Love Song for F.A. Hayek

This gets me excited about the recent growth in popularity of under appreciated individuals such as Hayek.



Courtesy of Dorian Electra

QE2 = Bank Bailout?

You have got to be kidding. The hits just keep on coming for an economy that is suffering and a government that won't let it recover. Read more

On Bailouts

Is it more efficient to keep fixing a rusty pipe that is incapable of holding water on its own or let someone install a new one that you don't have to keep fixing?

Zeitgeist Movement = Marxist Futurism?

Perhaps. After a barrage of irrelevant comments from supporters of the Zeitgeist Movement on this blog, I did a little research into what they are all about. After reading a good bit of bantering over at the Mises forum, I can say that I am really unimpressed with the Zeitgeist position and their idea of what is called resource based economy. I have a general distrust of anything or anyone that has a disregard for logic and evidence-based argumentation. As indicated by one individual on the Mises forum, logic has been replaced with a sort of mystic hubris:

"lol. I will not debate this, because it is senseless to argue, considering those who argue seldom change their minds. lol. I doubt many will be able to understand the ZM concepts from where they are now. That's ok... it's not a matter of superiority or inferiority... it's all about cultural conditioning, which our present culture is expert at... And that will change anyway because of continuing information flow."

What a ridiculous string of words. It would be nice if these people were as open-minded as they claim to be. A little research and inquiry into the minds of Mises, Hayek, Rothbard et al might glean some understanding on economics and praxeology. They might come to the realization that resource based economy backed by a super computer that will bring superabundance to society is a fantasy that might be fitting for a Marxist science fiction, but not reality. The same poster on Mises forum later said:

And since I am putting in question the very foundation of this forum, I'm not surprised you would find my words useless. But I didn't come here to argue about this stuff, so I am bowing out. I do not wish to step upon your 'religion'. (which is another conceptual system people mistake for reality...)

That is an interesting assertion considering that is exactly what this "movement" appears to be - a religion.

Update (8/30/10): Robert Murphy took a stab at RBE over at Mises today. We share the same concerns.

7 Things the Government is Teaching Our Children About Money

Congress handles our federal budget about as poorly as one could ever imagine handling a personal budget. The government is teaching our children the worst possible way to handle money and budgets. Here is a list of some of the lessons children might learn from government:

• 1. Spending money you don't have is stimulating.
• 2. Paying off debt is not important.
• 3. Managing money poorly will get you a raise.
• 4. Prudent shopping is unnecessary.
• 5. Work is optional for income.
• 6. Stealing is okay as long as the ends are deemed worthy.
• 7. Long term goals have no worth.

At face value, these lessons seem absolutely absurd. However, some (especially governments) seem to think it is the quintessential recipe for successful economy. I tend to think that what is actually good for my household economy is also good for the economy as a whole. When I economize, it is a good thing.

Mises Academy: New Way of Learning

Recommended Reading: 5/18/2010

Here are just a few articles recently written by various economists that I think are beneficial to read:

Is Capitalism Something Good?

Consumer Spending Doesn't Drive the Economy

Neither Evil Nor Incompetent

Thank Goodness for Capitalism

Some Social Aspects of Medical Socialism

Absurdity of the State: Child Labor Violations

Current laws forbid children from earning wages from their expertise. It doesn't matter if they are using the money to save for their future education or to live out their dreams such as Tallan "T-Man" Latz who loves to play his guitar as evidenced in the video below. He is seven years old, so he cannot legally be compensated for playing the guitar or even play in traditional establishments of business. He has a gift that people wish to compensate him for, therefore his talents have become an enemy of the State. When you factor in all the various levels of federal, state, and local laws it is a complex web of absurdity. It is about time we repeal these ridiculous laws.

Health Care Reform?

H.L. Mencken once said that “Every election is a sort of advance auction sale of stolen goods.” The majority of the political process is deciding which favored groups get what. It is important to understand that with all spending bills, some people undoubtedly benefit whether they be a Wall Street CEO, a mid-western farmer, or an inner-city homeless person. This is the visible effect on which most people, even renowned economists, focus and rely to determine their opinion of the efficacy of a policy. This focus is also what makes for a poor economist – renowned or not. Henry Hazlitt wrote in his great book Economics in One Lesson, “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” Hazlitt further wrote, “Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of ignoring this lesson.”

There are definitely a lot of misconceptions about health care. The bigger picture should be explored in regards to health care intervention so we might attain a better grasp of where we stand. First, the current system is mixed with a large regulatory apparatus including subsidies, licenses, controls, patents, monopolies, and outright welfare. Government makes up 42% of all health services and supplies spending.[1] 75% of all citizens over the age of 65 are provided for by the government. Conservatives are wrong – we already have government health care. This bill just increases what we already have. A common misconception about our current system is probably epitomized in the town-hall exchange between Congressman Bob Inglis (R) and one of his constituents in South Carolina. The man charged that Inglis should “keep your government hands off my Medicare.”

