Book: The Lost Science of Money

Overview

The Lost Science of Money: The Mythology of Money, The Story of Power (2002) by Stephen A. Zarlenga argues that money is a legal and social institution defined by law, not a commodity arising from barter or market spontaneity. Challenging mainstream narratives from Aristotle’s misread interpreters through Adam Smith, Menger, and modern monetarists, Zarlenga frames monetary history as a struggle over who controls the money power, public authority or private banking interests, and contends that confusion about money’s essence has enabled repeated transfers of wealth and political dominance.

Central Thesis

Zarlenga’s core claim is that money’s essence is abstract and legal: it is a socially sanctioned measure and means of payment created by governance and sustained by law. He rejects commodity theories that tether money’s value to gold or silver, arguing those theories smuggle in political preferences under the guise of natural law. When private entities create money as interest-bearing debt, public purpose is subordinated to private rent-seeking; when the state issues money directly, society captures seigniorage and gains stable financing for common goods.

Historical Arc

The narrative surveys civilizations to show recurring patterns. In classical Greece, the concept of nomisma underlined money’s legal character. Rome’s monetary mismanagement and elite capture of coinage policy illustrate how control of money shapes imperial fortunes. Medieval Europe’s tally sticks and chartal practices reveal workable non-commodity systems grounded in law. Chinese paper money demonstrates that fiat instruments can support large-scale commerce when governance is credible. The English experience culminating in the Bank of England highlights how private credit creation, protected by the state, transforms public authority into a guarantor of private profits.

American Case Studies

Zarlenga emphasizes the American colonies’ paper currencies, especially Pennsylvania’s land-backed notes, as examples of prudent public money that boosted trade without inflationary collapse. The Greenbacks of the Civil War serve as his showcase: government-issued legal tender financed national survival and infrastructure, and subsequent Supreme Court Legal Tender Cases affirmed Congress’s constitutional authority over money. He reads the gold standard era as a period of engineered scarcity that enriched creditors, exacerbated deflation, and helped trigger panics, with the Populists and Greenbackers mounting an important, if incomplete, challenge.

Critique of Orthodox Economics

The book contends that standard economics never settled on a coherent definition of money, allowing myths, barter origins, neutrality, commodity backing, to dominate textbooks. Zarlenga argues that this intellectual fog benefits private banking, which manufactures most “money” as interest-bearing deposits. He is sharply critical of fractional-reserve banking, interpreting it as a legal privilege that socializes risk and privatizes gains. Gold is treated not as a stabilizer but as an instrument that concentrates power and misdirects policy.

Reform Program

Zarlenga calls for restoring the money power to the public through sovereign money reforms: have the national government create and spend money directly for public purposes; transition bank deposits from privately created credit to full, publicly issued money; and fold central banking into transparent public authority. He draws on the “Chicago Plan, ” the Colonial and Greenback precedents, and constitutional provisions granting Congress the power to coin money and regulate its value. The aim is a monetary system oriented to the general welfare rather than to debt expansion.

Style and Contribution

Dense with historical case studies, legal citations, and archival material, the book blends scholarship with polemic. Its contribution lies in reframing money as a legal institution embedded in power relations and in recovering neglected episodes where public money worked effectively. Whether one accepts the policy prescriptions, the reorientation it demands, away from commodity myths and toward monetary sovereignty, offers a provocative lens on the past and a blueprint for reconsidering the architecture of modern finance.