Mises Weekends: Jeff Deist Talks Scottish Secession and the EU with Andy Duncan

Jeff Deist and Andy Duncan discuss the rise of UKIP in England, and whether it represents a real populist anti-state uprising or just rightist politics. Andy skewers the strutting political class in London, and the charade of voting Labour or Conservative based on minute policy differences. They also discuss the upcoming Scottish independence vote, and whether the land that gave us Robert the Bruce and David Hume has succumbed completely to socialism. Could an independent Scotland become the Singapore of the North, or just another Eurozone basket case?

Andy Duncan is financial derivatives lecturer based in England. He uses the lessons of Austrian Economics to help explain how free markets are trying to work under the current blanket of global government regulation. He teaches mainly in New York, London, Dubai, and Singapore.

YouTube link: https://www.youtube.com/watch?v=uWDTvwI7m1o

 

Must Free-Marketers Reject Global Warming?

GISS_temperature_2000-09_lrgYou can’t make this stuff up. Someone at the UK Guardian named David Grimes has declared that “economic liberalism,” by which he means the ideology of laissez-faire, “clashes” with “scientific evidence.” Which scientific evidence, you might ask? Well, the unassailable scientific dogma of global warming is one:

Climate change illustrates this well, because despite overwhelming evidence of anthropogenic influence, there is a tendency for those with pronounced free-market views to reject the reality of global warming. The reason underpinning this is transparent – if one accepts human-mediated climate change, then supporting mitigating action should follow. But the demon of regulation is a bridge too far for many libertarians.

There is no doubt that some people who purport to be advocates for free markets reject arguments of anthropogenic global warming out of hand without even considering the evidence. I’m agnostic on the matter myself, although I certainly reject the ludicrous assertion that there is such a thing as “settled science” and that the matter is not debatable. And unlike many allegedly great men and women of scientific inquiry, I refuse to agree that global warming “deniers” are heretics who should be burned at the stake (or the modern equivalent of having one’s career ruined). To anyone capable of logical thought, it should be obvious that one’s support for free markets is utterly independent from one’s opinions on the matter of global warming. There’s no reason at all why someone who accepts the reality of anthropogenic global warming would have to support government regulation of all energy usage. To argue such would be like arguing that one’s acceptance of the Bering Strait theory determines one’s opinions about the minimum wage. So why would Grimes think this? We can see it in his quotation above where he says:

The reason underpinning this is transparent – if one accepts human-mediated climate change, then supporting mitigating action should follow.

Ah, so there it is. Acceptance of global warming = acceptance of “mitigation” = acceptance of government regulation. Case closed.

Grimes packs many assumptions into just this one statement. Let’s look more closely:

If one accepts that global warming is a grave danger, is it nonetheless necessary to support “mitigating action” even if it can’t be shown to actually improve anything at all? Even assuming that global warming were proven beyond a reasonable doubt, the burden of proof of success is still on those who want mitigating action. Specifically, they need to be able to prove that such action has  a reasonable chance of achieving the desired ends. They most certainly have not done so. Indeed, many scientists say it’s already too late to stop it. Many argue that even if major global action were taken right now, the expected result over the next century would be too small to make any difference. In other words, it’s futile at this point to enact mitigating actions. (Also here.) Presumably, if it’s too late, then there’s no reason we should still be debating mitigating action. But of course, having realized that the “it’s too late” message is a PR disaster, the message has instead been changed to “it won’t be too late if we act right now!”

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The Johnson Center at Troy University

The Johnson Center at Troy University has two Mises alums and former Fellows on the faculty: Malavika Nair and G.P. Manish. Have a look at the center’s new video:

Writes Malavika Nair: “We are getting a Masters program next fall with a focus on Austrian economics and liberty so there’s exciting stuff happening!”

The Myth of the Unchanging Value of Gold

6858Mises Daily Friday by Joseph Salerno:

Many economics textbooks claim that a function of money is to measure the value of goods. In fact, the value an individual attaches to a given sum of money or to any kind of good (including gold) is based on a subjective judgment and is without physical dimensions.

