Category Archives: Political Economy

I’m Disappointed with Scientific American

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In the December 2015 issue of Scientific American, Naomi Oreskes writes,

For the past 30 years the ideology of the unfettered marketplace has so dominated our discourse that most of use can scarcely imagine an alternative way of organizing our affairs. Individuals who try are dismissed as unrealistic, romantic, polemical or (in America) communists.

Like many others, she cites the 2008 financial crisis as the result of “deregulated capitalism” and the blames the Great Depression on “market failure.” She goes on to cite other favorite complaints of those with an anti-market ideology, such as inequality or the environment.

It seems that no matter how much the government will intervene into the economy, the “unfettered,” “deregulated” market will always be the alleged culprit. Indeed, Ms. Oreskes acknowledges the “spectacular government intervention” apparatus that was created after the Great Depression. How can she believe that with the modern regulatory state that creates thousands of new regulations every year that the US economy can accurately be described as laissez-faire? I can see one making an argument that perhaps the currently existing regulatory scheme for various sectors of the economy do not have the optimal rules or that certain regulatory agencies are under-powered. But at what point will the US economy have to be regulated in order for people like Ms. Oreskes to classify them as non-free market?

Furthermore, what I find particularly ironic about Ms. Oreskes’ article (which is called “How to Break the Climate Deadlock” but reads more like an anti-market diatribe) is that she does nothing to reassure those who question the efficacy of government efforts to abate the effects of climate change that their concern is unwarranted. Near the beginning of her essay, she makes a reference to those who suspect that empowering supranational governments to implement grand plans to combat climate change might significantly impact their freedom.However, instead of addressing their concerns (which I think would be more in line with breaking “the climate deadlock”), she seems to confirm them. Instead of explaining how people’s lives wouldn’t need be dramatically changed or how the power of the state wouldn’t need to be greatly expanded, she writes of how we “can scarcely imagine an alternative way of organizing our affairs.” She throws in the red herring of how the absence of state authority “opens the door to tyranny and tragedy.” The title of her article led me to believe that she was going to attempt to bridge the gap and try to foster a legitimate dialogue with those with differing opinions than her own. Her essay did not seem like one written by a level-headed scientist trying to find areas of agreement about climate policy, but an ideologue that should be relegated to the opinion section.

 

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Paying for Choo Choos is Expensive

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I like trains. I’m not sure exactly why. It has been suggested to me that it could be nostalgia, but I don’t think it can be nostalgia from personal experience. The only trains I’ve ridden were in Thailand, and while that is a cheap mode of intercity travel and isn’t too bad for trips that are only a few hours, I was pretty miserable riding overnight in 3rd class. The odor of diesel exhaust and the water closet were constant companions, as was the cold air coming through the windows overnight, as I tried to get some sleep on a hard plastic seat sitting upright. I don’t think it’s nostalgia from personal experience.

Part of it could be that I enjoy the board game Ticket to Ride. It’s highly recommended, as is Hell on Wheels, which not only features the construction of the Union Pacific Railroad but is also sympathetic to a Southron.

However, it just doesn’t seem to be the case that many passenger trains are profitable; most have to be heavily subsidized by the government. I certainly wish this wasn’t the case given my enthusiasm for trains, but I would rather not see huge amounts of money be wasted constructing totally unnecessary rail lines.

Unfortunately, this seems to be the case for California’s High Speed Rail Authority. According to MyGovCost.org, one end of the line is to be in a remote area of San Joaquin Valley, clearly showing that politicians push for these trains, not because they believe that they will act as efficient means of transportation, but because they can then claim they are creating jobs. We recognize that such claims are erroneous, of course, knowing the lesson that Henry Hazlitt taught us. What is seen is all the people working to create these rail lines, but what is unseen are all the jobs that now aren’t going to be created because of the money spent building this rail line, jobs that are far more likely to be sustainable.

