Archive for June 2012 – Page 2

Jerry Davis R.I.P.

Sadly, one of the most enthusiastic and generous supporters to the Mises Institute, Jerry Davis, has passed away.  Before health issues slowed him, Jerry was a frequent caller to the Institute, providing inspiration, to talk about Austrian economics and liberty, or to order books to be sent to friends or just people he came in contact with.  Jerry purchased  thousands of books  to spread the word of liberty.

His generosity made the Mises Circle in Houston a tradition and set the standard for Mises Circle attendance.   Mr. Davis’s sponsorship extended above and beyond, as he worked tirelessly to fill tables.  He paid the admission for dozens of attendees in addition to the Institute’s event costs.

Jerry was also an enthusiastic supporter of Mises High School events, sponsoring these programs in Auburn, Houston, and other cities.  What he cared about most was for young people to learn about freedom and sound economics.

Jerry was truly one of a kind.  Thousands of students have benefited from his kindness, generosity and passion for liberty.

Today, the cause of freedom lost a real warrior.  But his legacy will live on through the many he has inspired.

Jerry, R.I.P.

On Napolitano’s Facebook Page

A Glimpse at Rothbard the Man

“While Rothbard was still busy writing and polishing the manuscript of his magnum opus, Hans Sennholz was already a quality product of Mises’s NYU seminar….And in distinct contrast to Rothbard, who spent nights working or discussing with friends, slept through much of the day, missed deadline after deadline, and tended to be messy and disorderly, Sennholz featured the Teutonic personal virtues of punctuality, orderliness, and reliability.”

–Jörg Guido Hülsmann, Mises:  The Last Knight of Liberalism

Fed “Transparency”

According to Bloomberg’s survey of economists, 58 percent believe that the FOMC will announce an extension of Operation Twist at the end of its meeting at 12:30 pm today.  The majority expect the Fed to extend the maturity of its securities portfolio by substituting the purchase of long-term securities, possibly even more mortgage-backed securities, as its short-term securities mature in order to further depress long-term, especially mortgage, interest rates.  This alternative would not expand the money supply, but merely further distort credit markets. With the U.S. inflation rate near its 2-percent “anti-deflationary” target and the break up of the euro at least momentarily averted by the results of the Greek election, 60 percent of the survey’s respondents do not foresee the implementation of the more radical stimulus of a third round of quantitative easing, which involves the expansion of the Fed’s balance sheet and the money supply through the net purchase of additional securities.

But how will the new kinder, gentler and more transparent Fed communicate to the public this momentous decision?  Will it do so frankly and in plain language?  Right! According to a senior economist at Bank of America Corp. in New York, “The FOMC in its post-meeting statement could voice more willingness to buy [long-term] bonds if necessary, saying that it ‘stands ready’ to adjust its balance sheet rather than that it ‘is prepared’ . . . .”

WSJ Bemoans Restoration of Efficient Allocation of Credit

Here are the lamentations.

Taking Most of the Credit

 

Remembering Bill Peterson

We hear from Roy Cordato that our old friend Bill Peterson passed away today at age 91.  Bill was a student of Ludwig von Mises, having attended his NYU seminars and written his dissertation under Mises at NYU.  He was a recipient of the Mises Institute’s Schlarbaum Prize for lifetime achievement several years ago.  I first met Bill in the early 80s.  He was one of the most eloquent writers I have ever come across, someone who could write as well on economic matters as Henry Hazlitt.  This talent apparently got Bill a job as a speech writer for Richard Nixon.  Bill never wrote a great treatise (but hey, who has?) or even many scholarly articles, but he was a free-market crusader all his life, along with his wife Mary who worked for one of the Big Three U.S. automakers during her career as a publicist.  Part of her job was defending free enterprise.  I doubt that such jobs exist any more.
Bill was a health and exercise aficianado his entire life, and his diet and exercise routine always kept him slim.  I don’t think I ever saw him when he was not dressed in an expensive looking men’s suit.  In this regard he copied Mises in the old European tradition.  Bill’s main talent as an economist was in popularizing the ideas of Mises and other Austrians.  Whenever I ran across an op-ed of his in the Washington Times or some such place they always stood out very starkly as by far the best-written articles in the entire newspaper, and of course I usually agreed with everything in them.
R.I.P.

