Road to Rothbard

Welfare statism - oligopolists' best friend

2009-12-13T09:44:00.000-08:00

Welfare states increase social mobility and break deadlocked class structures. That's what we often hear. But is it true?

If this view is correct, then countries with a high degree of redistribution activity such as Sweden should by now have reached a status with very few signs of class structuring left. A good way to measure this is the Gini coefficient. Wikipedia informs us that "The Gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution." Wealth distribution is much more interesting than income distribution because it reflects more accurately the dispersion of economic power. To illustrate that, you can have an allegedly socialist paradise with everyone earning exactly the same wage, but a very tiny minority of oligopolists owning all the means of production. Is everyone equal in this society? Of course not. Gini-income wouldn't show that, Gini-wealth does.

It so happens that while Gini-income for Sweden is conspicuously low (meaning that wage differences are not that prominent), Gini-wealth lists Sweden in the top bracket, even surpassing countries like Brazil or Mexico (sorry that my sources on this stuff are in German, I couldn't find any accurate English ones, but you should be able to understand the important bits). Why could that be? We have to understand the incentive structure behind the welfare state. The welfare state basically tells its clients: you do not need to worry about tough times, I'll care for you. Just pay me. As a consequence, people tend to save less and spend more, hoping that all the money they already paid into the welfare state will eventually work like a savings accout, helping them in bad times. If a welfare state grows so big that any conceivable extra-expense is covered for everyone, there is little to no incentive left to save. In other words, the accumulation of capital comes to a halt for those who rely on the welfare state, that is poor and middle class individuals. Those who already own vast amounts of capital will eventually be the only wealthy ones left. Plus, since they do not have to worry about competition from poor and middle class capitalists, they can easily expand their wealth thanks to a welfare state-incentivized oligopoly of capital, making them the only incontestable economic power group.

This should also have an impact on the household savings rate of affected countries. And indeed, in the heyday of the Swedish welfare state, the 1980s, household savings rates actually turned negative, took a sharp turn upwards in the days of welfare reform in the mid 90s (when it became apparent that their model was unsustainable), but declined after that for it seemed that the welfare problem had been solved satisfactorily.

But does that matter at all? If the state provides for you, why do you need personal wealth? The thing is, somebody needs to create wealth before it can be distributed. If nobody but a select few have enough capital to start a venture, then not only your employment, but also your provision of "basic services" depends on the good will of a few capital oligopolists. That makes countries prone to blackmail - "either you allow me to pursue reckless business policies or I'll move out of country, taking one fifth of all jobs and the capital structure with me". With a more dispersed distribution of wealth, such claims are much less powerful since the macro-economic damage one can do tends to be comparatively small.

In conclusion, we might say that the welfare state, unwillingly perhaps, considerably widens the gap between "haves" and "have-nots" and increases social mobility only to the extent that you can now better compete with others for jobs offered by the remaining oligopolists - X, Y or the state. Globalization improves this situation to some extent because foreign capital investors can now compete with domestic big shots, but domestic big shots still have their "home advantages". The situation needs be cured from within, not without.

Credit Crunch?

2009-09-14T12:49:00.000-07:00

Rough translation of this article.

Since the major governments of this planet have arrived at the conclusion that a reckless money-printing policy was the way to go for tackling the current economic downturn, unimaginable amounts of fiat currency have been produced and given out to increase bank solvency. Still, politicians and some among the economic aristocracy bemoan the perceived "restrictive" loan policies of these banks. They are bunkering the money and not giving it out into the economy. Thus, we are supposed to be experiencing a credit crunch.

A credit crunch is a risk-aversive mentality among credit institutions which prevents lending to supposedly creditworthy non-bank customers despite an existing demand. One has to wonder why a careful lending mentality would suddenly produce such criticism, given the fact that the recent financial crash was caused by a lack of foresight and care in lending. Cautious lending is a very social behavior, it protects the assets of depositors and secures the future existence of a bank.

Another worrisome undertone of the debate is the entitlement mentality regarding a loan - there is no "right to credit". Credit, derived from the latin "credere", "to believe", is not at all automatic. In a tribal society with a strong social network, lending on good faith may be an option since peer pressure and the threat of ostracism and expulsion from the community may be sufficient to secure payment. However, in modern mass societies, one needs more security (such as capital or company assets) than just a wholehearted promise. It is self-evident that creditors must act prudently when lending out to strangers, even more so since the position of creditors has been considerably weakened through all kinds of debtor-protection legislation.

Considering this, who but a creditor should be allowed to decide which criteria are important to calculate the creditworthiness of a potential debtor? Who should be entrusted with giving away other people's money to third parties by just assuming their collective solvency?

And of course, it's highly questionable whether there is ever "too little" credit. For an addicted gambler, there will always be too little credit. The statement that "there is too little credit" is a classic case of Hayekian pretense of knowledge.

We should also remind ourselves that only that which has been produced and saved before can be lent out later on. This conspicuous fact is somewhat absent in the public consciousness since our decade-long tolerance of an unrestricted fiat monetary system has created the impression that money from the printing press or digital numbers created through the fractional reserve process by banks themselves are actual capital, which, in reality, is the result of deferred consumption. So on second thought, the credit crunch is really a capital crunch which was caused, at least in the US, by people who were living above their means for years and now lack an understanding of the virtue of saving.

Politicians, tenured economists and talking heads criticize the new conservative lending attitude of banks as this is supposed to hinder the recovery of companies which suffer from a severe decline of demand. However, both Austrian economics and empirical evidence suggest that the panacea of increasing the monetary base and the volume of credit will at best initiate a new business cycle with a pre-programmed recession at its end or, at worst, lead to a scenario of which even a few mainstream economists and pundits are now warning - hyperinflation, Zimbabwe-style.

The fact that demand is decreasing has to do with the former artificial boom created by loads of fiat money. In a recession, we see nothing more than a necessary correction of the structure of production, a redimensioning of overcapacities, a market clearing and the elimination of companies which have wrongly assessed customer preferences. What are additional loans supposed to improve in this situation?

Finally, we should consider what another author of this fine magazine had to say about creditworthiness a few days ago. Humanity in the lending business is, according to this gentleman, "anti-social". He continues, "When there were still debtors' prisons, the little guy could be counted on to repay his loans - he was a safe debtor. He feared imprisonment and this made him a reliable caretaker of other people's money. Today, the progressive state is protecting debtors from such a fate, but at their loss, since lenders are not attracted to them anymore." Conclusion: "Legislators have damaged those who they claim to protect, and are thus anti-social to the highest degree". How true!

The Archon Mentality In Europe

2009-09-10T20:34:00.000-07:00

In some regards, Europe is much more anti-statist than the US. There's not as much flag-waving and nationalism, not as much military and police worship, not as much upheaval when it comes to elections. You will also find a left-wing culture that has some anarchistic extensions, but these are going into a completely different direction than the free market-type ideas which are stemming from many US anarchists.

To understand this, we need to look at history. In the late 18th century, the popular philosophy of the day was liberalism. It wasn't the ruling idea, but many of those who had been under a monarch's thumbs for centuries believed that with freedom, their lot would improve. In America, people believed in this so strongly that they successfully overthrew the ruling monarchy and an aristocratic republic with a liberal bent was established. US citizens, as long as they were not black, females, Indians or dirt poor, were now able to make use of the benefits of an emergent society based on private property - the liberal ideal. This was sufficient to make the US a steady haven for laissez-faire ideas, although the atrocities towards native Americans, slavery and a not-so-limited federal government, among other things, showed that these ideas were not necessarily implemented politically.

In France, people were so impressed by the American revolution and so appalled by what was going on at home that they, too, successfully overthrew the ruling monarchy and a brutal tyranny was established. Notwithstanding the fact that Robespierre's tyranny and Napoleon's ensuing empire had nothing to do with liberalism, continental monarchs and their sympathizers were so terrified by the example of France that they did everything necessary to prevent the spread of liberalism. After a while, though, they realized that without at least some economic liberalism they would soon be at the mercy of countries like Great Britain which had acquired considerable wealth by allowing their populations to self-organize the production of goods and services. The result was authoritarian capitalism: by trying to beat down any revolutionary sentiment or emergent order among the lower classes while at the same time letting production organize itself along private capital lines, European monarchs created the bleak, elitist, poverty-ridden societies which we today know from textbooks to be the result of "laissez-faire capitalism".

This discredited liberalism in Europe and gave rise to Marxism, a philosophy that correctly attributed the century-long misery of the working classes to the alliance between "property owners" (who were, in fact, state-sanctioned slave drivers) and the state which Marx considered to be a mere fictional superstructure created by burgeois society. According to Marx, the final goal of history would be the stateless society wherein everyone would be treated along the lines of "from each according to his ability, to each according to his need". "Stateless" meant, of course, that every idea associated with Marx' understanding of the state would vanish as well, including concepts such as property, religion or hierarchy. Since liberals continuously lost touch with the underprivileged classes, their arguments for property or merit-based hierarchies remained unheard. Marx' definition of anti-statism gained a firm grip among the working class of Europe.

Around the same time, Lysander Spooner espoused another form of anarchy in the United States, one that was founded on what he called "natural law" - the non-aggression principle. Spooner, being an American, understood that there was nothing inherently oppressive with private property. In fact, he argued that in a stateless society, nearly everyone would want to become a capitalist to receive their full return on productivity. In that sense, Spooner and Marx were pretty close in that they both rejected the idea of "wage slavery", however, Spooner, being an American businessman, argued with laws of human action whereas Marx, being a European philosopher, argued with supposed laws of history.

Consequentially, whereas "the state" had been the main enemy archon for American anti-statists early on, European anarchists considered it just a byproduct of other archons such as religion or property. That's why resistance against "the state" seems to be rather weak in Europe - free thinkers are busy fighting all kinds of archons and tend to see the state as a comparatively small danger, maybe even something to work with. This, plus those who firmly believe in the goodness of the state, make Europe look so in love with the state archon - though most differences to the American tradition boil down to "human nature" vs "nature of history".

On Regulation

2009-09-10T20:31:00.000-07:00

Everybody has preferences. However, the preferences of two individuals seldom match completely. Nevertheless, in some areas of life, large groups of people share a very similar preference concerning a specific topic. All things equal, they would be happier if things were run this particular way.

That's the basis of regulation. A shared desire by a group of individuals to have things done a specific way, and to have means with which to control the compliance with and punish deviations from this process.

The benefits of regulation are apparent: without it, the quality of a product could not be assessed by the end customer. Regular shoppers in a supermarket have no way whatsoever to ensure that the products they buy have been manufactured in a healthy, worker-friendly, clean facility and that what's inside the box matches what is advertised on the ouside. That's why many customers demand regulation of these products.

When you hear regulation, you probably think of the state. Government needs to regulate market products so that an impartial and trustworthy judgement can occur. However, there are some serious issues with state regulation:

1) The state is a monopoly service. If you entrust the state with regulating your daily life, you are opening the door for abuse and misconduct. Think of it that way: those who are mandated to regulate the safety of your food are probably tenured bureaucrats. They have no competition because expensive government regulatory processes have made it impractical for a market competitor to emerge. Now, a cunning food capitalist knows that and decides to bribe these bureaucrats into looking the other way when his contaminated food hits the shore. The consequences for you may be severe health problems, the consequences for the bureaucrats, if any, may amount to an inquiry which does not lead to anything meaningful. All the while, the government agency responsible will continue to exist and live off your taxes. Market competitors may be prone to corruption as well, but in their case, a whole fortune is at stake - when a food regulator gives his okay to a food that is contaminated, there's no need for a lengthy trial to make him pay. His stock will tank, he will be facing class action lawsuits before he knows what's happening and his quality seal will be an embarassment, not a desired product anymore. In short, he may go bankrupt for just one mistake. Not only does that prevent corruption, but it's a much greater motivation for meticulous work than an oath to uphold public safety and the Constitution.

2) But Monopoly regulation is not only unsafe, it is also impractical. Let's assume that a 75% majority of people feels that cars are unsafe and should be regulated to have more safety features. In a democracy, chances are that a party will pick up this vibe and implement such a thing later on. Now, cars have many more safety features, but have also doubled in price as a consequence. Now, only 55% are still in favor of mandatory safety schemes. The renegade 20% can't afford a car anymore. Unfortunately, it would take some time to abolish this new regulation and the newly created state agency that monitors car regulation IF a major party were to support it, but right now, health care and various wars are on the popular agenda and so it might take a few decades to fix the problem. A free market regulatory agency could just award a special seal to expensive cars with lots of safety features so that worried customers have the option of either purchasing a very safe, but very expensive or a not-so-safe, but cheap vehicle. Different strokes for different folks.

3) Finally, monopoly regulation may have unintended consequences which make the situation worse for some people. Let's take working hour regulations as an example. Let's say the state legislates that one employee may only work 8 hours a day. That's great for employees, right? Well, Joe Sixpack happened to earn just enough to make ends meet when he was working 10 hours a day for the man. Now that he's only allowed to work 8 hours at his job, he won't make enough to make a living. So he has to get a second job. Unfortunately, he doesn't find anything that allows him to work 2 hours per day, the minimum would be 5 hours per day. So, thanks to our 8-hours-a-day limitation, Joe is now forced to work 13 hours a day, even though his preference at the current price for his labor would've been 10. This is somewhat related to my point about impracticality, but in this case, it's not about having an upside and a downside (for example, more safety, but higher cost), but about having downsides only. This, too, is possible with monopoly regulation.

But how would a free market regulate? According to demand. Whenever an enterpreneur senses that people would like to have certainty about specific aspects of a product, he is free to create a quality seal which advertises this specific quality. It is his job to promote this seal to create both customer recognition and company demand for it so that the extra-cost imposed on businesses by admitting a quality control will be considered worthwhile. It is likely that renowned companies with a reputation for good quality control will eventually extend their sphere of influence on the general market, but there's also a lot of potential for niche quality testers in market areas with comparatively small profit expectations. For more on the issue, I recommend the video to the right.

Free Market Defense and Protection

2009-09-10T20:30:00.001-07:00

How would a free market defense system work? That's a question statists immediately come up with when faced with the proposal of abolishing the state. Here's some ideas on the matter, and on the matter of defense and protection only; investigation, arbitration and restitution are a different pair of shoes.

Before we start with anarchic defense, I must remark that it's somewhat intriguing how much statists cling to their model of protection. What does it even promise to accomplish? Police is not here to protect you from crime (even though this is commonly assumed), but to investigate crimes after they have occured. Sure, if police happen to come along while you're being victimized, then you're lucky. But how likely is that? There is this classic gun lobby scare story of a murderer standing in your bedroom and the police being "only minutes" away. Unfortunately, that's not a scare story, but the truth. Even worse, contemporary states tend to be hostile towards gun owners, thereby making it difficult or outright impossible to acquire effective tools of self-defense. What'cha gonna do when you're barred by law from defending yourself and police take their time to arrive at your destination in case of a crime? Getting raped, that's your only option. State defense equals getting raped not only in this sense. Since states are monopolists and claim a monopoly on defense, you can expect, just like with any other force-backed monopoly, the price of defense to rise while quality decreases. Worst of all, you won't be able to do anything about it. In other words, state defense as a system fails.

Now to free market defense. The bedrock of free market defense is yourself. Free markets are all about individuals taking responsibility, and this is what's expected of you as well. You are your last line of defense and you're well-advised to take heed of your personal safety first. Staying in good shape, maybe acquainting yourself with a martial art, being familiar with common defense tools and using your territory to your strategic advantage (especially important for people with large properties out in the country) is always the best choice to keep criminals at bay. Hans-Hermann Hoppe once made the point that free market insurance companies would most likely reward qualified gun owners with more attractive premiums. I would add that any accredited improvements of one's self-defense or danger prevention abilities would better your rates since a customer that can safely take care of most perils himself is every insurance broker's wet dream.

But of course, you're most likely not alone against the world. The details of your mid-level protection structure would, I guess, depend on where you live. Sovereign property holders in thinly populated areas (farmers, hermits, nature-lovers, you name it) would be best served with a farm patrol-style guarding system. Depending on how big the protected area is, this could either be organized along the lines of a volunteer fire department with a few farm boys driving their daddy's trucks around their friends' farms, equipped with some CB radios and looking for imminent danger, or, if it's a rather large area, with a commercial defense provider cruising in the air with one or more helicopters and some sort of mobile rapid deployment force on the ground in case of an emergency. Restrictive covenants would have a wide range of defense possibilites at their disposal, and that's one of the reasons why I think that RCs would be fiercely popular in the absence of the state. There's the classic "gated community" style protection mechanism with checkpoints at entry and exit stations, making sure that at least vehicle traffic in the area is unlikely to cause trouble. This can be complemented by the presence of a few friendly and smiling constables who take a look around the streets and help strangers find their way in and out of the community. Enormously timid folks could opt for a RC with cameras on every street corner, but I doubt this would be a common sight. I could name all the shadings and nuances to that, but you get the picture: RCs can cater to any kind of security demand and experiment with varying policies to try out which one enhances the well-being of its citizens the most.

Now, one may ask, where's the difference between that and a state? The difference is one of status: security personnel hired by RCs depend directly on the satisfaction of RC inhabitants. Angry, abusive police agencies would go bust in no time due to contract annulations by RC entrepreneurs, or else people would move out of the covenant / refrain from moving there in the first place and the covenant entrepreneur would be left holding the bag. Since suppliers of living environments are able to cater to nice demands as well, it is much more likely that liberty-oriented folks will also find their place of choice with no cameras, no checkpoints, no restrictions on personal habits and so on. This can be implemented much easier in a state of markets than in a state of states.

