainty geometry, were brought into existence, as shadows, within the shadow-world of sense-certainty.

Leibniz, similarly, in his discovery of the fundamental principle of a science of physical economy, gave the Platonic name of powers (Kraft) to the effects of application of discovered physical principles to improve the practice of economy. Gauss employs the same notion of powers in defining the complex domain. The Leibniz-Bernouilli proof that the catenary, the characteristic reflection of the complex domain, expresses a principle of universal least-action, is the most efficiently simple demonstration of Leibniz’s physical principle of the infinitesimal calculus, opposite to the famous conceits of Carl Gauss’s adversaries Lagrange and Cauchy.

The use of Socratic method, to adduce the efficient existence of those powers called universal physical principles, as acting on our senses from beyond the veil of sense-certainty, is the essential, experimentally defined demonstration of the fundamental difference between the human individual and the lower forms of life. No other species is capable of willfully increasing, again and again, its potential relative population-density.

This difference is expressed as the increase of the relative potential population-density of the human species, above the millions possible among species of higher apes, to the billions of today. The potential of the human species, not only to generate an individual’s discovery of an efficient principle of action from beyond the veil of sense-certainty, but to induce the replication of that act of discovery in succeeding generations, is the essential species of action which separates human cultures scientifically from the attributed cultures of the lower forms of life. The general expression of this is the resulting increase of the potential relative population-density of mankind, as measurable per capita and per square kilometer of surface area.

Through this cognitive mode of individual and collective reaching beyond the veil, man not only improves his individual power over nature as he finds it, but changes his environment, as by scientific revolutions, and by means of development of capital investment in physical improvements of conditions of production, such as basic economic infrastructure,

It is by the maintenance and enhancement of such willful improvements in human knowledge and physical-capital improvements, that the productive powers of labor are maintained and also improved. In the science of physical economy, the mind looks at the shadow-world of sense-certainty from a vantage-point beyond the veil of sense-certainty, and measures the performance of economy in physical, rather than merely financial terms, accordingly.

Useful Versus Toxic Money

In a sound nation-state system, as under the U.S. Federal Constitution, the power to create and regulate all forms of monetary currency, is restricted to the sovereign power of the state; no monetary power external to regulation by the state is permitted. The properly governing objective of those acts of creation and regulation, is to control the behavior of the effects of circulation of money, that for the purpose of fostering results which will coincide with desired intentions of physical-economic goals serving the maintenance and improvement of the general welfare. That constitutional restriction draws a line of separation between useful and usuriously toxic forms of that purely symbolic, empty form of existence called “money.”

The significance of this argument is illustrated most simply, by considering two of the most common expressions of popular but intrinsically psychopathic opinions concerning money. The first, is the delusion that there is a natural rate of interest on loaned money. The second, is that the proper rate of interest on any particular lot of loaned money, is determined by an (actually non-existent) “law of supply and demand.”

First of all, contrary to those marginal minds who babble about a non-existent magnitude called “utility,” the investment of money as such will not increase the level of wealth produced by society. Paper remains paper, and, within the bounds of the real world, paper values tend more readily to burn than to breed.

Improvement—i.e., physical growth, increased physical productivity, physically improved product—occurs solely through physical investment in the production of those physical effects which tend to increase the average level of the physical-productive powers of labor in the society as a whole. The state, with its unrestricted sovereign authority for the creation and circulation of its currency, must shape the rules of credit and monetary circulation in ways which tend to foster the physically desired long-term physical effects. The emphasis must be as much, or even more, than on the short-term effects.

The most difficult challenges are posed by matters lying within the categories of medium- to long-term capital cycles. To define competent policy bearing upon these cycles, one must always consider the physical cycle as primary, and bring the financial reflection of that physical cycle into conformity with the physical valuation.

The most elementary type of long-term economic cycle is measured in generations: the investment which must be made, cumulatively, in the development of the newborn infant into an educated, economically efficient young adult, a generation later. For example, the cost and prices of production and exchange, must reflect the incurred physical cost of that investment in the development of a new generation of a certain productive potential.

The variation in quality of the physical investment by society in any one generation, were better estimated in terms of the gains in per-capita physical productivity of society over a minimum of two generations, approximately fifty years, and, still more reliably, three generations. The essence of any effective leadership of a nation, is to be measured as the intellectual power of foresight and will, to set effectively into motion today, future generations’ achievement which could not be realized within the bounds of a single generation. In President de Gaulle’s France, this was expressed by the notion of indicative planning of long-range investment priorities. Such “indicative plannning” was the basis for the U.S.A.’s “economic miracle” of 1861-1876, of President Franklin Roosevelt’s recovery program, and the stunning technological benefits, for the economy as a whole, of the Kennedy “crash” space program.

Apart from the society’s investment in the typical family household’s development of its successive generations, we must consider several exemplary, other types of long-term cycles of physical investment. There is investment in basic economic infrastructure, such as systems of general transportation, power generation and distribution, water management, land reclamation, sanitation, education, and health-care systems. These involve cycles to be estimated and measured in spans of two or more generations. There is, typically, private capital investment in local productive capacity, as of agriculture and manufacturing. There are also two very special categories of individuals’ activity, in scientific discovery and productive entrepreneurship as such.

