Power & Market
Yesterday afternoon, Butler Shaffer, one of the great pioneers of the libertarian movement, passed away, two weeks before his eighty-fifth birthday. In a column written in December 2014, he tells us, "My interest in what is now called 'libertarian' thinking was kindled in college in the late 1950s. There was no coherent philosophy by that name in those years, but I found myself attracted to such thinkers as John Locke, John Stuart Mill, the Stoics, and very much annoyed by the likes of Thomas Hobbes, Karl Marx, and my undergrad study of 'economics' taught by a prominent Keynesian. While in law school, I began my study of genuine economics with Prof. Aaron Director, and began my focused and energized inquiry into the kinds of ideas later to be described as 'libertarianism.'"
Butler’s brand of libertarianism was exceptionally pure and consistent. As he explains in his superb monograph A Libertarian Critque of Intellectual Property (free here), he believed that rights stem from "the informal processes by which men and women accord to each other a respect for the inviolability of their lives — along with claims to external resources (e.g., land, food, water, etc.) necessary to sustain their lives." (p. 18) The "informal processes" that Shaffer mentions proceed without coercion. In particular, law and rights do not depend on the dictates of the state, an organization that claims a monopoly over the legitimate use of force in a territory.
In adopting this stance, Shaffer puts himself at odds with much that passes in our day for wisdom among professors of law. "In a world grounded in institutional structuring, it is often difficult to find people willing to consider the possibility that property interests could derive from any source other than an acknowledged legal authority. There is an apparent acceptance of Jeremy Bentham’s dictum that 'property is entirely the creature of law.'" (pp. 18–19) Butler explained his approach in great detail in his Boundaries of Order, a major contribution to libertarian political philosophy.
Butler taught at Southwestern Law School from 1977 to 2014 and influenced generations of students. He was a master of the Socratic method. He would sometimes read to his class a list of "progressive"-sounding measures that would usually command approval. He would then tell the students, "You just voted for Hitler!" His list had been taken from the Nazi Party platform. Butler always looked at things from an original angle, and in my many conversations with him, his ability to subject his own ideas to constant criticism and rethinking impressed me.
Butler continued to share his wisdom with us nearly to the end of his life, and his mordant criticism of the state brings to mind H. L. Mencken, a writer he greatly admired. In a column on LewRockwell.com published last August 13, he said,
Those who seek to control our lives must first gain control of our minds. If one of your neighbors went through the neighborhood with a gun, informing you that he was the sovereign authority therein, and that you were required to obey his orders, how would you respond? When, as a child, I visited my aunt and uncle on their farm, there was a retarded man in the neighborhood who informed us that he was the local sheriff and we had to do as he directed. Since he was completely harmless and pleasant, the neighbors tended to humor him and treat him with respect. But when you listen to the gaggle of Democratic Party presidential candidates with essentially the same baseless claim to run your life with policies that would be far more disruptive of your interests, you become aware that you are not hearing the voices of good-natured chuckleheads; but of men and women who fully intend to make their delusions enforceable through the coercive powers of the state.
Butler was my dear friend for many years, and now that he is gone what comes most to my mind is his sense of humor. He loved words and was a master of puns. Few things in my life brought me as much joy as a conversation with Butler, and now that is gone forever.
Butler is survived by his wonderful wife, Jane, to whom he was married for 63 years, their three daughters, and a number of grandchildren.
As I get older and people close to me pass away, the melancholy words of Ovid come to mind: Omnia perdidimus: tantummodo vita relicta est / praebat ut sensum materiamque mali — I have lost all; life alone remains / to give me the consciousness and the substance of sorrow.
Is socialism the enemy of the civilized order? It depends on what kind of socialism we are discussing. There are several varieties, not only one. If it is the version calling for government ownership and control of all the means of production, the complete nationalization of all industries, then yes, socialism is the work of the devil. All we need do to demonstrate this is mention economic basket cases like Venezuela, East Germany, Maoist China and the USSR. They produced dire poverty and the deaths of millions of innocent people.