One last area to cover for mid-level protection is non-RC city areas. Generally, protection in a city will probably be much more individualized since no police force could ever credibly promise protection of such large numbers of people. Now, apartment buildings could opt for a doorman who regulates entry. Individual property owners would best be served with a fence or a gate and knowledge of personal protection techniques. In more suburban areas, mid-level protection would most likely be completely individualized, maybe combined with a neighborhood militia, depending on how good neighbors get along. If there is still a demand for on-call protection services similar to today's police, it will be mainly in these suburban and city areas, though I doubt it. In the absence of an ideologically regulating state, property owners will most likely pragmatically discriminate in favor of civilized behavior, thereby making concerns about inner-city safety a thing of the past. For the rare occasions when trouble does arise, arms-carrying citizens will be able to defend themselves or a fellow sovereign against a criminal. I believe that organized protection is much more useful in the country than in the city and that many security concerns of today's cities are caused by state regulation of transport, tenant choice and personal protection. Whatever the problem will be, market participants will be incentivized to figure it out.

But what happens in case of an invasion? That's top-level protection and private military contractors will most likely emerge to deal with it. I don't think they will look like today's military; their most important personnel will be engineers and pioneers, special forces-type units and negotiators. Engineers and pioneers will be used to study the area around a client's position before conflicts heat up to figure out strategically important positions and apt locations to install appropriate defense facilities in case of an emergency. Of course, this will be much easier if the client owns the land (for example, in case of a RC) than if contractors have to negotiate agreements with neighboring property owners, thereby increasing the premium for the individual customer due to these additional expenses. Anyhow, if a heavily armed group of villains does threaten to invade, engineers will be rapidly deployed to the scene of action to prepare all kinds of traps and gadgets to hinder their invasion's progress. At the same time, negotiators will be activated to seek out the leaders behind the invasion and talk about conditions of peace. To improve their bargaining position, the defense contractor will also send out special forces units to take out the most important parts of the invasion, namely vehicles and the command structure. Open combat will be actively avoided to reduce costs. Blood will primarily be shed among those who claim responsibility for the aggressive invasion (the command structure). If negotiators cannot come to an agreement with the invader that suits the preferences of a customer (or matches the conditions previously defined in the contract between customer and contractor), the situation will unfortunately turn into a Guerilla war. We do, however, know from recent history that an oppressing group that is not viewn as legitimate cannot sustainably occupy a certain territory, especially if its inhabitants were not brainwashed by a state into giving the means of protection out of their hands. This will most likely turn into a completely disaster for the invader and become a warning to all prospective aggressors to just beat it.

Keep in mind, these are just ideas how this problem could be solved that I came up with while eating Easter Eggs. How much more creative will a guy be whom you'll actually pay to figure stuff out?

Constitutions - Unreliable Allies

2009-09-10T20:26:00.000-07:00

American state-libertarians really enjoy talking about the Constitution. The Constitution needs to be respected, they say, for it is the founding document of this country and the source of our liberty! Constitutions are seen by these people as a means to shackle the state and protect individual liberty. That's a batshit insane idea.

First of all, the source of one's liberty is not a constitution, but the fact that the dominant powers in one's territory have so far refrained from infringing upon it. It is successful defense (in whatever way) against the spread of the state or any oppressing groups, not "the Constitution" that enables you to live with more choices than a poor serf in North Korea. One might argue that since the Constitution gives a resemblance of legitimacy to the state and, in the case of the United States, has a strong libertarian bent, institutionalized violence needs to adhere to some extent to these principles. That may be temporarily true, but as soon as a state is given power to interpret your Constitution, it will gradually dismantle its original message and replace it with whatever is in fashion. Just look at the Second Amendment mess.

Essentially, constitutions are words printed on paper. They keep a state from becoming tyrannical as much as a written contract keeps one of the signatories from breaching it, even much less so if you consider that while contract signatories tend to be of somewhat equal legal status, the state is in any case above you, either financially or militarily or legally or according to public approval or, most likely, by all of those criteria. Words on paper mean nothing to men with guns, determined to enforce authority. Your "guaranteed rights" are a claim based on the notion that the state works just as it was intended or promised to work, as a guarantor of certain claims called "rights", but it has no answer as to what happens when the state abandons this role and becomes an aggressive exploiter instead. All it does is convey a false sense of security, a last resort justification along the lines of "If policemen with submachine guns ever break into my house, I'll still have the Constitution!" And please don't pretend that "it couldn't happen here" because Mr. Jefferson had some good ideas 250 years ago.

Even worse, constitutionalism has long abandoned its function as a limit to state power. Today's constitutions are full of entitlement mentality, guaranteeing everything to everyone and making sure that legally, no effort can ever change the founding principles of social democracy. Take a look at the German constitution's section of "unalterable, foundational rights". That's as liberty-oriented as a congregation of postmillenial bigots:

Article 2, (1):
Every person shall have the right to free development of his personality insofar as he does not violate the rights of others or offend against the constitutional order or the moral law.

Now, what is "the moral law"? Sounds like an ambiguous clause, doesn't it? Right there, in article 2 of your list of "guaranteed rights", it says that you cannot break "the moral law". Didn't I mention postmillenialism?

Article 3, (3):
No person shall be favoured or disfavoured because of sex, parentage, race, language, homeland and origin, faith, or religious or political opinions. No person shall be disfavoured because of disability.

That's your affirmative action paragraph right there. You thought AA was unconstitutional? Not in progressive Europe!

Article 5, (1):
Every person shall have the right freely to express and disseminate his opinions in speech, writing and pictures [...]
(2):
These rights shall find their limits in the provisions of general laws, in provisions for the protection of young persons, and in the right to personal honour.

Do I have to say anything more?

Article 7, (1):
The entire school system shall be under the supervision of the state.
(4):
The right to establish private schools shall be guaranteed. Private schools that serve as alternatives to state schools shall require the approval of the state and shall be subject to the laws of the Länder.

Yay, a completely state-run school system with no homeschooling options! What a beautiful "right" !

Article 14, (2):
Property entails obligations. Its use shall also serve the public good.

That sounds like straight out of an Ayn Rand novel.

Love your freedom more than your constitution, or else you're most likely bound to lose it.

Back on Track

2009-09-10T20:21:00.000-07:00

Dear readers,

shamefully have I abandoned this blog for months and months. This was partly due to a lack of inspiration and partly due to my activity on YouTube where I have been uploading videos which concern themselves with the management and workings of an anarchic society, among other topics.

I hope to be able to resume my writing here from now on. First though, I will be posting transcripts of my videos to try to make up for the months of inactivity.

I apologize for any inconveniences.

On the cornerstones of civilization

2009-03-19T03:18:00.000-07:00

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?

2009-03-18T14:41:00.000-07:00

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

2009-03-16T12:54:00.001-07:00

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

Sunday Best - Mar 15th 2009

2009-03-15T03:11:00.000-07:00

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

2009-03-14T16:13:00.000-07:00

My contribution to the auto bailout debate.

Movers, shakers and producers

2009-03-10T14:45:00.000-07:00

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?

2009-03-09T12:02:00.000-07:00

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

2009-03-08T06:04:00.000-07:00

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

2009-03-02T10:29:00.000-08:00

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

2009-03-01T12:22:00.000-08:00

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

Sunday Best - Mar 1st 2009

2009-03-01T12:04:00.000-08:00

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.

Don't talk about that!

2009-02-26T12:14:00.000-08:00

A father tries to explain to his two young children that they will have to foot the bill for their daddy's generation's spending. Hearing this, the girl responds that their money belongs to them. The boy adds they don't have any money to spend at all.

These two objections show that even a kindergarten class is likely to have a better grasp on reality than our Dear Leader(s).

(hat tip to LewRockwell.co m)

Comic: the common good

2009-02-26T09:07:00.000-08:00

Politicians never grow tired of promising to further the "common good" or the "general welfare" in case they are being elected. However, there is no such thing as a "common good". My good may not be your good, so what is our common good? Indeed, what is the common good of millions of individual actors with different hopes, plans and resources? "Common good" or "national interest" means the well-being of politically connected insiders.

There's no other way to sustainably improve your own situation than to do it yourself - by acting in your own rational self-interest.

(source: CartoonStock)

Darryl Worley and misguided patriotism

2009-02-26T05:36:00.000-08:00

In the early days of the Iraq War, one song touched many Americans very deeply and was able to remain on Number One for several weeks. Outside the US, it has received little to no attention, but it's a very honest emotional testimony to the mix of patriotism, desperation, hatred and belligerence that caused so many US citizens to support a war that they would later recognize to be one giant mistake. We're talking, of course, about Darryl Worley's "Have You Forgotten?".

I hear people saying we don't need this war
But, I say there's some things worth fighting for
What about our freedom and this piece of ground
We didn't get to keep 'em by backing down

Applied to the Iraq War, one confuses a fight for freedom (which is necessarily a fight against aggression, but the Iraq War was, per definition, an act of aggression itself) and for the safety of one's common perimeter (Iraq was at no time a threat to the safety of the US, at least no such estimates have come to my attention) with an act of violence. Fighting for freedom doesn't entail bombing innocent civilians. No threat to American freedom originated from these unfortunate Iraqi people.

Additionally, a revolution against an oppressive monarch ("not backing down") is not quite the same as clusterbombing a foreign nation. Worley should've considered this possibility before cheering for war.

Some say this country's just out looking for a fight
Well, after 9/11 man I'd have to say that's right

A national trauma cured with the lives of peaceful, innocent civilians? That's sick.

I've been there with the soldiers
Who've gone away to war
And you can bet that they remember
Just what they're fighting for

The sad thing is, while many of these soldiers do believe they fight for freedom, they're (not quite falsely) seen as an occupying force by a good number of natives and are being used to justify all kinds of tyrannical measures at home in the meantime.

The entire Iraq War should have never begun. Too many lives have already been lost due to it. There's no point in pretending that it "must be won", we can't let any more individuals die to fulfill a never clearly defined objective. It must end now. Every delay will cause new hurt and tragedy.

Snake Oil Stimulus

2009-02-25T15:08:00.001-08:00

Another good job by our fellow progressive comrades at ThePeoplesCube.

Are you insane?

2009-02-25T14:01:00.000-08:00

According to some ivory tower prisoners at Harvard Law (sic) School, you could be if you share the opinions expressed on this blog.

As the Cato Institute reports, a conference will be held to analyze the "free market mindset", creating ample opportunity for leading "social scientists and legal scholars" to express their nicely worded aversion for the system of production and exchange that has probably enabled most of them to be in the lofty position they occupy today. Maybe we're just narcissistic egoists, out-of-control Randroids, maybe we lacked attention in our childhood and now we're megalomaniacs. Who knows?

In an age that treats compromise as a virtue, principled opposition to evil is easily categorized as an insanity. That shouldn't stop us from being stubborn and insisting on our rights to life, liberty and property, no matter how many "scholars" disagree.

(hat tip to Ars Libertatis)

Obama's economic agenda is fallacious

2009-02-25T05:06:00.000-08:00

President Obama delivered his first speech to a joint session of Congress yesterday. By employing a lot of platitudes and unwittingly painting a dreadfully wrong picture of what his plans will achieve, he tried to win the hearts of the nation once again. Let's have a closer look at his visions:

Obama said it's time to act boldly not just to revive the economy, but "to build a new foundation for lasting prosperity."

The only sustainable foundation for lasting prosperity is capital accumulation. Saving. Deferred consumption. Obama's stimulus plan entails quite the opposite, deficit spending and inflation. That may be the foundation for a new economic bubble, but it's far from being a foundation for prosperity.

"While the cost of action will be great, I can assure you that the cost of inaction will be far greater," he said.

This view implies that only government can take (and therefore must take) action or an already bad situation is bound to get even worse. Obama apparently doesn't believe in the power of emergence and grassroots operations, but rather trusts his own wits instead of letting the combined abilities and ideas of millions of individuals work out a solution. Such a stance requires quite a lot of self-confidence - Hayek coined it "presumption of knowledge".

Obama said his administration already has identified $2 trillion in government spending cuts that can be made over the next decade.

A surprisingly positive remark. Let's hope that "can" is not just a euphemism for "should be, but won't".

Obama predicted that because of the recovery plan, the United States will double its supply of renewable energy in the next three years. [...] Obama also pledged a "historic commitment" to health care and said the recovery plan could lead to a cure for cancer. He also promised the "largest investment ever" in preventive care. [...]

I don't even know how to call this. His first claim about a doubling output at least sticks to classic central planners' rhetoric, but holding out the prospect of a "cure to cancer" is one step beyond that. How can you promise a scientific breakthrough as a politician? Does he really think that throwing money after a project is all it takes? Amazing.

"Slowly, but surely, confidence will return, and our economy will recover," he said, asking Congress to join him in "doing whatever proves necessary because we cannot consign our nation to an open-ended recession."

The unfortunate aspect is that he's trying to imitate or even surpass Roosevelt in his "stimulus spending", thereby dramatically increasing the likelihood of an "open-ended recession". As I said above, dreadfully wrong expectations.

Obama promised to reform the regulatory system to "ensure that a crisis of this magnitude never happens again."

By ignoring the origins of the crisis, the existence of a central banking system, two state-backed mortgage corporations and a number of laws prohibiting banks from discriminating against customers with a low degree of creditworthiness, and instead opting for the popular, but misguided view of an "out-of-control market system", Obama is bound to aggravate the crisis and to sow the seeds for a new economic bust.

"A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future," Obama said.

This quote scares me. Obama seems to hold the view that giving money to the wealthy does not lead to any kind of investment. While it was certainly bad-mannered to grant tax cuts to the rich, but not to the poor, any new private sector money creates more prosperity and opportunity than wasteful and misdirected government spending. Is a tax cut some sort of "gift" to Obama? Do we need to stop giving gifts when times get tough and instead "save" money by giving it to government? The idea makes me shudder.

Even more disturbing is the response of his alleged political "opponents":

Louisiana Gov. Bobby Jindal, who delivered the Republican response to Obama, blasted the Democrats' stimulus plan, saying, "while some of the projects in the bill make sense, their legislation is larded with wasteful spending."

No principled opposition to stimulus packages. No defense of free markets or individual decision-making. No, just an admonishment for being "too wasteful". Another reminder that working within the two-party-system might be a giant waste of time if your goal is to promote liberty, though Governor Jindal found stronger words to express his support for a bottom-up grassroots society in his YouTube response. So we shouldn't judge too soon.

In conclusion, Obama's attitude resembles the confidence of a central planner when it comes to controlling the lives of millions of individuals. His distaste for private investment and his obsession with politically correct spending are frightening. The lack of a principled opposition should be clarion call for action to all friends of liberty.

A shining example of individual liberty

2009-02-24T08:51:00.000-08:00

Being able to walk into a police station while openly carrying your personal defense tools. No hierarchy between policemen and customers: both are armed, both have their reasons. No embarassing questions, no paperwork, no panic, just respectful business between two equally free men.

As Heinlein said, "An armed society is a polite society". If you don't believe it, go and find out in New Hampshire.

(hat tip to Opponent)

Minimum wage laws are counterproductive

2009-02-24T05:31:00.000-08:00

For several reasons:

1) A wage determines the value of work performed. This value cannot be changed by fiat because it depends on how much customers are willing to pay for it. If we assume that a certain type of labor only generates a profit of 4 dollars per hour, then an employer can only pay a wage of 4 dollars per hour at the maximum to avoid a loss. If the worker were in an entrepreneurial position, he couldn't charge more than 4 dollars per hour for his work either or else he wouldn't find willing customers. A law that prohibits him from earning less than 5 dollars per hour would not increase his income, but most likely cost his job.

2) There's no "positive upwards spiral" created by minimum wage laws. Some proponents argue that more revenue earned by underprivileged workers will cause more money to circulate in an economy and in the end, everyone is supposed to be better off. If that were possible, we shouldn't stop at 8 dollars per hour, but enact laws that allow everyone to earn a gazillion dollars per hour at the minimum. That may sound insane, but it's merely the logical conclusion of the "positive upwards spiral" argument.

In reality, a finite amount of money chases an equally finite amount of goods and services. Prices for these goods and services need to be set according to supply and demand or else calculational chaos (such as we've been witnessing in the Soviet Union) will ensue. A minimum wage of one million dollars would totally destroy the division of labor. A minimum wage of 8 dollars doesn't do as much damage, but has exactly the same effects on a smaller scale.

3) Empirical evidence indicating that minimum wages and increased employment correlate is negligible. Minimum wage laws are one factor in an economy that influences the demand for labor. If other factors outweigh the damage done by minimum wage laws, there can be increased employment despite of, not because of minimum wage laws. One should not confuse correlation with causation.

Thus, while minimum wage laws may, on first glance, seem like a good idea to protect unskilled workers from bad living conditions, in reality all they do is create barriers for the poor, disturb the division of labor and decrease overall wealth and opportunity.

How to treat a recession V

2009-02-23T14:13:00.000-08:00

In previous recession articles, I referred to recessions as a result of "vast shifts in customer preference" that cause temporary economic inconveniences which are inevitable in a period of comparatively large transitions. While being correct in the most general terms, this is, of course, a bit misleading since it leaves out of the picture why exactly these preference shifts started occuring in the first place. It could be that people all of a sudden decided to change their preferences, but that's unlikely on such a scale. The real culprit, at least in this recent case, seems to be central banking and centrally managed interest rates.

Let's start from scratch. Our current crisis originated in the housing market. A lot of people were unable to repay their mortgages and had their homes foreclosed; house prices started dropping since an increasing number of foreclosed homes were now up for sale. This created another problem: a number of homeowners used their homes as a "source of revenue", they hoped on ever-increasing homes prices and maxed out their mortgages whenever the speculative price of their home had risen. Now that house prices started dropping, their securities started melting away and other expensive consumer goods that had been leased with the expectation of ever-increasing housing prices had to be returned, thus decreasing demand and prices in these industries as well. Ensuing layoffs in affected sectors of the economy soon started spreading and recessionary tendencies became visible.

In other words, a good amount of people had been living well above their means for quite some time. How did this happen? Why did these people get a mortgage in the first place if their solvency was that unstable?

