Butler Shaffer, RIP

Butler Shaffer, RIP

12/30/2019David Gordon

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.

 

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Coronavirus? The Chinese Central Bank Has a "Solution"

02/07/2020Frank Shostak

In response to the economic paralysis brought about by the coronavirus, the Chinese central bank has pumped $243 billion into financial markets. On Monday, February 3, 2020, China’s equity market shed $393 billion of its value.

Most experts are of the view that in order to counter the damage that the coronavirus has inflicted, loose monetary policy is of utmost importance to stabilize the economy. It is believed that the massive monetary pumping will lift overall demand in the economy and in turn will likely move the economy out of the stagnation hole.

According to this way of thinking, consumer confidence, which has weakened as a result of the coronavirus, could be lifted by massive monetary pumping.

Now, even if consumers were to become more confident about economic prospects, how is all this related to the damage that the virus continues to inflict? Would the increase in consumer confidence due to the monetary pumping cause individuals to go back to work?

Unless the causes of the virus are ascertained or unless some vaccine is produced to protect individuals against the virus, they are likely to continue to pursue a life of isolation. This means that most people are not going to risk their lives and start using the newly pumped money to boost their spending.

It seems that whenever a crisis emerges, central banks are of the view that first of all they must push plenty of money in to “cushion” the side effects of the crisis. The central bankers are following the idea that if in doubt “grease” the problem with a lot of money.

It did not occur to all the advocates of the aggressive loose monetary policy that this is going to transform a given economic crisis into a much larger one.

Most advocates would respond that it is the central bank’s duty to defend individuals against various bad side effects. The only way they can defend individuals is by not adding more damage.

If loose monetary policy could counter the bad side effects of the coronavirus, we could agree that money pumping is an effective remedy to eradicate side effects of viruses. In such a case, central bankers should be nominated for the Nobel Prize in medicine.

But most experts still don’t get it—money is just the medium of exchange. It produces nothing and it can only provide the services of a medium of exchange. If we begin to consider money as something magical that can fix everything, including eradicating the economic side effects of the coronavirus, it opens the door to nasty economic surprises.

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The State of the Union: An Annual Reminder of Inevitable Default

02/05/2020Tho Bishop

Last night’s State of the Union was particularly noteworthy for its showmanship. Scholarships were given away, medals were awarded, families reunited. At a time when national politics is bad theater, President Trump is clearly its most gifted star.

Trump also knows what sells. As a political figure, he’s motivated not by any consistent ideology, but rather by transactional legislation. Following the performance, an MSNBC pundit noted that the speech was a “microtargeted ad” to various demographics aimed at expanding his base before next year’s election.

Combined with his Super Bowl ads highlighting criminal justice reform, his focus on charter schools and honoring a hundred-year-old Tuskegee airman are aimed at eroding away the Democrats' 90 percent control of black voters. The cameo by Venezuela opposition leader Juan Guaidó was an appeal to Hispanic families who have fled communist regimes—perhaps a poke at Bernie Sanders. Paid family leave, a policy focus of his daughter, is intended to help him with suburban women.

What doesn’t sell? Fiscal responsibility.

The political equivalent of Crystal Pepsi, the Republican Party has given up its long-standing façade of budgetary restraint. As Donald Trump told donors earlier this year, "Who the hell cares about the budget?”

Of course, some people do care, particularly those who understand the real costs of runaway spending. Unfortunately, politics isn’t about the economic literacy of the few, but the prevailing ideology of the masses. As Jeff Deist noted in 2016, the implicit ideology of the American population is much closer to Bernie Sanders than it is to Ludwig von Mises. As such, it should be no surprise that the policies of the country align more closely with the “deficits don’t matter” vision of Modern Monetary Theorists than the sober analysis of Austrians economists.

Of course, the popularity of political positions cannot shield a society from the consequences of their actions.

A recent Congressional Budget Office (CBO) forecast now has America on track for a 98 percent debt-to-GDP ratio by the end of the decade, and that’s with a built-in assumption that spending trends won’t significantly increase—a bet I wouldn’t feel comfortable making.

Left out of this measure, of course, are the true costs of the current American government—including unfunded liabilities built into to America’s entitlement system. For example, social security has a projected long-term deficit of over $13 trillion. Medicare adds another $37 trillion. Factor in federal pensions and veterans' benefits and the number gets to $122 trillion.

Working to DC’s benefit is the fact that American debt is still treated globally as one of the world’s most secure assets. Global demand for US Treasurys remains strong, and directly subsidizes our leviathan state even as we simultaneously weaponize it against the rest of the world. While it’s impossible to predict exactly how long this status will continue, history informs us that it would be foolish to assume it will go on forever.