With the latter pair of capital cycles, science and productive entrepreneurship, we touch most directly on the most crucial features of a modern economy: the sovereign role of the cognitive powers of the individual person in generating progress. Although only some entrepreneurs employed in production perform their function of economic leadership as scientists, all effective entrepreneurship among farmers and manufacturers touches upon the same role of leadership exerted through the sovereign powers of the individual mind so reflected, if in a relatively diluted, and also indirect form.

The essential feature of increases in physical productivity in production of agricultural, manufactured, and related physical goods, is the impact of variations in the practiced rate of investment in fundamental scientific progress, and that progress’s determining control over the potential rate of technological progress. These overriding scientific-technological determinants of the boundaries of increased productivity, are expressed mathematically as physical powers, as the Gauss-Riemann domain defines the physical meaning of the mathematical complex domain, contrary to Gauss’s reductionist adversaries Lagrange and Cauchy.

No existing financial-accounting system, or methods derived from the reductionist, ivory-tower notions of “systems analysis,” by such clones of Bertrand Russell as Norbert Wiener and John von Neumann, can competently assess such aspects of the physical-economic processes. Financial accounting, systems analysis, and other “ivory tower” misconstructions of economic analysis of real economies, will always, and always does produce wrong-headed policy directives, that as a consequence of the lack of correspondence of such simple-sense-certainty-based mathematical schemes to the real universe within which physical economy actually exists.

Put the usually questionable role of the corporate absentee-ownership to one side for a moment. Focus upon the example of the owner-operated small- to medium-sized manufacturing firm whose essential contribution to the society’s economy is either generating, or, more frequently producing technological advances in product and process designs. Compare this entrepreneur’s truly Classical role in society with the contribution of those discovered universal physical principles which Plato, Leibniz, and Gauss, for example, define as the physical powers of the mind to change the real world which exists beyond the veil of sense-certainty.

In the latter example, the scientific discoverer, the characteristic physical-economic activity of that individual, is the power unique to the sovereign creative powers of the human individual, to generate valid working definitions of universal physical principles. In the case of the referenced type of entrepreneur, we have a case best understood by comparison with that of the scientific discoverer. Power, as used by me here, has the same connotations as Plato’s use of the equivalent term in his treatment of the construction of the doubling of the square, Leibniz’s use of power (Kraft) in defining a science of physical economy, and the physical meaning of the use of the notion of powers in both Gauss’s 1799 report of his discovery of the fundamental theorem of algebra, and Riemann’s definition of the physical-experimental significance of powers within the concluding portion of 1854 habilitation dissertation.

Physical Science and Society

The development and use of these qualities of the sovereign cognitive intellect of the individual person, is the underlying, unifying principle of all competent economics knowledge. The modern republic, typified by the intent of the Preamble of our historically exceptional Federal Constitution, is intended to develop our economy as an instrument through which to bring those creative powers of the sovereign human individual into play, as the reigning feature of our medium- to long-range policy decisions. We must recognize that there exists no populist, or other sort of reductionist social or other system, by means of which those specific kinds of fruits of the individual intellect could be generated “collectively.”

The function of the proper political design of a republic, is to create the combined social and physical preconditions, under which the development of the creative powers of every individual (as Plato, Leibniz, and Gauss defined “powers”) is fostered, and in which those with developed such sovereign creative powers of the individual mind, from whatever prior station in life, are steered into opportunities to supply society as a whole with the performance of those functions which the creative scientist, entrepreneur, and workman bring to the social-economic process.

There is no way to calculate arithmetically the value of such persons and their work; we must rely on producing such persons, and affording them the circumstances to do their work. We measure economic growth, not in simple arithmetic magnitudes, but in powers. Each such power is expressed in the form of a discovery of a universal physical principle. (Physical principles include those Classical-artistic and other social principles for which an efficient, specific physical effect may be demonstrated experimentally. These principles are discovered in the same way in which universal physical principles of abiotic and biological processes are demonstrated. The restriction is, that only those artistic and related social principles which conform to Classical principles can be defined as principles in this manner.) It is the accumulation of the combined transmitted, and new discovery of such principles, as powers, which defines human progress scientifically. Therefore, the most profitable form of national economy is known to be the type of science-driver program which U.S. President Kennedy motivated.

Therefore, we must never permit today’s generally accepted definition of a financial-accounting system, or its derivatives, to determine our government’s economic policies. It is the generation, transmission, and application of the discovery of such powers, which is the sole mode of action by which the characteristic productivity of a society (e.g., an economy) is effected. These powers define the physical action, performed on the universe, by means of which the increase of the productive powers of labor may be measured in a meaningful way. Ultimately, there is no valid definition of profit, unless we mean the term “profit” as it might be applied to measuring the performance of a national economy considered as an indivisible unit. Neither an individual human being, nor an economy, actually exists as the sum of its separable parts.