Rethinking Japan’s “Lost Decades”

6860Mises Daily Friday by Peter St. Onge:

The “Lost Decades” narrative in Japan and the US has kept the drive for more government intervention going for a long time.

Hoppe on Entrepreneurs and Thornton on the Drug War in The Free Market

augfm The August Issue of The Free Market Is Now Online!

Hans-Hermann Hoppe is back with a new lecture on the social virtues of the entrepreneur this month:

What can be unambiguously stated about a capitalist’s profit or loss is this: his profit or loss is the quantitative expression of the size of his contribution to the well-being of his fellow men, i.e., the buyers and consumers of his product, who have surrendered their money in exchange for his more highly valued (by the buyers) product. The capitalist’s profit indicates that he has successfully transformed socially less highly valued and appraised means of action into socially more highly valued and appraised ones, and thus increased and enhanced social welfare.

We also interview Mark Thornton about his recent debate at Oxford University:

Mises Institute: Why were you invited to debate at Oxford?

Mark Thornton: The Oxford Union can pretty much get whoever they want to debate, including presidents, prime ministers, Mother Theresa, the Dalai Lama, and even Julian Assange, so I was honored that they invited me. I met several students in the Oxford Union and at Oxford University who were familiar with my work on the drug war and at the Mises Institute. Each side of the debate generally consists of a student presenter and three experts. The debate is similar in structure to the House of Commons and has been that way since 1823.

We recounted the highlights of the Summer Fellows program and the Rothbard Graduate Seminar here in Auburn. Be sure to also find the latest updates on new translations, and new publications, degrees, and media appearances from our scholars and alumni.

Military Spending and Bastiat’s “Unseen”

OrigamiTankEric Phillips’s Mises Daily article  on military spending from 2012 is as timely as ever: 

Military Spending and Bastiat’s “Unseen”

by Eric Phillips

[An army of] a hundred thousand men, costing the taxpayers a hundred million of money, live and bring to the purveyors as much as a hundred million can supply. That is which is seen.

But, a hundred million taken from the pockets of the taxpayers, ceases to maintain these taxpayers and their purveyors as far as a hundred million reaches. This is that which is not seen. Now make your calculations. Add it all up, and tell me what profit there is for the masses?

-Frédéric Bastiat

You will often hear self-styled conservatives say, “I support the free market and a strong national defense.” But if by supporting a “strong national defense” they mean supporting a large and aggressive conventional military — as they almost invariably do — these two positions are mutually exclusive. A military establishment funded by taxation, inflation, and debt is just as destructive to the market economy as a welfare establishment funded by taxation, inflation, and debt. Every dollar spent on the military, just like every dollar spent on the Department of Health and Human Services, is a dollar not spent or invested in the civilian economy. Every person employed by the military or the firms that supply the military with equipment is a person not employed in the civilian economy. And since civilian employment and capital accumulation are the foundations of a prosperous capitalist economy, a conventional military can only exist at the expense of a fully functioning free-market capitalist system.

Pork-seeking congressmen, crank economists, and many laypeople believe that generously funding the conventional military is good for the economy. They point to the factories that manufacture tanks and fighter jets, the ports that build ships and service the navy, and the booming economies that surround military bases. But as Bastiat explained, they err in focusing on only “that which is seen.” They neglect to consider the private-sector jobs and investment projects that do not exist because of the taxes necessary to fund the military. In other words, they miss “that which is not seen.” Economists call these foregone alternative uses opportunity costs. The opportunity cost of funding the military is the sum of what could have been produced if the resources devoted to the defense establishment had not been drained from the private sector.

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How Non-Profits Enhance Freedom and Markets

6850Mises Daily Thursday by Karen De Coster:

The nonprofit form of enterprise is indispensable to both recipient individuals and the benefactors who fund them.

States, Cartels, and the Anarcho-Capitalist Opposition

Political protestMises Daily Thursday by David D’amato:

If, for good reason, we generally distrust the concentrated power wielded by coercive monopolies, we ought to avoid at all costs placing more power in the state, the ultimate embodiment of monopoly.

Working in Ron Paul’s Congressional Office

Lew Rockwell talks to Tom Woods, who was guest-hosting the Peter Schiff Show, about his days as Ron Paul’s chief of staff in DC.

