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(For release 11:00 a.m.,
Eastern Daylight Saving
Time, June 3, 1960)

Address of J. L. Robertson
Member of the Board of Governors
of the
Federal Reserve System
Before the Fifty-eighth Annual Convention
of the
American Institute of Banking
at the
Statler Hilton Hotel, Boston, Massachusetts
June 3, 1960

The Battle against Economic Illiteracy

Since this Convention was opened with an address by
a distinguished clergyman, who courageously ventured into
the midst of the moneychangers, it seems appropriate for me
to follow the minister's practice by setting a text for my
own remarks. Now there are many texts that might be appro­
priate for a gathering of this type. Obviously, I could not
use Shakespeare, for he was very much down on banking. You
will recall his injunction, "Neither a borrower nor a lender
be." Rabelais would be more appropriate, for he said, "It
is a divine thing to lend; to owe is an heroic virtue." It
is strange that one never sees those words emblazoned over
the porticos of banks. Of course, they would not do for a
central bank, which, as the lender of last resort, seldom en­
courages others to borrow from it.
In considering the various possibilities, I was con­
cerned that I not choose a topic that would leave any of you
muttering, "Hebrews, Chapter 13, verse 8." I had better ex­
plain that. Years ago when my home town, Broken Bow, Ne­
braska, was a pioneer settlement, a minister of the gospel
resided there for some months in a boarding house which was
not noted for the variety of its cuisine - that means they
served hash every day. The boarders were afraid to complain,
however, since this happened to be the only boarding house
in town and, besides, the burly proprietor had no hesitation
in throwing out anyone who dared remonstrate, supplicate, or
petition. And so they all suffered in silence, all except the
minister, who, as the hash was served up at every meal, was
invariably heard to utter, "Hebrews, Chapter 13, verse 8."
Needless to say, this aroused considerable curiosity, and
finally one of the boarders unearthed a Bible so that he could
unravel the mystery of this remark. All the curious pioneers
gathered round as he laboriously hunted for the passage, and
when he found it, this is what he read, "0 Lord, the same yes­
terday, and to day, and for ever."
At last I decided that in view of the educational in­
terests of the American Institute of Banking, a theme touch­
ing on knowledge and learning might be more suitable than a
topic limited strictly to banking, which, coming from me,
might evoke some remarks about Hebrews, 13:8. I therefore
selected the following text adapted from, I think, the Ameri­
can sage, Josh Billings: "The trouble with most of us isn't

- 2 -

so much that we are ignorant, as knowing so many things that
ain't so.1
I am afraid that there are very few of us who could
not properly apply this text to ourselves, but we are likely
to be most aware of its validity in examining what passes
for knowledge outside our own circle. The expert can readily
detect errors within the confines of his specialty. He is
usually less ready to admit the possibility of error in his
own views in the many areas in which he is not a specialist.
In this world of greater and greater specialization,
we increasingly see examples of the prominent expert who
strives to bring to bear his eminence, though not his exper­
tise, in fields that he has not studied with the requisite
care. There is the chemist who is convinced that the social
security program is ruining the country, the toothbrush manu­
facturer who knows that the scientists are bungling the space
program, the television comic who expounds authoritatively
on delicate diplomatic problems, and perhaps even - as some­
one else might say - the central banker who discusses defects
in our educational system.
Now I do not wish to suggest that we leave all our
problems strictly to the experts and reject all nonprofes­
sional opinion. There is probably no field of human knowl­
edge in which the so-called amateur cannot make a contribu­
tion. This was dramatically demonstrated a few years ago in
the field of nuclear physics - an area that most of us would
not consider likely to be conquered by the self-educated ama­
teur. You may recall the story of Nicholas Christofilos, the
obscure elevator engineer of Athens, Greece, who began to
pester American nuclear physicists with his ideas soon after
the end of the war. They thought he was a crank at first, but
he took the advice they gave him on books that he should read,
and before long the experts were compelled to admit that he
had some ideas worth considering. The culmination of this
came with Project Argus, the nuclear explosion tests in space
in 1958, which proved theories developed by the Greek amateur
physicist who had successfully invaded the camp of the experts.
If this can be done in so new and difficult a field
as nuclear physics, it should also be possible in the older -