It is surprising that the politicians’ handling of finance of the project is considered legal. According to K. Lloyd Billingsley, the voters approved bonds for the project back in 2008 for $43 billion. Now the cost is projected to be $100 billion (and not to be completed until 2033)! CA voters don’t get to vote on the higher price tag. How is this not fraud?

The politicians also care not for either the environment nor property rights. Billingsley: “…one thing stands between the state rail bosses and the property they need: the rightful owners. They are not eager for a train to displace productive farmland. The project would also be environmentally destructive but supporters such as California governor Jerry Brown want to suspend environmental regulations for high-speed rail.”

Thus, the whole thing seems to be a loser all around, except for the politicians and contractors who get to take the money away from taxpayers, who are left with an extremely expensive rail line that few of them are likely to use and will probably have to be subsidized just to operate. It is the boondoggle that keeps on taking.

Should the Government Pay Its Debts?

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I don’t want it to seem like I think of Bleeding Heart Libertarians as a punching bag. I think they often make interesting points and bring challenges to mainstream libertarianism that its adherents need to be able to grapple with. They also often make for interesting discussion.

An article I would like to discuss today is that of Andrew Cohen’s, called “Shutting Down.” Cohen makes the argument that the government should uphold its contracts to pay those it owes. He puts aside the idea that “taxation is theft” and starts with the premise that if harm prevention and rectification are legitimate functions of government, then taxation is necessary.

He compares government to an individual:

Agent A makes a contract with agent B, agreeing to pay B $X. A overspends and has difficulty paying B. A decides not to pay B. In many cases, we would say this is unacceptable and that A must pay B what is owed. At least, we think, A must go through the proper channels to declare bankruptcy if A is to not pay B what A owes B. This would be unfortunate, we are told, but bankruptcy law is needed to allow for the proper running of the economy.

Today, the U.S. government is agent A.

He goes on:

People who were promised paychecks will not get them. Some will get them late. Some will get smaller paychecks (due to furlough time). Some of these people will face tremendous difficulty. I think it fair to say they will be harmed–having planned their lives given the promise of a regular paycheck, they have legitimate expectations that are being set back. Perhaps the government should not have hired those people in the first place (after all, they are “non-essential” personnel!). But the fact is they were hired and treating them this way is wrong and makes a mockery of contract.

Cohen admits that most of what the government considers “essential” and therefore won’t be affected by the shutdown has little to do with harm prevention or rectification. I feel like that fact makes it so that the government is unjustified in taxing people to pay these debts, since the government is going beyond Cohen’s role for government. Clearly, if taxation is not theft if it pays for legitimate government functions, it ought to be considered theft if it pays for something outside legitimate functions.

But, for Cohen, even criminal enterprises ought to honor their contracts:

Put the point this way: a mobster might be wrong to extract protection money from a business, but that does not make it any less wrong for the mobster to fail to protect that business in time of need. We don’t say “wait, the mobster doesn’t have to live up to its agreement because it was wrong to make the agreement in the first place.” I think most of us think 2 things: (a) the mobster should not have extracted the protection money in the first place and (b) the mobster owes the business protection. Similarly, I think the government should not have hired people to do non-essential jobs (by which I mean any jobs not needed for harm prevention and rectification) in the first place but that because it did, the government* owes those people their salaries on the regular pay days.

I find this to be a tragically poor analogy. The protection money is involuntarily coming from a business (analogous to tax revenue) and the mobster ought to protect that business in exchange (but is that really analogous to what the federal government uses its money to do?). What if that tax revenue is to pay a federal employee for something nobody would voluntarily pay for, such as an NSA employee spying on the American people or a drone operator killing children overseas? A more accurate analogy would then be the mobster paying his hitmen for the contracts he made with them. Honestly, I am more than fine with NSA agents and drone operators not being paid.