Steve Forbes Misunderstands Money

Billets_de_5000A recent column by Steve Forbes on money is a peculiar mixture of insight and error.  Forbes rightly says, “The blunt truth is that an active monetary policy has never, ever led to sound, sustainable growth. Without exception it has always done more harm than good, the only variable being the degree of damage rendered…It’s truly amazing that economists and policymakers remain obliviously impervious to the mountains of evidence proving that you cannot constructively guide an economy by manipulating interest rates and bank reserves.” Given these wise words, you might expect Forbes to call for a total end to government monetary policy.

Unfortunately, a key mistake prevents him from taking this step. He thinks that money measures economic value. “Money isn’t wealth. It measures wealth the way a ruler measures length, a clock measures time and a scale measures weight.” Forbes ignores the Austrian insight that economic value is purely subjective. There is no “unit of value” that corresponds to the objective measurements Forbes mentions.

Because Forbes thinks that money measures value, he favors “stable” money. “Central banks have only two legitimate tasks: preserving stable values for their money and dealing quickly, decisively with financial panics.” Beguiled by the illusion of a stable measure of value, Forbes winds up in support of an activist monetary policy.

Forbes discusses at greater length his account on money in his recent book Money, written with Elizabeth Ames.  I review this book, with my customary lack of enthusiasm, in the forthcoming September issue of The Free Market.

The Socialist Party In Chile Gets to Work Destroying the Economy

download (5)Axel Kaiser at Mises Brasil has penned a helpful update on the situation in Chile where socialist president Michelle Bachelet was elected to a second non-consecutive term in Chile. Bechelet’s second term appears to be far more ambitious in its efforts to introduce a series of socialist programs and reforms, and it certainly looks to be far more damaging than the administration of Ricardo Lagos, who seemed largely concerned with promoting relatively-free trade in spite of his own status as a member of the Socialist Party. 

Below is the Google Translate version of Kaiser’s article (edited down a little and corrected by me):

Michelle Bachelet Intends to Destroy the Institutional Foundations of Chile’s Economy

by Axel Kaiser

Only five months have passed since the socialist government of Michelle Bachelet took power in Chile, but it has been enough to make economic growth in the country collapse. The main cause of this sudden and dramatic decline in economic activity is the increased uncertainty generated by the new Chilean government, which aims to take a tabula rasa approach to to the institutions of the free market that allowed Chile to become the most prosperous country in Latin America.

One of the most harmful proposals is a massive tax reform, which has already been approved, which will dramatically increase the corporate income tax in Chile, leaving it above the average for OECD countries. Moreover, this tax reform – which was strongly opposed by associations of Chilean entrepreneurs, and is losing popular support – grants the national tax agency arbitrary powers over taxpayers.

Another target of the radical socialist Bachelet program is the flagship pension system in Chile. As is widely known, Chile was the first country to introduce a social security system that is managed by private companies and is based on individual capitalization accounts. Under this scheme, each month, the Chilean workers deposit a percentage of their income in an account under your name, which is administered by private companies called AFP (Pension Fund Administration). The arrangement works just like a funded system.

Thus, when the Chilean workers retire, they – unlike all other current worldwide pension systems – do not depend on other workers to continue contributing to the system to receive their retirement; they just get back all the money applied adjusted for inflation plus interest.

Unlike the state pension system created by Bismarck and copied all over the world – technically called pay-as-you-go – the Chilean system is fully solvent, because it does not depend on demographics or fertility rates to remain so.

Moreover, this system, by encouraging savings, has led to an intense process of capital accumulation in the country. The savings of workers was invested in the Chilean economy itself, something that was essential to the remarkable economic growth that the country experienced in the 1990s and 2000.

In many ways,  this arrangement has transformed Chilean workers into capitalists. In Chile, all follow the evolution of their Cuenta AFP (account) as they might follow the national football league, or even more closely: Chileans receive a monthly statement detailing how much has been added to one’s account detailing what he would receive monthly if he retired today, and how much he will receive if he continues contributing to the account until reaching 65 years of age…So it has become anathema in Chile for any union or political group to want to disrupt the system to their advantage. Such groups simply do not have the support of the population.

