Archive for Guest Posts

Nevada Standoff a Symptom of Increasing Authoritarianism

us_public (2)By Ron Paul

The nation’s attention has for the past few weeks been riveted by a standoff in Nevada between armed federal agents and the Bundys, a ranching family who believe the federal government is exceeding its authority by assessing “fees” against ranchers who graze cattle on government lands. Outrage over the government’s use of armed agents to forcibly remove the Bundys’ cattle led many Americans to travel to Nevada to engage in nonviolent civil disobedience in support of the family.

The protests seem to have worked, at least for now, as the government appears to have backed off from direct confrontation. Sadly, some elected officials have inflamed the situation by labeling the Bundys and their supporters “domestic terrorists,” thus justifying any future use of force by the government. That means there is always the possibility of another deadly Waco-style raid on the Bundys or a similar group in the future.

In a state like Nevada, where 84 percent of the land is owned by the federal government, these types of conflicts are inevitable. Government ownership of land means that land is in theory owned by everyone, but in practice owned by no one. Thus, those who use the land lack the incentives to preserve it for the long term. As a result, land-use rules are set by politicians and bureaucrats. Oftentimes, the so-called “public” land is used in ways that benefit politically-powerful special interests.

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‘Everything we are told about deflation is a lie’

By Tim Price

[The Cobden Centre]

“The European Central Bank has given its strongest signal yet that it is prepared to embrace quantitative easing to prevent the euro zone from sliding into deflation or even a prolonged period of low inflation.”

- ‘Draghi strengthens QE signal’, Financial Times, April 4, 2014.

Yes, heaven protect Europe’s embattled citizens and savers from a prolonged period of low inflation. How could they possibly survive it ?

If history is any guide, probably quite well. As Chris Casey points out in his essay “Deflating the Deflation Myth,” the American economy during the 19th Century twice experienced deflationary periods of roughly 50 percent:

Source: McCusker, John J. “How Much Is That in Real Money?: A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States.” Proceedings of the American Antiquarian Society, Volume 101, Part 2, October 1991, pp. 297-373.

This during a period of “sustained and significant economic growth”. But just think of all those poor consumers, having to make the best of constantly falling everyday low prices.

In their research article ‘Deflation and Depression: Is There an Empirical Link?’ of January 2004, Federal Reserve economists Andrew Atkeson and Patrick Kehoe found that “..the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-1934). We find virtually no evidence of such a link in any other period.. What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”

In his 2008 essay ‘Deflation and Liberty’, Jörg Guido Hülsmann writes as follows:

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Another Phony Budget Debate

spendingBy Ron Paul

Anyone watching last week’s debate over the Republican budget resolution would have experienced déjà vu, as the debate bore a depressing similarity to those of previous years. Once again, the Republicans claimed their budget would cut spending in a responsible manner, while Democratic opponents claimed the plan’s spending cuts would shred the safety net and leave vital programs unfunded. Of course, neither claim is true.

The budget does not cut spending at all, and in fact actually increases spending by $1.5 trillion over ten years. The Republicans are using the old DC trick of spending less than originally planned and calling that reduced spending increase a $5.1 trillion cut in spending. Only in DC could a budget that increases spending by 3.5 percent per year instead of by 5.2 percent per year be attacked as a “slash-and-burn” plan.

The budget also relies on “dynamic scoring.” This trick is where the budget numbers account for increased government revenue generated by economic growth the budget will supposedly unleash. The claims are dubious at best. Of course, reducing government spending will lead to economic growth. But real growth requires real cuts, not this budget’s phony cuts.

As important as reducing spending and balancing the budget is, focusing solely on budget numbers ignores the root of the problem. The real problem is that too many in Washington — and the nation as a whole — refuse to consider any serious reductions in the welfare-warfare state.

I have always maintained that the logical place to start reducing spending is the trillions wasted on our interventionist foreign policy. Unfortunately, there are still too many in Congress who claim to be fiscal hawks when it comes to welfare spending, but turn into Keynesian “doves” when it comes to spending on the military-industrial complex.

These members cling to the mistaken belief that the government can balance it budget, keep taxes low, and even have a growing economy, while spending trillions of dollars policing the world, and propping up some governments and changing others overtly or covertly. Thus, President Obama is attacked as soft on defense because he only wants to spend $5.9 trillion over ten years on the military. In contrast, the Republican budget spends $6.2 trillion over the next decade. That is almost a trillion more than the budget’s total so-called spending cuts.

If there are too many fiscal conservatives who refuse to abandon the warfare state, there are too many liberals who act as if any reduction in welfare or entitlement spending leaves children starving. I agree it is unrealistic to simply end programs that people are currently dependent on. However, isn’t it inhumane to not take steps to unwind the welfare system before government overspending causes a bigger financial crisis and drags millions more into poverty?