- 3 -

though no less difficult - fields of economics, finance, gov­
ernment, and education. It is in fields such as these, even
more than nuclear physics, where daily decisions profoundly
affect the lives of millions. It would be practically im­
possible and morally indefensible to brush aside the views
of any of the affected millions simply because they were not
professionals in these fields.
This does not mean that one man's opinions are just
as good as those of anyone else. Christofilos won the recog­
nition of the nuclear physicists because he painstakingly
educated himself in the difficult but essential facts and
principles which had already been discovered. His example
illustrates two points: first, that the specialists should
not smugly dismiss the outsider; and second, but not less
important, that the amateur who wishes to be heard by the
professionals has an obligation to educate himself carefully
with regard to the essential facts and principles.
No professional should ever be unhappy merely because
an amateur has ventured into his field. He should feel en­
couraged by the interest manifested, and do all in his power
to interest a greater number of people. However, he has every
right to object when he finds that the novice, and in some
cases the professional, has not bothered to do his homework
and is either one of those who knows a great deal that is not
true or who speaks in reckless disregard of what he knows to
be true.
It seems that one is especially likely to encounter
this problem in economics. Here men are particularly prone
to take to their bosoms ideas and beliefs that, on their face,
appear to serve their own narrow personal interests - which
they equate, often erroneously, with the national interest.
I do not assert that all differences of opinion on
economic questions could be solved if men were only more care­
ful about their facts, but certainly the area of disagreement
would be narrowed considerably. The facts are not always easy
to come by. Our m odem methods of education unfortunately do
not place great emphasis on seeking out primary sources of in­
formation. Even in college most knowledge is pre-chewed and
pre-digested and offered to the students second- or thirdhand in textbooks. Indeed, the trend seems to be against

- 4 -

placing emphasis on factual knowledge, and since facts are
not considered all-important, the logical conclusion is that
there is little need to teach how and where to check the ac­
curacy of statements that purport to be factual. What is
supposed to be important is not hard, factual knowledge, but
attitudes and feelings on a given subject.
This leaves the individual at the mercy of the spell­
binder, the huckster, the word-artist. Unless he is prepared
to knuckle down to the laborious task of checking claims
against facts, one is doomed to become burdened with a stock
of "knowledge" of questionable validity. He must resign him­
self into the hands of someone who sounds like an expert; and
the gullible one - and even the not-so-gullible one - is apt
to believe anything that gets into print. He is likely to
end up either thinking with his glandular system or abdicat­
ing the power of thought to some popular pundit - or even a
A good example of this is the attitude that one en­
counters all too often these days that it is absurdly short­
sighted to give any consideration to the question of balanc­
ing the budget in determining public policies. How often
have we heard that such and such a program has failed to get
the funds it deserved because of "narrow budgetary considera­
tions", or that an administrator suffers from "budget-balancing
blindness"? One would think that those who have been con­
cerned with fighting inflation through a sound fiscal policy
were the victims of a phobia which left them blind to the
real needs of the country. The Federal Reserve has also been
attacked for using monetary policy for this same end. The
Governors of the Federal Reserve System are, by implication,
portrayed as being either obtuse or callous, or both, simply
because in the discharge of their responsibilities they find
it necessary to weigh the hardships which result from infla­
tion as against the very worthy purposes for which some would
be willing to depreciate the value of the people's money with­
out regard to consequences.
I doubt very much that many of the people who repeat
these hackneyed charges have given any real thought to the
question whether it is desirable to tax by inflation. Taxa­
tion by inflation is simply not an acceptable or morally