There is a second, just as historically accurate definition of socialism as the first. It is predicated on the Marxian nostrum “From each according to his ability, to each according to his need.” If this goal is attained on a coercive basis, then, yet again, this compulsory egalitarianism is surely uncivilized. It amounts to stealing from the innocent rich. But suppose people agree to live under this principle? Ayn Rand might not like this too much, but, if it is truly voluntary, then instead of being incompatible with civilized principles, it is a paradigmatic case of them. That is, the rich agree to be “expropriated” in favor of the poor.
Are there any such institutions that actually flourish? Here are a few: the convent, monastery, kibbutz, commune, syndicalist association, cooperative. I teach at a Jesuit school, and all members of this order subscribe to the “from each, to each” philosophy. True, kibbutzim were initially subsidized by the state of Israel and are now shadows of their former selves, and Robert Owen’s commune in New Harmony, Ind., is no longer in operation. But neither does every business last forever. Then there is the average American family. It, too, lives according to this Marxian doctrine. The three-year-old girl eats, gets toys, and is clothed not in accordance with her ability to earn income, but based on her needs.
Capitalism is likewise divided into several varieties. If it is free market capitalism we are contemplating, or as near to that system as we can approach in this vale of tears, then this—along with voluntary socialism—is the very foundation of the civilized order. All boats rise on a tide of profit maximization and untrammeled entrepreneurship, as long as personal and property rights are respected. The experiences of places with expansive economic freedom, such as the US, Switzerland, Hong Kong, Singapore—and yes, Bernie, Scandinavia too—give ample testimony to this claim.
Yet under the veneer of economic freedom, markets have their dark side, too: crony capitalism. Uber is brutalized by the taxi industry in the name of protecting the public; young women who braid hair are hassled by licensed beauticians; domestic manufacturers lust after protective tariffs; farm states tried to outlaw dyeing margarine yellow; labor unions champion minimum wage laws to price their unskilled competitors out of the market. As Adam Smith wisely said, under this type of capitalism, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
No, not all versions of socialism are the enemy of humanity and decency, nor are all types of capitalism their friend. It all depends on which variety of each we are discussing.
Published with permission of the author. Originally published on December 15 in the Wall Street Journal.
Oct. 31 marks the 11th anniversary of the release of the famous bitcoin whitepaper. It is worthwhile to take stock of the first crypto-currency’s impressive achievements to date, while also warning of the future perils it faces.
Bitcoin has defied the critics repeatedly, being declared “dead” many times over. (In this respect it’s appropriate that it was born on Halloween.) Although its price has been volatile, it’s currently trading at a market cap of $170 billion — more than McDonald’s, and comparable to CitiGroup.
Along the way, internecine battles led to a “hard fork” and the creation of “Bitcoin cash” (in August 2017), but the cryptocurrency community emerged wiser. As for the future, ironically a piece of otherwise good news — faster computing power — may pose serious problems if the promise of “quantum supremacy” should be fulfilled.
An estimated 5 percent of Americans hold bitcoin, and the global number of users is probably around 25 million. More impressive (and precise) details concern the financials: as of this writing, some 18 million bitcoins have been “mined” — the metaphorical term describing the procedure by which a new bitcoin becomes recognized as belonging to someone’s address on the blockchain — and a single bitcoin currently fetches a market price of about $9,450. For something that critics derided as a tech fad that would soon evaporate, that’s a rather impressive accomplishment.
Read more at The Hill
Things are about to get noisy in Burlington, Vermont. No, it’s not a rally for the state’s Brooklyn-born junior senator. After some pomp including a “mini air-show,” the first two of 20 F-35s have begun settling into their new home at Vermont’s Air National Guard base, located at the Burlington Airport.