Far from abandoning those in need of help, returning the responsibility for caring for the needy to private charities, churches, and local communities will improve the welfare system. At the very least,  young people should have the freedom to choose to pay a lower tax rate in exchange for promising to never participate in a government welfare or entitlement program.

Last week’s budget debate showed how little difference there lies between the parties when it comes to preserving the warfare-welfare state. One side may prefer more warfare while the other prefers more welfare, but neither side actually wants to significantly reduce the size and scope of government. Until Congress stops trying to run the world, run the economy, and run our lives, there will never be a real debate about cutting spending and limiting government.

[The Ron Paul Institute]

What the State Fears

FnstBy Murray Rothbard

From Anatomy of the State:

What the State fears above all, of course, is any fundamental threat to its own power and its own existence. The death of a State can come about in two major ways: (a) through conquest by another State, or (b) through revolutionary overthrow by its own subjects?in short, by war or revolution. War and revolution, as the two basic threats, invariably arouse in the State rulers their maximum efforts and maximum propaganda among the people. As stated above, any way must always be used to mobilize the people to come to the State’s defense in the belief that they are defending themselves. The fallacy of the idea becomes evident when conscription is wielded against those who refuse to “defend” themselves and are, therefore, forced into joining the State’s military band: needless to add, no “defense” is permitted them against this act of “their own” State.

In war, State power is pushed to its ultimate, and, under the slogans of “defense” and “emergency,” it can impose a tyranny upon the public such as might be openly resisted in time of peace. War thus provides many benefits to a State, and indeed every modern war has brought to the warring peoples a permanent legacy of increased State burdens upon society. War, moreover, provides to a State tempting opportunities for conquest of land areas over which it may exercise its monopoly of force. Randolph Bourne was certainly correct when he wrote that “war is the health of the State,” but to any particular State a war may spell either health or grave injury.

We may test the hypothesis that the State is largely interested in protecting itself rather than its subjects by asking: which category of crimes does the State pursue and punish most intensely? Those against private citizens or those against itself? The gravest crimes in the State’s lexicon are almost invariably not invasions of private person or property, but dangers to its own contentment, for example, treason, desertion of a soldier to the enemy, failure to register for the draft, subversion and subversive conspiracy, assassination of rulers and such economic crimes against the State as counterfeiting its money or evasion of its income tax. Or compare the degree of zeal devoted to pursuing the man who assaults a policeman, with the attention that the State pays to the assault of an ordinary citizen. Yet, curiously, the State’s openly assigned priority to its own defense against the public strikes few people as inconsistent with its presumed raison d’etre.

Republicans and Refundable Tax Credits

600px-Republicanlogo.svgBy Laurence Vance

The so-called Bush tax cuts were, unfortunately, set by Republicans to expire at the end of 2010. Although they were extended, with modifications, and then extended again, with more modifications, this Republican blunder has led—like so many of their other actions—to an increase in the welfare state.

The Bush tax cuts, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), added a 10 percent tax bracket, set the tax rates of the others at 15, 25, 28, 33, and 35 percent, increased the child credit to $1,000, lowered the long-term capital gains and qualified dividend tax rates to 15 percent, increased the Section 179 expense deduction to $250,000, gradually eliminated the “PEP and Pease” personal exemption and itemized deduction reductions, and gradually eliminated the estate tax.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA) extended most of these provisions. Although the estate tax was revived, the Section 179 expense deduction was extended and increased.

But after this expired at the end of 2012, Congress passed, with the help of Republicans, the American Tax Relief Act of 2012. The six tax brackets were made permanent, but for those making over $400,000 a year ($450,000 for married couples), the top marginal tax rate increased to 39.6 percent. Additionally, the estate tax rate increased, the tax rates on long-term capital gains and dividends were raised on higher-income taxpayers, and the personal exemption and itemized deduction reductions were reinstated. But the worst thing about the American Tax Relief Act is its expansion of refundable tax credits.

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Ron Paul: Aid to Ukraine Is a Bad Deal For All

3134323442_52a9009ce7_oBy Ron Paul

 

Last week Congress overwhelmingly passed a bill approving a billion dollars in aid to Ukraine and more sanctions on Russia. The bill will likely receive the president’s signature within days. If you think this is the last time US citizens will have their money sent to Ukraine, you should think again. This is only the beginning.

This $1 billion for Ukraine is a rip-off for the America taxpayer, but it is also a bad deal for Ukrainians. Not a single needy Ukrainian will see a penny of this money, as it will be used to bail out international banks who hold Ukrainian government debt. According to the terms of the International Monetary Fund (IMF)-designed plan for Ukraine, life is about to get much more difficult for average Ukrainians. The government will freeze some wage increases, significantly raise taxes, and increase energy prices by a considerable margin.