Human Rights as Property Rights

“Liberals generally wish to preserve the concept of ‘rights’ for such ‘human’ rights as freedom of speech, while denying the concept to private property.  And yet, on the contrary, the concept of ‘rights’ only makes sense as property rights.”

–Murray N. Rothbard, The Ethics of Liberty

Start Wenzel’s Reading List Today

Starting today, we are running each article on Robert Wenzel’s 30-Day Reading List That Will Lead You to Becoming a Knowledgeable Libertarian as a Mises Daily.  (Today’s article is The Task Confronting Libertarians by Henry Hazlitt.)  So check out the front page of Mises.org each day to read the next article on the list!

Undone by Opportunity Costs

Yesterday morning my wife and I were planning to celebrate our wedding anniversary with dinner at an upscale restaurant.  We had been to the restaurant in the past  and were impressed by its  atmosphere and the quality of its meal ingredients, preparation, and service.  We also checked the menu online and decided our likely menu choices greatly exceeded their respective prices on “our” (i.e., her) value scale.  But by late yesterday afternoon, the cost of the meal had risen so much that we no longer could afford it,  despite the fact that the  restaurant prices, our culinary tastes, our household income prospects and the market value of our real and financial assets had not changed during that short period.  What  happened was that we wandered into a bake shop and cafe that displayed on its walls the original paintings of several local artists that were for sale.  My wife’s desire for one of the paintings suddenly made each dollar much more valuable relative to the enjoyment from our prospective dinner.  In economic terms, the opportunity cost of our planned anniversary dinner, in terms of the higher valued painting we would have to forego,  now exceeded its expected benefit.  Thus we celebrated our anniversary with a very good antipasta salad and pizza–although the whole time I thought about a cashew-encrusted rack of New Zealand lamb brushed with honey and served with whipped garlic mashed potatoes.

The Economist and Errant Doctrines

“The economist must deal with doctrines, and not with men.  It is for him to critique errant doctrine; it is not his charge to uncover the personal motives behind heterodoxy.  The economist must face his opponents under the fictitious assumption that they are guided by objective considerations alone.  It is irrelevant whether the advocate of a false notion acts in good or bad faith; what matters is if the stated notion is true or false.”

–Ludwig von Mises, Memoirs

Block on Raico’s Great Book

Walter Block reviews Ralph Raico’s magnificent Classical Liberalism and the Austrian School for Barron’s. (Scroll down to the third review.)

Newly Released Video: Rothbard on Mises

From the description:

In this never-before-seen video, Rothbard gives a tribute to his mentor in Austrian economics, Ludwig von Mises, at a Libertarian Party convention in Pennsylvania in 1984. Rothbard discusses Mises’s work and life, and the growing popularization of his ideas in the United States.

Download an .mp3 version of this lecture here: http://bit.ly/Kh4jBj

Please note: The audio cuts out for a few seconds at the three-minute mark due to the age of the original tape.

Is Subjective Economics “Bourgeois Economics”?

“Marxism makes use of the same method with regard to modern subjective economics.  Unable to oppose it by a single word of reasonable criticism, the Marxian tries to dispose of it by denouncing it as ‘bourgeois economics.’  To show that subjective economics is not ‘capitalist apologetics’ it should be sufficient, surely, to point out that there are socialists who stand firmly by the theory of subjective value.  The evolution of economics is a process of the mind, independent of the supposed class interests of economists, and has nothing to do with supporting or condemning any particular social institutions.”

–Ludwig von Mises, Socialism:  An Economic and Sociological Analysis

Economics is Abstract Reasoning

“Economics, like logic and mathematics, is a display of abstract reasoning.  Economics can never be experimental and empirical.  The economist does not need an expensive apparatus for the conduct of his studies.  What he needs is the power to think clearly and to discern in the wilderness of events what is essential from what is merely accidental.”

–Ludwig von Mises, Human Action:  A Treatise on Economics

Defending the Defendable

Ron Paul for President in 2012: Yes to Ron Paul and Liberty by Walter E. Block. Bronx, New York: ISHI Press International.