The current legislation is basically a continued effort to repair a failed system that has been fiddled with for nearly a century. The first national conference that declared for universal health and social insurance was in the 1910s. It has taken 100 years to get where we are today and Obamacare isn’t even proposing anything that is close to total socialism of medical services regardless of purported intentions by opponents. The problem with socializing even just a bit more of health care is that it will produce exactly the same results here that it has everywhere else. We will increase over-consumption, rationing, and stagnation. The problem is that without freedom of exchange and market pricing, economic sense disappears and the system becomes entangling and impoverishing.

There is another component rarely mentioned beyond casual concern. How do we pay for this sublime utopia of health parity? The government can’t pay for this by taxing everyone because citizens wouldn’t allow for it over the long term. The national debt is already enormous. We should look no further than the Federal Reserve. They will run the presses to pay for these foolish dreams. The Fed makes something like this possible – without it - no politician would make such bold promises. The real problem may not be the impossible visions of politicians. It may be the institution that allows for such foolery, and it comes at our own expense. Inflation through fiat currency is one of the most insidious mechanisms ever introduced to an economy.

We should be mindful that worsening the system of medical purveyance is only part of the defect of universal health insurance. The unseen costs will include worsening business cycles, depletion of the dollar, and destruction of private wealth via inflation which will be spread equally (ironic?) among all individuals whether rich or poor. I’ll close with the wisdom of Frederic Bastiat, the French economist of the 19th century:

“In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause – it is seen. The others unfold in succession – they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference – the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

Note:
1. Health Expenditures by Sponsers. http://www.cms.gov/NationalHealthExpendData/downloads/bhg08.pdf (PDF)

Should Government Subsidize Education?

Staunch fiscal conservatives sometimes entertain or even fervently support the idea of subsidizing higher education. I do not entertain such ideas and neither does education expert James Stanfield from E.G. West Centre in the School of Education at Newcastle University located in Newcastle upon Tyne, UK. The Adam Smith Institute published a paper today by Stanfield that makes a very strong case against university subsidies. Stanfield steals a page right out of Frederic Bastiat's playbook. In the book That Which is Seen & That Which is Not Seen, Bastiat asserted that public policy via government intervention tended to result in not just one immediate and visible effect, but a whole host of hidden effects which accrue over time. Stanfield makes his case from this framework.

The case for government subsidies is based entirely on the assumption that it will not only benefit every individual student, but the society as a whole. Stanfield vitiates this writing,

"While it is claimed that the taxpayer will benefit indirectly from his so-called £400 investment, what is not seen is that the taxpayer would still enjoy the indirect benefits of higher education if students funded themselves."

The argument against public education is nothing new. Albert Jay Nock lectured about the ills of government interference in education circa 1930. His talks were compiled into a brilliant work known as The Theory of Education in the United States. The book is made up of a string of lectures given by Nock at the University of Virginia which makes the style interesting and direct. Nock took the issue of education seriously believing it to be a matter that greatly affected the welfare of our republic.

If you have any interest in education, I highly recommend reading both the current and vintage works by Stanfield and Nock. Picking up a copy of Bastiat's classic to read wouldn't hurt either.

Was the Wild West Really that "Wild?"

The later half of the 19th century in the Western United States is often known as the period of the "Wild West." It is nearly always exaggerated by historians and Hollywood. The implication of this presentation is that, without government, society becomes disordered and out of control. Areas without a State become hotbeds for crime, exploitation, and inestimable rises in price. The Wild West is often cited as an example of such anarchic conditions. In their book The Not So Wild, Wild West: Property Rights on the Frontier, Terry L. Anderson and Peter J. Hill provide a solid exposition of the period and dispel many of these myths. Thomas Woods describes how the "Wild West" was more peaceful and much safer than most modern cities in his book 33 Questions About American History You're Not Supposed to Ask.

Among the most interesting aspects of this period in U.S. history were the innovations in property rights that occurred far from government enforcement. The pioneers themselves created and enforced contracts and, as Anderson and Hill describe, the result was a large relocation of population to the West relatively free of conflict. One problem arose from defining and defending property rights concerning cattle in large expanses of land. Several entrepreneurial solutions resolved these problems as they ensued. These solutions were gradually introduced, and included cattle branding, constant supervision by armed cowboys on horseback, and the invention of barbed wire. Barbed wire permitted for the first time an effective separation of vast stretches of land at an affordable price.

In a recent essay addressing conventional propaganda in regard to the period, Ryan McMaken described the American West as a "heritage of peace." It is important to understand that proponents of laissez-faire aren't subsequently forced to renounce all rules and forms of regulation. By definition, supporters of laissez-faire economics renounce rules and regulations enforced by coercive bureaucracies that can't go out of business. Don't fall for the straw man argument postured by statists that free-market supporters believe in a "no rules" system or that the "Wild West" was a period of excessive violence, severe injustice, and predominantly unsuitable for civilized human habitation.