But the bankers will get paid and the IMF will get control over the Ukrainian economy.

The bill also authorizes more US taxpayer money for government-funded “democracy promotion” NGOs, and more money to broadcast US government propaganda into Ukraine via Radio Free Europe and Voice of America. It also includes some saber-rattling, directing the US Secretary of State to “provide enhanced security cooperation with Central and Eastern European NATO member states.”

The US has been “promoting democracy” in Ukraine for more than ten years now, but it doesn’t seem to have done much good. Recently a democratically-elected government was overthrown by violent protestors. That is the opposite of democracy, where governments are changed by free and fair elections. What is shocking is that the US government and its NGOs were on the side of the protestors! If we really cared about democracy we would not have taken either side, as it is none of our business.

Washington does not want to talk about its own actions that led to the coup, instead focusing on attacking the Russian reaction to US-instigated unrest next door to them. So the new bill passed by Congress will expand sanctions against Russia for its role in backing a referendum in Crimea, where most of the population voted to join Russia. The US, which has participated in the forced change of borders in Serbia and elsewhere, suddenly declares that international borders cannot be challenged in Ukraine.

Those of us who are less than gung-ho about sanctions, manipulating elections, and sending our troops overseas are criticized as somehow being unpatriotic. It happened before when so many of us were opposed to the Iraq war, the US attack on Libya, and elsewhere. And it is happening again to those of us not eager to get in another cold — or hot — war with Russia over a small peninsula that means absolutely nothing to the US or its security.

I would argue that real patriotism is defending this country and making sure that our freedoms are not undermined here. Unfortunately, while so many are focused on freedoms in Crimea and Ukraine, the US Congress is set to pass an NSA “reform” bill that will force private companies to retain our personal data and make it even easier for the NSA to spy on the rest of us. We need to refocus our priorities toward promoting liberty in the United States!

[The Ron Paul Institute]

Pragmatism and Intellectual Property

5025541044_09ab3769ba_zBy Nathan Nicolaisen

Libertarians often argue over the pragmatism of intellectual property at the expense of the ethical aspect of restricting knowledge by force. The question posed in Butler Shaffer’s A Libertarian Critique of Intellectual Property is, “…by what reasoning can the state create and enforce such interests upon persons who have not agreed to be so bound?”[i]  This is the core of all voluntary interactions, and the question of whether or not intellectual property is profitable is not critical for the libertarian. Of course there will be winners and losers by granting IP rights to some at the expense of others, but Shaffer’s point is that it is wrong to enforce contracts upon those who have not voluntarily accepted the terms.  This crucial tenet of libertarian ethics is essential in understanding why so many libertarians are opposed to intellectual property.  Few people, and even fewer libertarians, if any, contend that inventors should not be rewarded for their efforts. Rather, the chief objection to intellectual property is that inventors may not use the force of government to prevent others from peacefully employing that knowledge.

Even if we ignore the ethical and moral objections, however,  numerous problems arise in the application of intellectual property laws. For example, how do we properly credit long-dead inventors for providing us with their discoveries?  Do we track down their offspring and pay royalties?  If it’s impractical to grant perpetual IP rights, then exactly how long should they last? Patent term length in the United States is twenty years while copyrights last seventy years after the last surviving author’s death.[ii]  What makes it right to grant patents for twenty years, but not nineteen?  What happens at seventy years that makes copyrights invalid at seventy years and one day?  The question seems trivial, but is nevertheless revealing.  If IP rights are truly rights, they must be inviolable and universal, unconstrained by time and place and not established by the arbitrary laws by the state.

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Triumph of The Permanent Warfare State

502px-Nagasakibombby David Stockman

From David Stockman’s Contra Corner. Remarks to the Committee For The Republic, Washington DC, February 2014 (Part 6 in a 6-Part Series) Go to Part 1.

After America’s earlier wars there occurred a swift and near total demobilization: the Union Army of 2 million had been reduced to 24,000 within months of Appomattox, and the 3 million called to arms by Woodrow Wilson was down to 50,000 within a few years of the armistice.

By contrast, the American Warfare State became permanent and self-fueling after World War II. So doing, it both catalyzed new extensions of Keynesian statism and monetary central planning and simultaneously flourished from their rise.

How Truman Lost the Battle To Contain the Warfare State

President Eisenhower famously warned about the dangers of the military-industrial complex in his 1961 farewell, but it was Harry Truman who first felt the sting of its political power. Truman was an old-fashioned budget balancer and made remarkable strides in the immediate post-war years toward traditional demobilization— cutting military spending from $70 billion to $15 billion by 1948 and balancing the Federal budget two years in a row.