Most would agree that people should pay their debts, but they wouldn’t approve of someone stealing from others in order to be able to do so. Even if we assume the idea that taxation is not theft, so much of what the federal government does has nothing to do with Cohen’s defined role for government (indeed, if we consider the US Constitution to be the federal government’s contract with the states regarding its role, it must honor that contract before it has any obligation to pay for employees whose jobs explicitly violate it). Thus,  Cohen’s point is rendered moot: in reality, the employees having delayed, reduced, or even no paychecks do not serve Cohen’s role for legitimate government functions. Even if government ought to honor its contracts with them, that does not give it the right to tax others to pay for its debts. Otherwise, the government is not limited in its powers.

Do Property Rights Need Political Authority?

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No Time 4 BullI recently published a post on No Time 4 Bull, engaging a post on Bleeding Heart Libertarians arguing that by explaining away justifications for the state, one also argues away justifications for property rights.

This seems nonsensical to me. Please take a look at both and let me know what you think.

A Libertarian Culture?

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Wilhelm Röpke and Social Order

I recently read a piece by Wilhelm Röpke called “Free Economy and Social Order.” It was part of “The 30 Day Reading List that will Lead You to Becoming a Knowledgeable Libertarian.” His basic point in it (at least from what I could gather) is that the market system cannot be something thought of independently from the people who participate in it; there is a certain kind of culture required. He states:

Libertarian Wilhelm Röpke

Wilhelm Röpke

It illustrates the fact that the market economy is a form of economic order that is correlated to a concept of life and a socio-moral pattern which, for want of an appropriate English or French term, we may call buergerliche in the wide sense of this German word, which is largely free of the disparaging associations of the adjective “bourgeois.”

This buergerliche foundation of the market economy must be frankly acknowledged. All the more so because a century of Marxist propaganda and intellectualist romanticism has been astonishingly and alarmingly successful in spreading a parody of this concept. In fact, the market economy can thrive only as part of and surrounded by a buergerliche social order.

Its place is in a society where certain elementary things are respected and are coloring the whole life of the community: individual responsibility; respect of certain indisputable norms; the individual’s honest and serious struggle to get ahead and develop his faculties; independence anchored in property; responsible planning of one’s own life and that of one’s family; thriftiness; enterprise; assuming well calculated risks; the sense of workmanship; the right relation to nature and the community; the sense of continuity and tradition; the courage to brave the uncertainties of life on one’s own account; the sense of the natural order of things.

Is that the case? I’ve been trying to answer the question of who and what ideological foundations can be appropriately put under the “libertarian” umbrella. I think one of the obvious tenets is acceptance of the free market system as legitimate (this would include all voluntary human interaction, including communes that are mutually agreed upon by their members). I would also say that full consistency would require the application of the non-aggression principle to all human relationships. Anything beyond that ceases to be solely libertarian. For example, one can consistently be ardently opposed to the use of narcotics for recreation yet also be opposed to the criminalization of such activity. Libertarians only need be “socially liberal” in the sense that they tolerate people doing things that aren’t aggressions against others’ person or property, not that they accept them as morally upright.

Thin and Thick Libertarianism

Libertarian Matt Zwolinski

Matt Zwolinski

This idea of only needing to accept the non-aggression principle is called “thin libertarianism” (please see Zwolinski’s argument for why he thinks libertarianism rests upon a “thicker” foundation). Zwolinski is critical of Rothbard’s foundational arguments for libertarianism, but I am sympathetic to the idea that libertarianism as such deals solely with when the use of force is justified. But I would like to comment on Zwolinski’s idea that libertarianism “rests on more foundational  beliefs about individualism, tolerance, skepticism about power, respect for spontaneous order, and  belief in the importance of property rights…” What I find interesting is that both libertarians of the left and right variety believe that certain cultural norms and attitudes are required for a free society to operate beyond only a respect for property rights (though this may be the most important).