On a free market, credit is a finite good. The availability of credit is expressed by interest rates. If little to no savings (the foundation for sound credit) exist, interest rates are high: that way, scarce credit is directed to very profitable endeavors only that are able to generate enough revenue to pay back the considerable interest. As savings become more abundant, more credit can be given out for less interest and less profitable enterprises can make use of this tool as well. The least profitable enterprise is consumption. Consumption generates no monetary profit per definition because funds are being consumed instead of being invested. Thus, credit-financed consumption by a few (basically, what the United States had been doing in the last few years) is only sustainable to some extent in a society with an enormous savings rate (in case of the United States, the thrifty lender was mainly China).

A central bank with centrally managed interest rates shuts off this market-based process of interest rate creation. Interest rates are set by fiat ("according to leading economists' market estimates"). Because central planners are unable to imitate the effectiveness of a real market, central banking also has a political objective, namely to transform the "is" condition of the market into an "ought to" condition of what politicians would like to see. Wanna "spur consumption"? Just lower interest rates! Needless to say, this creates a lot of problems down the road once political planning collides with reality. To pick up our example of United States consumption, years of low interest and low personal savings rates created a vast debt bubble that popped once one of the most debt-laden sectors of the economy, the housing market, had started to crumble - in other words, once it had become obvious that the amount of debt circulating was not backed by a sufficient amount of savings or productivity, that there simply was a lack of funds that could not be compensated by an increase in debt because there was way too much of it already.

Saving money constitutes deferred consumption. Think of money as bricks. It's your decision whether you want to use all your bricks right now to build houses for yourself or put them into a bank to gain interest and to allow others to build houses with them. If a brick bank promises to loan out more bricks than it can reasonably expect to get in due time, any constructions that have already begun based on brick loans from this particular bank will eventually come to a halt. If the brick money system itself is based on not lending out bricks according to how many bricks are there, but according to how many bricks should be there or how many bricks a wise, but economically ignorant wizard estimates to be there, then all houses that have been planned based on this system will face a lack of bricks rather soon.

And then, to finally make the point I wanted to get to, you'll see these miraculous "vast shifts in customer preference" that I'd been talking about all along. When people realize there ain't enough bricks, they'll change plans and opt for alternative solutions. This will necessarily interfere with the schemes of those who had been calculating with central bank brick numbers, but ultimately, either there are enough bricks or not. If not, there's no point in pretending anything else. It will only delay recovery.

Now, recessions are not always the fault of central banks, but these banks notably increase the likelihood of far-reaching malinvestments. They are most likely to be blamed for our most recent recession. Accordingly, I considered it worthwhile to point out that "vast shifts in customer preference" do not need to be the result of "free market animal spirits", but can also be caused by the actions of state institutions.

Comic: market regulation

2009-02-23T04:07:00.000-08:00

Market regulations impose costs on businesses. Since most regulators have no experiences with the kind of business they are supposed to regulate, the results can be expected to be tedious and expensive while at the same time creating a legal minefield. Worse even, since the cost of compliance does not scale with business size, huge corporations gain big advantages over their smaller competitors. That's why big business is generally in favor of regulation; you'll find their lobbyists near most regulatory committees.

Regulations do not help "tame the market". They glue together the legs of small and swift competitors so that corporate giants can easily crush them.

(source: Cartoonstock)

Sunday Best - Feb 22nd 2009

2009-02-22T03:57:00.000-08:00

1) All-time best: Libertarian Anarchism: Responses to Ten Objections by Roderick T. Long
A classic of libertarian theory by one of its most famous academic proponents, Dr. Roderick T. Long.

2) Best news-related: Battling the Threat of Famine with One Hand Tied -- Thanks Again Greenpeace and FOE by Ronald Bailey
While crops worldwide are being infected with a dangerous rust, adaption to this new situation becomes increasingly difficult due to the political minefield of genetic engineering. Demonizing technology will hardly improve global living standards - and it's a play with fire (or, more appropriately, "a pending disaster in global agriculture") in this particular case.

3) Best debate: Most Libertarian Country on the Mises Institute boards
A discussion on the freest place on earth that turned into an argument over secular statism. Quite thought-provoking.

Solutions to anthropogenic global warming: The Carbon Badge

2009-02-21T10:47:00.000-08:00

We're coming across a number of quality seals in our everyday lives. Some commend the product for its superior quality, others for the company's worker-friendly atmosphere, others for the humane treatment of any animals involved in the production process. In an age of climate concern, companies could show their efforts to reduce greenhouse gas emissions by putting a special quality seal on their products that we will refer to as The Carbon Badge (TCB).

TCBs will be issued by separate companies which specialize in analyzing the carbon output of other businesses. To get permission to use the seal on their products, companies would have to subject themselves to the rigorous scrutiny of TCB employees who have been trained to look twice on an official carbon balance sheet before accepting it and who would be allowed to check any corner or record of the aspiring company for evidence of fraudulent carbon claims. After successfully verifying the carbon benevolence of a company, "TCB Inc." would contractually allow them to use their seal on any company-related product and probably promote willing companies on their website or in TCB-friendly magazines and papers. That way, climate-conscious customers could discriminate against companies who refuse to take action against climate change and support industrial efforts to cut back on greenhouse gases.

But what if, say, Big Oil sets up a TCB-issuance company to promote their products with a phony seal? Markets will figure out which seals to take seriously and which not. An oil company that sets up a rigged seal and puts it on its products would soon be discovered by environmental activists and pilloried in their publications. Any general news outlet that has a reputation of editorial independence to lose will likely cover the topic as well as soon as the details reach the general market. Another approach would be customer guidance booklets which promote trustworthy seals so that customers can specifically look for them. After some time, those seals with the best customer/market feedback would become general knowledge and people would be able to recognize brand names or specific signs on first glance.

How about companies which put a trustworthy TCB seal on their product without permission? That would constitute fraud. If a product is supposed to contain apple juice, but you smell root beer after opening it, you're free to sue the producer and inform customer information agencies. Entrepreneurs who chose to act like that would soon lose credibility, maybe even their good credit ratings (after all, a fraud lawsuit may result in a hefty amount of trial fees and smart-money obligations).

What if people just don't care enough about climate change to notice any carbon badges? In that scenario, we'd be even worse off with a state solution. Since a majority of voters wouldn't care about climate change and likely oppose any related political measure that burdens them with extra costs and toils, we can expect politicians to drop the issue. Worse even, they might fund scientists to disprove anthropogenic climate change theory, thereby decreasing the chances of concerned AGW activists to get the message through. If a sufficient number of people worry about AGW, we shouldn't settle for an unsatisfying, wasteful and slow state solution, but instead harness the power of the market to tackle the issue.

Comic: farm subsidies

2009-02-20T17:30:00.000-08:00

Farm subsidies are supported by most factions of the mainstream political spectrum for one reason: nobody wants to be guilty of "letting family farms perish". Subsidies are supposed to level the playing field and guarantee a basic income for those who pursue this traditional and hard way of life.

However, getting your hands on a state subsidy is an arcane and complicated task. Those who barely make ends meet by plowing their fields and harvesting their crops don't have time to get into this shady business and lack funds to hire a lawyer or tax consultant to handle it for them. Thus, agricultural subsidies flow mostly to big producers who thereby gain another advantage over their smaller competitors. Big agribusiness has the means to effectively siphon off subsidies. Family farms don't; they just want to honestly grow crops.

Farm subsidies are not a blessing to the family farm. They're another nail in its coffin.

(source: The Public Choice Capitalist)

We're all spendthrifts now

2009-02-19T11:23:00.000-08:00

Who would've thought? Federal government spending has been increasing almost exponentially over the last few decades. However, sometimes a graph is necessary to show how bad things actually are:

Two details are especially intriguing:
1) In 1971, President Nixon went off the Bretton Woods system which was the last vestige of the former gold standard. In this system, foreign countries used the US dollar as a reserve currency while the dollar itself was bound to a a gold exchange rate. That way, there was a last, albeit weak obligation to fiscal sanity left which prevented governments (especially the US government) from printing money and spending madly. Unsurprisingly, once this had been abolished, spending went through the roof almost immediately.
2) The graph ends in 2003. Iraq War, bailout and stimulus package would've lengthened the axis of ordinates quite a bit.

(source: Political Class Dismissed)

Europe's in trouble, says Gary North

2009-02-19T06:35:00.000-08:00

Normally, I would've put this article in my "Sunday Best" category. It sure deserves to be called "best news-related article". However, its implications are too important to wait for Sunday.

Gary North writes about a Daily Telegraph article which, before being edited, said that a secret EU report available to DT editors warned about the magnitude of toxic assets on the balance sheets of European banks. They may amount up to 16,3 trillion pounds which is about 18,4 trillion euros. Failure to bail out these lending institutions with a comparable sum may lead to bank failures and ensuing bank runs. A breakdown of major European banks would basically collapse the European economy which is just as dependent on credit as any other. Plus, if people lose their savings, there's nothing left to spend or invest.

Worse even, since the European community consists of countries with vastly different debt conditions and financial credibility, a uniform solution is highly unlikely to be found if such a great sum had to be scraped up. For example, while investors may still have a lot of trust left in Germany's stability, they may refuse to lend to Italy. But since both Germany and Italy are part of the Euro monetary union, Germans would have to tolerate massive inflation by the European Central Bank to make up for a lack of creditor confidence in Italy. How long will they be willing to take that?

In my view, the European public still has faith that the governments and the central banks will successfully intervene to restore commercial banks. But if the original article was correct, that 44% of bank balance sheets have disappeared, then the public is living in la-la land. The entire structure of Europe's capital markets is at risk. Or, I should say, what remains of the capital markets is at risk.

Reality is an unforgiving mistress. If the public refuses to acknowledge the severity of a problem, it will not disappear. It will come back in an even worse fashion. If European banks have lost nearly half of their balance sheet, I honestly don't know what's going to happen. It could be everything from an exceptionally long and severe depression to a complete breakdown of civilization, but in any case, you bet it won't be pretty.

The validity of the cited Daily Telegraph article has not been verified as of yet, but I wouldn't take that as a relief. Try to imagine what's going to happen when welfare checks stop coming in because governments are out of credit and a vast number of people lose their savings. You can't picture it? Neither can I.

Brace yourselves, we may be in for a rough ride.

The Frederal Reserve

2009-02-18T16:12:00.000-08:00

Cute Kirby analogy to the nature of central banking. Another good job by confederalsocialist.

Sacred pieces of paper

2009-02-18T12:53:00.000-08:00

In the 18th and 19th century, constitutionalism was a popular political philosophy. Annoyed by despotic acts of their monarchic rulers, people figured that written limitations on a king's power would stop him from abusing his position too much. Thus, instead of demanding the abolition of monarchic rule, the popular sentiment was that a constitution could be introduced to keep the balance between liberty and power.

Classical liberals and contemporary constitutionalists cling to this idea. Believing in the necessity of a state, they argue that a liberty-oriented constitution jealously guarded by a liberty-loving population can guarantee the sustainability of a minarchist state (sometimes denigratingly referred to as a "night watchman state") and enable liberty in a statist framework.

However, there are several major concerns worth considering. First, if people need to have a libertarian attitude to keep a constitution alive, we might as well not have one; for a libertarian people will demand sufficient restrictions on state action by itself, whereas a non-libertarian populace cannot be stopped by a piece of paper anyway. That's the main problem with a constitution; as George W. Bush so beautifully put it, a constitution is "just a goddamned piece of paper". It may be a revered piece of paper that everyone pretends to worship, but at the end of the day, it is subject to the political whims of a time, not the other way round. There is no magic involved here, only paper and ink.

Furthermore, constitutions tend to give legitimacy to bad actions. In the absence of a constitution, a king's taxation powers were considered a legal gray area. Even though nobody had signed a contract with the king, it was expected that he should fulfill his part of the protection racket arrangement - or else his claims for tax money would become null and void. With an active constitution mandating taxation powers to government, there is still no contract signed (except for an obscure 'social contract'), but states which do not fulfill their duty of protecting citizens can point to the constitution for continued tax claims - after all, if a constitution has no legitimacy, they say, you don't have any rights whatsoever. Either you pay according to the constitution or you lose your constitutional rights. Thereby, natural rights that predated the drafting of a constitution become mere legislation bound to your compliance with state violence.

And even then, it is by no means secure that these constitutional rights will forever be upheld. After all, a constitution is subject to interpretation by states and their courts. With incremental distortions or conflations of certain articles, their actual meaning can be easily eroded and transformed into a pro-state position. Consider, for example, the Second Amendment. It states quite clearly that every individual has a right to keep and bear arms. After decades of distortion and creative interpretation of punctuation and semantics, we are now on the brink of a Supreme Court judgment that defines this Amendment as granting arms rights to state militias only. That way, the original intent of the Amendment, another balance of power by allowing ordinary citizens to guard themselves against tyranny, has been destroyed completely.

Finally, who says that constitutions have to be libertarian? Some contemporary constitutions seem to have almost completely abandoned the idea of limiting state powers and instead function as a regulatory element that promises welfare and affirmative action to its subjects while already infringing upon real rights in the respective articles. You don't believe me? Check out the German Grundgesetz:

Article 2, (1):
Every person shall have the right to free development of his personality insofar as he does not violate the rights of others or offend against the constitutional order or the moral law.

Article 3, (3):
No person shall be favoured or disfavoured because of sex, parentage, race, language, homeland and origin, faith, or religious or political opinions. No person shall be disfavoured because of disability.

Article 5, (1):
Every person shall have the right freely to express and disseminate his opinions in speech, writing and pictures [...]
(2):
These rights shall find their limits in the provisions of general laws, in provisions for the protection of young persons, and in the right to personal honour.

Article 7, (1):
The entire school system shall be under the supervision of the state.
(4):
The right to establish private schools shall be guaranteed. Private schools that serve as alternatives to state schools shall require the approval of the state and shall be subject to the laws of the Länder.

Article 14, (2):
Property entails obligations. Its use shall also serve the public good.

And so on. Americans tend to think of constitutions as limits to state power, and while that was indeed the original intent behind them, it's not necessarily the only purpose of a constitution anymore today.

In closing, we have to admit that pieces of paper do not effectively keep a state in check. Sometimes, they even aid it in growing. Libertarians should seek for more appropriate tools to preserve liberty.

Comic: the value of knowledge

2009-02-17T14:23:00.000-08:00

Schools are respected institutions because people believe they teach valuable knowledge to our children. However, the value of knowledge is subjective. While schools do communicate a lot of information, it is questionable whether a student will find any use in knowing these at all. Quite often, students will pursue enjoyable activities they can put to direct use much more productively and successfully than what they are forced to do at school. Still, these private activities tend to be considered less important than random school knowledge. That's a bad incentive structure which may delay the accumulation of worthwhile knowledge far too long.

(source: xkcd)

Comic: capitalists and competition

2009-02-16T15:48:00.000-08:00

It is a common belief that big business is the driving force behind free trade and free market ideology. Not too rarely, that's wrong. Large corporations tend to lobby for state regulation of the market and protectionist tariffs to secure their established position and keep their own profits high due to a lack of competitors. That's why free markets do not equal the enslavement of mankind by capitalists, but much rather liberate humanity from the shackles that some businessmen want to impose on it.

(source: Cartoonstock)

How to treat a recession IV

2009-02-16T09:51:00.000-08:00

We often hear claims for tax cuts by free market advocates in times of a recession. Generally, they are right: cutting taxes allows people to control a greater share of their resources, thus making production according to public demand, not government fiat more profitable and thereby increasing the likelihood of an economy that actually satisfies people's demands.

But there's a catch: cutting taxes only works if government spending is cut by the same amount or more at the same time. Otherwise, it'll be merely make-believe: while you may have some more dollars in your wallet, your government will already be engaged in deficit spending or monetary inflation to keep up with the cost of burdensome state programs.

The current recession seems to be a prime example of this schizophrenic mentality: in order to reach a "compromise", supposed free marketeers and those who put their trust in government agree to cut taxes, but increase spending ("stimulate the economy") at the same time. That's like eating your cake and having it, too. You can only spend money once: either for private sector needs and wants or for state purposes. If both compete for a finite amount of goods and services, prices will go up and your tax cuts will essentially vanish.

Not only is this a very dishonest method of trying to buy as many political sympathies as possible, but it's more of the same "let our grandchildren pay" mentality. At some point in time, debt incurred by a state will have to be paid back: either by taxing every bit of surplus wealth out of those who are still producing, a sure-fire way to economic collapse. Or by madly inflating the currency, another quick road to economic turmoil through hyperinflation. Or by pleading with creditors to forgive debts which they will only do for a good amount of political favors - which means that the bosses you can still vote on will be subject to the decisions of another layer of creditor functionaries - so you'll be even more screwed.

In conclusion, be careful whose tax cut plan you support. Paying less is only reasonable if less is being spent as well. Otherwise, nothing fundamental changes about the unsustainable attitude of spending until the cows come home.

Sunday Best - Feb 15th 2009

2009-02-15T04:30:00.000-08:00

1) All-time best: Schelling Points by khydraa
An analysis of why the state is still seen as a moral and sound entity despite its obvious systematic and ethical flaws. Also contains some interesting historical evidence for the claims made. An enlightening read for anyone wondering why the state is so effective at, well, governing people.

2) Best news-related: National Healthcare FAIL: Japan by David Z
A sickening case of socialized medicine failing to help those who are really in need. It's just an empirical observation, of course, but proves the libertarian point that socialization of certain sectors of the economy does by no means guarantee that they will be available to you should you have to depend on them.

3) Best debate: Does free will exist? on the Anti-State boards
Maybe it's because I have been pondering on the issue myself for quite some time now, but I found these exchanges very helpful and instructive. One should not be so quick to accept and promote the idea of "free will", even if one is advocating freedom in general.

Implications of the Myers-Briggs Type Indicator

2009-02-14T14:13:00.000-08:00

I've come across a very interesting personality characterization method today. It is called the Myers-Briggs Type Indicator and attempts to categorize your personality according to four factors: social attitude (Extraversion / Intraversion), perceiving functions (Sensing / Intuition), judging functions (Thinking / Feeling) and lifestyle preferences (Judgment / Perception).