All of this, recognized by the economic literature, is disdained by the current socialist government.

Determined to bring the state back to pension management, Mrs. Bachelet and her ministers have already submitted a plan to create a state company for the pension sector. As is easy to predict, it is likely to create unfair competition for existing private companies, which would no longer be able to cope with the administration fees for a company that is subsidized with tax money. Moreover, if the state agency has a bad run, it will immediately be bailed out with more taxpayer money. Read More→

The Space-Junk “Crisis”

Debris-GEO1280Whenever you see the words “Lockheed Martin” you should think “taxpayer-funded cronyism,” so when I saw the recent Drudge headline that read “LOCKHEED seeks to clean up space…” I mentally added the clause “with money stolen from taxpayers.”

The space junk crisis is apparently the latest looming global disaster that requires a government solution. Drudge links to a Financial Times article that only gets to the financial heart of the matter six paragraphs down:

[The joint venture to track space junk between Lockheed and Electro Optic System Holdings] follows the award in June of a US$915m contract by the US Air Force to Lockheed to build a “space fence” project – a powerful radar system to track and catalogue space debris. This radar will monitor 200,000 of the largest pieces of junk in orbit.

Ah, so this latest “private sector” effort is really an adjunct to a grant of nearly a billion dollars from the US Treasury to Lockheed.

Lockheed knew how to strike when the iron was hot, of course, since the recent movie Gravity make space junk an issue in the popular imagination:

The 2013 Hollywood movie Gravity, which starred Sandra Bullock and George Clooney, focused public attention on the space junk problem, which Nasa [sic] has been grappling with for years.

It’s not hard to imagine the Powerpoint presentation delivered by Lockheed salesmen to USAF bureaucrats featuring a clip of the space-junk-caused disaster at the beginning of Gravity as an illustration of just how important it is that Lockheed get $900 million ASAP.

This isn’t to say that space junk isn’t a real issue. Space junk is causing real damage to actual property in orbit as noted in the article:

Awareness of the dangers posed by man-made space debris has grown since the first hypervelocity collision between satellites in 2009, which took place 800km above Siberia. Iridium 33, which was part of a network of satellites providing phone services, was destroyed when it collided with a deactivated Russia satellite Cosmos-2251.

But if space junk is a real problem for private parties, then it would appear that they have a large stake in solving the problem either through clean-up or by constructing space crafts differently. In other words, there’s an incentive to put private money into solving the problem. But why use voluntary and peaceful means when it’s easier for Lockheed to just go back to the well of taxpayer funds? When you’re a lobbyist-heavy corporatist outfit like Lockheed, it’s always easier to just employ the violence of taxation than the more costly work of market transactions. The financial benefits of such a strategy can be immense. The FT article notes:

…shares in Electro Optic Systems Holdings have risen: up by 49 per cent over the past seven days, closing Tuesday at 67 cents.

“There is a commercial opportunity when you consider investment in space is worth about US$900m,” says Ba-Ngu Vo, professor at Curtin University.

I wonder how many high-ranking DOD employees and members of Congress just happened to buy stock in EOS right before the new agreement was announced. We may never know.

 

The Economics of Perpetual War

Cyprian_WarThe 100th anniversary of the beginning of World War I seems like an ideal opportunity to spread a message of peace and economic cooperation; sadly, 2014 has so far been a year of new and renewed conflict far more than one of reconciliation.

By now, talk of the horrors of war is nothing new. Everyone knows about the total destruction war brings; in fact, we’ve known for millennia. As Lew Rockwell points out, “just about everyone makes the perfunctory nod to the tragedy of war, that war is a last resort only, and that everyone sincerely regrets having to go to war”—but war continues all the same. Even classical military strategists like Sun Tzu believed war should only be used only as a last resort, and argued that military campaigns could bankrupt states and ultimately, destroy them. Art of War actually states that “no country has ever profited from protracted warfare,” and cautions generals to “fight under Heaven with the paramount aim of ‘preservation.’” Yet as far back as we have historical records, these sorts of ideas have fallen on deaf ears among governments and military organizations alike.