Unfortunately, his government was still crawling with warriors—like Admiral Leahey and General Curtis LeMay and civilian hardliners like Secretaries Forrestal and Acheson—-who had thrived during WWII and were looking for new enemies to vanquish. Moreover, the unschooled haberdasher and machine politician from Missouri had made it far easier for them with his deplorable decision to drop atom bombs on an already beaten Japan.

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A Lifetime of War—Explained

760px-ACAV_and_M48_Convoy_Vietnam_Warby Kirkpatrick Sale

[LewRockwell.com, March 25, 2014]

A few days ago, my partner, turning from something about Afghanistan on the television news, said to me, “It seems there’s been a war going on as long as we’ve been alive.”

And we’re well into our 70s.

But think about it: she’s almost right.  This country has been at war, or at least has deployed troops, every year since 1940, when we were tots, except for occasional sporadic periods of quasi-peace amounting in all to about 18 years. Not our whole lives, but three-quarters of it.

Let’s do a little of the history.  In 1940 we deployed troops throughout the West Indies, to protect those countries and free British troops, and the next year we took over Greenland and Iceland militarily. The next five years saw world war, and after the war we had troops in Germany, Austria, Japan, and South Korea, sent troops into Greece in 1947, and used the Air Force for the Berlin airlift in 1948-49.  Then came the Korean War, Indochina, and Vietnam until 1975.  From 1960 on we sent troops to the Congo, Colombia (where they’re still at war), the Dominican Republic, Lebanon, and we invaded Grenada in 1983.

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US ‘Democracy Promotion’ Destroys Democracy Overseas

11879731476_415694913b_bby Ron Paul

It was almost ten years ago when, before the House International Relations Committee, I objected to the US Government funding NGOs to meddle in the internal affairs of Ukraine. At the time the “Orange Revolution” had forced a regime change in Ukraine with the help of millions of dollars from Washington.

At that time I told the Committee:

We do not know exactly how many millions—or tens of millions—of dollars the United States government spent on the presidential election in Ukraine. We do know that much of that money was targeted to assist one particular candidate, and that through a series of cut-out non-governmental organizations (NGOs)—both American and Ukrainian—millions of dollars ended up in support of the presidential candidate…

I was worried about millions of dollars that the US government-funded National Endowment for Democracy (NED) and its various related organizations spent to meddle in Ukraine’s internal affairs. But it turns out that was only the tip of the iceberg.

Last December, US Assistant Secretary of State Victoria Nuland gave a speechin which she admitted that since 1991 the US government has:

[I]nvested more than 5 billion dollars to help Ukraine…in the development of democratic institutions and skills in promoting civil society and a good form of government.

This is the same State Department official who was caught on tape just recently planning in detail the overthrow of the Ukrainian government.

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If Spying on Senate is So Bad, Why is it OK For Them To Spy On Us?

1970119596_d8690c817a_bby Ron Paul

The reaction of Sen. Dianne Feinstein (D-CA) to last week’s revelations that the CIA secretly searched Senate Intelligence Committee computers reveals much about what the elites in government think about the rest of us. “Spy on thee, but not on me!”

The hypocrisy of Sen. Feinstein is astounding. She is the biggest backer of the NSA spying on the rest of us, but when the tables are turned and her staff is the target she becomes irate. But there is more to it than that. There is an attitude in Washington that the laws Congress passes do not apply to Members. They can trample our civil liberties, they believe, but it should never affect their own freedom.

Remember that much of this started when politicians rushed to past the PATRIOT Act after 9/11. Those of us who warned that such new powers granted to the state would be used against us someday were criticized as alarmist and worse. The violations happened just as we warned, but when political leaders discovered the breach of our civil liberties they did nothing about it. It was not until whistleblowers like Edward Snowden and others informed us of the abuses that the “debate” over surveillance that President Obama claimed to welcome could even begin to take place! Left to politicians like Dianne Feinstein, Mike Rogers, and President Obama, we would never have that debate because we would not know.

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US Foreign Interventions Help Putin

443px-Bush&Putin33rdG8

By Andrew P. Napolitano

What happens when the United States government participates meaningfully in toppling foreign governments in the name of spreading democracy? That behavior usually results in unintended consequences and often produces disasters.

When the United States invaded Iraq in 2003, initially to search for weapons of mass destruction that we now know the Bush administration knew did not exist there, and eventually for regime change, the U.S. succeeded in changing profoundly the Iraqi government. But in the process, we lost 4,500 American troops, suffered 45,000 substantial injuries, borrowed and spent and have not paid back more than $2 trillion, caused the deaths of 650,000 Iraqis, displaced 2.5 million Iraqis, and unleashed into Iraq our public enemy, al-Qaida. Al-Qaida was not in Iraq before we invaded. Today, it controls one-third of that now unstable country.