Social attitude describes the way you interact with others: either openly or shyly (very generally spoken, as will be the case for all other factors). Perceiving functions are the way you process information: either by trusting unfiltered, tangible data collected by your senses or by abstractly analyzing what happens around you. Judging functions delineate how you evaluate gathered information: either by comparing them to general concepts in your mind or by weighing them with situational environments and events. Lifestyle preferences characterize which set of abilities, perceiving or judging, you like to use and to show to others.

You can take a personality test based on this model here. To find out what your results could translate into in real-life, look here. Wikipedia has a section on the frequency of all 16 Myers-Briggs personality groups within the United States population.

I decided to give it a shot and my result was INTJ - Introverted Intuitive Thinking Judging. I found astonishing similarities between the type decription on personalitypage.com and my own perception of myself:

The INTJ's interest in dealing with the world is to make decisions, express judgments, and put everything that they encounter into an understandable and rational system. Consequently, they are quick to express judgments. Often they have very evolved intuitions, and are convinced that they are right about things.

They dislike messiness and inefficiency, and anything that is muddled or unclear. They value clarity and efficiency, and will put enormous amounts of energy and time into consolidating their insights into structured patterns.

INTJs need to remember to express themselves sufficiently, so as to avoid difficulties with people misunderstandings. In the absence of properly developing their communication abilities, they may become abrupt and short with people, and isolationists.

Interestingly, I see a similar behavioral pattern on libertarian message boards quite a lot. The majority of users demand rigorous intellectual honesty in debates and get annoyed and angry fairly easily once a counterpart seems to be avoiding this duty. You'll encounter long-lasting debates on details of a philosophy in which users with adverse views will valiantly defend their own position over many pages, even if it's just a minor detail among details - logic and stringency are to be preserved. And of course, there'll be countless debates about semantics for the purpose of being right because one feels right. I expect this to be more generally the case among those with a contrarian point of view or a very specific research interest. I wouldn't be surprised if a good number of professed and philosophically sound libertarians scored somewhere around INTJ.

Another intriguing aspect are attitudes towards morality, duty and authority among the more common personality types (INTJ is the third rarest personality, according to Wikipedia). For example, take a look at ISFJ, the most widespread character type:

They value security and kindness, and respect traditions and laws. They tend to believe that existing systems are there because they work.

The ISFJ has a difficult time saying "no" when asked to do something, and may become over-burdened. In such cases, the ISFJ does not usually express their difficulties to others, because they intensely dislike conflict, and because they tend to place other people's needs over their own.

ISFJs need positive feedback from others. In the absence of positive feedback, or in the face of criticism, the ISFJ gets discouraged, and may even become depressed.

In other words, ISFJ types fit best into a highly regulating statist society. They have faith in existing institutions, they do not tend to question the good motive of those working within them, they will not complain too much about overbearing taxation or presumptuous legislation (they can't say no!) and they're unlikely to adopt unpopular (anti-state) views because they need positive feedback from others - who are probably going to be pro-state in a statist society. That doesn't mean this personality type is somehow "bad" - only that it can easily be abused in a statist environment when there's no consciousness for the potential of abuse among ISFJers.

The second most common personality type is ESFJ. ESFJers are closely related to ISFJ persons, they just tend to be a little bit more outspoken. See what's prevalent among them:

They need approval from others to feel good about themselves. They are hurt by indifference and don't understand unkindness. They are very giving people, who get a lot of their personal satisfaction from the happiness of others. They want to be appreciated for who they are, and what they give.

They may have a strong moral code, but it is defined by the community that they live in, rather than by any strongly felt internal values.

In such cases, the ESFJ most often genuinely believes in the integrity of their skewed value system. They have no internal understanding of values to set them straight. In weighing their values against our society, they find plenty of support for whatever moral transgression they wish to justify. This type of ESFJ is a dangerous person indeed.

ESFJs respect and believe in the laws and rules of authority, and believe that others should do so as well.

ESFJ types seem to be prone to all kinds of indoctrination. If a person holding a high public office tried to explain to me that printing money equals generating wealth, I'd most likely call shenanigans. ESFJ types might reconsider their own position instead of questioning the view of public authority. Given state power, they may also be more reckless in using it since they tend to lack a correction mechanism for bad ethical standards. Plus, they believe in existing institutions as well, making them wary of any revolutionary thought. Basically, they seem to be the more active counterpart to the ISFJ type.

Finally, let's examine ISTJ personalities, the third most common type of person:

They are "good citizens" who can be depended on to do the right thing for their families and communities.

ISTJs tend to believe in laws and traditions, and expect the same from others. They're not comfortable with breaking laws or going against the rules. If they are able to see a good reason for stepping outside of the established mode of doing things, the ISTJ will support that effort. However, ISTJs more often tend to believe that things should be done according to procedures and plans. If an ISTJ has not developed their Intuitive side sufficiently, they may become overly obsessed with structure, and insist on doing everything "by the book".

Another kind of person that can be horribly abused under the wrong kind of guidance. Again, I'd like to point out that there's no intrinsically "bad" or "weak" element in these personalities; however, understanding that about one third of the US population shares a common inclination towards manipulation by "society" might help us see through some of the mechanisms that exist around us and whose function we understand on a theoretical level, but can't comprehend practically. How is it that obvious contradictions in state theory are often ignored? Why do so many people seem to blindly follow authority? This might give us some hints.

It may also explain why libertarians had only limited success in communicating their ideas despite an unmatched theoretical framework. Many people just don't seem to be into abstract cloud-castles even if they appear superior to currently existing systems and institutions. Understanding the personality of our target group should help to adapt our strategies.

There's a lot more to it, but I'll leave it at that. However, I strongly encourage you to research this topic. It sure caught my attention once I got the fundamentals.

Comic: socialized medicine

2009-02-14T07:39:00.001-08:00

Price controls, government cost calculations and the loss of customer sovereignty will lead to shortages, bad quality and less innovation. That's true for cars as it is for medicine.

(source: First Friday Collective)

Weapon control in a free society

2009-02-13T14:29:00.000-08:00

When there are no laws regarding weapon control, what's to stop a madman from collecting WMDs and threatening his neighbors with it? Wouldn't a free society need some kind of controlling mechanism to prevent scenarios like these from happening?

Yes, it would. And that's how it could be handled:

Assume you're walking down the street and a man holding a knife runs towards you, screaming wildly. You knock him down and he starts complaining that he didn't want you any harm, he was merely rehearsing for a drama play. Was your defense reaction justified? Yes, most certainly.

Now assume this man was rehearsing on an empty football field. Nobody was threatened by his actions, so there's nothing wrong with it. Nobody minds him doing so.

Let's further assume that a man living in the desert without any neighbors in a 50-mile perimeter sets up a rocket launcher in his yard to defend himself and his property against marauders. Would anyone mind? Probably not. However, if someone decided to install a rocket launcher on his balcony in a crowded city, this might lead to trouble with neighbors; just like building a toxic waste dump in a family-friendly suburb will cause conflicts.

It's become clear that the ownership and usage of different kinds of weapons has different effects in different circumstances. As long as you're living a recluse life, you're free to drive a tank and set up missile launchers on your lawn. Since you were there first, any future neighbors will have to tolerate this behavior or stay away. However, threatening the security and well-being of your already existing neighbors with potentially harmful gadgets will be a controversial issue in a private property society.

How will this be resolved? Individually, either by reaching a compromise or using arbitration services/free market courts to settle the matter. You may choose to ignore a court ruling and keep your Stalin's organ on your balcony, but you're bound to face pretty harsh consequences once this information reaches the general market (I need to do an article on free market arbitration in the future to elaborate on this).

The state is completely useless in solving this problem. States produce codified law that is supposed to apply to all possible situations involving a particular matter. But as we've just shown, gun control in a free society is a case-by-case matter, something that cannot be codified, but must be weighed anew in every single instance. You'd need states that encompass only two pieces of property to adequately address this issue within the framework of a state, an obviously ludicrous proposal. A free market will be able to eliminate problems individually, thus creating much more maneuvering room for possible solutions.

But what about our WMD collector? He's dangerous even if he's chosen the path of the hermit. Basically, once it becomes known that he's bunkering highly dangerous substances, insurance and defense providers will find it profitable to eliminate the threat before it escalates and severe damage is done. Several approaches could be taken to do this; negotiating with the collector or breaking into his cellar to neutralize all WMDs (remember, hoarding WMDs counts as an act of aggression, so counter-force is allowed) are two of them. Killing the hermit would be a both morally and economically terrible decision; morally for his right to life and liberty, economically for compensation charges of potential relatives and for possible harm done by the hermit while defending himself. If you think states could solve problems of this kind more appropriately, think again: Waco and Ruby Ridge.

Now, there may be good reasons to own WMDs. Research purposes are one. But think of owning WMDs in the context of our rehearsing actor. If you behave irresponsibly (for example, by putting WMDs into canning jars in your cellar), you constitute a threat to your fellow men. They will feel an urgent need to eliminate this threat. Claiming that you're "just a WMD collector" is like claiming that you simply wanted to rehearse when you seemed to assault a random pedestrian.

Lastly, I recommend this paper by Walter Block for further reading. My ideas are based on his research, so I have to give him credit for this article - without him, it may not exist today.

Guns and crime on YouTube

2009-02-13T04:58:00.000-08:00

I decided to create read versions of the articles that have the biggest potential of becoming popular. So, this is my first attempt. As I said in the comments section, please excuse my accent and breathing.

How to treat a recession III

2009-02-13T02:12:00.000-08:00

When everything else fails, there's still the printing press - even though today's money creation happens mostly within the digital realm. Anyhow, politicians praise inflationary policies in recessions as a means to achieve three things:

1) Generating funds to finance stimulus packages without taxation
2) Creating incentives to spend money now due to expected future inflation
3) Preventing falling prices

As for the first part, that's pretty easily refuted. There's no such thing as a free lunch. Even though you don't have to tax at gunpoint in this case, the effects of inflation will be the same as taxing a comparable amount of money. Your dollars lose purchasing power, thus they're worth less - you're likely to need more of them to buy the same amount of goods and services. It may not be as obvious, but it still happens and there's no categorical difference between governmental inflation and taxation. It's merely semantics.

The second point rests on the fallacious view that "consumption drives the economy". If you can stimulate aggregate demand, that'll increase aggregate supply and everything's supposed to be fine again. But an economy exists to satisfy wants and needs. The fact that vast shifts in the structure of production are occuring (with the accompanying recessionary inconveniences) shows there is a vast discrepancy between what is being produced and what is being demanded. Artificially changing these demand patterns by threat of inflation does no good to the general welfare - it's like offering someone a childhood painting of yours for 50 dollars or else he will get shot. Considering his options, your counterpart will probably go for your painting - not because he demands this particular good, but because the only alternative you grant is much worse. Actual demands are not going to be satisfied. It's a charade.

Falling prices and deflation are among the biggest scare stories around. According to some, they will lead us into a downwards spiral that'll only end once we hit rock bottom. However, prices and wages need to drop if necessary adaptions to vast changes in customer demands are to be performed. If nobody wants to build a house anymore at current market rates, what's the use in upholding wages of construction crews? If jewelry is too expensive for the majority of previous customers, why should you keep prices up? It's a clinging to a previous state of affairs that may have been more beneficial to some individual market participants, but turned out to be unsustainable. Trying to freeze the economy in this boom period to prevent a supposed downwards spiral will only hinder essential corrections and prolong the recession.

In short, printing money does not increase wealth. As simple as that sounds, it's a pretty tough story to sell in Washington, D.C..

Solutions to anthropogenic global warming: insurance providers II

2009-02-12T15:20:00.000-08:00

I received criticism concerning one of my points in the previous article. The argument boils down to that:

How are carbon-conscious insurance providers going to get enough funds to pay for additional damages caused by climate change if they offer cheap rates to anyone driving a hybrid? It's an unsustainable business model. Only government, with its monopoly on force, can effectively curb high carbon outputs by taxing the hell out of it or outright banning it!

The objection is valid. There's a contradiction between needing more money to pay for higher damages and lowering rates at the same time. This creates another bad incentive, an enticement to avoid any customers within the mid- to high-risk regions such as areas close to the sea, a river or a potentially expanding desert. If we limit ourselves to the level of single insurance companies, the dilemma can hardly be resolved.

However, insurance companies also enter agreements with reinsurers. Reinsurers make sure damages on a really big scale that ordinary insurance companies cannot pay will be paid. Most details are similar to a deal between an insurance company and a customer: the higher your risk group, the higher your rate. Let's assume you're running a reinsurance company for medical services (quite unlikely, but still). You're insuring two insurers: the "Healthy Athletes' Pooling Group" and the "Obese Smokers' Insurance Corporation". You'll charge an extra fee for the latter company for picking its customers from a high-risk group.

The problem with carbon-based insurance calculation is that your carbon footprint does not necessarily increase your personal damage risk. Just because you fly your private jet for fun doesn't mean your house will be hit by a meteor, but maybe you increase risks for someone living on the coast or near a river. Why wouldn't insurance companies simply charge higher rates for those who live in a high-risk region, you ask? Well, if only symptoms and not root causes of a problem are being addressed, it's bound to get worse. If insurance companies decide to dump all those who live near a coast to let their homes be swallowed by the sea, then suddenly you'll have a new high-risk group in the former heartland due to a shift in sea levels. You could try to make living in a high-risk region unattractive by charging insane rates, but that'll only shrink your overall customer base. If climate change is real, nobody will be able to run from it. Far-sighted businessmen will recognize this fact and invest accordingly.

So, if insurance companies refuse to implement any kind of carbon footprint in their premium calculations because the effects of climate change are unlikely to affect their customers, reinsurers will remind them of their duties. Reinsurers have huge incentives to minimize risks due to their global obligations. Insurance companies which primarily insure carbon bigfoots will then have to pay higher premiums to their reinsurer, thus creating an incentive to join the carbon-conscious calculation style. Low-output insurers will have lower premiums, thereby being able to both cut rates and still have enough funds to compensate for any new damages thanks to reinsurers backing them. When everyone has become a low-output case, then, according to AGW theory, we should see a decline in additional climate-based damages so that lower rates for everyone appear sustainable.

But what if insurance companies simply refuse to do business with reinsurers that demand carbon-based premium calculations? Two things should be considered:

1) Even in low-risk regions, accidents occur. That's why you want to have a reinsurer. Insurance companies that refuse to deal with reinsurers due to a reluctance towards carbon-conscious premium calculations will lower their credibility since they follow a reckless risk-pooling policy and face bankruptcy in case of any major events. In short, they're walking on a tight rope.

2) What happens if you own a notoriously polluting factory that poisons the village next to it and decide to hide in your mansion on a hill to avoid the rage of the villagefolk? Right, at some point in time, they'll ring your doorbell with forks and torches in their hands. Those who try to hide from their climate responsibility will be faced with a similar scenario. Public ostracism and discrimination against those insurers which try to opt out will ensue. At some point, it may become profitable to give up the isolationism.

Finally, it should be said that insurance companies are by no means the only way to combat harmful climate change. They're an interesting economic aspect of the struggle against this common enemy within a free society, but not the sole cornerstone of all endeavors to prevent bad environmental changes. Thus, even if there's risks involved in the insurance approach, it doesn't need to be perfect since it can be complemented by other actions of free men in a free society.

Solutions to anthropogenic global warming: insurance providers

2009-02-12T10:49:00.000-08:00

[cross-posted in a slightly different fashion at the Mises Institute Forums]

If climate change is man-made, really dangerous and will cause massive damage, this will burden insurance companies a lot. They somehow need to collect more money to pay for the new damages. What's to stop them from using your "carbon footprint" in their premium calculations? After all, people who fly a lot, drive big SUVs and have energy-guzzling homes contribute more to man-made climate change than your average tree-hugger, and coal-fired power plants are much more of a threat than photovoltaic cells on a roof.

My first concern was competition. If one company raises rates for carbon bigfoots, others could simply woo them away by offering lower rates. However, these insurers also need to collect money for an increasingly damaging environment due to a changing climate. The only other way to get this done is by raising rates for everyone equally. Carbon-conscious individuals would then have an incentive to switch to those insurance providers who respect their efforts to contribute less GHGs, plus people who do not really care about climate change per se would have an incentive to pursue a more eco-friendly lifestyle. Temporarily, this would put a strain on both business models: climate-conscious companies would primarily get low-output individuals with lower rates whereas climate-indifferent insurers would mostly get "gas hogs" whose numbers would likely be dwindling due to newly created economic incentives. With the emergence of more and more sophisticated carbon-neutral technology, there would be an incentive for an increasingly large margin of carbon bigfoots to switch to a low-output behavior, thus creating an incentive to join carbon-conscious insurers. Those companies who do not reward low-output behavior would quickly see their customer base shrink. As more and more people decide to "go green", positive effects on climate development should become visible if the theory of AGW really holds water. The profit motive alone caused a shift to carbon-neutral ways of life in this case.

Of course, social pressure could also play a role in switching to a more carbon-conscious calculation and life-style. But I left it out of the picture for a lack of deductive power.

Insurance companies are already adapting to expected changes concerning the global environment. The Munich Re Group, one of the world's largest reinsurers, for example says:

Munich Re regards climate change as a major issue and, as co-founder of the Munich Climate Insurance Initiative, is devising appropriate insurance based tools. The project targets those countries and regions which are worst affected.

Now you may ask yourself, what's the difference between a carbon tax that decreases demand for carbon-intensive products and carbon-based insurance rates that do exactly the same? If government collects the money, it may go anywhere without notice. Instead of helping the victims of climate change, this carbon tax money may as well be used to build tanks to invade some foreign nation. Insurance companies also redistribute money in a sense, but it must flow directly to those in need without too much wasteful bureaucracy or the insurer will quickly face bankruptcy due to a lack of customers. Financial punishment for carbon bigfoots by insurers would not only be a purely market-based, but also much more efficient and just solution than letting government do the job.

Plus, there'd always be the possibility of opting out. If you don't like paying more for your gas-guzzler, feel free to quit, but live with the consequences. Individuals who chose to do so would probably face many obstacles in their daily lives and even ruin should a major accident ever occur in their lives which, again, creates an incentive to participate in this "carbon scheme" instead of rebelling and denying.

