About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Friday, January 24, 2014

From The Ridiculous To The Sublime

A few days ago an article by Robert Reich caught my eye: "David Brooks is dead wrong about inequality." Reich is a former US Secretary of Labor who often advocates progressive policies like income equality. In his article Reich writes:
First, when almost all the gains from growth go to the top, as they have for the last thirty years, the middle class doesn’t have the purchasing power necessary for buoyant growth.
I don't know what "buoyant growth" is or how it is measured. I don't think Reich knows either. It certainly is not a working concept of economics. Reich's article is a meaningless collection of assertions and undefined terms. It is pure demagoguery preached to the choir. One of the choir members named "Steve Lives" commented as follows on Reich's piece:

In the system of money management that we call Capitalism, it only makes sense for the capitalists to automate as much as possible, to increase profit. Unfortunately, this doesn't work out too well for the rest of us. We can go on as we are today, stumbling from economic collapse to economic collapse, suffering the fall out from such an ideology, or we can just accept that the knowledge and technology of humanity today can provide for all of us if we redesign our society with intelligence and forethought. Of course this would mean the end of the current work ethic, the end of currency (if we wanted to), current politics would become obsolete, and if implemented world wide, no more wars. Pretty hard to imagine huh? But it is possible, and wouldn't be that hard to do. [emphasis mine]
Yes, the Nirvana Mr. Lives describes is "hard to imagine." As I marveled at Mr. Lives' naivete, I wondered how people come by such bizarre opinions. Then Mr. Lives filled me in. He recommended readers visit the website of something called: "The Venus Project." So I visited the site and couldn't believe my eyes. The site immediately reminded me of Jim Jones and his "People's Temple" religious movement.

The Venus Project is run by a couple of characters named Jacque Fresco and Roxanne Meadows who advocate something called a "resource-based economy" in which there is no money, no law and no government. The economy would be run efficiently and dispassionately by computers. All goods and services would be free. The latest technology and strategically placed "sensors" would determine the nature and quantity of what needs to be produced by robots. Individuals in a "resource-based economy" would not work, they would simply do as they please and, at the same time, enjoy the benefits of products and services they need.

I'm not kidding. Check out the site's rather extensive FAQ page. It's truly ridiculous.

Needless to say, after visiting the site and reading the mush produced by individuals like Robert Reich, Steve Lives, Jacque Fresco and Rosanne Meadows I became depressed thinking about America's future.

Then today I came across this article by Austrian economist George Reisman: "The Very Deserving Super Rich." In his article Reisman elegantly explains the logic of the free market and defends successful, wealthy free market entrepreneurs as true "benefactors of mankind." Moreover, Reisman writes, those "who have earned their fortunes by means of such positive productive contributions fully deserve them."

So there you have it, from the ridiculous to the sublime. Two views of the capitalist economic system which are polar opposites. Two policy roads which lead directly to two drastically different, future Americas. How can individuals think so differently about capitalism? Reisman chalks it up to ignorance:
The enemies of such economic inequality are ignorant of economics. They know nothing about profits, innovation, or capital. They do not realize that in entailing the confiscation of high profits and aborting the earning of fortunes, their policies would stifle economic progress.

The enemies of such economic inequality believe that wealth is a pile of consumers’ goods that somehow is just here and can be taken for granted. They believe that the capitalists, whom they depict as fat men, allegedly have too much of this pile. Some of it, they claim, must be given to the starving masses. On this basis, they are led to advocate a policy of seizing capital in order to consume it— a policy of eating the seed corn and being impoverished.

In their ignorance, the enemies of the free-market’s economic inequality are fueled by envy and resentment, biting the hands that feed them.
I tend to agree with him. Mr. Lives certainly is ignorant of economics, as is the staff of The Venus Project. But Robert Reich is no uneducated fool. He's studied economics, as I have, and has arrived at opposite conclusions about how the economy works. How can that be explained?

Reisman provides the answer at the beginning of his article where he exempts some wealthy capitalists from his defense:
I exclude fortunes built on a foundation of government subsidies, or government regulations harming competitors, and those built merely on a foundation of inflation and credit expansion. In today’s “mixed economy,” many great fortunes have mixed foundations. In such cases, my discussion applies only to the free market element in the mixture.
Reisman refuses to defend capitalists who earned their fortunes by becoming cronies of governmental authority. Reisman trusts the free market, by means of competition and bankruptcy, to neutralize the fortunes of fraudulent, dishonest and manipulative capitalists .

On the other hand, Robert Reich and those who buy into the policies advocated by The Venus Project distrust the free market. They trust some incarnation of authority to keep capitalists honest. There lies the difference and the rub.