The F-35s will replace a fleet of F-16s, which the Vermont Air National Guard flew for 33 years. In an interview with WCAX, a CBS-affiliated local news station, Colonel David A. Smith , Commander, 158th Fighter Wing, Vermont Air National Guard, said, “Bringing the F-35 to Vermont secures our future for decades.” According to WCAX, the Vermont Guard began lobbying for the F-35 in the mid-2000s. “When you consider significant milestones in our storied history, this one certainly rises to the top,” Smith said.
The F-35 has indeed risen to the top in terms of cost: at $1.5 trillion, it is the world’s most expensive weapons program. Earlier this year, Bloomberg reported that the F-35 jet “just got even costlier. The estimated total price for research and procurement has increased by $22 billion in current dollars adjusted for inflation, according to the Pentagon’s latest annual cost assessment of major projects.”
Despite the staggering costs, the super-stealth fighter plane is not living up to expectations. An April 2019 report by the Government Accountability Office (GAO) found that “F-35 aircraft performance is falling short of warfighter requirements – that is, aircraft cannot perform as many missions or fly as often as required.”
Initiated by the Department of Defense in 2001, the F-35 program was designed to provide “next-generation strike fighter aircraft” for the U.S. Air Force, Navy, and Marines. The GAO found that one of the most pressing issues with the program is spare parts: “DOD has spent billions of dollars on F-35 spare parts but does not have records for all the parts it has purchased, where they are, or how much they cost.” This situation, according to the GAO, risks the ability to support an expanding fleet. The U.S. plans to buy 2,500 jets total, with 700 to be purchased by foreign military.
The Vermont 20, however, are on schedule for arrival in Burlington. While some residents have expressed enthusiasm about the F-35s, not everyone is optimistic. Citizen coalitions have been fighting the basing for five years, citing noise concerns and the possibility of the F-35s carrying nuclear arms. The F-35 is as much as four times louder than the F-16. The latest sound map of the area that will be affected by noise levels of 65 decibels or higher includes 2,640 dwelling units and an elementary school. Rosanne Greco, a retired Air Force colonel, had initially supported the F-35 basing in Burlington, her hometown. Then she read the Air Force’s environmental impact statement. She told Time, “All I had to do was read what the Air Force said about the impact it would have. The evidence was overwhelming it would have a very negative effect on close to 7,000 people.”
Concerns about what will happen in Vermont with the arrival of the F-35s echo Sen. Bernie Sanders’ statements at his 2020 presidential campaign kickoff rally earlier this year:
“Today, we say to the military-industrial-complex that we will not continue to spend $700 billion a year on the military – more than the next ten nations combined. We’re going to invest in affordable housing, we’re going to invest in public education, we’re going to invest in rebuilding our crumbling infrastructure – not more nuclear weapons and never-ending wars.”
Why not call on Sen. Sanders for help?
Bernie Sanders supports the basing of the F-35s in Vermont. He said, in an interview with the Wall Street Journal, that it would be a “major blow” if the weapons program did not come to Vermont. Referring to the Vermont National Guard, Sen. Sanders stated, “If they don’t have planes to fly, there ain’t going to be too much for them to do.”
Late South African economist Ludwig Lachmann once wrote, “The future is unknowable, though not unimaginable.”
What he meant is, it's beyond our ability to know what the future will bring. We cannot plan without errors, because we do not actually know anything about the future before it's already reality.
The future is not simply unknown, which suggests a lack of information, but unknowable -- what will be is uncertain. There is no information. We are, in this sense, slaves to destiny.
But while the future is unknowable, this does not mean it is hopeless. Our efforts always aim to create some specific, limited part of the future. Entrepreneurs do this more than others, as entrepreneurship scholar Saras Sarasvathy argues.
They can do this, as Lachmann notes, as the future is imaginable. Because we can imagine different futures, we can act to create the better version. We have the creative ability to draft scenarios and possible outcomes, so we can prepare for what is more likely to be. And attempt to bring it about.