Just in case climate change is merely a giant money-making scheme, this solution will also help. If there's no additional damage done by climate change and insurers just use it as a scare tactic to siphon off money, just one competitor who doesn't will suffice to lure off customers who don't like to pay more for nothing. If climate change is damaging, but human activity doesn't cause it, low rates for carbon-conscious individuals will not be sustainable. Everyone will have to pay more then, regardless of their carbon footprint.

The welfare state's tipping point

2009-02-12T07:58:00.000-08:00

Libertarians have never grown tired to criticize the welfare state, and rightly so. Instead of helping the poor to get out of poverty, the incentive structure behind the welfare state tends to lock them in a state of poverty to create additional needs for all kinds of welfare programs that will, in turn, generate funding for those presiding them. It's not that the welfare state is some enlightened institution designed to eliminate poverty - it's just another government scheme to keep its subjects pacified while at the same time creating a pretext for massive increases in taxation, obscure redistribution practices (keep in mind, most redistribution happens from bottom to top, not the other way round) and lots of tenured employment down the road.

The good news is: this cannot go on forever. Since there is no material incentive to actually decrease poverty for those who are "working against it" (if there was no more poverty, they'd all lose their jobs) and governments tend to be expanding, the amount of money spent on welfare programs tends to increase. This makes honest work increasingly unattractive due to punitive taxation and non-wage labor costs. The ranks of net welfare beneficiaries tend to increase, thus creating a vicious circle.

Government ponzi schemes such as Social Security or Medicare are even more sinister - since an individual is forced to pay money into the system for those who currently receive benefits out of it, there is an expectation for future reimbursement; however, this expectation rests on the willingness of future generations to also participate in the system, in other words, today's confidence in Social Security rests on the firm belief that there will be enough willing payers in the future. If you need 1+x persons to finance 1 retiree - and make no mistake, you need much more than one payer per retiree -, every family needs to raise at least 2+x children. Looking at world fertility rates, quite a leap of faith is required to hold on to this belief in the western hemisphere - starting with 2,05 children per woman in the United States, it goes all downhill from there to 1,23 kids in Poland.

Which means that while western countries are struggling to hold population levels, their inhabitants cling to a retirement system that is based on rabbit-style fertility rates. Combine that with the many disincentives the general welfare state creates when it comes to honest work, and you'll hear the demographic time bomb tick. Tick-tack.

Western politicians are naturally hostile to accepting these facts. Their incentive is to keep the system going until their term is over so they can benefit from generous Congressional pensions. Besides, talking about abolishing the welfare state is fiercely unpopular; "welfare reform", the desperate gluing-together of an inherently broken system that's falling apart everywhere until the respective politician is able to retire, is the politically correct choice.

However, this will not change reality. Reality is that at some point in time, redistribution, government ponzi schemes and high taxes/inflation/deficit spending will destroy western civilization. Literally. If there is noone left to produce and nobody willing to trade, society falls back to primitive living standards. It's likely that before total destruction occurs, the welfare system will break apart - however, this will cause unimaginable suffering among those who are really dependent on it and disillusioned hatred among the many free riders. Not a pleasant prospect.

It may be too late already to ensure a smooth abolition of the welfare state, but the only chance for preventing absolute mayhem is to start the gradual end of the welfare state now. First, all citizens need to be able to opt out of the system with a clear warning that if they stay in, they will probably lose everything they pay into it. Those who are dependent on the system (e.g., the elderly and the sick) need to be taken care of by diverting tax funds away from less useful projects. At the same time, welfare bureaucracy needs to be cut drastically so there is no influential group left to lobby for budget increases. That's what can theoretically be done within the state framework.

Should this process not be enacted - and that's the most probable scenario -, our best option is to find a safe spot to watch the welfare time bomb go off. It won't be pretty, but all we could do was warn ahead of time.

Liberty Comics

2009-02-09T12:30:00.000-08:00

Check out these two continuing comic stories by Big Head Press: Escape From Terra and Odysseus The Rebel.

EFT is about two tax agents from Earth who are sent out to another world to establish a taxation system, but find that it's a free market anarchist society not quite impressed by their plans. Odysseus The Rebel tells the story of Odysseus from quite a libertarian point a view.

Also take a look at Scott Bieser's blog, he's one of the painters and a fellow libertarian thinker.

Guns and crime

2009-02-08T03:54:00.000-08:00

A hot topic, especially in debates with liberals, is the question of gun ownership. Liberals tend to be hostile towards gun ownership for practical reasons. A higher amount of guns in circulation, they argue, leads to an increased amount of gun violence; this additional gun violence is completely disproportionate compared to the amount of violence prevented by using a gun, and thus, guns are bad tools that ought to be banned.

Most often, these debates are settled by reciting different kinds of statistics that are meant to reaffirm the respective party's position. I don't intend to do this. I want to resolve the gun issue by employing praxeology and economics.

First of all, we must constitute that a person who intends to commit a crime does not care too much about the legitimacy of her actions. Whether or not guns are outlawed only matters to her in the sense that punishment may increase for getting caught, but also that the likelihood of an armed victim massively decreases. The advantages a criminal is able to gain over the victim make the increased punishment for owning a gun pale in significance.

Guns are great levelers. In a state of nature, superior physical force is an unsurmountable advantage in a fight between two individuals. As arms technology developed, these physical inequalities tended to matter less and less. A Roman gladius still required dexterity and some amount of bodily strength to be wielded. A musket is quite a hassle to load. Modern handguns can be used by anyone with three functioning fingers. Modern handguns are a blessing to the weak and downtrodden. Thus the old saying, "God created all men. Sam Colt made them equal."

When guns are outlawed, only outlaws will have guns. Outlaws will have a huge advantage over those who are barred by law to arm themselves. In fact, due to the effectiveness of contemporary firearms technology, even naturally strong individuals will then fall prey to anyone bold enough to purchase a firearm on the black market.

Since the probability of being victimized by a crime is low (and even then, the damage done is likely to be insignificant as well), non-criminals do not have an economic incentive to enter the black market and risk punishment by purchasing a potentially bad-quality, high-price firearm. Criminals, on the other hand, have an almost guaranteed success rate of 100% to victimize someone by employing firearm force in an area with an active universal gun ban. There's next to nothing that can match the power of an aggressively used firearm, except for a defensively drawn firearm. Accordingly, we can say that the economic incentive structure in a society with an active universal gun ban will lead to armed criminals and unarmed victims.

As soon as defensively used firearms enter the picture, the cost associated with the operational risk of committing a crime increases massively. Breaking into someone's house may result in getting shot or being threatened with a firearm and delivered to protection services later on. Robbing someone on the street may result in the victim drawing a firearm and therefore making it too dangerous to proceed (since the cost may be the robber's life), plus the possibility of being delivered to protection services due to a lack of escape possibilities. The same pattern can be applied to rape, kidnapping, murder or any other crime involving interpersonal contact.

Without a universal gun ban, the cost of owning a firearm decreases massively. Not only will they be cheaper and of better quality due to open competition, but there's no risk in owning them since it is perfectly legal to do so. This will set the threshold low enough for a certain margin of individuals to become gun owners. Once it becomes common market information that gun ownership is not a rarity, even non-gun-owners benefit as free riders: since a criminal cannot be sure whether you own a gun or not, but has to calculate the possibility due to the existence of gun owners in society, you're safer than you were before for, all else equal, you're now less likely to be assaulted.

Guns are force equalizers. Powerful as they are, it is irresponsible to deny ordinary citizens the option to own and use them. Doing that will only strengthen the position of criminals. We can assume that, ceteris paribus, an armed society will deter criminals more effectively than a non-armed one.

Sunday Best - Feb 08th 2009

2009-02-08T01:34:00.000-08:00

I decided to add a new feature to my blog: the Sunday Best. Every Sunday, I'll post a reading recommendation in three categories:

1) All-time best article
2) Best news-related story
3) Most inspiring debate

Today, the winners are as follows:

1) All-time best: The Hunt Brothers' Silver Corner by FSK
I've yet to see anyone describe the events surrounding the attempted cornering of the silver market by the Hunt family in the 1970s that accurately. Almost a Shakespeare play. Very well-informed documentation of the events that happened, a must-read.

2) Best news-related: The Federal Reserve's Self-Imposed Dilemma by Gary North
An excellent description of the catch-22 the Federal Reserve has maneuvred itself into lately. You'll recognize the direness of the situation once you understand the mechanisms behind it. Definitely worth a look.

3) Best debate: Microsecession as a strategy and the prospects for a new Hanseatic League by Stranger on the Mises Institute boards
It's been going for one and a half months now and discusses the idea of tiny libertarian micro-societies either splitting off from existing state territories or being founded on uninhabitated islands to function as a regional trading centre and a model project for libertarians to point to. Is that the right approach? You decide.

Anarchy is Emergent

2009-02-07T16:25:00.001-08:00

Excellent point about the grassroots, bottom-up, market-based nature of human society and the artificiality of state governance.

I'd recommend you subscribe to confederalsocialist's channel. He's WisdomOfTheAcorn whom I endorsed in a previous post. Smart guy!

How to treat a recession II

2009-02-07T13:57:00.002-08:00

Some more water's been going down the Mississippi since my last post. I decided it was time to get into the business again. Starting with a few minor design changes, I intend to contribute content more regularly now and offer some additional features to complement my random thoughts on supposedly important topics. Let's get back to work!

Now that a new high-priest in chief has been sworn into office, I figured it'd be a kind gesture to provide some more advice concerning the treatment of a recession. We'll examine public works programs today.

There is a widespread belief that one of the purposes of "the economy" is to provide jobs. This is false. The purpose of economic transacation is to satisfy needs and wants. The reason why the first cavemen engaged in trade with each other was precisely the effectiveness of the division of labor when it comes to satisfying diverse needs and wants. One caveman would hunt deer whereas the other one would collect berries. The two could then engage in voluntary exchange, improve their diet and increase their survivability - or just have more pleasure eating. In any case, they'd be better off than their non-trading caveman friends.

Of course, in the process of satisfying wants and needs, work opportunities are created. A few years down the road, the berry-trading cavemen may have been able to hire other neanderthals to collect more berries for him and get paid in, say, deer meat. The example isn't all too significant since it lacks a common currency and the job is not really an advance from scratch for the one performing it, but still. We now have employment. Meaningful employment. If our neanderthal would carve beautiful wooden dolls, that'd be great, but useless in the absence of demand for beautiful wooden dolls. There's no point in forcing the berry entrepreneur to give deer meat to the doll carver in order for the carver to continue his business, but that's exactly what public works programs are all about.

Instead of pursuing meaningful and profitable employment on the market, people are incentivized by the state to engage in random activity subsidized by tax money. The activity may not appear to be random since it benefits someone, but it remains a subsidy at best, for if the job was profitable, there'd be no need for the state to provide it. Thus, public works programs not only extract labor from the market to use it in unproductive endeavors, but force productive workers to finance this madness. That way, the real function of markets - the satisfaction of needs and wants - is impaired from two sides at the same time.

Public works programs do not support, but hinder economic recovery. The idea should've been discarded long ago.

Money storm ahead

2009-01-20T07:48:00.000-08:00

I'd like to point out to my readers some quite disturbing developments concerning the monetary system of the United States:

This is the estimated amount of Federal Reserve notes (or "US dollars") circulating within the economy or being held in commercial bank deposits. As anyone should be able to grasp, the current strategy of recklessly pumping money into the economy could very likely lead to massive inflation.

The reason why we still experience deflationary tendencies could be a notable drop in bank loans and credit, a so-called "credit crunch". Robert Higgs has shown this view to be false. Little to no money has been destroyed in the credit sector, in fact, credit is at an all-time high.

An alternative explanation could be provided by this particular measurement of bank excess reserves. This is money that banks are currently holding, but have not put to use, i.e. loaned out, yet. Let's compare some numbers here:

1978-12-01 0.232
1988-12-01 1.061
1998-12-01 1.512
2008-01-01 1.640
2008-02-01 1.724
2008-03-01 2.978
2008-04-01 1.844
2008-05-01 2.011
2008-06-01 2.272
2008-07-01 1.977
2008-08-01 1.988
2008-09-01 60.051
2008-10-01 267.905
2008-11-01 559.051
2008-12-01 767.422

Such an accumulation of excess reserves is unprecedented, at least in the records of the St. Louis Fed, and combined with a stable credit market, raises the possibility of a hyperinflationary depression considerably. Basically, what it means is that as soon as banks start lending aggressively again, they have about 700 times their usual amount of Federal Reserve notes available so that 700 times more loans can be given out. You calculate what that'll do to your savings account.

It has been repeated over and over again by countless friends of liberty, but among the best investments these days are in fact stable foods, common caliber firearms/ammo and physical gold in your own hands. Don't expect government to provide for you or defend your family once prices are going through the roof and a substantial part of the population find their savings vanishing and the store shelves empty.

What's wrong with Germany?

2009-01-02T09:01:00.000-08:00

Marco of the Opponent blog has drafted a little insight into the everyday tyranny of contemporary Germany. Pravda television, universal gun bans and state-financed ideological purgings, anyone?

Definitely worth reading, especially for those praising the progressive European social democracy.

Fred Thompson on the economy

2009-01-01T05:45:00.000-08:00

Thanks to Gary North for pointing me to this great video by former Republican Senator Fred Thompson in which he's making fun of the breathtakingly ignorant 'remedies' we're being sold in order to 'cure' the recession. Thompson also participated in last year's presidential race on the Republican party ticket, so he shouldn't be a stranger to anyone who is following current events.

While some of his views are not quite the libertarian choice, he's spot-on with that one. Enjoy.

How to treat a recession I

2008-12-18T14:05:00.001-08:00

In my last article I argued that recessions are actually a good and desirable development and should be greeted whenever they occur. However, I admitted that recessions are connected with temporary hardships that ought to be overcome as quickly as possible.

Quite a number of people put their trust in government to accelerate the process. So I figured I better start a new series: a handbook for the aspiring central banker and bureaucrat to find out how to ruin an economy in transition, in other words, what NOT to do.

Today we shall start with a popular magic trick out of Mr. Keynes' cylinder: deficit spending.

The reasoning behind running up debt to become wealthy is the idea that recessions are not caused by far-reaching shifts in customer preference patterns, but by "uncertainty" and "confusion". If people can be manipulated to spend money faster than they would under true market conditions, this is seen as a success and the correction of a "market failure". Keynes doesn't want to wait until markets have adapted in the long run to what customers actually desire because "we're all dead in the long run".

Debts can be repaid in boom periods, Keynes assumes. That way, we get the best of both worlds: a stable economy and zero public debt.

However, Keynes doesn't answer the question of how to determine which public works program that we need to go into debt for will yield a sufficient profit so we can repay our obligations. Obviously, government doesn't follow the price mechanism - it would be unnecessary otherwise. That leaves political/ideological projects and socialized industries as areas to invest.

An example for an ideological project would be renewable energies. You can pump a lot of money into it without clearly defining your aim. Do you want long-lasting home generators for survivalist-minded folks in the outback, or high-performance cells with a relatively low shelf life for emergency use in factories and offices? Or do you intend to replace every non-renewable energy source in the country with wind parks and solar panels? You need to calculate your budget accordingly, and need a good reason why your specific purpose is more worthwhile than any other use (e.g., researching waterproof solar panels for diving purposes). It's a subsidy in any case, however, and yields no expected positive return. Otherwise, the market would do it.

Socialized industries include, but are not limited to, streets and police. One might wonder how building more streets or hiring more cops is going to boost profitable trade and commerce. As I explained above, there's just no way to determine and thus, no way to promise that debt incurred during a period of economic adjustment will ever be paid back.

And that's exactly what's been going on ever since. A lot more debt during recessions and a little less more debt during a boom. Interest needs to be paid for this debt in the future, this will drag down economic development since taxes need to be levied or money needs to be printed which will lead to inflation, a hidden tax, in order to repay it. Deficit spending is a vicious cycle.

In addition, government needs to borrow somewhere to finance its deficit spending. Even though credit markets have been extended ridiculously through fractional reserve banking and the Fed itself, there is still no unlimited amount of credit available. If government buys up all the credit, this drives up interest rates for private sector businesses in need. They may not get the loan they need and go bust. This is called "crowding out".

Anything more to say about it? Government deficit spending ignores your personal subjective value choices, sacrifices long-term, but stable business plans for short-term, debt-based ones and levies taxes on your children's future. In other words: hands off !

All hail the recession !

2008-12-15T10:53:00.000-08:00

First, I'd like to apologize to my dear readers for being unproductive over such a long time span. Lack of inspiration, business in out-of-blog life and general tiredness kept me from writing.

Today, however, I feel like commenting on the craze of the day: claims that someone finally "get us out" of the coming recession.

It is a generally accepted view that recessions are bad. 'Something' ought to be done about them, we are told by all the concerned-looking pundits, otherwise we might face the full impact of the bust. And that is, supposedly, "bad" for "the economy".

That may be true in Bizarro World. On Earth, a recession indicates a reallocation of resources away from seemingly unproductive enterprises to those which actually satisfy customer demands. Various shifts in preference patterns may occur: market participants may either change their preferences for certain goods and services while remaining in the same time preference pattern, e.g. change their fondness for chewing gum to a liking for white bread, or alter their time preference altogether, e.g. stop buying video games and instead save for a house. As long as this happens in small doses, the impact of the reallocation is hardly recognizable. If, however, for some reason a large amount of market participants decide to switch from popular industry A to unpopular product B, markets need to restructure on a grand scale.

This, in turn, leads to temporary inconveniences such as unemployment, wage reductions, short-time work (or overtime) or business failures.

Think about it again: politicians, economists and pundits generally support fighting this process. How does that make any sense? It is not some bad voodoo that tends to haunt our world for an unknown reason from time to time, but simply markets reacting to future trends and expected modifications in supply and demand. So why would they want to stop it?