A difficulty I have is finding out where left and right libertarians diverge in their beliefs. According to Gary Chartier, the “left” in left-libertarian is marked by an opposition to subordination, deprivation, and exclusion. Of course, these aren’t meant to be an exhaustive list, but it gives us a start. However, I don’t imagine libertarians who don’t consider themselves left-libertarians would disagree with these positions, but might give them a different importance in terms of priority or importance. Come to think of it, I don’t really notice many people self-identifying as “right-libertarian.” Just looking at the Wiki for it, it’s hard to come up with a definition of it at all. The first sentence says that right-libertarians are libertarians who believe in limited government, free markets, and self-ownership, yet left-libertarians also support free markets, self-ownership, and if they support the existence of government at all it is as a strictly limited entity. Strangely, if I didn’t know any better, I would say that the existence of left-libertarians leads us to naturally believe there must be such a thing as right-libertarians, not that there actually is such a thing that necessitates a delineation with left-libertarianism.

Thus, the way I think about libertarianism is this: I think that the “thin” idea of libertarianism is the proper one: that libertarianism is largely based in non-aggression. Anything beyond that, like having the social goals of, say, decreasing racial prejudice, is something beyond libertarianism. Libertarianism is a political philosophy, not an all-encompassing moral theory. Thus, though there are traits we would like all libertarians to have (such as being friendly to all races, treating women respectfully, and so forth) those are things beyond libertarianism. So, I regard the “thick” brand of libertarianism as being “libertarianism plus something else.”

Libertarian Cultural Values

As to whether libertarianism requires some types of cultural values, I would say it is undoubtedly so. As Röpke states above, I think personal responsibility, a certain amount of thriftiness and industriousness, as well as familial and community ties will help ensure the health of a libertarian society. Indeed, the fewer people who have any desire or need for the welfare state, the less likely it is to exist. As well, the greater tolerance and consideration we have for others, the less likely that conflicts will occur. So, while libertarianism gives us insight as to what proper legal rules are, there are certain moral behaviors that will help reinforce these rules.

How Rich Could We All Be?

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How Rich Could We All BeI recently wrote an essay called, How Rich Could We All Be? for a site I started with a friend I met at Mises University and I thought you might like to read it. It was inspired by an excerpt from “Egalitarianism as a Revolt Against Nature” published on mises.org.

For Murray Rothbard, the ultimate justification for libertarianism is natural rights: you own your self and you own your justly acquired property. To be certain, a libertarian society would also have many other benefits, not the least of which is the increased material prosperity due to the totally unhampered free market economy. But Rothbard says such a consideration is not only not good enough to be the basis of libertarianism, but it also would not be enough of a long-term motivation for people to support libertarianism. He seems to discount the degree to which a truly free market would increase human well-being. I take issue with this.

It is my contention that the masses would be overwhelmingly more wealthy in an unhampered free market economy. To show this, I invite the reader to engage in a though experiment that takes into account the costs of the leviathan US government and then asks, “What would happen if all the money spent on wars, useless projects, and redistribution to the wealthy, were instead spent on things that actually create wealth, like start-ups and capital goods?” It also takes account of the costs of extracting and spending the wealth of the American people, as well as the costs imposed by onerous regulation.

I’d love to know what you think. Do I overestimate how rich we could all be?

Power and Market: What Can a Shopping Cart Tell Us about Political Efficacy?

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Shopping Cart - Power and MarketSometimes I am really baffled by people’s proclivity to have a mistrust of free markets but a faith in government.

Let’s do a thought experiment.

Scenario 1:

You go into a grocery store. You need to stock up so you grab a shopping cart. You have so many choices. If you want apples, there are granny smith, gold delicious, red delicious, fuji, and so on. There are also mangos, papayas, peaches, strawberries, bananas, oranges, tangerines, nectarines, grapefruit, cherries, limes, blueberries, and many more. And this is just the fruit of the produce section!