We all differ in our ability to imagine the future that will be. Very often it might simply be luck. But luck is not all, and it certainly isn’t reliable. Some seem to have the ability and willingness to face the unknowable by imagining and attempting to shape it, and they're willing to bet that they’re right and put their money where their mouths are.
Entrepreneurs are in the business of creating big chunks of our future. They bear uncertainty.
Read the full article at Entrepreneur.
In a recent tweet, Philip Kotler, author of the most widely used marketing book in graduate business schools worldwide suggested that the government should be doing much more to reduce inequality.
To quote Kotler:
Income inequality keeps worsening. Four ways to keep income inequality from worsening. 1. Raise minimum wages, 2. Raise the top income tax rate, 3. Enact a wealth tax. 4. Raise estate taxes. One political party opposes all of these. The other will introduce all of them in time.— Philip Kotler (@kotl) July 30, 2019
By suggesting that the government should somehow put in place these "solutions," Professor Kotler (a student of Friedman, Samuelson, and Solow with degrees from University of Chicago and MIT), shows an incredible ignorance of some of the most fundamental economic principles that influence his (insightful, and I risk to say, mostly correct) thoughts about marketing and strategy.
Another very respected business school scholar, Henry Mintzberg, has also advocated for "raising the minimum wage, the need for government to act to stop climate change, that the ridesharing apps are making people poor and unhappy."
He even asks, on some occasion, 'how can smart people be so dumb?'
His question forces me to ask my own, "How can people that are so knowledgeable in their areas be so naïve (to say the least) in economics when the discipline is such a fundamental topic for businesses?
This kind of public positioning made by such an influential scholar highlights the importance of promoting Austrian economics in business schools.
The comments from Kotler and Mintzberg remind me of a talk Murray Rothbard’s gave in the early '90s on "The Future of Austrian Economics." Rothbard advocated for Austrian economists to spread their ideas outside academia, identifying business people as a particularly important audience. These are people that actually see the market process unfold and end up understanding that actors and firms all belong to a complex web of interactions.
Particularly now, I think it is important to act upon Rothbard's suggestion, in particular by targeting business schools.
Business students take courses in Strategy and Marketing that are based (although this is hardly mentioned directly) on sound economics principles. For example, people (not collectives) act, preferences are subjective, the market is dynamic, the influence of government policies over businesses exists and is very heavy, markets are interconnected, etc.
Those same students are exposed to various blends of economic thinking that lack much practical use. For example, textbooks by monetarists, Keynesians, and even Marxists are common textbooks all over the globe. Instead, what these future professionals need is a more logical approach to economic thinking.
Fortunately, we are making progress in this area.
The Economics for Entrepreneurs podcast, hosted by Hunter Hastings, melds the sound economic thinking of the Austrian school, with discussions of strategy, marketing, and entrepreneurship, among others. Several scholars associated with the Mises Institute teach at business programs (see for instance Peter Klein, Per Bylund, and Matt McCaffrey.) Social media groups have also arisen, such as "Mises For Business" and “Management Scholars for Free Markets.” There's is also a great number of academic papers being published synthesizing concepts in Austrian economics, management, and business strategy. These are areas that already have a lot in common, and we can build on that.
At the same time, there is still a lot of room to grow.
Apart from Marketing and Strategy, there are many other areas that business schools can learn from studying praxeology and catallactics. Entrepreneurship and innovation are some of the most obvious areas where Austrians can contribute, other topics such as human resources and finance are also very strong candidates for potential research. Accounting is another area where Austrians have also begun to contribute. With a personal background in industrial engineering, I even think fields like operations could gain a lot from the understanding of matters such as the business cycle and especially insights of the structure of capital.
To sum up, there is a lot of misunderstanding and bad economics being taught to business students, forcing many into courses claiming that theory in economics is useless, and that ‘data’ solves it all. In such programs, we are in desperate need for an Austrian revolution.