Both Reisman and Reich understand that some human beings are prone to take the dishonest, fraudulent route to wealth and comfort. Reisman thinks such dishonest human beings are just as likely to become governmental authorities as they are capitalists. So he distrusts government and advises against government intervention in the market.

Reich believes that those in government are somehow immune to fraud and dishonesty or, if they are not immune, he believes they will be kept honest by "the people" through democratic institutions or through direct and intense community scrutiny of government. Therefore, he advises government intervention in the marketplace at every turn.

Having been in business and having successfully competed in the free market, I side with Reisman. As a small business owner I observed first hand how large businesses and corporations seek advantage and favors from their friends in government. I saw how government officials were easily and willingly manipulated. I saw how they sought power and used it to their advantage and to support their own personal agendas...most often to the detriment of consumers in the marketplace.

Perhaps Reich is an honest man and perhaps he acted honestly when he was a powerful government official. However, I think the vast majority of Americans have observed politicians long enough and well enough to know that if Reich was truly honest then he was an exception to the rule.

Isn't it a self-evident truth that putting our trust in a politician or a bureaucrat -- or even in the meaningless abstraction of "the people" -- is a sublimely ridiculous notion in America today?

Wednesday, January 22, 2014

Do As I Say, Not As I Do

I've written here frequently on what's happening in Venezuela. The country is being destroyed by leftist policies and a tyrannical leader. It's come to my attention that back in November of 2013 the staff at Global Public Square, an organization at CNN run by Fareed Zakaria, weighed in on the Venezuelan situation with an article entitled: "Five ways to ruin an economy."

What are the five ways? Maru Angarita summarizes them:
Rule #1. Attack big business.
Rule #2. Create hyperinflation.
Rule #3. Induce a currency crisis. 
Rule #4. Subsidize, subsidize, subsidize
Rule #5 Become a dictatorship
The rules are self-explanatory except for Rule #3. Here's how the staff at Global Public Square explains it:
Rule #3. Induce a currency crisis. The easiest way to curb inflation is to increase the value of your currency. Basically, print less money. But it turns out Caracas actually has a cash crunch, so it actually needs to do the opposite. Meanwhile, the black market for American dollars is thriving. The official exchange rate is 6.3 Bolivars for every greenback. In reality, the black market rate is 7 to 10 times that amount. For a country which imports 70 percent of its basic goods, this is a big problem. You may remember recently that Venezuela ran out of toilet paper. Why? Well, it's running out of a different kind of paper – the money to pay for it.  [Italics are mine]
This explanation is bogus for a couple of reasons. First, the prescription to print more money (Bolivars) is the last thing the government of Venezuela needs to do. How do the authors of this article think their Rule #2 was accomplished? In fact, the Venezuelan government created hyperinflation by printing more Bolivars -- much too many Bolivars! Printing more now would not solve the problem, only exasperate it.

Second, the reason there is a "cash crunch" in Venezuela is because of Gresham's law -- good money drives out bad money. The black market for American dollars is thriving in Venezuela because American dollars are driving out the greatly depreciated Bolivars. In contrast to the Bolivar, US dollars are widely accepted in exchange for hotly demanded goods and services. The problem is that openly shopping with US dollars is illegal. Hence, the supply of goods and services is driven underground where the black market US dollar thrives.

The black market and the Bolivar's depreciation will continue so long as the central Venezuelan authority keeps printing the currency in massive quantities. 

Leftist ignorance of basic economics is astounding. Not only do the authors misunderstand the cause of inflation, they don't seem to realize the affect of government spending. In the paragraph under Rule #4 they write:
If Caracas is running out of money, the government doesn't seem to know. Just last month, President Maduro raised public sector salaries by 10 percent across the board. This comes after two recent elections, where the government lavished subsidies to win votes.
Question: If there is a "cash crunch" in Venezuela, how does the government find cash to pay salary raises and subsidies to their crony friends? I think it's obvious: they print it. But, as the authors seem to realize, such printing has no positive effect on the country's "currency crisis."

Another thing that struck me about the CNN article was that the authors' "five ways to ruin an economy" is the exact political policy and economic plan of the Obama administration for the US!

Could it be that the Global Policy Square staff believes that economic laws apply to banana republics like Venezuela but not to reserve currency empires like the US?

Thursday, January 16, 2014

Want A Good Laugh?

Google "The Economy."

The first items you'll see listed are ads from Goldman, Sachs and The Economist magazine. Don't try to understand "the economy" on your own. Ordinary chumps like you and I need brokers and technical magazines to explain it to us. Goldman, Sachs makes money investing us in "the economy;" The Economist makes money warning us that investing in it might not be a good idea.