Of course, the argument "it's bad for the economy" holds some truth: it is bad for those entrerprises that are expected to undergo enormous changes or go bust due to production of goods or services that are not in demand (anymore). Nobody wants to leave a front row seat in the ride of life, but we have to decide at some point: Do we want an economy that produces goods and services according to market demand, or a museum economy which reflects demands and speculations of the past, but is unwilling and unable to adapt to our changing wishes and needs?

If you don't want to live in a museum, you'll be just as glad as me to see the recession unfold. Gas prices dropping, house prices dropping, commodity prices dropping in general, laggard companies like GM that have been more busy meddling with Michigan politics than producing neat cars for decades threatened to be finally gone for good, Ponzi schemers like Bernie Madoff going broke as well and, maybe of paramount importance, politicians that are too busy "fixing the economy" to think about going to war another time. I might be wrong with that one, but at least it's a reasonable hope.

Thus, as the headline said: all hail the recession !

Wisdom of the Acorn

2008-10-18T06:53:00.000-07:00

A few weeks ago, this YouTube channel, called "Wisdom of the Acorn", was brought to my attention. It has produced quite a few amusing cartoons since then. I recommend watching all of them.

You may need to turn up your speakers a lot, though, since audio configuration is still improvable.

Hollywood wants your vote

2008-10-17T13:34:00.000-07:00

Every election cycle we're being bombarded with requests and encouragements to "do our civil duty", "let our voice be heard" or "make a change". We're talking, of course, about voting. And just as it happens to be, many of our favorite Hollywood stars have taken their time this year to inform us about the importance of playing the state game. Let's hear what they have to say:

"This is one of the biggest financial disasters in American history!" - "Why would you vote?"

Of course, they intend to be obviously ironic, but from a libertarian perspective, this is deadly serious. Voting out of the financial crisis won't work, no matter how flowery the promises. Politics in collusion with big banking and big business started the crisis, and politics in collusion with big banking and big business is ready to prolong it and bail out the unfortunate casualties of this financial war game. For more information on the details, see this by Roderick T. Long for a short overview and this by the Mises Institute for a really comprehensive understanding of what happened.

So, indeed - why would you vote if you really care about the economy?

"Because who cares about your children's eduation?" ... "Reading? Literacy? Really?"

Indeed, who among the ballot crooks cares about your children's education? What is government doing about literacy, except diverting funds inefficiently?

I'd really like to know where the idea originated that government should care for schooling. Government is just as apt to care for schooling than it is apt to handle indoor plumbing. Why would you entrust a bunch of tenured lawyers, carnival orators and general do-gooders with raising your children? What a strange idea in the light of facts.

"Who cares about global warming and the fact that our global ice caps are melting?"

Quite a lot of people. But as I pointed out in my last post, government is not able to "restore climate justice" because it has never existed. Every state of climate favors some at the expense of others. Furthermore, we cannot even exist without fueling this "injustice" since the need for breathing and other basic human activities contribute greenhouse gases to the climate equation.

What you can do is try to convince people why one state of climate might be more beneficial to them than another. But always keep in mind: you can be wrong. That's why you shouldn't employ government force to promote your world views.

"Who gives a shit about terrorism?"

I'd recommend a read on blowback and American military history to find out whether another "commander in chief" will "get us back on track", or rather not.

"The right to choose, the right to life, any right ..."

I wonder whether the excited woman stating this actually believes that I need to genuflect before government for my right to life, or my right to choose, or, indeed, any right.

If so, I'd recommend reading the Declaration of Independence to find out on what premises the American government ought to rest, and then a little pondering about the contradiction in forcefully expropriating citizens via taxation to "protect their rights and property".

"Who cares about the War on Drugs?"

Indeed, that should make you think whether you really want to vote: for 20 years now, heavily armed police troops have been kicking in doors of peaceful pot users to put them in filthy jails where they are likely to get raped by real criminals and often start a criminal career themselves, all on behalf of "morally conscious politicians", elected by the concerned people of this fine nation.

The War on Drugs - voting's finest brew.

"Who cares about Darfur?"

How often has governmental military interventionism in the absence of a previous aggression helped, and how often has it created bigger problems in the aftermath? Who says we need politicians to solve this?

"Nobody's listenin' to you, so you know what - fuck it."

That's actually a good statement.

"Don't vote unless you care about healthcare."

Governments have always played a key role in making treatment unaccessible for the needy so they could buy them with their control scheme later on.

If you care about healthcare, better avoid the ballot box.

"If you care about gun control ..."

Now this was to please your average liberal watcher, wasn't it?

"If you care about forcefully preventing people from buying means of self-defense, then VOTE !"

"Women's rights, civil rights ..."

... are individual rights or no rights at all, and thus violated by the very premise of government: taxation.

"Rising gas prices ..."

... are mostly rising due to an inflationary monetary policy and taxation. Even if this were not so, government could only cause production bottlenecks to occur because government doesn't produce oil.

I won't go on here, you get the picture. Famous people who have accommodated to the existing status quo, the all-powerful and all-regulating state, want you to join their happy ban-and-tax festivity so it can go on for quite another while. I don't assume bad intentions by any of them, but by luring people to the state apparatus, they're willingly supporting a system that gets more intolerable every day. Thus, take their ironic advice serious and "just don't vote".

A libertarian approach to climate change

2008-10-15T14:43:00.001-07:00

This is a topic I've been pondering about for quite some time. Climate change, should it indeed be mainly caused by human emissions, challenges conventional libertarian doctrine and forces us to think in terms not directly related to life and property. Homesteading the atmosphere is hardly possible, and attributing "fair shares" would require a literal shutdown of privacy to be enforced, aside from the practical difficulties it bears.

So, what is to be done about climate change, granted that human emissions do have as much impact on it as is generally presumed?

First of all, to record a change, one must choose a starting point. Problems begin to arise here: which state of climate is to be considered the starting point that is to be maintained? If human emissions like carbon dioxide or methane are indeed a major driver behind climate change, then any point in the history of human civilization will show us a distorted, mutated state of climate. Even in a completely de-industrialized society of hunters and gatherers, emissions from human activities like breathing or stool will alter the world's climate. If the goal is to return to a state of climate completely untouched by human activity, then the only proper solution is to annihilate the human species. Any ethics that concerns itself with the arrangement of human affairs cannot support such a conclusion.

Thus, our first observation is that human activity alters the climate, no matter how sophisticated or simple the pursued lifestyle is. Any struggle against climate change must therefore limit itself to achieve gradual changes, no total abolition of human-caused distortion.

Which leads us to the question of justice. Every state of climate favors and disadvantages certain regions. One might guess that a warmer climate will defreeze certain areas around the poles, making them available for homesteading and productive use, while on the other hand causing some islands to be swallowed by the sea. Vice versa for a cooler climate, of course. As I've pointed out above, we need to determine a certain point in climate history that ought to be conserved as "good" or "fair", but in the presence of human activity, such a choice must be purely arbitrary.

Why, for example, should we aspire to conserve the climate of 1999 when in 2009 property distribution might already have adapted to new climate conditions? Wouldn't that victimize 2009 property owners for the benefit of 1999 property owners? Even if 2009 property owners benefitted at the expense of 1999 property owners in the first place, the same would also be true for 1999 POs compared to 1989 POs, 1989 POs compared to 1979 POs and so on. Again, any arrangement as to which state of climate ought to be preferred must be purely despotic.

Unfortunately, this distinction is never actually made when the issue of climate change is being discussed, at least I haven't noticed it. Part of the blame goes to environmentalist ideology which claims that more human activity, i.e. more human emissions and thus more climate change, means more harm. This is false. Changes in our global environment abet certain areas while at the same time victimizing others. Environmentalists attempt to find an "equilibrium" state of climate which grants the same amount of advantage to every party involved, and by doing so engage in the same Sisyphonian endeavor that has been plaguing economics since almost 200 years: the desire to centrally manage a volatile, highly complicated and spontaneous order, the commitment to do good by force. Has it ever really worked out?

Of course, this theory doesn't invalidate generally established rules on property and pollution. Neighborhood pollution is an avoidable nuisance and should be treated as such. Climate change is not avoidable and must therefore be subjected to more appropriate treatment.

Talking about treatment, there are ways to influence human emissions and thus, to an extent, maybe even climate change itself. Obviously, changing one's own living habits is the straightforward way to start, but discriminating carefully to promote "eco-friendly behavior" will also set incentives to pursue a more desirable lifestyle. Note that "more desirable" is a subjective choice, since, again, different states of climate bear different results concerning winners and losers.

One reason why we shouldn't leave it to government to discriminate is its inability to react to new discoveries. Take, for example, this "Dust to Dust" study on car energy consumption. As it turns out, hybrid cars consume a lot more energy than previously assumed due to costly production and recycling processes and comparably low durability, at least according to this source. On the other hand, small-size trucks appear on the eco-friendly end of the scale for their simple setup, fairly low repair rates and relatively high "life expectancy". Unsurprisingly, this discovery received little to no attention in the mainstream media. Some people tried to refute it, which is good. Struggle of ideas, thesis-antithesis-synthesis and so on. Government can't accomplish that; government says "so be it" and goes on to receive the money. Little room for innovation is granted.

While not regarding this as a final analysis of the topic, I would certainly urge governments to stop politicizing climate change. It is out of their reach, and every attempt to "preserve justice" by collecting more taxes or creating more regulations will only add to the existing arbitrariness.

More thoughts to come in the future, hopefully.

Paul Krugman's Nobel Prize

2008-10-14T00:02:00.000-07:00

Knight_of_BAAWA on the Mises Institute forums has it right:

They should give the Nobel Prize in Biology to Kent Hovind.

Discrimination III

2008-10-11T04:42:00.000-07:00

Yes, it's discrimination weeks at Road to Rothbard's. Today's special menu will be this fallacious argument:

If we repeal affirmative action legislation, people will be left free to give in to their bad prejudices and we could witness a renaissance of segregation of black people in the South, or a reawakening of systematic discrimination against other minorities in other parts of the country/world. Affirmative action is a check and balance against such behavior and should thus remain intact.

As is the case with many "right on first sight" arguments, this one starts out with a correct premise, but employs too little thought in drawing conclusions.

Indeed, a repeal of anti-discrimination legislation would restore property owners' rights to invite and refuse anyone to/from their property, just as they see fit. Theoretically, this means that these property owners could give in to their bad habits and act stupidly in denying people access for silly reasons.

It is, however, a noteworthy fact that whenever discrimination against a certain group of people occured on a wide scale, there was legislation backing it. Be it Jim Crow laws directed against black people or the infamous Nuremberg Laws, among many other pieces of legislation, to expel Jews from German society, methodic discrimination, as it seems to me, exclusively happened with the help of the state apparatus.

Why is this so? Why wouldn't racists or anti-Semites just keep on raving about their enemy of choice, refuse to trade with them, and leave everything else as it is?

You see, with every further discriminating employer/property owner/customer, the cost of discriminating for a "non-discriminator" increases. Suppose there are 3 employers, you and two competitors. These competitors suddenly decide to lay off all Jews they employ. The pool of Jewish workers seeking employment suddenly increases which enables you to hire Jewish workers at a lower price than before. This will grant a Jewish applicant a possible advantage compared to a non-Jewish contender. Furthermore, among those laid-off workers there might just be a number of potentially indispensable talents nobody would fire in their right mind. These geniuses will be glad to work for someone who judges them according to their abilities, not their religion, and will thus give your enterprise a head start.

The same principle applies for housing, restaurants, liquor stores and everything else. Every practicing hater will only increase revenue for open-minded and tolerant folks, thereby willingly disadvantaging himself.

It should also be mentioned that not only will the discriminated minority avoid doing business with a discriminating businessman, but sympathizers of the disadvantaged group might decide to spend their money elsewhere as well. Depending on how apparent and how devoted somebody discriminates, this may cost the discriminating person a business, workplace or social reputation in no time.

Employing legislation to force one's own discriminatory views on everyone else socializes the cost of discriminating. If hiring Jews is banned, nobody may take advantage of an anti-Semite's behavior. Overall revenue is likely to decrease due to this policy, but it decreases for everyone equally and thus makes discriminating parties better off than they would be on a free market.

Affirmative action legislation, however, grants the moral high ground to people who shouldn't be in charge of it. A practicing anti-semite or racist may now say: "Look, force is used against me to prevent me from living my convictions. This is highly immoral. Compared to this, my racism/anti-Semitism/whateverism isn't much of a problem, is it?" Instead of effectively targeting haters by ostracizing them and refusing to support their businesses and endeavors, we allow them to play the role of martyrs. Nothing short of undermining our own efforts if you ask me.

In conclusion, we might say that government power is the origin of, not the solution to widespread discrimination. Free markets provide huge incentives not to discriminate according to race, religion, gender or other personal characteristics, and punish those who do. However, banning such discriminatory practices by law allows those with despicable attitudes to play the victim. That shouldn't be our objective at all.

Discrimination II

2008-10-03T05:12:00.000-07:00

I attempted to demonstrate in my last post why the practice of discrimination is not the infathomable evil that it is often being portrayed as, and how one can combat unjustified discriminatory practices without employing government force. Today I'll address an "anti-discrimination argument" I've been hearing a good many times lately:

Sure, people may discriminate against others in their own houses or flats. But if you open a business, you tie yourself to the general public by offering a service that everyone might want to enjoy. You're accepting a certain liability to further the general welfare (since this is what a national economy should be about), and thus can't just discriminate randomly as you please.

I'm not trying to water down this argument by making it appear strange or foolish. I was surprised myself that people would sputter this plethora of non-sequiturs. But they did, in different varieties, so I'll gladly comment.

The first sentence is most certainly correct. Property owners have a right, and even a responsibility, to discriminate. If property owners didn't discriminate carefully as to who they grant access to their property or who they entrust with taking care of it, they would effectively promote morally hazardous behavior. Noisy, shameless, violent and reckless behavior would become more common as there would be no incentive to temper these bad aspects of human nature. Civilization relies to a certain extent on the practice of discrimination.

However, the dichotomy between private-private and private-public property is false and philosophically unsustainable. Either you own a piece of land and act as sovereign, or you don't. It's irrelevant if you design this property to be specifically yours or a place for others to congregate.

One reason why this confusion occurs might be the somewhat subtle way of contracting in social environments such as restaurants, bars etc. When a restaurant owner opens the door to his property for everyone to step in, he's not automatically granting everyone access. He's signaling his willingness to enter negotiations as to whether he wants to serve a requesting customer or not. These negotiations are resolved by the first impression of the potential guest to avoid embarassing conversation. It is next to impossible for a restaurant owner to know the curriculum vitae of all potential customers, so he needs to discriminate according to superficial factors. This discrimination is necessary for two reasons:

1) The desire of other customers to dine in a quiet and relaxing atmosphere.
2) The desire of restaurant owners to serve the least troubling customers. It's a big relief if you don't have to watch the behavior of your clients all the time and may instead focus on doing your work.

Obviously, discrimination practices vary according to the setup of the business. A bikers' bar might have different demands when it comes to customer selection than a noble lounge. Some places may not discriminate at all. The point here is that it's not necessarily bigotry or hate that drives discrimination, but plain and simple business reasons or worries about general customer satisfaction.

Secondly, "social service businesses" like restaurants are not giving out general permissions to use their facilities when they open their doors. They merely express a desire to enter contract negotiations. The style of these negotiations may not resemble its general perception, but it is a negotiation nevertheless. No tie to the general public made, except the wish to enter contract negotiations with them.

To further the general welfare is indeed your objective as a restaurant owner, but probably not in the meaning that's most often talked about. You're supposed to offer goods and services in a manner which pleases potential customers so much that they are willing to trade certain amounts of money for it, which in turn lets you gain a profit. By that, you're contributing a whole new niche or segment to the local economy which, should it be making a profit, represents an achievement people value and may thus be described as your "fair share" of the great collective whole. The means to achieve this goal may involve discrimination as we've pointed out above.

Discrimination in privately owned places is therefore legitimate, no matter whether these places are private houses or private hang-out-places.

Discrimination

2008-10-02T15:59:00.000-07:00

Certain words in the English language are picked from time to time to completely distort their original meaning and make a negative buzz word out of them. "Climate" is one example. A couple of years ago, talking about climate meant describing certain weather conditions. Today, climate is some kind of code word for heralding the impending doom. "Climate deniers" are those who'd prefer not to drink the kool-aid, to be cast away and scorned. "Climate policy" means laws regulating the weather. You know, laws regulating the economy and people's personal lives worked so well that you might just try to wisely guide "the climate" as well.

But I'm digressing. Another famous example of restructuring the meaning of a word is "discrimination". A discriminating tradesman would denote a hard to please market participant in earlier times, today you'd rather think of a hypocritical white evangelical racist bigot who refuses to sell to homosexuals.

Of course, "discrimination" may legitimately be used in that sense as well. What bugs me is the automatically negative reaction connected to this meaning of discrimination.

Shockingly enough, you discriminate all the time every day of your life. Reading this blog instead of others discriminates against them. Using the internet browsers you do discriminates against all the other browsers available. Buying at the grocery store with that cute little blonde working at the counter discriminates against all the other grocery stores that decided to hire less attractive personnel.

No big deal, you say? That's discrimination based on quality as opposed to discrimination based on hypocritical white evangelical racist bigot factors? But where's the difference? Some people eat with spoons made by their kids in crafting class even though these might obviously lack quality compared to spoons created by professionals. Here you have discrimination based solely on emotion, still nobody would consider banning such behavior.

Let's take another step forward: Isaac Goldbaum (don't we all love stereotypes?) just migrated from Israel to the US where he opens a little bakery. He needs an assistant to do minor tasks for him. The only applicant is a muslim. Unfortunately, Mr. Goldbaum's family has been killed by a muslim suicide bomber which makes Mr. Goldbaum decide to refuse the applicant and do it all by himself instead. Would anyone want to force poor Isaac to act otherwise?

And now we put the icing on the cake. Rick Redneck runs a shooting range. Due to his personal preferences concerning people, he's put a big sign on the perimeter that reads "Only white evangelical bigots allowed".