In 2010, President Obama decided he no longer liked America’s favorite Middle Eastern dictator, President Hosni Mubarak of Egypt, even though he and his four immediate predecessors gave the Mubarak government about $4 billion annually. So our agents fomented revolution in the streets while Obama suggested openly that it was time for Mubarak to leave office. Then the hoped-for and promised free elections took place, and avowed enemy of the West and Islamic fanatic Mohammed Morsi became the first popularly elected president in Egyptian history. Then the U.S. decided it did not want him in power no matter the lawfulness and moral legitimacy of his election, and so the Obama administration encouraged a military coup.

Morsi was arrested by his own military commanders and is currently on trial for permitting his soldiers under those same commanders to kill nine people who were resisting the coup, even though the American-backed military plotters — who now rule Egypt and are prosecuting Morsi — have killed thousands of Egyptian civilians who attempted to resist the removal of Morsi from office. The result is a military dictatorship and murderous resistance far more odious than in the Mubarak years.

And in Ukraine in 2004, the Bush administration fomented the so-called Orange Revolution. This, too, was done by our diplomats and intelligence community, whose agents agitated demonstrators in the streets and liberally distributed American dollars to them. This resulted in a free election, which resulted in subsequent free elections, until the most recent of those produced a president who — as an ex-communist — was more drawn to Russia than to the U.S. or Europe.

When the Ukraine government needed cash and Russia offered it a better deal than the European Union, our imperial diplomats and lawless intelligence gurus were embarrassed. So, the U.S. fomented another revolution in the streets of Kiev. One of our diplomats, Victoria Nuland, acknowledged as much in a tapped and taped (complete with expletives) and eventually viral cellphone conversation. Then, Viktor Yanukovich, the popularly and lawfully elected Ukraine president, was toppled and fled to Moscow. The new unelected Ukraine president has received American recognition and help. Earlier this week, the U.S. offered him $1 billion in immediate cash.

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The Arithmetic of Keynesian Stimulus

[Editor's Note: Contrary to myth, Austrians are not opposed to quantitative or empirical assessments of history in light of economic knowledge. The confusion may arise from the fact that Mises regarded this not as economics, strictly speaking, but as economic history, or the work of historians. Nonetheless, discussions of measurements of economic phenomena are often informative. In this article, Julian Adorney examines some Keynesian methods of measuring the economy.]

by Julian Adorney

Keynesian economists claim that fiscal and monetary stimulus help cure recessions, but their evidence is largely correlational. They pump money into a recession, and if the situation improves they claim the credit. If it doesn’t improve, they argue that the picture would look much worse without their intervention.

In their defense, we can’t make a control economy to test the effects of Keynesian policies versus a laissez-faire approach. So Keynesian correlational evidence makes some sense. But what if we examined, not just 1 recession, but a history of 100 years’ worth? When you do that, it turns out, the evidence just doesn’t back up Keynesian claims.

How do we assess this?  Christy Romer put out a  paper in 1999 in which she created a metric to measure how deep a recession was: percentage-point months of industrial production lost until previous peak is regained (PPM).  Using this, she quantified every recession since 1886.  The chart she created is reproduced below.

adorney1

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Georgia Governor Worsens Local Propane Shortage

Don Printz, MD writes:

Georgia Governor Nathan Deal has just signed an executive order enforcing the “price gouging” rule for propane during the cold emergency. That’ll certainly encourage new suppliers to enter the market. I remember when some entrepreneurs brought a big supply of drinking water to Charleston, SC, for $5/gallon (usually about $1) after Hurricane Hugo wrecked the city water supply. The state called that price gouging if it were sold for more than $1.25. They sold it…and never returned.

11 Good Things for Liberty in 2013

9093113920_79c4a78d01

Credit: Mike Herbst

by Llewellyn H. Rockwell, Jr.

As 2013 draws to a close, let’s pause to recall some important developments for the cause of liberty – some of which you already know well, and others you’ll be hearing about for the first time.

Edward Snowden. After sitting on the Bush-era warrantless wiretapping story for 18 months, the New York Times revealed a portion of the surveillance activities of the US government in 2005. Thanks to Edward Snowden, we now know that the National Security Agency’s spying activities vastly exceeded anything we heard about in the media.

The Snowden revelations served two functions from the point of view of public enlightenment. First, the regime in DC was once again exposed as untruthful, even sinister. But second, the bipartisan condemnation of Snowden on the part of the political establishment – both Nancy Pelosi and John McCain denounced him, unsurprisingly – reminds us that there is, after all, one party: the state party. Whatever cosmetic differences separate politicians otherwise, when push comes to shove, they rally to one another in the face of a truth-teller.

New President for the Mises Institute. At the end of 2013 the Mises Institute named Jeff Deist, former as chief of staff to Ron Paul, as its new president. Jeff is a significant  figure in so many ways – smart, well spoken, principled, and knowledgeable about money, banking, the Fed, and indeed the entire edifice of Austrian economics.