Like most grocery stores, it also has many other types of food and beverage as well. You can get as little or as much of each, as long as it falls within your budget. You can also come back the next day or in a week or not at all. Your decision to patronize this grocery store is completely optional.

Scenario 2:

The grocery store you use has been decided for you since birth and it’s the only grocery store available in the country. You must use it since there are no other alternatives for food. Not only that, but the selection within the store isn’t very good. Instead of being able to select the contents of your shopping cart, it is decided by the democratic process. Everybody has to have the same items in their shopping cart for four years; after this time, people vote between two choices for a new shopping cart for the next four years.

It’s not as if the items in this shopping cart are very different. Instead of having distinct options, you might be able to change brands or switch to the diet version. Despite the intense battle over certain dessert items, both of these shopping carts are largely the same.

Which scenario would you prefer to live under?

In case it wasn’t obvious enough, Scenario 1 was intended to be an analogy for the amount of choice we have in the market, with the ultimate choice of whether we want to participate in it or not. Scenario 2 is the grocery store equivalent of the electoral process: you get two very similar choices which everyone must live with and no one has the option of opting out.

And yet, for some reason, many people have more trust in the government than they have in the market. Democracy is often held up as the bedrock of a free society. If we had to choose our food in the same way that we “choose” our governments, there would quickly be a revolt. I’ll acknowledge that the analogy presented above isn’t perfect, but I think it’s close enough to lead us to question how great our political system is.

So I leave you with this question: If our ability to choose our food is important enough to us to leave it to the market, why isn’t the legal system?

Power and Market

If the US Dollar is So Great, Why Do They Have to Force Us to Use It?

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Monopolies are bad. Is a money monopoly good?

Most mainstream economists will tell you that a central bank that has control over the currency is necessary, good, and just. But an important question that seems to go unanswered is: why do we have to be forced to use it?

Most Americans probably don’t feel as though they are being coerced into using the dollar. They go into a store and it has prices in dollars and nothing else. They get paid in dollars, make all of their purchases in dollars, and have their savings denominated in dollars. But even so, the US government not only frowns upon, but also prosecutes, those who challenge its monopoly on money.

Monopolies are maintained by force (even money monopolies)

According to Simon Black, the Department of the Treasury recently shut down Liberty Reserve, a digital currency provider that allowed customers to trade virtual currency that could be tied to fiat currency or precious metals. They did this ostensibly in the name of “money laundering.” Since it allows anonymous banking, Liberty Reserve was accused of being primarily “designed to allow money laundering and illicit finance.”

Liberty Dollars

Does this look like something that someone would try to pass off as US Dollars?

This is reminiscent of the prosecution of Bernard von NotHaus, the creator of the Liberty Dollar. He provided customers with monetary notes that were fully backed by precious metals. His vaults were raided by the US government, who stole all of his customers’ gold, silver, and platinum that was stored there. The warrant accused him of mail fraud, wire fraud, counterfeiting, money laundering, and conspiracy. A North Carolina jury found him guilty of “making, possessing, and selling his own coins.” He faces up to 15 years in prison, a $250,000 fine, and the forfeiture of $7 million worth of precious metal. His sentence is still being decided. (I actually wrote a letter to the judge presiding over his case. I’m not sure that it will do von NotHaus any good, but I felt compelled to to make any effort that might help alleviate such an injustice.)

Especially appalling was the gross hypocrisy and obvious falsities spoken by the Attorney for the Western District of North Carolina, Anne M. Tompkins, who said the Liberty Dollar was  “a unique form of domestic terrorism” trying “to undermine the legitimate currency of this country”. She also said, “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country.”

I did mention these statements in my letter to the judge, pointing out the fact that the US Constitution states that states may only consider gold and silver legal tender. Thus, von NotHaus’ currency is far more legitimate than Federal Reserve Notes! Not only that, but it is laughable to think that the Liberty Dollar undermines economic stability, especially in comparison to the problems caused by the creation of “legitimate currency” by the Fed.