Next we've got CNN bringing us "breaking news" on "the economy." Then, Whitehouse.gov weighs in. (Is anyone surprised?) Then, Wikipedia, the internet's go to site for explaining everything we don't know about, has its say. Then, there are newspapers like the LA Times reporting that the "housing market is still a drag on the economy." Next are "in-depth articles" about a "green economy" and an "innovation economy..."

Really? These sites treat "the economy" as if it were some kind of machine akin to a sports car or a jet airplane, a machine that can be slowed down by a faulty aerodynamic design. The best economy is a streamlined economy. A "green economy" is preferable to an economy of another color. Next year's "innovation economy" will be superior to this year's sluggish model.

If you want a really good laugh, read what the experts -- the professional economists -- have to say about "the economy."

Professional economists come in just about every flavor under the sun. There are Keynesians, Post Keynesians, Neo-Keynesians, Monitarists, Classicists, Neo-classicists, Ricardians, Marxists, Austrians, etc. etc. Each flavor has "the economy" figured out and dissected down to its last marginal utility and demand curve. It's rarified air thinner than Denver's, believe me.

The truth is professional economists are flimflam artists and their profession is smoke and mirrors. 99% of them are arrogant blowhards who love to hear themselves talk and crave seeing themselves published because that's how they become tenured professional economists, or professors. These are the guys who spend their entire adolescent and adult life sitting behind a Steelcase desk tucked away in a shabby office on the eighth floor of a State University academic building.

Professional economists are not like engineers who attend college, learn the physics behind building bridges, then graduate into the real world to actually build bridges. Professional economists never leave school. They don't build anything except their academic reputations and curriculum vitaes. Their idea of striking it rich is speaking at a Chamber of Commerce annual meeting where the sponsors will spring for airfare and a per diem. Their ultimate dream, of course, is winning the Nobel Prize. Sadly, this dream comes true for roughly one in a million of them.

But enough about the dreary lives of economists. Let's concentrate on what we can't learn from them. Barely one of them has the sense or the courage to say what "the economy" really is and to explain how it really works. "The economy," you see, is nothing more and nothing less than you and I and our neighbors cooperating...earning a living, running businesses, buying groceries, making and spending money. It's that simple.

So why do economists fuss so about supply and demand, optimal utility, endogenous money, multiplier effects and propensities to consume?

In order to answer that question, you have to understand the economics profession which is basically comprised of two different types of individuals: those who like to stick their nose in your business, and those who don't.

As I said, "the economy" is no mystery. It's simply you and I and our neighbors cooperating, trading, buying and selling, exchanging our skills, labor, ingenuity, products and services in factories, schools, grocery stores and shopping centers. In other words, "the economy" is you and I living our everyday life.

The problem is that some of our neighbors, namely the economists who like to stick their nose in other peoples' business, don't like the way you and I live our life. So they trick us into believing that "the economy" is something vitally important and threatening. They invent unfathomable jargon to describe it. They delude us into thinking they know what they're talking about. But all the while they are devising ingenious and devious means of using "the economy" to force us to live our life in a way they find more satisfying. The means they devise center around government coercion.

Left alone, individuals generally function pretty well in society. They know what's best for them and their families. For the most part, they cooperate with others and earn a pretty decent living. The problem is that nosy economists don't study individuals and their unique situations; they study faceless aggregates, i.e., they gather data on billions of nameless individuals and trillions of transactions, homogenize it all in a computer and print it out in statistical reports. Upon analysis of this anonymous data, they discover that some arbitrary group of people earns a higher income than another arbitrary group. Some arbitrary groups have bigger cars, fancier houses, better health insurance and loads of disposable income.

These facts of life are not all that disturbing to most Americans who understand that individuals are all uniquely different. Some are smart; some are stupid. Some are ambitious; some are not. Some are young and just starting out; some are in the prime of life. Some are retired business owners; some are just plain retired and bagging groceries. Most Americans aren't too concerned about how their neighbor earns his living. Most Americans are too wrapped up in making their own living. Most realize that what their neighbor earns or doesn't earn won't affect them in the least.

However, the economists with their noses stuck in their aggregate statistics are extremely disturbed by what they see. They ask themselves why one class of worker in "the economy" should earn lower wages than another class of worker? Why should one gender be paid more than another gender? Or one race be paid more than another race? Why should one group of Americans live relatively high on the hog while another group has to work two or three jobs to feed their families, and yet another group can't find work at all?

Perched high up in their university office towers, these nosy economists can't distinguish one human individual from another. Nor can they fathom unique human circumstances. The see only the aggregates: the masses, the groups, the classes, the categories and the factions -- all arbitrary, and all of their own invention. To the economist the masses casting about beneath them resemble ants and "the economy" the anthill. However, contrary to the anthill, this human economy seems chaotic and unplanned.