To his credit, Donald Trump seemed to instinctually understand this as a candidate. While running, he was remarkably honest when he talked about the need for American creditors to eventually take haircuts. The self-dubbed "king of debt," he compared it to his own approach in business:

I've borrowed knowing that you can pay back with discounts. And I've done very well with debt. Now of course I was swashbuckling, and it did well for me, and it was good for me and all of that. And you know debt was always sort of interesting to me. Now we're in a different situation with a country, but I would borrow knowing that if the economy crashed you could make a deal. And if the economy was good it was good so therefore you can't lose. It's like you make a deal before you go into a poker game. And your odds are much better.

While his comments shocked (shocked!) the Very Serious pundits at the time, they were a refreshingly honest look at America’s future. As is often the case with Trump, he was attacked by the press for saying aloud the things you're supposed to keep quiet—like his reportedly saying “Yeah, but I won’t be here,” when given a brief on America’s growing debt crisis in 2017.

Of course, although any sort of default by the American government would be a major chaotic event for the global financial system, it’s something we should embrace and prepare for. Peter Klein has noted, “that the US can never restructure or even repudiate the national debt—that US Treasuries must always be treated as a unique and magical "risk-free" investment—is wildly speculative at best, preposterous at worst.” Murray Rothbard advocated for the repudiation of the national debt, which he viewed as a “part of the American tradition.”

At the end of the day, however, whether one agrees with the idea of debt default is inconsequential. The political system today is inherently unprepared to tackle the issue. The incentive structures of democracy actively work against restraint and responsibility. So long as the economic profession is dominated by bad economists and our education system is dedicated to government indoctrination rather than economic literacy, we will continue to lack the political will to make the difficult choices necessary to get our fiscal house in order.

Luckily, America’s political disorder doesn’t mean that American citizens have to be unprepared. Awareness of the real problems we face doesn’t require taking the black pill, it simply means being aware of practical steps we can take as individuals to best prepare for the future.

Just as we can arm ourselves to protect ourselves against inept law enforcement, we can safeguard our wealth outside of the American financial system to protect ourselves against inept fiscal management. Be it gold, silver, bitcoin, or whatever, the future may very well belong to those who refuse to leave their destiny in the hands of politicians, bureaucrats, and central bankers.

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Iowa's Botched Election: Who (Or What) Counts the Votes Is Important

02/04/2020Ryan McMaken

The public still doesn't know who won the Iowa caucuses. Maybe the leaders of the Democratic Party don't know either.

But there's an important lesson here: if one's political process is founded on votes counted through a phone app, or a "direct recording electronic" (DRE) voting machine, centralized technical control of the system raises the risk of system-wide failure and corruption.

In Iowa the downside of an electronic system was made worse by a sheer lack of competence on the part of organizers. The Iowa system was something of a hybrid between physically tallied votes that were then reported through an electronic system. Some parts of the process were directly observable and verifiable. But the electronic component of the system appeared to increase human error rather than mitigate it.

Moreover, even when results finally are announced, many will have good reason to hold the results suspect. Some will likely claim party leaders purposely held up results to make "adjustments." Others will question—quite reasonably—if the people who can't competently use the vote counting system can be trusted to properly count the votes at all.

The good news in all of this is that this is just a primary. This vote is essentially a private vote count for a private organization known as the Democratic Party. Even if the vote in Iowa is totally botched, all that legally matters is the candidate chosen at the convention this summer.

Things are different in a national elections, however. In those cases, the stakes are higher, and the motivation to influence them greater. When using electronic voting, votes can be more easily and conveniently lost or changed through error or malicious schemes. This can also be done more easily on a larger scale. Yes, paper vote counts can be corrupted, but it is more difficult to do so on a large scale.

Yet, many policymakers in many states have suggested "streamlining" the voting process by moving ever further toward DREs to count votes. Many of these same people wax philosophical about the alleged sanctity of the democratic process, or they make hysterical claims about how "Russian hackers" are trying to corrupt American politics.

This isn't to say there aren't people out there trying to tamper with vote counts. "The Russians" are not the only people with an interest in doing so. As has become abundantly clear since the election of Donald Trump, US intelligence bureaucrats at agencies like the FBI and CIA are happy to employ an endless barrage of schemes to undermine an elected president. James Comey, for instance, employed FBI investigations to enhance his own power and influence the 2016 election to suit his personal ends. We also know that the CIA and other intelligence agencies engage in cyber warfare of their own design. The idea that these skills and resources would never be employed for domestic political ends is a cute one.