With the robust understanding of the market process that the Austrians are able to provide, business students, future entrepreneurs, and business professionals will be better prepared to operate their businesses and to better understand their consumers, competitors, and their macro environment. By talking to those people, moreover, we will be able to open the door to the other parts of Austro-libertarian thinking and, as a consequence, to bring more people to believe in individual liberties against central power coercion.
Powerline reports the results of a survey of ideological bias in philosophy. “The more right-leaning the participant, the more hostility they reported personally experiencing from colleagues, and, overall, the more left-leaning the participant, the less hostility they reported personally experiencing.” The hostility was no mere matter of dislike experienced by the conservatives. It carried over to hiring decisions and evaluating papers and grant applications. The more left-leaning the philosopher, the more likely was such bias held to be justified. The author of the post wrongly thinks that such bias is an instance of “epistemic closure,” but that is a technical term, not a synonym for “closed-mindedness.” But this is a minor failing in an informative post.
President Donald Trump’s plan to give an Independence Day televised address from the Lincoln Memorial has outraged manypundits and plenty of normal Americans, too. There has rarely been a shortage of political buncombe on July Fourth but Trump could, as usual, break all records.
For Trump’s extravaganza, the Pentagon is bringing out of mothballs some World War II-era Sherman tanks. Though the gun turrets look impressive, Allied soldiers nicknamed Sherman tanks “Ronsons” because they were death traps that "light first every time” in clashes with better built German tanks. But that painful fact, like many others, will be swept under the rug.
The Washington Post condemned Trump’s “gaudy display of military hardware that is more in keeping with a banana republic than the world’s oldest democracy.” Regrettably, the Post’s indignation over a few tanks does not extend to the fact that American troops are now fighting in 14 foreign nations. But the real problem is not the military relics; it's exalting government power and politicians on a day meant to celebrate individual liberty.
The Fourth of July in Washington has been going downhill ever since 9/11.
Read the full article at USA Today
This week the Supreme Court ruled that the federal government can keep secret the food stamp sales totals of grocery stores. By a 6-3 vote, the court decided that such business records are exempt from disclosure under the federal Freedom of Information Act (FOIA). This case, started eight years ago by the Argus Leader (a member of the USA Today network), is another landmark in cloaking federal data from the American people.
The court upheld retail sales data secrecy despite no evidence that such disclosures would harm anyone. Argus Leader news editor Cory Myers labeled the decision “a massive blow to the public’s right to know how its tax dollars are being spent, and who is benefiting."
Controversies over the food stamp program have multiplied as evidence accumulated revealing that the program is a public health disaster. A 2017 study published in BMC Public Health found that food stamp recipients were twice as likely to be obese as eligible non-recipients. This confirms a 2015 USDA report which revealed that food stamp recipients are more likely to be obese than eligible non-recipients (40% vs. 32%). But the feds have consistently sought to limit public information on the program.
Food stamp supporters and food retailers helped block a 2013 congressional proposal to disclose how recipients actually spend food stamps. A limited survey by USDA released in 2016 indicated that sugar sweetened beverages are the item recipients of food stamps spend the most money on.But opening up the sales data nationwide to reveal what people purchase across the nation would do far more to spur food stamp reform and cease subsidizing junk food.
Read the full article at USA Today
In the age of Trump, many American conservatives are adopting populist positions. Policies that were once considered the right-wing status quo are being questioned and assailed, particularly when it comes to capitalism and markets.
Fox News personality Tucker Carlson is often on the front lines of this iconoclasm, with his regular diatribes against unfettered capitalism and financial elites. His voice is that of a growing traditionalist movement that has begun to vocalize their idealistic challenges to basic capitalist principles. These traditionalists want a larger role for religion in the public square. Unfortunately, they want the state to help facilitate this, and in seeking government’s help, they’re shooting themselves in the foot.
Recently, a great many traditionalists were up in arms over North Dakota’s repeal of its blue laws, which prohibited retail businesses from operating before noon on Sundays. Blue laws were once in place across the country and increasingly have been rolled back. Usually they take the form of bans on alcohol and retail sales, hunting, and certain other recreations.