Economics offers many insights into war making and why it persists, but the most fundamental explanation is an institutional one. It’s tragically simple: warnings about the horrors of war go unheeded because the power to make war—as well as “justify” it in the eyes of those forced to fight and finance it—lies in the hands of the state and its business and intellectual allies. States are monopolists of organized force, and as such decide when and how to use their power on a grand scale, especially when they wish to confront other monopolists.

In fact, economic reasoning tells us that conflict is an integral part of the logic of states, which are inherently prone to warfare and imperialism. That war is an essential and practically inevitable behavior of government has been known since ancient times: for instance, Art of War begins by stating that “War is the greatest affair of state, the basis of [its] life and death, the Tao to survival or extinction.” Read More→

Free Markets and Fighting Fires

Wildfire_in_the_Pacific_Northwest_(8776249150)According to Terry L. Anderson and Daniel Botkin, “Fighting Western Fires with Economics” is a good idea.

Were I writing an essay with this title, I would emphasize the role of private property rights. If all forests were owned by individuals and private corporations, those that did well in protecting their trees from conflagrations would prosper, those who failed to do so would lose money and eventually be forced into bankruptcy. Whereupon the ones who were more efficient protectors of the woodlands would  take over the holdings of the failures, and more and more acreage would fall under the control of  those who were effective not only at fighting fires, but at all aspects of protecting and promoting this valuable resource.

Would this be a perfect system? No, of course not. Nothing in this vale of tears rises to that level. Entrepreneurs in charge of making these decisions are imperfect human beings, who always make mistakes. But this “weeding out of the unfit” process tends to ensure that more effective fire fighters would tend to control more and more stands of wood, and the particularly inept less and less. Does anyone else have a better idea? No? I thought not.

Is this the tack that was taken by Anderson and Botkin? No. Of course not. Had they done so, there would have been no reason for me to have written this sharpish critique of their essay. Instead, I might have just blogged this on LewRockwell.com, alerting readers to a good, modern, application of the Bastiat – Hazlitt insights.

Which analytic technique did these authors offer to combat forest fires? What advice did they offer to this end? Property rights, profit and loss? No. Perhaps a different version of these insights? No, again. We search in vain for even any mention of these concepts. And this is more than passing curious, in that these authors are well known as being advocates of free market environmentalism.

Instead, horrors, they took on the role of efficiency experts for the state. Murray N. Rothbard had this to say about Milton Friedman in this regard: “Milton Friedman has once again been guided by his overwhelming desire not to remove the State from our lives, but to make the State more efficient.” Why do I mention this? I am not sure of Botkin, but Anderson is certainly a disciple of Friedman (full disclosure, as if any were needed: as I am of Rothbard). The point is, both Anderson and I are heavily guided by our respective mentors: Anderson (and Botkin) try to promote more efficient state control of forests, and I now upbraid him (them) for so doing, from the free enterprise perspective.  Neither the word “privatization” nor the phrase “private property” appears even once in this essay, and this is incomprehensible for an analyst who claims any adherence at all to the philosophy of laissez faire capitalism.

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Blaming That Cold Weather Culprit

One hundred dollar bill frozen in iceMises Daily Wednesday by Devin Leary-Hanebrink:

The Fed and it’s friends blamed cold weather for much of the year’s lackluster economic growth. But cold weather does not explain the economic slowdown because cold weather does not stop economic activity, it merely shifts it to other activities and products.

A Lesson in Economic Analysis from the Minimum Wage Debate

Magician holding a magic wandMises Daily Tuesday by Ken Zahringer:

Supporters of government interventions like minimum wages often pretend the economy is far less complex than it really is, and then conjure up a statistic as evidence of success. Careful analysis reveals another story, however.

How the Private Sector Might Colonize the Red Planet

Der Spiegel reports on the Mars One project to colonize Mars with funding coming from an 1440expected $6 billion in broadcasting rights in what would be a sort of interplanetary Truman Show.  Over 700 people are competing for four slots to make the trip 10 years from now, even though “a return ticket is not part of the deal.”