If you consider that to be obnoxious behavior of Mr. Redneck, you're probably right. Still, you lack philosophical ground arguing for a ban of such actions if you didn't mind browser discrimination, shop discrimination, emotional discrimination or discrimination due to personal history. You yourself might want to discriminate against Redneck's shooting range so he'll run out of funds in due time. But using government force against Rick to bar him from using his property according to his wishes would grant him the moral high ground. You don't want this to happen, do you?

Free markets and morality II

2008-09-20T10:37:00.000-07:00

Today I'll try to counter a somewhat tricky "ought to" argument that is sometimes yielded against free markets. It is often answered by pointing out its subjectivity ("you may consider that to be bad, not everyone does"), but I think there's a better approach to the topic. Anyway, our concern today is this:

Free markets create a dull kind of consumer culture. People lose their intellectual capacity and fall for cheap and quick pleasure. Thus, even if free markets were superior in producing goods, they are bad for humanity and its progress.

Prima facie, the assertion of the argument (free markets create a consumer culture) appears to be valid. After all, we see advertisement, consumption and shopping rushes all around us, and we're constantly being told that our system of trade constitutes a free market.

But free markets generally lack forced expropriation of wealth produced, also known as taxation, especially in the amount it is occuring today. Add to this an increasing insecurity as to when the next expropriation raise will happen and how big it will be.

There's also the state-caused danger of being victimized by a terrorist attack aimed at hurting a certain collective. Let me elaborate. Whenever you hear someone saying that he "hates the West" or "Western values" or whatever, for whatever reason, this includes you. You may never have met that person, nor desired to hurt the person in any way, but your government has or is at least considered to be a threat. Since you cannot withdraw your consent from being subject to your particular government, you'll be associated with it. So, especially in an age of Western imperialism and warfare, the danger of being hit for no other reason than living where you live increases. This sets no incentives for future-orientation either.

Public schooling is hindering the development of farsightedness and forward planning as well. As I pointed out in my last entry, public schools create peculiar kinds of habitats which resemble prisons to a certain extent and which teach students how to be popular and how to worry about short-term goals like the next exam, but rarely about growing up and taking responsibility. You'll notice the difference in self-reliance when comparing a homeschooler and a public school inmate of about the same age.

These three factors are, in my humble opinion, the biggest contributors to a high time preference or present-orientation: great levels of wealth confiscation and legal uncertainty, an increasing number of government-created dangers and perils and institutional depravation.

None of these are the outgrowth of a free market, as my readers may already have noticed. Of course, this attribution may just be my random opinion, an unconvinced opponent of the free market may now say. How can I be sure that free market economies are not the main culprit for social disintegration?

Well, based on the observation that humans act, we have to assume that humans structure their actions since we cannot fulfill all of our goals at the same time. In other words, humans have to prioritize their actions. Highest priority means highest importance, highest incentive or highest inclination.

Contrast the two scenarios:

a) A has complete control over all of his assets. He can be sure that no person X or Y will keep him from investing as he pleases.
b) B has partial control over his assets. He cannot directly influence the distribution of those resources that are taken away from him. He doesn't know how many resources he will be allowed to keep next year.

Which person has a greater incentive to spend and consume right now instead of saving and investing? Thus, which person will be more inclined to engage in consumer culture behavior?

a) A is responsible for his own behavior, not for the attitudes and actions of others. If his neighbor publicly insults any group of people, they will focus their anger on his neighbor rather than him.
b) B, while not being responsible for the behavior of others, will be associated with it as long as they inhabit the same country as B. Since B has little control over the behavior of all of his countrymen, let alone his government, he has to assume to be hated by others without really knowing why.

Which person has a greater incentive to behave irresponsibly since the cost of behaving badly can be partially socialized? Which person will see the future and thus future investment and future-orientation more favorably?

There is little incentive for a person living in a system of free trade and free association to behave irresponsibly, both personally and economically. Carelessness and headless behavior occur when the state mechanism sets in. Frédéric Bastiat said that "the state is the great fictitious entity by which everyone seeks to live at the expense of everyone else". Threatened by such a monstrous devourer, people tend to become present-focused as they figure there might not be much time left before the monster gets too big. They also tend to focus on playing the state game rather than being productive.

All this leads to a dull-minded consumer culture. Who cares about education if you can enjoy yourself? Who cares about farsighted decisions if the future most likely sucks? Rather drive that sports car now than expand your enterprise, can't compete against state-protected corporate giants anyway.

Once again, it is thus the state that is to blame, not the market.

Public school rant

2008-09-17T14:59:00.000-07:00

Public schools are by far among the most obnoxious and pretentious institutions around. Imagine the hubris: some school bureaucrat forces you at gunpoint to pay him for compiling a curriculum according to his own preferences and value judgements, then he forces you to hand over your children so he can spoonfeed them with his ideology. Should you refuse to comply, the bureaucrat's armed friends will pull over and lock you up after they've kidnapped your children. If you're lucky though, you'll only have to pay the bureaucrat and give a good excuse for why you want to keep your children out of his reach.

I've spent 13 years in public school myself. Indeed, I did learn quite a lot. I consider these lessons to be especially important:

1) Government personnel tends to care far less about your wishes and needs than people who must rely on your voluntary cooperation to stay in business. In fact, an astonishing number of government henchmen consider it to be a benevolent action on their part to actually work for their money.

2) Education must be boring. Teaching must happen in a specifically designated building under the supervision of government employees. Learning outside of government territory requires previous training in a state-approved institution.

3) To be a good citizen, I will learn a lot, study hard, get a good job and pay my taxes. And cast a ballot for the right guy every four years or so.

It's a big relief for naysayers like me to get in contact with homeschoolers and see children getting the opportunity to discover the wonders of life outside of an uncomforting prison atmosphere. And if you think about it, "prison atmosphere" hit the nail right on the head. People get raped in prisons by inmates and sometimes guards, students get (psychologically) raped in schools by classmates and sometimes teachers. Prisons give rise to a culture of group segregation and fear, so do schools. Prisons are likely to create broken and dull minds, so are schools.

Of course, humans tend to romanticize the past, increasingly so if it's been a few decades. Everybody remembers that funny fella in sixth grade who would always crack a dirty joke. Oh, and prom night for sure. Few question the logic behind public schooling since a) nearly everyone's been there and b) many have been habitualized to believe that public schooling is the pillar of wealth and civilization. Reality's a tough act to follow sometimes.

Now, after I've been bitching around for half a page, I owe my readers some thoughtful refutation of common arguments in favor of public schooling. I'm really sorry, but I don't know where to begin. The idea that children must spend more than a decade in a bureaucrat boot camp completely detached from reality to learn "general knowledge" and "social skills" seems to me like a yellow turtle with five legs.

One thing, however, should be recommended: please read "The Underground History of American Education" by John Taylor Gatto. You can find the whole book online here. If you've ever found public schooling to be somewhat smelly, you'll be told the reasons in this great and exciting opus on public education.

On reformism and revolution

2008-09-14T17:01:00.000-07:00

In my last post I laid out a three-step plan which I described to be a possible road to a libertarian society. This plan involved, to some extent, political action. It is therefore often branded as "reformism". Niccolo from Catholic Market Anarchy, for example, has found pretty harsh words for "guys like me":

Conflating their system with one of incrementalist phases, claiming a monopoly on a realistic approach to change, the reformists, narrow minded and pompous, shut off completely to external logic and consistency in favor of the compromise of a crazed lunacy that suggests the nature of an entity can be overcome by the will of a handful of old men spitting and drooling into their couch cushions every night in their father’s mothball filled coats – still that’s progress from not knowing where they were sleeping to begin with.

Apart from such ungentlemanly rants, however, he still has a number of points worth considering. In short, he claims that states and their minions will always have a tendency towards more oppression, exploitation and general decay and thus, every attempt to minimize or abolish them from within must fail.

I partially agree. I consider it pointless to try to shrink the state massively from within. There is too much vested interest, too many roadblocks hindering you. The only way to stop the expansion of the state in some areas is to use roadblocks yourself, as I proposed in my last post when I encouraged people to elect decent people into local offices to impede the enforcement of harmful legislation. This uses the state's planned chaos and inner inconsistency (the reasons why government tends to screw up big time at everything it does) against itself. To hope for more is pretty much make-believe indeed. Even though Ron Paul's presidential bid might have awoken this hope in a number of people, the chances for America to "return to its founders' intent" don't exceed 0 by a lot.

Talking about Ron Paul, I'm often flabbergasted as to how much hostility is brought up against him among libertarian purists. Sure, I'm biased because it was Paul who turned me over to libertarianism, but to consider his campaign a grab for power is lunacy. He did what I recommend, too: he used the self-important state apparatus and its extensions, namely the presidential election circus which already tends to flare up 2 years before the actual election, to throw in some important issues besides the usual quip about candidate A's sex life and B's haircut.

I guess he didn't expect too much from his education campaign and just wanted to fulfill his duty. But to the contrary; many mainline conservatives and watered-down libertarians, even some disenchanted liberals, were ready for the doctor's shock treatment. He caused something big to start rolling. That's his contribution. The fact that his campaign sometimes became what it tried to fight against, political pandering, is sad but not necessarily related to Paul's aims and convictions. After all, he delegated a lot of responsibility to his campaign staff. No excuse, but an explanation.

One last point. There will be no libertarian society as long as a critical mass of people still believes in the superiority of the state. This belief is communicated very early in public schools and is also touted by the government-corporate media complex. It's self-enforcing as it is being held and expressed by a crucial number of people. It is therefore not just a nice idea, but probably essential to use traditional state institutions in our struggle against the state apparatus. To inform themselves about the possibilities of social change, people will not go to the library and read Rothbard, as some libertarians tend to imagine, but watch TV talk shows and political debates. "Our guys" need to be in those programs to reach out to an increasingly disaffected, but mostly misguided citizenship. Political action and speech, as dirty and mindless as it is, still remains an important vehicle to carry out freedom's message (note that you don't have to be in office to engage in it).

Thus, reformism, as scorned and hated as it may be, still remains a way to follow as long as practicing agorists count as a minority among the minorities.

Undead ideologies (and how to combat them)

2008-09-13T08:51:00.000-07:00

It's hard to believe sometimes. Just 18 years ago, one half of the planet was suffering under socialist gridlock. Finally, the pressure became intolerable and the masses flooded the streets, demanding liberty. Those bureaucrats and apparatchiks who would mercilessly beat down riots a couple of years ago were now stuck; nobody had confidence in their empty promises anymore, the vast majority didn't care about obeying orders. This proved the crucial point that government solely rests on the good faith of its subjects.

The Soviet Empire imploded pretty soon after that. Maybe it was this unexpected vanishing of their ideological adversaries that left liberty-oriented people worldwide in a shock at the wrong time. All the rhetoric about how the USSR would outperform free markets, about a thriving socialist commonwealth, happy people everywhere, suddenly clashed with reality. Poverty-ridden peasants in a run-down environment with feces spilling out of the sewers (sorry for being that graphic here) were on the TV screens of middle-class people in the free world. Soon after, gulags and all the other cruelties of Comrade Stalin and his fellow revolutionaries ascended from the Soviet archives. Word of socialist tyranny was spread around everywhere.

Socialism, to put it mildly, had failed epically, and everybody knew it.

Not even two decades later, socialism appears to be as fit as a fiddle. While politicians in the US still feel a need to employ liberty-related rhetorics ("the ownership society" etc) to sell their collectivist concepts, goold ol' Europe is increasingly lusting for the total state, both in practice and in speech. In an odd and alarming way, it reminds me of the time between World War I and II, when fascist-authoritarian statists would battle state socialists on their quest for power.

But why, I often ask myself? We had fascism in various colors, it failed. We had socialism in various colors and it failed as well. Shouldn't we move on, then, just maybe?

The reason why we still have to deal with a false dichotomy between fascism (better known today as neoliberalism or neoconservatism, the fusion of state and Big Capital) and socialism (the expropriation of capitalists by the state) is the lack of libertarian courage, especially in Europe, to present solutions which do not include state action. More generally spoken, libertarians lack attention at all. Libertarians had a once-in-a-lifetime opportunity to step into the spotlight and show the way. After all, libertarian theory is one of the most sophisticated and straightforward doctrines out there. But did they?

Fortunately, in some cases, it was done for them by others. I'm thinking especially about (and please don't hate me for saying this) Larry Hunter's Contract with America. Even though conservatives are scorned as impure renegades among a number of libertarians, we owe them a favor for pushing liberty, at least in a rhetorical way, when the time was right.

Some claim this actually hurt the cause of liberty since it watered down its original meaning. While that may be true, it caused , in my opinion, a more important thing to happen, it laid the foundation for a more advanced libertarian philosophy among the general public. How do you think was Ron Paul able to rally so much support with so little backing in the mass media? He simply reaped the fruits of a decade of conservative inconsistency: while people did desire liberty, they realized that Republicans, though they liked to talk about it, wouldn't support the idea in office. Paul appeared to be a guy who would, having a pretty much pro-liberty voting record and resembling the philosophy of individual responsibility in his own life.

If Ron Paul tried to communicate his radical classical-liberal philosophy with the average European audience, he wouldn't find too many listerners I'm afraid. A mass-movement as it has formed in the US could hardly be reproduced. After literally a hundred years of fascism, socialism, social democracy and big government conservatism, people have been alienated from liberty. An approach would have to begin softly, it should believably champion improvements of the situation for the poor, the unemployed and those who live on state welfare, and it would most likely require a popular national figure. Tough job.

The US are a number of steps ahead in the process. After getting people warmed up for liberty in the 90s, now they are being moved to the streets to demand it loud and clear, just as the inhabitants of the Soviet Union did. And as the American Empire crumbles, the next step would be the formation of local landowners' associations (as is already happening in so called Gated Communities) to create alternative forms of organizing society on a small scale until the state, with increasingly shrinking resources and compliance, simply becomes a minor nuisance like bad weather.

But what do we do about all those expensive and worrisome leviathanic projects in the meantime? As for centralized Europe, I can't really say. US citizens should try to fend them off by electing trustworthy people into local offices. "Electing the good guys" is easily said, but it's a lot easier within your community than on a state or national level. As an example of how that would work out, a number of cities and communities have refused to engage in the surveillance activities prescribed by the Patriot Act. Remember, central planners may command a lot, but enforcement is an utterly different topic.

Thus, my three-stage plan for liberty is:

1. Get people excited for it - show them specific examples where more liberty and less state may be beneficial, and try to avoid too much radicalism. You don't want to scare them off.
2. As soon as a general tendency in favor of liberty is recognizable (e.g. in the rhetorics of politicians, rants of your fellow citizens), shift up gears. Make the case for uncompromised classical-liberal statehood. Totally discredit the idea of "more government", energize people even more.
3. When government has lost its glamor, replace it. Make government services dispensable. Openly compete in core fields like security, "public goods" provision like energy production (with cooperatively financed renewable energy, for example) or social security (neighborhood trust funds, or whatever comes to mind).

Be creative. It will be rewarded.

Spectacular hosting offer

2008-09-11T15:29:00.000-07:00

I've just stumbled upon a really interesting file hosting offer:

FileSavr claims to provide a 30-year (yes, year, not day) free premium webhosting service for everyone who signs up until September 15th. 250 GB free webspace for everyone who's fast enough. Just sign up here.

I've registered, just in case. You never know what you need 250 GB space for ...

With A Little Help From My Friends ...

2008-09-07T16:34:00.000-07:00

What would you do if I sang out of tune,
Would you stand up and walk out on me?
Lend me your ears and I'll sing you a song
And I'll try not to sing out of key.

Joe Cocker's famous interpretation of this classic at the Woodstock festival has certainly been a source of inspiration for millions of eager listeners. Quite inspiring are also the vast amounts of money Washington has decided to raise in order to bail out major failing players on the US market, especially if you're a major failing player yourself. This is probably what Detroit's Big Three had been thinking all along, and indeed, now they've come out of the closet.

The last line of the article is, in my opinion, the most revealing:

But he added that "our trading partners give us no choice. Every other major auto manufacturing country protects their industry so we may have to do the same."

This ties in perfectly with the song lyrics posted above. He might as well have said:

Well, they may have done some malinvestments, yes, they kept producing gas-guzzlers for an increasingly shrinking market, maybe they didn't care too much about future planning, but everybody makes mistakes, no? You don't want to leave them alone right now, do you? After all, they're uniquely American car manufacturers. Just lend them a few billions and they'll honestly try to get in touch with customers again.

But seriously, he does make a point. Shouldn't we protect our domestic industries when foreigners do the same for their manufacturers? After all, foreigners will be able to export cheap cars, thus undermining our own efforts. Wouldn't it make sense to face "market realities" and fork some money out for a couple of minor subsidies?

First of all, there is no point in having "domestic car producers" if foreign car producers do the job more efficiently. Whether or not this is the case should be decided by customers and not by central bureaucrats. Now one might argue that tax-subsidized foreign car producers are being advantaged since they can make cheaper offers or include more features for the same price or whatever. To this I say, good for the customer. Taxpayers in a far-away land had to give their earnings to allow for such a great bargain, and Americans would only be disadvantaging themselves if they did the same or refused to take the subsidized offer.

Furthermore, subsidies lower the incentive of producers to improve price and quality conditions. Faced with below-market price competition from abroad, domestic car producers would have a huge incentive to implement even the smallest improvements, thus constantly pushing for the most efficient ways of production, the highest gas mileage, the most economical transportation routes and so on. In short, they'd be working for the customer which is what free markets are all about.

Subsidies, to the contrary, would set an incentive to hire more and better lobbying personnel to make sure the next bailout won't be all too troublesome to get. Car quality would be degraded to second rank, in spite of what all those neatly dressed spokesmen will tell you in the next few weeks.

However, there's still one concern left: jobs. Not subsidizing failing companies may result in a temporary unemployment rate hike. But there's no reason to believe that a) no new car producers would fill the gap (think, for example, of Tesla Motors, pretty much pioneers in mass-producing electric cars [thanks to Opponent for pointing me to this]) and b) people wouldn't find employment outside the car industry. Instead of producing cars that don't sell, people would engage in more profitable endeavors and would thus be doing society a much greater favor than by clinging to (at least for the moment) low-demand industries and products.