The most reasonable response to all of this is to make the logistics of corrupting and "hacking" elections as daunting as possible. The first step is in insisting on old-fashioned paper ballots in all elections.

Unfortunately, fewer than half of US states require the use of physical ballots only. More than half employ electronic voting, at least in part. Some states even employ electronic voting without any sort of paper trail at all.

A big reason to employ electronic counting schemes is to make life easier for government officials. In other words,  laziness and incompetence on the part of the vote-counting officials (mostly state governments' "secretaries of state") means they're looking for a way to manage vote counts with minimal logistical effort.

These officials claim it's just too difficult to count all the votes in a public, traceable, and accurate way.

And yet, the United Kingdom just held an all-paper-ballot election in a country of over 65 million people. It's not that hard. As explained here, each UK voter casts a paper ballot. The ballots are rushed to the place where they are counted. People then count the votes out in the open. Candidates can ask for multiple recounts. The candidate with the most votes is announced in each constituency. The end. As one British observer noted:

On the 24th June 2016, by approximately 6am, we had managed to count 33,577,342 votes in the UK Brexit Referendum. These votes were counted by hand and we all voted by putting a simple cross in a box, using a trusty pencil.

Now, the voting in the Iowa Caucus has been closed for over 16 hours and, as of now, there has been no result. In fact only 1.9% of the votes have been tallied and are being reported.

Now, I'm not saying the British have a perfect system, and few would accuse me of being any sort of an Anglophile. Counting votes in a Prime Minister system is a bit different.  But the fact is that this isn't rocket science. Yet we now live in an America where governments can't manage their most basic functions. Yes, state and local governments are sure to pay their employees big salaries with exorbitant retirement benefits. Yet we're also being told—by these well-paid officials themselves—that in spite of perennially growing budgets, roads are falling apart and bridges are falling down. We're told school kids can't read because teaching people to read is just so, so difficult. And counting paper ballots? For these people, that's a nut that's just too hard to crack.

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The Fable of the Bungling Firemen

02/04/2020Gary Galles

From the time I was an undergraduate, I can remember reading many articles by Leonard Read, founder of the Foundation for Economic Education (FEE). I found his insights valuable enough that I eventually wrote a book, The Apostle of Peace, about what I considered were his best sustained arguments. Many of his shorter arguments were not included. But every so often, I go back and read one or two of his books in search of overlooked inspiration. I did this recently with his 1980 book Seeds of Progress, free online at Mises.org, for its fortieth anniversary.

There, I found a fireman analogy I thought was worth sharing.

Bungling Firemen

  • Imagine this fictitious situation—the firemen of a community answering an alarm and rushing to a burning home. Failing to extinguish the fire immediately, they spray the home with kerosene. The fire worsens. The remedy? Spray it with gasoline! Still worse! On and on with “remedies” galore, each more moronic than the former. These imaginary firemen resemble the millions of political bunglers whose actions lead to “the misery and ruin of many thousands and millions of people.”
  • How do our political bunglers resemble the fictitious firemen[?]…First and foremost, they have no more understanding of how freedom works its wonders….Thus blinded to reality, they see what to them appears as a societal flaw, and then employ coercion to correct it. Their remedy does not work. They then double their coercions. Worse than ever: more flaws appear! Deeper into the mire of our present mess! Their cure? More and more of their foolish interventions!
  • Those who do little if any thinking for themselves are inclined to follow the millions of bunglers who loudly proclaim their know-it-all-ness and promise a heaven on earth.

What Do Bungling Firemen Miss?

  • The keynote to the good life is freedom….To pare over-extended government down to its proper role is to maximize liberty…that heavenly power which releases human creativity.
  • When the free and unfettered market prevails, there is a race for excellence.
  • Each of us should do our little creative things and let everyone else—no exceptions—do theirs. These trillions times trillions of little things are, indeed, the seeds of all human progress and are founded on liberty for one and all.

Living with Bungling Firemen

  • We are living under government by unwise men. And the reason is that many of the wise men among us…fail to see what they could and should be doing to limit government to its principled role of keeping the peace with justice to all.
  • The most bothersome, frustrating and destructive of all are the millions of dictocrats who…sincerely believe that it is their duty to solve your and my problems.
  • Ever so many seekers of political office…actually “think” that we know not how to run our lives; but they never doubt that we are wise enough to select them as our masters!
  • Limiting bungling firemen.
  • Individual liberty depends on the general observance of the principle of equality before the law.
  • Liberty and justice are inseparably associated.
  • An ideal government…is where no one “rules” another! Government is an agency of defense…keeping the peace and invoking a common justice. Period!
  • What, in all good conscience, should be inhibited? The moral codes give the answer: fraud, violence, misrepresentation—thou shalt not steal or kill or do any evil. And government cannot perform this role when over-stepping its proper bounds.

