Nobel Catfight

It is gratifying to see two prominent mainstream economists attacking each other’s defective models.  It is especially fun---and instructive--to observe when the economists in question are Nobel laureates who have shared the very same prize.   Robert Shiller and Eugene Fama along with Lars Peter Hansen were awarded the 2013 Nobel Prize in Economics. (Actually the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013 is not a Nobel prize but one established and awarded by the Swedish central bank.)  To mark their award, the thee Nobel

What Must Be Done

Lecture given at “The Bankruptcy of American Politics” conference, sponsored by the Mises Institute and held in Newport Beach, California; January 24-25, 1997. An audio version of this talk is available here.

Society and Cooperation

Let me begin with a few words about society. Why is there society? Why do people cooperate? Why is there peaceful cooperation rather than permanent war among mankind? Austrians, and in particular Misesians, emphasize the fact that we do not need to assume anything like sympathy or love for other people in order to explain this. Self-interest—that is, to prefer more over less—is entirely sufficient to explain this phenomenon of cooperation. Men cooperate because they are able to recognize that production under division of labor is more productive than self-sufficient isolation.

Protection and the State

But something can and obviously has happened that disrupts and distorts or even derails this normal, self-interest driven development. And this is of course the State, which I will define initially, rather abstractly, as a compulsorily-funded territorial monopolist of protection. That is, a monopolist of defense and the provision and enforcement of law and order.

The Impossibility of Limited Government

Now, once the protection monopoly is in place, a logic of its own is set in motion. Every monopolist takes advantage of his position. The price of protection will go up, and more importantly, the content of the law, that is the product quality, will be altered to the advantage of the monopolist and at the expense of others. Justice will be perverted, and the protector becomes increasingly an exploiter and an expropriator. More specifically, as the result of the territorial monopolization of protection, two tendencies are generated.

Monarchy vs. Democracy

However, even apart from this, as soon as a protection monopoly exists, for any given sized territory, the monopolist will try to intensify his exploitation and increase his income and wealth at the expense of the protected subjects to the maximum extent possible. As long as the monopoly is held by a single person, like a prince or a king, and especially when it is a hereditary monopoly, then it is in the monopolist’s interest, because he owns the monopoly and the capital value of it, to preserve the value of his property. He will exploit little today in order to exploit more tomorrow.

Subscribe to