In response to North Dakota’s repeal, Father Dominic Bouck, a Catholic priest in Bismarck, argued in First Things that the move will hurt the poor and even make the siren song of socialism more palatable to the tired and restless masses.
Without blue laws, Bouck contends that many workers “conscripted into hourly wage jobs” will be denied the ability to attend mass and enjoy holidays with their families. In Bouck’s words, “the legal protection of Sunday rest helps the individual worker and preserves the family from the arms race that is our consumer society.” He also cautions that the decline of blue laws has helped facilitate the rise of our hyper-consumerist culture and the tendency to view man as “the sum of his production and consumption.”
Bouck is onto something here. However, blue laws aren’t going to address his concerns.
Rest from work is crucial, and a person’s worth doesn’t stem from his ability to be a cog in the retail machine. This lack of regularized rest has doubtless contributed to the current increases in anxiety and depression. In 1843 Magazine, psychoanalyst Josh Cohen notes that “anxieties about burnout seem to be everywhere these days.” Coupled with this problem is a lack of togetherness and fellowship. Whereas Sundays have traditionally provided opportunities for families and friends to spend time together, Cigna reports that there’s currently an epidemic of loneliness in the United States.
There can be no doubt that most people would benefit from taking Sundays slowly and spending time with their friends, family, and God. However, reinstating blue laws won’t solve the problem. It’s completely off-base to attribute the dramatic decline in American churchgoing to the lack of legal prohibitions on Sunday work. According to Gallup, weekly religious attendance has been going down since the 1950s.
Ask a young person why he didn’t go to church last Sunday, and I doubt he’ll offer a work shift as the reason. More likely, you’ll hear that church isn’t relevant to his life.
As sociologist Robert Nisbet noted in his classic work The Quest for Community, the relevance of a social institution depends on its maintaining a function and fulfilling the needs of its members. As the centralized state has usurped more and more of the traditional functions of important mediating institutions such as the church and family, the relevance of those institutions has waned. Relying on the same state to rejuvenate church attendance would only further religion down the path of irrelevance and decay.
In his essay “The Balance of Power in Society,” sociologist Frank Tannenbaum discussed the importance of maintaining a balance in society between the various institutions that comprise it: the family, the church, the state, and the market. According to Tannenbaum, these institutions are frequently in conflict and constantly trying to encroach upon the territory of the others. This push and pull is natural, Tannenbaum says, and even healthy when it results in societal balance. Unfortunately, when one institution gains too much power, the result is usually chaos and disorder.
There’s no doubt that our society is woefully out of balance. Family and church are deprioritized in favor of the market and job concerns, and all three are dominated by the powerful centralized state. Many in our Western world see their primary value in their jobs to the neglect of other aspects of their lives. It’s this imbalance that traditionalists are getting at with their call for more blue laws. But legislation is a poor method of restoring balance and order to society because it fails to address the underlying issue: the values that motivate people’s actions.
In the long run, consumers determine the shape of the market, a concept known as consumer-sovereignty. As I’ve argued previously, it’s inaccurate to say that markets are responsible for the decay of community and family. Markets are merely a mirror of people’s values. Employers can’t actually force or “conscript” others into working for them, Father Bouck’s hyperbole notwithstanding. Although man must eat “by the sweat of his brow,” that does not mean he must let the world determine in what manner he will sweat. Employers only have as much power as their employees give them. It may be uncomfortable and inconvenient to resist, but no one is forced to worship mammon.
Blue laws are merely an attempt to make the already very low barriers to church attendance even lower—to match the low value people ascribe to it. That isn’t going to fix anything. Early Christians were martyred and fed to the Roman lions because they valued their beliefs even more than their lives, much like the merchant seeking the pearl of great price. Have contemporary Christians really fallen so far that they’re unable to organize their economic lives so they too can worship?