I don’t know who these 700 people are, but they provide a nice illustration of the subjectivity of value, given that

Mars is not a destination that sounds particularly attractive. It is bitterly cold and dust storms sometimes envelope the entire planet for weeks at a time. Its sights are also limited to gorges that are several kilometers deep and enormous volcanoes, one of which is the size of Poland and stretches 26 kilometers (16 miles) into the Martian sky.  For settlers there, though, the Earth would be but a tiny point in the heavens and if something happened, there would be no help available. The flight takes at least six months — and the two planets are close enough to each other for such a trip only once every two years.

That some might choose to live in such an environment is easily understood within the Austrian framework which argues that “the incentive of human activity is always some uneasiness and its aim always to remove such uneasiness as far as possible, that is, to make the acting men feel happier….”  How much better are such projects given that they do not rely on coercive redistributions of wealth, as is the case with NASA, the Russian Federal Space Agency, and all other state organizations that view space as simply an untapped area of potential control.

So go for it, colonizers, even though I may be cheering you back here on earth, poolside with gin-and-tonic in hand, wondering if, someday, there might actually be a Mises Institute Mars explaining homesteading to a distant generation.

I am on Twitter.

Why Isn’t Monetary Pumping Helping the Economy?

slow2Mises Daily Monday by Frank Shostak:

The longer central banks world wide persist with their loose monetary policies the greater the risk of severely damaging the wealth-generating process is. This in turn raises the likelihood of a prolonged stagnation.

 

 

Trouble at Jackson Hole

Central bankers and their economists had their annual retreat to Jackson Hole Wyoming this past week. Given all of their self-proclaimed success in curing the economic crisis with their Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE). You would think that the event would have been a big celebration.

However, as we got closer and closer to the Fed’s target unemployment rate of 6.5% the more we have been hearing from Janet Yellen about “labor market imperfections.” She has changed her tune and instead of touting the decreases in the unemployment rate, she is talking about all the people working part-time when they would prefer to work full time and the decline in the labor participation rate. In truth the Fed did not fix the economy. In other words, she is searching for a justification to continue the money printing if the bubbles start leaking again. Several papers were presented about the problems of labor markets.

In contrast, others were concerned about the emerging price inflation:

• Martin Feldstein, Harvard economics professor, chairman of the Council of Economic Advisers under President Ronald Reagan:

“I wish the Fed would be more explicit about being concerned about inflation. They were slow to communicate about inflation. Yellen gave a speech at the (International Monetary Fund) a few weeks ago in which she acknowledged that there were risks of financial instabilities but said that’s not going to change our monetary policy.

“My sense is there’s probably more inflation in the pipeline and closer (than Yellen thinks).

MORE: Yellen talks labor market slack at Jackson Hole

“Her eyes are on the underutilized labor resources. She’d like to be able to continue to bring that down.

“We may see inflation sooner than she thinks we’re going to see, and I think if that happens, then I think they’ll move the date (to raise rates) forward.”

Others, like Yellen, were less concerned with price inflation and more concerned with unemployment:

• William Spriggs, chief economist for the AFL-CIO, Howard University economics professor, former assistant labor secretary under President Barack Obama:

“I think (the Fed is) still thinking too much in the framework of, ‘We’re waiting for inflation.’ I think they have to re-configure this. The cost of unemployment has gone up, and so in making that choice between whether I raise interest rates to stir the economy or whether I pursue full employment, we just have to say: ‘You know what? Inflation doesn’t cost as much as unemployment.’

“(Yellen) is forcing them to be nuanced, so they can’t get out of talking about this in a more nuanced way.

“If, for a little while, you have 3% or 4% inflation or maybe even 4.5% inflation, that’s fine. Because we are so far away from full unemployment.

“But if you (raise interest rates), it’s going to be arbitrary. It’s going to be very broad. It’s going to hurt managers, it’s going to hurt professionals, it’s going to hurt everyone.”

“This is real damage to real people. You have to factor that cost. This is not free.”

It would seem that the rosy picture of the Fed fixing the economy does not look as rosy to central bankers themselves once they have supposedly fixed the economy!

As quotes in the USA Today.