“Ron Paul’s congressional staff viewed the Mises Institute as our intellectual home,” Jeff recalls. “We applied Austrian principles and scholarship to virtually everything Ron did as a member of Congress. I’m honored to join an organization Ron has enthusiastically supported from the very beginning, and excited about dedicating myself to furthering the Austrian message.”

Ron, for his part, says he’s thrilled that Jeff “is fighting for liberty again.”

Obamacare. Everybody knows about the Obamacare fiascoes – the useless website and “if you like your plan, you can keep it” chief among them. But what a disaster the rollout of this program has been for the regime, which hates nothing more than looking ridiculous and incompetent, and being the butt of the people’s jokes. Meanwhile, supporters of the president think they’re helping matters by casually pointing out that of course the president knew he was lying when he said people could keep health plans they liked; he had to lie to them in order to get this program passed.

It’s rare to encounter such refreshing candor from the political and media classes.

The Austrian School. Meanwhile, interest in the Austrian School continues to grow, and demands for our resources and services have never been greater. Our Austrian Economics Research Conference, which attracts the best scholars from around the world working in the Austrian tradition, promises to be among our best ever, with an illustrious list of named lecturers and scores of papers advancing the Austrian School in new and exciting ways.

The Great Deformation. David Stockman’s gripping book The Great Deformation: The Corruption of Capitalism in America is more than a devastating blow to the conventional narrative of the financial crisis and the geniuses who supposedly put things right. It is a sweeping, revisionist account of 20th-century US history, bristling with insights and little-known history. Imagine reading a book on 20th-century America without a systematic pro-Fed bias, and without the usual deference to the “great presidents.” I reviewed it for LRC. I urge you to read it. [Here is a Mises Institute Q and A with David Stockman.]

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Mises: Like a Jiu-jitsu Master

Mises_jiujitsu2

Guest Post by Fernando Chiocca

Economics and martial arts? One might be tempted to think that those two things can’t have anything in common. But there are some parallels that we can trace. First of all, both are types of systematic knowledge. The former is the study of human action and interaction with goods and services and the latter is the study of the best way to physically overpower another man. Both are ideas developed throughout millennia subdivided in several different schools or styles. And in the middle of the 20th century both have matured into sophisticated schools of thought known as the AustrianSchool of Economics and Gracie Brazilian Jiu-jitsu.

Let me begin with the Gracie Jiu-jitsu history. Jiu-jitsu was created by Indian monks and spread over Asia reaching feudal Japan where it was practiced and developed by Samurai. After the Meiji period with the abolition of the Samurai, and the developments of Judo by Kano Jigoro, this martial art arrived Brazil in 1914, with Kano’s student, Conde Koma, who in 1917 taught the young Carlos Gracie his martial art. Carlos passed his knowledge on to his brothers and the Gracies began to practice and develop this martial art, giving rise to a new style called Brazilian or Gracie jiu-jitsu. It was his younger and weaker brother, Hélio, who created the most efficient improvements to jiu-jitsu.

The Gracie brothers started to open jiu-jitsu gyms and, in order to prove their martial art superiority, began to challenge fighters of different styles, with great success. Hélio became a celebrity in Brazil and Gracie jiu-jitsu was recognized by many as the best and most unbeatable martial art. In the beginning of the 1950’s Hélio retired.

During the late 1970′s, Bruce Lee movies were a great hit, and Kung Fu and Karate practitioners came out to challenge the Gracie supremacy. It was time for Rolls Gracie, Carlos’s son, raised by Hélio, to take up the challenge. He easily vanquished the Karate masters and other Gracie jiu-jitsu fighters represented the Gracies in several subsequent challenges with an unbroken record of victory for Gracie jiu-jitsu. But even with this overwhelming superiority, Gracie jiu-jitsu wasn’t able to defeat one opponent: Hollywood. The great majority of the world’s public still believed that Kung Fu and other styles alike were the foremost martial arts. Globally, only a few were aware of Gracie jiu-jitsu. Things changed in the early 1990s.

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How Government Regulations Made Healthcare So Expensive

Guest Post: The U.S. Offers Obamacare to Those Who Don’t Remember When Markets Controlled Medical Costs

By Mike Holly

“Those who cannot remember the past are condemned to repeat it,” declared philosopher George Santayana.  The U.S. “health care cost crisis” didn’t start until 1965.  The government increased demand with the passage of Medicare and Medicaid while restricting the supply of doctors and hospitals.  Health care prices responded at twice the rate of inflation (Figure 1).  Now, the U.S. is repeating the same mistakes with the unveiling of Obamacare (a.k.a. “Medicare and Medicaid for the middle class”).

holly1

Figure 1:  An Indexed Comparison of Health Care Inflation and Consumer Price Index in US from 1935 to 2009  (Source: US Census 2013)

Nobel Prize-winning economist Milton Friedman wrote that medical price inflation since 1965 has been caused by the rising demand for health-care coupled with restricted supply (Friedman 1992).  Robert Alford explained the minority view: “The market reformers wish to preserve the control of the individual physician over his practice, over the hospital, and over his fees, and they simply wish to open up the medical schools in order to meet the demand for doctors, to give patients more choice among doctors, clinics, and hospitals, and to make that choice a real one by public subsidies for medical bills” (Alford 1975).