Walter Block is well known for his book Defending the Undefendable. In this new work, Walter presents a series of essays to “make the case for his [Ron Paul’s] occupancy of the White House. Each and every last one of these chapters is an attempt on my [Walter’s] part to expand and expound upon his [Congressman Paul’s] views, to publicize them, to promote his candidacy, to defend it against attacks from within and without the libertarian movement” (p. 13).

While the book is written to defend and support Dr. Paul’s run for the highest elected office in this country, the book is important in a broader context. In these essays Professor Block does what he does best, defend the defendable; libertarian principles and Austrian economics.  Readers of this book, even those who consider themselves well versed in either or both of the above, will find their understanding clarified, enhanced, or reinforced by Walter’s biting commentary on Paul’s “distinctive views on  three issues; foreign policy, personal liberties, and economics” (p. 16). In fact, as I first began reading, I was reminded of a most enlightening dinner at an Austrian Scholars Conference  in the late 1990s where I was fortunate enough to be sitting between Walter and Stephan Kinsella as they engaged in a vigorous discussion of various fine points and controversies in libertarian philosophy; extensions and applications of the non-aggression axiom.

As the self appointed Jewish Mother of the libertarian movement, Walter, while promoting Ron Paul, does not shy away from ‘nudging’, not only his readers, but also Ron Paul. One of my favorites:

Gold. Strictly speaking, you [Congressman Paul], do NOT favor a gold standard. Rather you favor free market money: any monetary medium chosen by market participants. The reason you mention gold at all is that whenever people were “free to choose” (title of a book written by an opponent of the gold standard, Milton Friedman), as a historical fact they chose gold (and sometimes, silver). But, if in the future, under the sort of free enterprise system you will promote as president of the United States, if the market settled on copper or platinum, or indeed anything else, you would have no quarrel with that outcome (p. 172). [For an in depth discussion see Jeffrey M. Herbener recent excellent testimony to the Subcommittee on Domestic Monetary Policy and Technology, Committee of Financial Services, U.S. House of Representatives, “ Production of Money on the Market”)

If I could nit: the book does suffer slightly from repetition, sloppy editing, and sources mentioned in the text but not listed in the references at the end. An index might have been useful as well.

However, Walter effectively explains the importance of Paul’s candidacy for increasing awareness of and acceptance of libertarianism philosophy to a broader public (something I experienced this spring as I returned to the classroom after nearly 7 years in administration). In my view, Block effectively responds to Paul’s critics both from within and outside the libertarian movement. Readers, like me, who have not been as active as supporters as we should have been, will hopefully, stand correctly chastised and nudged to greater efforts in the future. Would that we could all do as much and as effectively for liberty as Dr. Paul (and Professor Block).

The State-Subsidized Car Nobody Wants

Of course, GM does understand at least one economic concept: rent-seeking.

The State is a Protection Racket

“Yet how can there be better protection for A and B, if S must tax them in order to provide it?  Is there not a contradiction within the very construction of S as an expropriating property protector?  In fact, is this not exactly what is also–and more appropriately–referred to as a protection racket?  To be sure, S will make peace between A and B but only so that he himself can rob both of them more profitably.”

–Hans-Hermann Hoppe, Democracy:  The God That Failed

An Inevitable Unity to Market Phenomena

“And it was realized that there is an inevitable unity to market phenomena that even power cannot undermine.  It was discovered that in the social arena there is something at work that even the one holding power cannot bend and to which, in achieving his ends, he must conform no differently than in submitting to the laws of nature.  In the entire history of human thought and the sciences, there has never been a greater discovery.”

–Ludwig von Mises, The Myth of the Failure of Capitalism in Volume 2 of the Selected Writings of Ludwig von Mises

The Private Economy Is Doing Fine: Regime Uncertainty or Regime Worsening?

A day after President Obama opined, “the private economy is doing fine”, the Wall Street Journal in its “Notable & Quotable (June 9, 2012, on page A11) highlighted Economist Robert Higgs from his new book “Delusions of Power” (2012) (Here and here). Dr. Higgs who has early and often argued that ‘regime uncertainty’ (Important New Evidence on Regime Uncertainty) has been a major factor in the slow, no, worst since the great depression, recovery is quoted:

John Maynard Keynes persuaded his fellow economists and then they persuaded the public that it makes sense to think of the economy in terms of a handful of economy-wide aggregates: total income or output, total consumption spending, total investment spending, and total net exports. . . .