- 5 -

defensible policy for the United States of America. We have
long been concerned in this country that our system of taxa­
tion be just and equitable; that the heaviest burden not be
placed on the backs of those least able to bear it; and that
the tax system not produce serious economic distortions that
lessen the will to work, to save, and to invest in construc­
tive activities.
This concern has been one of the factors that has stim­
ulated our economic growth and made this a great and wealthy
country. I find it interesting to note that the economic
system that is competing with us in the world today seems to
be characterized by what might be called the "Midas touch1
It has the knack of turning necessities into luxuries, to the
sorrow of the consumer. Conversely, we have acquired the more
gratifying power of turning luxuries into necessities. How­
ever, we must bear in mind that anything we can afford to do
by inflationary policies, we can afford to do by noninflationary means. Inflation is simply a form of taxation; it adds
nothing to our resources; it merely redistributes them. The
trouble is that the redistribution is not based on principles
of equity. By the very nature of the process it is bound to
be unjust.
It may be true that we should devote more of our ris­
ing income to those services that can best be provided by gov­
ernment, but is it fair to present the bill to those among us
who have shared least in the rise in income? This is pre­
cisely what we do when we permit inflation to go on. We pre­
sent the bill to those with fixed or relatively inelastic in­
comes, such as our millions of retired workers, who are unable
to protect themselves against rising prices. Their real in­
comes are eroded, while those more favorably situated enjoy
not only improved public services, but an increase in real in­
come as well.
If you want to get the full flavor of the injustice of
this process, read the record of the hearings in Congress last
year on the plight of our educators who have had the misfor­
tune of living long beyond the retirement age in a period of
inflation. It is truly disheartening to read that noted men
of learning have been reduced by inflation to a state of beg­
gary in this great, rich country of ours. I am sure that

- 6 -

many retired bank officers and employees have suffered simi­
larly, though no one has brought the spotlight to bear on
their situation.
It is surprising to me that so many people who are
genuinely motivated by humanitarian impulses and concern for
the well-being of the unfortunate have, perhaps unthinkingly,
allowed themselves to accept the view that the pursuit of
monetary stability through sound fiscal and monetary poli­
cies is reprehensibly shortsighted and inhumane.
It is surprising because the principles involved are
not as abstruse and difficult to comprehend as the theories
of nuclear physics. Indeed, they should be susceptible to
mastery by the average student. I only wish that in these
days of critical re-examination of what our young people are
learning in school, there were more appreciation of the fact
that the survival of our free institutions may depend even
more heavily on the knowledge that they acquire about eco­
nomic laws than on their understanding of the laws of physics.
It is vitally important that we develop skilled physicists,
but it is not essential that everyone be knowledgeable in
that sphere. On the other hand, in a democracy where, in
the final analysis, the people determine the course of the
economy, it is important that all of us cultivate the will
and the capacity to seek out the facts that bear on public
economic policy and learn to interpret them rationally.
In this field, one of the big tasks that confronts us
today is to devise ways and means of bringing about a wider
public understanding of monetary policy. Why? First, be­
cause it is probably as important as any single factor (other
than war) affecting the economic welfare of the people of the
United States. Second, because, being a difficult topic to
grasp and hold, in the absence of a basic understanding of
economics, it lends itself easily to misrepresentation of
the real problems and misunderstanding of the real values in­
volved. And finally, because Americans, knowing the facts and
the choices, are more likely to make the proper judgments and
decisions with regard to the critical issues in the monetary
and credit field.
Someone may ask: "What is the monetary policy of the
Federal Reserve System?" The answer is quite easy. Our policy

- 7 -

is to make available all the money and credit the economy
needs for both normal operation and healthy growth, but not
so much as to induce inflation or so little as to set the
stage for a depression. Since both inflation and deflation
have causes other than money and credit misbehavior, we can­
not hope to achieve perfection. But our aim is to see to
it that boom and bust cycles do not arise from money and
credit causes, and to moderate (within the limits of our
power) cyclical movements stemming from other causes.
Some of our critics seem to be deeply dissatisfied
with anything less than some form of economic alchemy whereby
we can eat our cake and have it too, or indulge in excessive
spending with its resultant inflation and corruption of values
and yet maintain stability in the purchasing power of the dol­
lar. Frankly, we have not yet found the formula for this
kind of economic alchemy, any more than the scientists have
been able to find a formula for changing base metals into
The credo that underlies our policy and our efforts to
make it effective is our conviction that monetary stability which means a dollar that will buy approximately the same
amount of goods and services from one year to another - is
necessary to aid the growth of our economy and improve the
standard of living for the people as a whole.
These are simple and direct statements which can be
readily understood and can be demonstrated to have real mean­
ing to the man in the street. After all,there are relatively
few American families today which are not contributing to some
form of pension plan or life insurance program, or do not have
a savings account or some savings bonds. In these circum­
stances, is it difficult to choose between a dollar of stable
value and a dollar that will buy less and less each year?
Unfortunately, we are not as a nation placing the em­
phasis that we should on subjects like these. If Admiral
Rickover thinks that mathematics is being neglected in Ameri­
can schools, he should take a look at economics. A recent
study by the National Education Association concluded that
most of our high school and college students would fail even