The majority of policymakers support either monopolization (e.g. typically Republicans) or nationalization (e.g., typically Democrats).  Both have claimed “physician supply can create its own demand,” which means increasing the supply of doctors and hospitals will just motivate them to convince “ignorant” consumers to order more unnecessary and expensive health care.   During the 1970s, Frank Sloan, a Vanderbilt University health care economist, explained the success of the most influential pro-regulation health care economist, Uwe Reinhardt: “His theories are highly regarded because he is so clearly understood.  Unfortunately the evidence for them is not good; it is not bad either, it is just not there.  And it would be a shame to see federal policy set on such a poor, unscientific basis.”

Since the early 1900s, medical special interests have been lobbying politicians to reduce competition.  By the 1980s, the U.S. was restricting the supply of physicians, hospitals, insurance and pharmaceuticals, while subsidizing demand.  Since then, the U.S. has been trying to control high costs by moving toward something perhaps best described by the House Budget Committee: “In too many areas of the economy – especially energy, housing, finance, and health care – free enterprise has given way to government control in “partnership” with a few large or politically well-connected companies”  (Ryan 2012).  The following are past major laws and other policies implemented by the Federal and state governments that have interfered with the health care marketplace (HHS 2013):

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Pope Francis, Income Inequality, Poverty, and Capitalism

Guest Post:  Pope Francis, Income Equality, Poverty, and Capitalism  

By Nicolás Cachanosky

The criticisms of free markets in Pope Francis’s Apostolic Exhortation Evangelii Gaudium (“The Joy of the Gospel”) have generated strong reactions around the world. One example is a recent post by Gregory Mankiw on his blog with brief but interesting reflections. Special attention was paid to the passage where the document criticizes the “trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.” (p. 46).

First we must recognize that there may be possible semantic nuances that can lead to inaccurate interpretations because Evangelii Gaudiium is not an economic document and, certainly, the “prevailing economic system” is not exactly a blueprint for free market economies. However, the criticism of free markets is clear and presents a difficult challenge to suggest that the document does not refer, indeed, to free markets after arguing for “semantic nuances.” Secondly, I agree with Mankiw that “trickle-down” is not a technical term, much less a theory, and is a derogatory word used by the left and other groups critical of free markets. By using this phrase, the Pope inserts a negative bias against the free market; a neutral term would been a better choice of words. The terminological slip on economic issues in the document (an example of many) suggests the need for caution regarding the strong claims that the document puts forward on economic issues. Categorical statements in a document of this importance should be better supported and articulated. Imagine an economic document critical of the Church with a clear superficial use of the language of the discipline being criticized accompanied by adjectives such as “crude and naive.” Using imprecise definitions can make us see non-existent problems. Third, the effect produced by the Evangelii Gaudium on public opinion invites us to review some general indicators of social and economic welfare in countries that are more and less inclined to free markets. Is it true that the free market leaves the homeless and marginalized the less wealthy? How much truth and how much myth is in the so-widespread criticism of “evil capitalism”? What Pope Francis expresses is ultimately a reflection of a widespread belief across a number of sectors in most countries around the world.

It is easy to get an overview of the economic and social situation of more and less free market countries if we group them into four categories according to their economic freedom. This allows a gradient of results and to observe differences between more and less free countries. It is important to note that the data of all countries must be observed, and not chosen, for example, from only a few (more details here). This would allow both an advocate and a critic of free market to choose a couple of countries at their convenience. Is the entire sample, not ad hoc selection, what should be used as reference. Let us consider, then, some economic and social data from countries around the world according to their economic freedom.

The following graphs show the GDP per capita (PPP) [i.e. adjusted for cost of living] and the average 10-year growth rate for four groups of countries according to their economic freedom. As the graphs show, on average, the freest countries are not only richer, but also grow faster in the long run.

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Rothbard on the Evil of Trade Sanctions (in South Africa)

downloadRothbard’s arguments against trade sanctions explored in this article are of course applicable to Syria, Cuba, Iran, and elsewhere. Sanctions imposed in the name of reform and regime change hurt the general population in the targeted country, and often are felt most severely by the poorest and most powerless segments of society:

The Crusade Against South Africa

by Murray N. Rothbard

For many years, America’s campuses have been sunk in political apathy. The values of the 1950s are supposed to be back, including concentration on one’s career and lack of interest in social or political causes.