In fact, “the economy” does not produce an undifferentiated mass we call “output.” Instead, the millions of producers who bring forth “aggregate supply” provide an almost infinite variety of specific goods and services that differ in countless ways. Moreover, an immense amount of what goes on in a market economy consists of dealings among producers who supply no “final” goods and services at all, but instead supply raw materials, components, intermediate products, and services to one another. Because these producers are connected in an intricate pattern of relations, which must assume certain proportions if the entire arrangement is to work effectively, critical consequences turn on what in particular gets produced, when, where, and how.

These extraordinarily complex micro-relationships are what we are really referring to when we speak of “the economy.” It is definitely not a single, simple process for producing a uniform, aggregate glop. Moreover, when we speak of “economic action,” we are referring to the choices that millions of diverse participants make in selecting one course of action and setting aside a possible alternative. Without choice, constrained by scarcity, no true economic action takes place. Thus, vulgar Keynesianism, which purports to be an economic model or at least a coherent framework of economic analysis, actually excludes the very possibility of genuine economic action, substituting for it a simple, mechanical conception, the intellectual equivalent of a baby toy. . . .

Because the vulgar Keynesian has no conception of the economy’s structure of output, he cannot conceive of how an expansion of demand along certain lines but not along others might be problematic. In his view, one cannot have, say, too many houses and apartments. Increasing the spending for houses and apartments is, he thinks, always good whenever the economy has unemployed resources, regardless of how many houses and apartments now stand vacant and regardless of what specific kinds of resources are unemployed and where they are located in this vast land. Although the unemployed laborers may be skilled silver miners in Idaho, it is supposedly still a good thing if somehow the demand for condos is increased in Palm Beach.

Economist John Taylor in “Rules for America’s Road to Recovery” (Friday June 1, in the Wall Street Journal) provided an analysis of the current slow recovery that adherents of Robert Higgs’s “regime uncertainty”argument will find much to agree with, “America’s economic future is increasingly uncertain. In my view, unpredictable economic policy─massive fiscal ‘stimulus’ and ballooning debt, the Federal Reserve quantitative easing with multiyear near-zero interest rates, and regulatory uncertainty due to ObamaCare and the Dodd-Frank Reforms─is the main cause of persistent high unemployment and our feeble recovery from the recession.”

The real problem is not with just policy uncertainty, but uncertainty in the direction of “regime worsening”─the slowness in the economy is driven, not by just uncertainty, but more by the possibility that things could become even worse for returns on investment and property rights rather than better. Just imagine where the economy would be now if the current administration had gotten even more of what it asked for or has asked for─card check, cap and trade, increased tax rates on capital income, or even more recently, the Paycheck Fairness Act. Robert Higgs and the Journal are correct (“An Economy Built to Stall,” June 2-3, 2012, A14), “Mr. Obama has had the freest run of policy of any President since LBJ [The 1970s illustrate just how well that turned out.] So maybe the problem is the policies. ” And the rhetoric.

To see just how fine the private sector is doing in this environment see the graph on Real Gross private Domestic Investment:

http://research.stlouisfed.org/fredgraph.png?g=7Tp

Suggested Reading: John B. Taylor, “More Evidence on What Is Holding the Economy Back.”

Important extensions and/ or applications of ABCT to the current economy: two highly impotant new contributions:

Joseph T. Salerno, “A Reformulation of Austrian Business Cycle Theory in Light of the Financial Crisis,”

Adrian Ravier and Peter Lewin, “The Subprime Crisis,”

The Anti-Utopianism of Private-Property Anarchism

“As a reflection of this fundamental realism–anti-utopianism–of his private-property anarchism, Rothbard, unlike most contemporary political philosophers, accorded central importance to the subject of punishment.  For him, private property and the right to physical defense were inseparable.  No one can be said to be the owner of something if he is not permitted to defend his property by physical violence against possible invaders and invasions.

–Hans-Hermann Hoppe’s Introduction to Murray N. Rothbard’s The Ethics of Liberty