On the cornerstones of civilization

A primitive man whose only objective in life is to collect enough berries to survive would most likely be considered uncivilized today. Developed societies prefer to describe themselves as "civilized". But where is that dividing line between a caveman collecting berries and a salesman selling them?

In short, it is time preference. Our berry collector has a very high time preference - everything he produces (by collecting berries) he immediately wants to consume (by eating them). By not eating all berries and instead trading some for, say, clothes, other foods or weapons, he could increase his health and security and further down the road he might even have the prospect of living in a hut instead of a cave. A man living in a hut is certainly more civilized than one who dwells in a cave. Of course, this only works if at least two people share a time preference below immediate consumption of all goods produced, that is, if at least two people have saved goods to trade them afterwards. Civilization is thus largely dependent on human cooperation; it is individuals interacting in their rational self-interest. It is a community phenomenon also known as "the free market".

Obviously, those who consume all they produce immediately cannot take part in this exchange community. As time passes, an increasing number of producers will recognize the benefits of lowering time preference to save and trade and the market web will expand, thereby enriching every participant. Those with exceptionally high time preferences will soon be a tiny minority, but even these people will benefit from others' capital accumulation, be it through a wealthy man's ability to donate to charity or through surplus production that is given out for free.

Given time, this market process will eventually lead to modern civilization. While ideas, resources and business opportunity all play a role in it, the most important and fundamental prerequisite is low time preference; the willingness of a sufficient number of people to sacrifice present consumption for the sake of future profits that enables others to develop and materialize their concepts and productive endeavors. Henry Ford's ideas on automobile production would've been as valid 3000 years ago as they are today; still, with high time preference being the prevalent attitude, no factory could be built or sustainably run due to a lack of credit (that is, deferred consumption) and also purchasing power.

Productive processes can be reversed and destroyed if time preferences shift upwards again. A famous example would be the Roman Empire where, in its end phase, drinking orgies and corruption on all levels of society were quite common since investing and producing had long become unprofitable due to adverse political circumstances. Sounds strangely familiar, doesn't it? The strong economic foundation of the Roman Empire can still be seen today in its resilient ruins that have endured 2000 years of destructive environmental influences. Still, the productive processes that kept the Empire alive eventually came to a halt. That's when the somewhat intellectually developed world ended and a long dark age set in.

Can this happen again today? Yes, most certainly. Ironically, the Romans suffered from similar problems that we experience today - depreciated currency, nepotism, a burdensome military budget etc - that ultimately raise time preference to unhealthy levels. The rationale has remained the same over the centuries: if production doesn't get me anywhere, I might as well get drunk.

That's how civilizations perish. And that's why we shouldn't fall for the same temptations that have wrecked so many of them before us - because, in my humble opinion, there's something to be said for Western civilization after all.

103 famous faces and no entrepreneurs?

I saw this post on LewRockwell today. It is about a picture with 103 famous persons on it.

One can easily spot the political leaders and demagogues in it. Every big name, from Hitler to Che Guevara, has been portrayed. You'll also find famous scientists such as Einstein or a couple of popular sportsmen and artists. What I didn't find, except for Bill Gates, was entrepreneurs.

This proves an interesting point. Entrepreneurs are the invisible Atlas of this world; if it weren't for their coordination of what, when, how and in which amount, there would be no such thing as an economy. Entrepreneurs come in manifold ways and fashions; some wear forks and overalls, others prefer plain clothes, others have fine suits and briefcases. They seldom step out of the shadows, they are coordinating their business from behind; you're unlikely to see them unless you enter a vintage mom-and-pop store. Still, the reason for all the oranges at the supermarket, all the great new software at the computer store and all the sophisticated mechanics in a simple household gadget is the coordinated exchange of information, goods and services by entrepreneurs on the global market.

In the last century and still today, pretentious politicians claim(ed) to be better able to coordinate this process than literally millions of entrepreneurs on the market. They fail(ed) miserably and thereby underscore(d) the importance of entrepreneurial activity for modern humanity.

Entrepreneurs have been demonized, denounced, driven out of business by state violence and expropriated. They are under constant scrutiny by tax authorities because of the wealth that is created on their behalf. Nobody sees them, yet without them, we'd still be cavemen.