But now, suddenly, it begins to seem like a replay of the late 1960s: demonstrations, placards, even sit-ins on campus. The issue is apartheid in South Africa, and the campaign hopes to bring down apartheid by pressuring colleges and universities to disinvest in South Africa. Coercion against South Africa is also being pursued on the legislative front, including drives to embargo that country as well as prohibit the importation of Krugerrands.

I yield to no one in my abhorrence of the apartheid system, but it must never be forgotten what the road to Hell is paved with. Good intentions are scarcely enough, and we must always be careful that in trying to do good, we don’t do harm instead.

The object of the new crusade is presumably to help the oppressed blacks of South Africa. But what would be the impact of U.S. disinvestment?

The demand for black workers in South Africa would fall, and the result would be loss of jobs and lower wage rates for the oppressed people of that country. Not only that: presumably the U.S. firms are among the highest-paying employers in South Africa, so that the impact on black wages and working conditions would be particularly severe. In short: the group we are most trying to help by our well-meaning intervention will be precisely the one to lose the most. As on so many other occasions, doing good for becomes doing harm to.

The same result would follow from the other legislative actions against South Africa. Prohibition of Krugerrands, for example, would injure, first and foremost, the black workers in the gold mining industry. And so on down the line.

I suppose that demonstrating and crusading against apartheid gives American liberals a fine glow of moral righteousness. But have they really pondered the consequences? Some American black leaders are beginning to do so. A spokesman for the National Urban League concedes that “We do not favor disinvestment . . . . We believe that the workers would be the ones that would be hurt.” And Ted Adams, executive director of the National Association of Blacks Within Government, warns that disinvestment would “come down hard on black people,” and could wind up “throwing the baby out with the bath water.”

But other black leaders take a sterner view. A spokesman for Chicago Mayor Harold Washington admits “some concern that the most immediate effect of disinvestment may be felt by the laborers themselves,” but then adds, on a curious note, “that’s never an excuse not to take action.” Michelle Kourouma, executive director of the National Conference of Black Mayors, explains the hard-line position: “How could it get any worse? We have nothing to lose and everything to gain: freedom.”

The profound flaw is an equivocation on the word “we,” a collective term covering a multitude of sins. Unfortunately, it is not Ms. Kourouma or Mr. Washington or any American liberal who stands to lose by disinvestment; it is only the blacks in South Africa.

It is all too easy for American liberals, secure in their well-paid jobs and their freedom in the United States, to say, in effect, to the blacks of South Africa: “We’re going to make you sacrifice for your own benefit.” It is doubtful whether the blacks in South Africa will respond with the same enthusiasm. Unfortunately, they have nothing to say in the matter; once again, their lives will be the pawns in other people’s political games. Read More→

Wilhelm von Humboldt’s ‘The Sphere and Duties of Government’

220px-WilhelmvonHumboldtGuest Post: Wilhelm von Humboldt’s ‘Calm Investigation of the Most Important Questions’                    

by Gary M. Galles

When House Speaker Nancy Pelosi was asked about the constitutional authority for Obamacare, her reply was to incredulously repeat “Are you serious?,” echoed by her spokesman, who said, “You can put this on the record: That is not a serious question.” Senate Judiciary Committee Chairman Patrick Leahy (with oversight to ensure that America is under the rule of law and not of men) asserted “there’s no question there’s authority. Nobody questions that.”

Such derisive responses to questions of the limits on government authority overthrow the principles that defined America. For instance, James Madison, considered “the father of the Constitution,” wrote in that “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” Since the dissonance between those words and our ubiquitous government could hardly be greater, it is long past time to return to those foundational questions.

One valuable source of this understanding comes from one of Madison’s contemporaries, unfortunately overlooked in America today–Friedrich Wilhelm Christian Karl Ferdinand von Humboldt (1767 – 1835), better known as Wilhelm von Humboldt. Humboldt was a philosopher, linguist, diplomat, educational reformer and founder of the University of Berlin, among other accomplishments. But his great contribution to liberty was his book The Sphere and Duties of Government (or The Limits of State Action), finished in 1792 but not published in its entirety until almost half a century later, long after his death.

Humboldt’s 1854 English translator, Joseph Coulthard, said The Sphere and Duties of Government offers, “a calm investigation of the most important questions that can occupy the attention of the statesman and the moralist.” The liberal-international website describes the central thrust of his work as arguing that “a state seeking to provide for more than the physical safety of the citizens will inevitably destroy the freedom and the creativity of the individuals. The only source of progress in a liberal society is the free interaction of free people.” Ralph Raico wrote that “in it are set forth– in some cases, I believe, for the first time–some of the major arguments for freedom.”

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