I’m surprised and disappointed that a jury could be convinced that the Liberty Dollar was intended as counterfeit. Indeed, I’m not even sure that’s what they were convinced of. Maybe they heard the term “terrorism” and soiled their pants and decided to convict. Even a small child could easily tell that the Liberty Dollar is distinct from the USD.

What can we do?

In addition to the cases of Liberty Reserve and the Liberty Dollar, the government went after Mt. Gox, the largest Bitcoin exchange site. It seems to be quite clear that the government is desperate to maintain its money monopoly. They will accuse those who don’t go along of being terrorists, money launderers, and counterfeiters…whatever is necessary.

But there are solutions, as long as people are willing to use them. Unlike the Liberty Reserve and Liberty Dollar, Bitcoin has no central vault or exchange, making it nearly impossible for the government to stop. As well, I find the solutions mentioned and used by GSF in this No Time 4 Bull article to be quite interesting. I highly recommend checking it out.

It appears that the Internet and encryption have given us new opportunities to undermine the money monopoly and create our own sound money since the government is unable or unwilling to do so itself.

This is part of the beauty of voluntary interaction.

 

Roderick T. Long – Invisible Hands and Incantations: The Mystification of State Power

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Roderick T. Long

Roderick T. Long

In this essay, Rod Long covers several topics masterfully, including:

  • The spontaneous order mechanisms of the State
  • How, contrary to popular opinion, big corporations and big government largely reinforce and support one another
  • How the status quo in America doesn’t even closely resemble a free market
  • Uses the Star Wars prequels as an analogy for the relationship between corporations and government
  • Why the default is for government to grow
  • The incentives for the mainstream media to be biased (I find this especially interesting. MSM is unquestionably biased but why?)
  • How the blatant contradictions between political reality and people’s perceptions of it can exist
  • Strategies of Resistance

I certainly trust that you will find it as worth reading as I did. It is so insightful and honestly tries to uncover why things as they are instead of simply saying, “It’s just public school indoctrination,” or something like that.

Please read Invisible Hands and Incantations: The Mystification of State Power

A Case Study on Nullification: Marijuana Laws

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I’ve written a few of posts mentioning nullification: Tom Woods on NPR, Tom Woods’ article on anti-nullifiers, and challenging the notion that the Supreme Court ought to have a monopoly on Constitutional interpretation.

Tom Woods wrote the book on this subject and has FAQ.

But the first thing I would like to ask in today’s post is: “How much does it matter that nullification has a Constitutional or historical basis?” The more I think about it, I find that my answer is: “It matters only to the extent that people will accept its use as a method for decentralizing power.” If it were to be shown, beyond a doubt, that nullification is, in fact, unconstitutional, that wouldn’t matter one bit to me in terms of its legitimacy. I took no oath to uphold the Constitution; I was forced under it at birth.

It seems ridiculous that the same people who accept no limits on federal power are often the same ones who declare nullification unconstitutional. But most of what is considered “constitutional law” has nothing to do with the Constitution, but with legal precedents. For example, judicial review is not in the Constitution. It was a precedent set by Marbury v. Madison (1803).  In the same way, why can’t states nullifying federal laws set a precedent? According to the anti-nullifiers’ own logic, nullification would have to be acceptable.

Photo of Mark ThorntonAnd we have several precedents of states doing just that. A recent example is of Washington and Colorado decriminalizing marijuana and Mark Thornton writes a fantastic article about it.

One particularly interesting point he makes is that, in doing this, Washington and Colorado are effectively nullifying a UN Law as well. He says,

In effect, the voters of Colorado and Washington have placed themselves and their states on equal legal footing with both national and international governments. This is important, because, if thanks to nullification, governments have to obtain acceptance, or at least acquiescence from subsidiary governments, rather than just imposing their dictates on them, they are more likely to act in a less threatening and harmful manner.

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