And indeed, even though it was unimaginable amounts of combined entrepreneurial effort that made possible the manufacture, distribution and display of the picture of 103 faces, little to no attention is paid to their existence. Time to raise our hats to all the entrepreneurial spirits in the world and say thanks - keep up the good work, please.

Gun control reloaded

A Dilbert comic strip from 1989. Still rings true today.

Sunday Best - Mar 15th 2009

1) All-time best: The Compound Interest Paradox by FSK
A brief explanation of why a central bank fiat monetary system is unsustainable.

2) Best news-related: Further Adventures in the Quantum Wrongness Field, Economic Crisis Edition by Glen Allport
Short and comprehensible overview of why the current political prescriptions for overcoming the recession will not work and, in fact, be a great burden for generations to come.

3) Best discussion: 100% Reserve Gold Standard Banking and Loans on the Mises Institute boards
Thoughts on how a non-fractional reserve banking system might work out.

Nationalized car production

My contribution to the auto bailout debate.

Movers, shakers and producers

Have you ever stood inside of a crowded, busy town and just adored what an evolutionary market system and the simple laws of supply and demand, combined with human entrepreneurial spirits and abilities, can accomplish?

Just picture yourself on the same spot 30 years ago. Would you recognize your environment if you didn't know where you were beforehand? Probably not. So much has changed in so little time. Businesses that serve customers well have expanded or moved into larger buildings, thereby probably changing their appearance and resembling a newly risen star. Enterprises that didn't even satisfy niche demands anymore have quietly packed their bags and made room for more promising startups. Countless numbers of individuals move in different directions on the sidewalks, but still, their walk is smooth: they adapt their paths in their rational self-interest and benefit everyone else in the process.

Now go back 30 years again. Would you see many motorists? Depending on where you are, it may seem like a lot. But compare today: consider the sheer amount and luxury of the cars you see rolling in a straight line. Aerodynamic, dashing artworks that only seem to improve with every new model. And the variety: you'll see swift and compact mini-cars waiting next to a sturdy SUV before a red light. It seems like everyone is able to find a model that suits their needs nowadays.

Take a stroll down the retail strip. In Charles Dickens' "A Christmas Carol", we find a lovely description of the richness of goods that attempts to catch the attention of potential buyers in a busy city street in Christmas time:

There were great, round, pot-bellied baskets of chestnuts, shaped like the waistcoats of jolly old gentlemen, lolling at the doors, and tumbling out into the street in their apoplectic opulence. There were ruddy, brown-faced, broad-girthed Spanish Friars, and winking from their shelves in wanton slyness at the girls as they went by, and glanced demurely at the hung-up mistletoe. There were pears and apples, clustered high in blooming pyramids; there were bunches of grapes, made, in the shopkeepers” benevolence to dangle from conspicuous hooks, that people’s mouths might water gratis as they passed; there were piles of filberts, mossy and brown, recalling, in their fragrance, ancient walks among the woods, and pleasant shufflings ankle deep through withered leaves; there were Norfolk Biffins, squab and swarthy, setting off the yellow of the oranges and lemons, and, in the great compactness of their juicy persons, urgently entreating and beseeching to be carried home in paper bags and eaten after dinner. The very gold and silver fish, set forth among these choice fruits in a bowl, though members of a dull and stagnant-blooded race, appeared to know that there was something going on; and, to a fish, went gasping round and round their little world in slow and passionless excitement. [...]

That was miraculous in Dickens' times. Today, we're living in an even more elaborate Cockaigne: from every window, the finest clothes, the most delicious foods and the most sophisticated tools are literally begging to be bought. Your choices are overwhelming indeed.

Follow me to one last corner of the city. You see a gray, unattractive edifice which gives a saddening impression. In 30 years, next to nothing has changed on its exterior. It's a state building. It is not subject to the laws of supply and demand, and whatever is done in there seems to interest nobody except those who perform the actual work. Compared to the other parts of our town, this seems misplaced. It's like a sore thumb that is sticking out. You wonder, how is such a company going to survive? Then you remember, it's not a company. It's the state.

For one second, a thought crosses your mind that something might be inherently wrong with the nature of the state. But you reject it immediately. After all, somebody has to build the roads. Right?

What about the poor?

One argument commonly heard in defense of states is concern for the poor. Without socialized provision of security, justice and defense, how are the underprivileged going to cope with rich evildoers?