So they devise plans to fix it from on high. To eliminate income inequities they suggest taxing one aggregate and using these taxes to subsidize another. They suggest raising the wages of one "class" and they rationalize away the negative affects this policy will have on another "class." They surmise that "the economy" they study and observe would function better and more equitably if it were planned and if that plan was administered by a centralized manager in the government. And who better to fill the role of the planning and managing government bureaucrat than the "experts" who have made studying "the economy" their life's passion?

So these nosy economists sell themselves and their theories like cheap whores to newspapers and political think tanks, to industry and unions, but most of all to government executives, legislatures and bureaucracies. After all, what good are economic theories if they gather dust in old books on a library shelf? What good is an economist unless he has the power to test his theories on real, live human ants?

And believe me, these nosy economists know how to gain power. They gain enough to vacate their shabby university offices and take up residence on Wall Street and in the White House and in the Congress and the Federal Reserve. And their theories follow wherever they go.

As a result, the government spends massive amounts of money it doesn't have and incurs mountains of debt following the advice of economists who insist "the economy" be stimulated in order to smooth out the bumps in their charts and graphs.

And where does it get us? Nowhere. Individuals like you and I have a more difficult time living life. Our taxes are higher. Our wages are lower. Our money is depreciated. Our savings are depleted. We are showered with worthless government programs we don't need and don't use. In order to retire we are forced to go on the government dole. In order to get ahead, or at least keep from falling behind, we have to lobby our congressman at every turn...or make a donation to his campaign fund.

Our kids are brainwashed in public schools. Even our light bulbs are regulated. And our health insurance and health care system are controlled from a luxurious suite full of highly paid bureaucrats and economists at the top of a building in Washington, DC.

Bottom line: We're not better off but the economists sure are.

Gee, maybe they're the ones having a good laugh.

Saturday, January 11, 2014

My Economic Freedom For "An Apartment And Some Groceries"

According to Jesse A. Myerson, America is an "economic hellhole." As much as I agree with Myerson, I disagree with his prescriptions for climbing out.

Myerson prescribes five means which will, supposedly, allow Americans to climb out of their economic hellhole: a government-mandated "guaranteed job;" a government-mandated "guaranteed income;" government-mandated community-owned "land trusts;" government-ownership of the "private sector;" and government-ownership of the "banking game."

Of course, in order to do all this, the government would have to own you and whatever "private" property you now think you own. Moreover, the politicians and bureaucrats that make up government would have to be smarter than you, more efficient than you, more ambitious than you and more honest than you. All doubtful propositions.

Jonah Goldberg wrote a followup piece reminding Myerson that his "concrete proposals" for creating a "just, fair society" are hardly new. Rather, they are well-worn and tried prescriptions of Marx and Lenin. Goldberg offers an opinion as to why the "failure of communism didn't put the debate [between capitalism and communism] to rest." He chalks it up to youthful ignorance of economics and history.

In a rebuttal to Goldberg's followup, hard to imagine squeezing in the Continental Congress in a world where Thomas Jefferson had to run across town to his minimum-wage night job." He suggests Jefferson might have achieved more if his pals in the Continental Congress had voted to provide him with an "apartment and some groceries."

What kind of moral outlook must a fellow have who could even imagine a man like Thomas Jefferson working for and being satisfied with a "minimum wage night job?" Or a man like Jefferson being demoralized and economically defeated by the lack of an apartment and three squares a day?

Rensin describes his "moral outlook" as follows: "Freedom, in the most prosperous nation on Earth, must entail the freedom to act without the constant specter of homelessness, hunger and preventable illness." He grounds his endorsement of Myerson and Myerson's communist prescriptions in this moral outlook. I contend Rensin's moral outlook is both unrealistic and illogical. Therefore, it is nothing less than 21st century snake oil.

It is obvious that Rensin's moral outlook can be realistic and logical only in the context of a nation that is already "prosperous." To deny this is to endorse the absurd. How could there be freedom from the "constant specter of homelessness, hunger and preventable illness" in a nation which is already beset by homelessness, hunger and preventable illness?

What Rensin, Myerson and their fellow "lefty millennial activists" don't seem to comprehend is that individuals like Thomas Jefferson create prosperous nations because they are haunted by "the constant specter of homelessness, hunger and preventable illness." This specter is the incentive that motivates their individual creativity and industriousness, that causes them to earn themselves out of poverty, that creates a nation of prosperous individuals.

Poverty, not prosperity, is the natural state of mankind. So the proper question for lefty millennials to consider is not how should the spoils of prosperity be divvied up, but how was this prosperity created in the first place?

And how will this prosperity continue to be created if individual Americans come to believe they must no longer create it themselves?