- 8 -

a rudimentary test dealing with the economy of their city,
state, or nation. The sad fact is that fewer than onequarter of our high school graduates have taken courses in
economics. Even if we assume that every student who takes
an economics course emerges with a good basic knowledge of
the subject and an ability to dig out the facts and think
for himself (a rather far-fetched assumption), we still have
a very high percentage of our high school graduates who must
either acquire the requisite knowledge in college or educate
themselves. Since only a small percentage go on to college,
the number who must be self-educated, if educated at all,
is tremendous.
I must say that there is abundant opportunity for
self-education in this country. We have a seemingly in­
exhaustible outpouring of the printed word; newspapers, maga­
zines and books are readily available to everyone. Of course,
our newspapers devote less space to the activities that come
under the purview of the Federal Reserve System than to those
that are of concern to the Criminal Division of the Depart­
ment of Justice, and I am sure that Playboy magazine has a
somewhat larger and more avid readership than does the Federal
Reserve Bulletin. Someone has suggested that this may be be­
cause of the difference in the illustrations. I do not under­
stand this because in illustrating our articles, we, like
Playboy, always try to make liberal use of curves and figures.
The truth of the matter is that too few people will go
to the trouble of educating themselves. Even where the will
is present, it is often overwhelmed by the multitude of dis­
tractions that push and tug all of us from every side. Amuse­
ment is far more popular than self-education, as the facili­
ties for entertainment in our society attest. It is for this
reason that an organization such as yours is so important, for
it provides not only the opportunity but the stimulus that
helps men overcome the temptation to fritter away their time
and enables them to improve their professional skills and to
grow in understanding.
I fear that we are making a grave mistake in leaving
economic education so largely to chance. If we would pre­
serve for our children the kind of society that has made this

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country great, we must see that those in whose hands our fu­
ture rests have an adequate understanding of the basic prin­
ciples of our economic system, as well as the ability and
inclination to examine the facts before reaching conclusions.
We cannot expect them to absorb this understanding
from the free air they breathe or from the food that they in­
gest. Neither nasal passages nor alimentary canals are par­
ticularly good channels for introducing economic knowledge
into the human organism. I would add, parenthetically, that
this applies equally to people in other countries, including
those in the less developed parts of the world. A visitor
who recently returned from talks with high officials in the
Kremlin reports that the Russians have the impression that
we Americans do not know what the contest in the world today
is all about. The Russians think they are engaged in a con­
test of ideas. The meager attention we give to economic edu­
cation in this country might well lead others to think that
we have missed the point.
We do not seem to have taken as seriously as we might
Emerson's dictum that "the world stands on ideas, not cotton
and iron." It may be easier to produce cotton and iron than
it is to educate our children adequately, but it is certainly
not more important. We all have a heavy responsibility to
interest ourselves in this matter. The American Institute
of Banking collectively, and all of us individually, can per­
form a great service to the nation by endeavoring to stimu­
late interest and action in improving education in economics.
The question is not wholly one of money. Rather it
is: Are we getting all we should from the $25 billion this
country spends every year on education? Obviously this prob­
lem will not be solved merely by larger expenditures. It
will be solved only by the concerted efforts of an enlightened
citizenry, working with educational authorities, to devise a
program that meets the needs of our age.
Some say that such matters are best left to the pro­
fessionals, that the amateurs should keep quiet. But the
same rules apply here as in nuclear physics. The amateurs
have a vital interest in this area, and they have every right

- 10 -

to ask questions and dig for the facts. Like Nicholas
Christofilos, the self-trained nuclear physicist, let us
first do our homework, and then dare to expose our conclu­
sions to the critical examination of experts. I am confi­
dent that we will find that there are practical ways of en­
hancing the economic understanding of the American people.
If we can do this we will have made a major contribution to
the survival and extension of free institutions in America
and in the world. In fact, we must do it if the free enter­
prise system, in which all of us believe, and which has en­
abled us to become the world's strongest force for freedom,
is to endure. Whenever we are tempted to sit back and relax,
let us recall the words of Edmund Burke, "The only thing
necessary for the triumph of evil is for good men to do noth­