This assumes, of course, that they are better off in a statist environment. But are they really? For a layman, it is (on purpose) next to impossible to decrypt the legal code. Thus, if you intend to sue somebody, you'll most likely need to hire a lawyer. Lawyers enjoy the benefits of a state-enforced cartel. Only licensed lawyers may practice and accordingly, the price of a lawyer tends to be high due to a lack of competition. A rich villain has top niche lawyers at his disposal that are familiar with the loopholes of one particular legal area. That way, even if a poor plaintiff were able to afford a lawyer, in all likelihood he'd still be disadvantaged compared to a rich defendant.

But not only that. Suppose there is a, despite all these obstacles, a high likelihood that a rich defendant may be found guilty despite his efforts in court. He could then also lobby the legislative branch of government to change the law. Specific legislation that is not of popular interest tends to be discussed by just a few members of the legislative branch at all. That way, the cost of lobbying legislators is still manageable. It's much easier, though, if the regulation you'd like to see changed is subject to a non-elected agency's whim. The intransparency and general confusion within these organizations makes it easier to bribe the persons important to your cause since they are not subject to public scrutiny and the actions of their agencies tend to be largely ignored, even more so than what Congress is doing. A determined wealthy individual would have much more options at his disposal than a poor plaintiff, despite the poor man's "right to socialized justice".

Now the minarchists are going to step in and claim that while all this may be true, in a minimal state with a liberty-oriented constitution and no unaccountable agencies, such problems would not exist. Granted, if I had to choose between what we have now and a minarchist state, I'd most certainly go for the latter to seek justice.

Still, with the state being the monopoly supplier of justice, a bad incentive structure arises. On a free market, arbitrators would have to be very careful not to lose their reputation as non-partisan and fair judges or else they'd be out of customers in no time. State judges, even if they are not protected by some kind of tenure, do not have to worry about this. They would be more likely to accept third-party favors since they have no competitors to worry about and even if some rumors arose about them, it'd still be harder to throw them out of office than it would be to just switch arbitration agencies. Since laws are subject to a judge's interpretation, even a staunchly minarchist society could degenerate into petty tyranny eventually. Liberty on paper is not a guarantee for actual freedom, see the Bill of Rights.

Are there legitimate concerns over the provision of law and order for the underprivileged? Yes, one cannot deny that. Is the state an appropriate answer? No, most certainly not.

Sunday Best - Mar 8th 2009

1) All-time best: The Idea of a Private Law Society by Hans-Hermann Hoppe
Professor Hoppe on how law can emerge without a state proclaiming it.

2) Best news-related: Rush to Judgment by Peter Schiff
'Austrian' investment giant Peter Schiff's take on Rush Limbaugh's recent comments regarding the Obama administration, the inappropriate Republican response and what to do.

3) Best discussion: Formal Debate on Manoralism on the Mises Institute boards
After countless skirmishes between so-called "left-libertarians" and "right-libertarians", two representatives of these groups try to settle the issue in a final debate: would people in a free society prefer entrepreneurially run enclaves or solid property ownership?

It's the conservatives again

Rush Limbaugh, renowned conservative radio talk show host, announces that he wants Obama to fail because

his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundation.

Great, Rush, so you're with us on abolishing the Fed? You're for private money, no FDIC, no FTC, no wartime inflation to mess around with Arab nations? You're against big government, so why do you seem so enamored with wars, the "health of the state"? Speaking of individual liberty, you're also for drugs?

Conservatives need to adhere to the principles they like to talk about or change their language. Conflation of state-conservatism and libertarianism is not desirable.

Minimum wage laws are counterproductive on YouTube

My second try. Hopefully, I've improved. Any criticism would be appreciated.

Sunday Best - Mar 1st 2009

1) All-time best: Detroit Iron by Karen De Coster
A touching summary of why American V8s are still the best cars in the world from a time when the not-so-glorious bailout of the Big Three seemed like a bizarre joke. If you're not in love with cars already, you probably will be after looking at the photo gallery ...

2) Best news-related: Return of the war party by Pat Buchanan
Should we go to war again? No, says Pat Buchanan, and so do I.

3) Best discussion: Disappointed Anarchists on the Mises Institute boards
What would a stateless society look like? Would we see a revival of conservatism or more counter-culture? GilesStratton has some provocative thoughts on that one.