And for those (including myself, American trucks and SUVs are sure to draw my attention) who fear their "tough-built big block wonder machines" might stop being produced: there's always room for niche markets. If one of the Big Three, for example, decided to specialize on building heavy vehicles, they'd probably have to cut down on their production lines, but might be able to sustain doing "big car business" on a smaller scale, always according to market demand.

Cressbeckler for President!

2008-09-06T08:14:00.000-07:00

I got a tax plan for ye *spits out* that goes right there!

"Cressbeckler has been living in a mountain shack with no hot water or indoor plumbing, making him a true Beltway outsider."

"Cressbeckler also promised ... [to replace] Congress with a horse that stomps once for yes, twice for no."

Seems like ol' Cressbeckler holds a fairly libertarian stance at least when it comes to domestic policy. You can't say the same of the mainstream candidates, can you ... ?

More internet insights

2008-09-04T12:18:00.000-07:00

Since I shared my views on net neutrality and politicization of the internet with you just yesterday, I was quite pleased to see a similar, far more informed article appear on LewRockwell today.

It's most certainly worth reading.

On the legitimacy of private property

2008-09-04T06:11:00.000-07:00

One of libertarianism's cornerstones most certainly is the idea of private property. But what is property, how does it come to be private and who defines the borders? Libertarians approach the topic this way:

Man owns himself. If this weren't so, those who disagree would have to explain who gave them permission to express disagreement and why exactly this circle of persons owns them while at the same time delivering a universal explanation of body ownership. Since this borders on impossibility, we assume self-ownership to be correct. Should man indeed own himself, then he also gets to own his labor, that is the product of his body's actions. But in order to use his bodily powers, he needs something to legitimately refine. This he finds in nature: unowned, unclaimed objects. Mixing his labor with unowned nature creates his own private property which is now subject to his own jurisdiction.

But why should individuals be allowed to claim nature for themselves? It is the only conclusive way of distributing resources. If we desired to establish collective ownership of the land, i.e. nobody owns anything, it is questionable whether we have a right to stand (sit) on the ground we do right now. Who gives us the right? Furthermore, who is to decide on the use of the land in such a society? Government? But isn't government just a number of powerful people and would therefore create just another form of private property in which central planners act as ultimate property owners? Every other shade of collectivist land ownership, be it Gesell's Freiwirtschaft (which Wikipedia, at this point in time, is for some reason calling a "libertarian economic idea") or social-democratic property redistribution schemes, suffer from the same philosophical weakness.

Of course, libertarian property theory is not to be used as an apology for existing property distribution either. Vulgar libertarians tend to do this in defense of corporations quite often. If person or corporation X illegitimately steals property from some native tribe or from poor locals, this most certainly constitutes a crime as well and should be punished.

Liberty and extremism

2008-09-03T16:46:00.000-07:00

As long as I've held conscious and thought-out views on how to organize society, I have been pretty much an extremist. Throughout my adolescense, I would advocate nationalization of industries as a means for just distribution of goods produced and profits reaped or propose expropriation of those who work against the "common good". Sounds scary for someone who nowadays claims to be a libertarian, doesn't it?

These days, I've switched to the other extreme. I support laissez-faire markets, privatization (not in the corporatist sense, however) of former state property or the abolition of compulsory institutions like the draft, public schooling or even taxes. This attitude has been troubling me for quite some time since a number of acquaintances of mine have been expressing worry about my unyielding stance on things. Some have even stopped arguing with me for my lack of willingness to compromise. Maybe, I thought, I'm just a simplistic moron without sensitivity for exceptions.

However, I've recently developed another more encouraging explanation which I would naturally favor to believe. My hardcore socialist views, as well as my unrelenting libertarian stance, are simply the result of rational deduction from given premises. While being a socialist, I accepted the Hobbesian theory of "homo homini lupus" and the consequent need for a monopoly of force. But I advanced from there: if people really are inherently bad and only work to trick one another, how in the world can we allow a market-based economy and society to exist? This view was reinforced by the Marxist theory of capital accumulation which states that in a capitalist economy, capital tends to concentrate in an ever diminishing number of hands until there is only one great capitalist or one powerful oligarchy left. This, of course, coincided with the view that humans act to fool each other and provided the economic background for the philosophical observation. I just needed to follow the path ahead to consider socialism superior to every free market organization.

Thanks to Ron Paul and several other conservatives and libertarians, I was able to question the Hobbesian premise. If people are inherently bad, how can we allow a monopoly of force to be run by them? This produced a huge crack in my socialist think-wall. As I later found out, among many other insights, about the mutually beneficial nature of market transactions and the principle of self-ownership, I had to change my philosophy in order to stay consistent.

Thus, my extremist views were simply rational deductions from my philosophical premises. Being "extremist" simply meant employing logic. A change in premises may imply differing results which made me arrive at libertarianism.

As Barry Goldwater concisely put it,

"I would remind you that extremism in the defense of liberty is no vice! And let me remind you also that moderation in the pursuit of justice is no virtue!"

Good to know, isn't it?

People's republic of Internet?

2008-09-03T04:33:00.000-07:00

About a week ago, members of the German left-wing anti-fascist activist alliance "Antifa" hacked the forums of the racist "Blood and Honour" organization. A German statement, plus links to the downloadable forums, can be found here.

What raised my attention was one phrase in the statement. Translated into English, it says "dear citizens of the people's republic of Internet". I was struck by surprise since I'd never considered the Internet to resemble "a people", let alone a "people's republic". I'm not sure whether this was just a fun phrase used by the notoriously socialist Antifa people or whether some more deeply rooted conviction had been expressed by it.

I tend to favor the latter as there are manifold examples of attempts to "democratize" the Internet. The net neutrality movement is a somewhat famous one. Net neutrality advocates claim that internet providers have no right to suppress certain internet activities on their wires or to discriminate against specific contents or services by slowing the data transmission over their wires. Most internet users would readily agree with this postulate since the internet is now widely considered to be "a public good", something not to be interfered with by single individuals or companies.

But is it really? Is the internet a public good, a democracy or a people's republic?

Actually, the internet is a prime example of a libertarian success story. In a number of ways, the internet may be compared to a completely privatized city. Private road owners (internet providers) connect real estate owners (servers, content hosts). Everything is defined by private property rights; road owners have created agreements on crossings and traffic allocation which allows for the fastest possible and therefore most profitable data exchange. Server owners are free to discriminate against any content they deem inappropriate (for example, quite a lot of hosts don't allow porn on their networks). So are (or were) road owners; they are (or were) free to slow traffic to and from content distributors they considered improper. That's a fine example of a self-governing private property society, but most certainly not of a people's republic.

But the primary difference between the internet and a people's republic is the lack of government. The internet equals a spontaneous order, created and maintained without centrally planned advice. Western governments, while certainly desiring to control and regulate the internet, have so far mostly confined themselves to only intervening when "real world laws" were broken within the framework of the net.

This could dramatically change with the onset of net neutrality legislation. While initially just working towards "net justice" and "securing equal access", government will soon begin to pursue special interest wishes in the name of these formerly named goals, just as "real-life government" now extends to almost every aspect of life even though it had been installed to merely "protect life and liberty". Net neutrality advocates ignore this danger of "legalizing government" and instead trust in the wonders of democracy to secure that "good people are being elected" in order to keep the internet clean and free. Just like it works in the real world, doesn't it?

Conclusively we might say the internet is a libertarian private property anarchy and that's why it has been so vibrant and successful. Every attempt to modify it by government regulation will most likely strangle its self-correcting mechanisms and thus, diminish its seemingly inexhaustible potential. Therefore, keep it clean of legislation !

Dear Neocons

2008-08-27T09:46:00.000-07:00

With all due respect, but what's going on in your red-white-and-blue brains?

Short story of what happened: I've just learned from Gary North that several US aircraft carrier task forces have recently been sent to the Persian Gulf area without a publicly defined mission. Speculations on why they were dispatched come to vastly different conclusions; some claim they might simply replace currently patrolling carriers, others name the possibility of preparations for an attack on Iran.

Whatever the reason may be, moving considerable parts of one's military forces around the globe without giving a plausible explanation is like setting up a sniper rifle aimed at your neighbor's bedroom window. Or charging at your neighbor screaming "You dead man soon" with a knife in your hand. In the first scenario, it may have been "just a nice garden decoration" and the perceived knife attack may have been you rehearsing for your drama group play, but people will think of you as a lunatic anyway and treat you that way as well.

You may not care about your neighbors, but you better care about the biggest oil exporters in the world that happen to be flirting with one of the most potent resource distributers, Russia. You also better care about world peace, at least for the sake of your (or other folks') children.

What is it that makes neocons so bellicose?

Free markets and morality

2008-08-26T16:51:00.000-07:00

I've recently come across the same exemplified argument against free trade several times, so I decided to put a few of my thoughts on it down on my blog. The point goes like that:

On a free market, those who cannot pay the price for bread won't be able to buy bread. Thus, free markets rob poor people of their right to life and cannot possibly be associated with liberty.

On first glance, this appears to be valid since it contains an oversimplified, but common definition of a free market and niftily blinds out the alternative. But let's put first things first.

One reason why not every person X can afford good or service Y at price Z is because producer A wants to make a profit. Profit is a personal reward for the entrepreneur which is added to the cost of production. Profits are not immoral as one particular good or service wouldn't be available without a specific person offering or creating it; thus, you are not being exploited by profit-seeking entrepreneurs, but merely award a thoughtful man for producing a good or service you happen to desire. Remember: without him, it wouldn't be there.

Another reason why some goods may not be affordable to certain people may be the cost of production itself. This includes the cost of raw materials, wages, transport and many other factors, and usually exceeds the amount of profit reaped.

So, if good G is offered, without alternative, for a fixed price Y, and person P is only able to pay "Y - x", there will indeed be no transaction happening. That's how enemies of the free market often tend to portray it: as a rigged profit game with winners and losers.

Now for the real story. Prices on a free market are set according to supply and demand. Both sides change constantly, and they mostly do in favor of the customers in an unregulated market. This has a number of causes:

- The easier it gets to enter a market, the more competitors will there be. Competition leads to falling prices as cheaper providers will attract more customers. Government regulation, however, creates obstacles which tend to discourage potential competitors. This obviously hurts the customer.

- Free market means no tariffs. Tariffs are a surcharge on prices created by government to increase its revenue or to protect domestic producers who fear the competition from abroad. As the classic supply and demand curve shows, higher prices lead to falling demand; thus, tariffs lower the accessibility of goods and services. That doesn't feed the hungry at all.

- If nothing hinders the flow of information on a free market, technological advancements will be implemented in the production process as fast as possible. This lowers the cost of goods and services and therefore increases their accessibility. The Soviet economy, as an example, seriously lacked efficiency compared to Western economies which has certainly been caused, in part, by the communication roadblocks set up by the numerous bureaus and planning committees.

Plus all the other things I didn't mention right now. As we have demonstrated, free markets tend to produce the best access to goods and services. Also, there's always room for charitable actions of wealthy individuals who might want to donate to the less fortunate. Charity is part of a free market as well.

To put it in a nutshell, you'll have the best chances of getting your hands on something you want if you live in a free market.

But this didn't solve the original problem, our fellow progressives might say. What if someone really can't pay for bread? Shouldn't the government intervene so this doesn't happen?

Unforunately, laws don't bake bread. People do.

Congress might pass a bill today stating that everyone should own a '59 Cadillac, but that's just words on paper.

In an attempt to conciliate reality with utopia, quite a few measures have been proposed which appear more reasonable at first glance, but turn out to be just as inefficient when it comes to implementing them. We'll discuss price controls and welfare as the most prominent examples.

Price controls are seen as a guarantee for low prices, but they are by nature unable to live up to their goal. As I pointed out before, laws are just words. In order for bread to exist, people have to produce it. They won't produce if it doesn't pay. Whether it does pay or not is not defined by regulations and politicians, but by supply and demand. So either controlled prices are being set high enough for an entrepreneur to make a profit, in that case they wouldn't have been necessary in the first place, or they are being set too low which causes a thing called "production bottlenecks". As it isn't profitable anymore to bake breads, people will give up doing so and do profitable things instead. Now you have low prices and low bread supplies. Doesn't feed the poor either.

Welfare creates a moral hazard and is thus economically unsustainable. Instead of accumulating wealth through the production of goods and services, needs and wants are satisfied by fiat. This doesn't emancipate welfare recipients, but rather shackles and paralyzes them while at the same time slowing progress among those who finance the system. It has the same effect as simply stealing bread and giving it to others: at some point in time, bread-producing people will be fed up and stop working. "If everybody else is given bread, then so will I", they think and the redistribution machine implodes in lack of funds. Those who have been at the receiving end for a long time will be hit the hardest as they need to relearn being productive. Who will feed them in the meantime? Ask that a caring progressive.

Conclusion:

Free markets are still undefeated in making goods and services accessible to the greatest number of people. Government regulation and redistribution schemes, to the contrary, produce poverty and misery in the long run. And most imporantly: There is no free lunch. Even if the law says so.

Hayek and the Seminoles

2008-08-25T18:27:00.000-07:00

You know, one of my musical passions is to listen to Country music, as odd as that sounds to most "city dwellers". Among my favorite tunes ranks "Seminole Wind" from John Anderson which is best played in quiet and reflective situations.

Of course, I can't help trying to sense any libertarian tendency whatever I do, and so it happened that I noticed this particular line in John Anderson's song:

Progress came and took its toll
And in the name of flood control
They made their plans and they drained the land
Now the glades are goin' dry

In other words, the regular Seminole Indian Joe had been living in soaking wet swamps for all his life, just as his parents and grandparents most likely had. At some point in time, when living in swamps had become unimaginable for average whites, some well-intentioned people with governing powers probably decided it was best to drain the home swamps of the Seminoles so they didn't have to live in fear of floods anymore, and besides it'd sure look like a nice gesture to their suburban constituency.

This, of course, forced the Seminole people to abandon their traditional way of life, and guess what they did instead:

In 1979, the Seminoles opened the first casino on Indian land, ushering in what has become a multibillion-dollar industry operated by numerous tribes nationwide.

And with gambling most likely came all the other side-effects which plague Indian reservations today such as alcoholism or an alarmingly high rate of family breakups.

So, one may ask, was the decision to forcibly change the native peoples' way of life really a sensible step? Or was it just assumed to be helpful, but turned out to be ruinous? This is what F.A. Hayek coined "presumption of knowledge", the hubris of central planners which makes them believe they can judge all the individual results of their one-man (or one-committee) resolution well enough to know it's "good for the community".

Those responsible for the swamp drains probably didn't foresee how people with completely different world views and approaches to life would react to a sudden change in their environment. They didn't get together and said "Well guys, the party's over, let's industrialize", but are now stuck between the ways of their ancestors and shady business schemers whose projects have (illegitimately) been banned outside of native territory and who now make use of the debilitated Indians, as these folks are probably glad about anyone offering any kind of work.

But that's what happened. And that's what is going to happen over and over again as long as we allow individuals with limited knowledge to make decisions that would require a vastly superior overlook. Several measures of improving a planner's overlook have been proposed, including the use of equations, the consulting of various "experts" or planning by majority vote, but all of these merely attempt to conceal the limited abilities of planning individuals when it comes to regulating whole markets, that is huge aggregates of mutually beneficial trades and transactions as well as unplannable price signals.

Indian wisdom still teaches us a lot today, and so does the recent history of the natives. As well as country music, or so it seems.

Philosophical overlook

2008-08-25T09:10:00.000-07:00

As this is going to be my first blog entry on "Road to Rothbard", I figured I might introduce you to what I believe and why I don't believe in what you might consider my beliefs to be. Compris?

I desire a thing called liberty. Liberty has probably become one of the most meaningless nouns in the English language. Almost anything or anyone has made use of it in some context or another.

As liberty won't suffice to describe my views, I'll try "individualism". While individualism has also lost much of its appeal due to overuse, it stills conveys the original meaning of "indivisible entities", of people existing as individual beings rather than as a mass or a collective.

In addition to individualism, I believe in self-ownership. Most people do without realizing. However, from self-ownership derive quite a few interesting implications which are seldomly expressed, but hardly to be contested.

If I solely own myself, then nobody else can. That means I alone have the right to control my body, just as the sole owner of a car is the only person which has the right to use it. He may grant it to another person, but he has to consent. Otherwise, nobody may take it from him.

Just like nobody may take the right to use your body from you. You can make use of your body in versatile ways; it can be employed to refine previously unowned nature which, by combining it with your labor, becomes your property. One may ask: true, nature is unowned at some point, but who grants exactly you the right to make it your own? Well, if nature may not be appropriated by any person on his or her own, then it cannot be appropriated by any individual in particular.

Depending on which philosophy one follows, either all of mankind had to agree on a specific use for a particular piece of nature which is both impractical (self-evident) and unfair (since those who are assigned to till the land are, in effect, slaves to the commanders, which is all of mankind, and therefore every man would be every man's slave: "homo homini servus"). Or nature should not be appropriated at all as it has intrinsic value as a living cosmos. In that case, we had to kill ourselves immediately in order to stop hurting the "Earthen Entity" which makes it not a human, but an anti-human philosophy completely unfeasible to structure societies of (living) humans.

Therefore, as people make use of their appropriated land, they will eventually desire to engage in trade to satisfy their ever-growing needs and desires. Thereby, they create wealth. Individuals who engage in aggression (robbery, murder etc.) to enhance their standard of living are subject to punishment as they do not resort to mutually beneficial transactions with other individuals to increase the value of their estates, but decide to make use of other individuals' property without their consent. This system of mutually beneficial transactions is called "the free market".

Now the cat's outta the bag. I believe in individualism and free markets. I could've said it in less words, but just wanted to make sure my views are still logically deductible. Which I hope you'll agree they are.

That said, I'm looking forward to blogging. More to come soon if nothing gets in the way.