A recent NYT article from this year’s economics Nobel Prize winners, Esther Duflo and Abhijit Banerjee, argues that “economists have somehow managed to hide in plain sight an enormously consequential finding from their research: Financial incentives are nowhere near as powerful as they are usually assumed to be.” Yet as we’ll see, Duflo and Banerjee cherry-pick studies that support their conclusion, while ignoring the body of literature that opposes it.

There is nothing new in monopoly capital gaining power and threatening free market capitalism. Government-favored and protected bankers, firms, and financiers have been around for centuries. But this time, monetary inflation and the nature of contemporary technological change have combined to raise the threat posed by these monopolists to an existential level. The ultimate barrier against this is the institution of sound money, at present virtually extinct in the world of politics.

Sometimes the government passes laws that restrict people for what it claims to be their own good, such as laws that ban drugs that are supposed to be bad for your health. Laws like this are called “paternalistic.”

The US federal government is divided up into a variety of institutions, with the three main “branches” of government designed to compete against each other. Theoretically, these three branches were initially thought to place checks on the other branches of government, thus minimizing abuses of power by the federal government overall.

School children learn that there are three branches of government: the legislative, executive, and judicial. In actual practice, however, there are four branches of government.

The fourth is what for decades now has been called a “headless fourth branch of government,” the administrative state.

[This article contains excerpts from a presentation given at the 70th anniversary of the publication of Human Action, in Vienna, at the Palais Coburg, November 23, 2019.