In millions of words over many decades, Leonard Read spent his life trying to “advance freedom by an improved phrasing of its truths.” Those efforts yield those of us who wish to advance freedom today much wisdom, in small as well as large ways. Seeds of Progress is just one example of how even a small investment can yield us substantial returns to that project.

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Coronavirus: Is This the Black Swan Many Feared?

02/03/2020Daniel Lacalle

The slump in energy commodities and copper shows the fragility of the global economy and the risks to the consensus’s reflation trade. It is easy to blame the recent fall of commodity prices on the coronavirus outbreak, but the weakness was already evident before the outbreak.

We need to remember that the coronavirus epidemic is, first and foremost, a humanitarian crisis. At the close of this article, the number of affected rose to more than 14,700 and the death toll to 305 citizens. Our thoughts are with the victims and their families.

This epidemic cannot be detached from an event that has not grabbed many headlines last year. The retail price of pork rose last year by more than 80 percent. Food price inflation—despite an official low headline consumer price index (CPI) of 3 percent—and a shortage in the supply of meat and pork generated a rapid increase in consumption of wild animals, including bats and snakes, which led to a rapid deterioration in health controls and a large exposure to diseases like the coronavirus. This is one of the reasons why the death toll and affected headcount are rising so fast. Not only is coronavirus more contagious than previous similar viruses, but the risk is extended to various provinces.

We all hope that the outbreak will be contained quickly, but we also need to make some estimates of economic risk. According to a study by Jong-Wha Lee and Warwick J. McKibbin, the impact on the global economy from the earlier SARS coronavirus epidemic was up to $45 billion. But once the WHO introduced decisive measures and the epidemic was contained, both the stock market and the global economy resumed an upward trend. However, in 2003 China only made up 4 percent of the global GDP, and now it is around 17 percent. The level of trade with China was also much smaller. Nomura expects a 2 percent slump in China’s annualized GDP growth in one quarter, which could cause ripple effects in Japan, with an impact of up to 0.4 percent, and Hong Kong, up to 1.7 percent. The coronavirus is more contagious but less lethal than SARS, hence the economic impact is estimated to be at least four times higher than what the experts estimated from the SARS outbreak, according to Bloomberg, and some studies elevate the economic impact to $500 billion if the epidemic lasts for an entire year.

China’s top trading partners are likely to suffer. The United States has a massive trade deficit, but remains, at 19 percent, China’s largest trading partner. Outside of the US, Hong Kong (12.1 percent), should be the most affected, followed by Japan (5.9 percent), South Korea (4.4 percent), Vietnam (3.4 percent), Germany (3.1 percent), India (3.1 percent) and the Netherlands (2.9 percent): $73.1 billion.

China has closed all commercial activities in at least twenty-one provinces, municipalities, and regions and authorities have told businesses not to resume work until Feb. 10 at the earliest. Last year, those parts of China accounted for more than 80 percent of national GDP, and 90 percent of exports, so the impact on the domestic and global economy cannot be underestimated.

Emerging markets face a double risk. On the one side, collapsing commodity prices and weaker trade growth are likely to have an important impact on exports and growth. However, the other important risk comes from weakening reserves as foreign currency revenues fall, precisely in a year when USD-denominated maturities exceed $1 trillion.

The eurozone is not immune. Its massive trade surplus also relies heavily on markets where China is either the main partner or a key driver of growth and trade.

So far, most of these risks are only assumptions and many come from speculation, because the extent of the outbreak has not been defined in detail. As such, it is logical that markets and economists see a wide range of impacts. One thing, however, is clear: the estimates of global GDP, inflation, and trade growth for 2020 that we saw at the end of last year are going to be slashed, and the likelihood of full normalization of trade and commercial activity in and with China in the short term is small. We all want a rapid resolution, effective containment of the epidemic, and no more deaths, but the economic ramifications cannot be ignored

Originally published at Dlacalle.com
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More on Joe Salerno's Critique of Economism

02/03/2020Jeff Deist

Dr. Joe Salerno recently penned a response to economist Tyler Cowen's call for "State Capacity Libertarianism."  It's a very important essay, and I encourage you to read it. It gets to the heart of a very important and broad question in America today, namely whether what we can call the "managerial capitalism" of the twentieth and early twenty-first centuries is working. 

Embedded in Salerno's broader critique of Cowen, focused on the predatory nature of state power, is this important point about the unsatisfying doctrine of economism:

The bulk of Henderson’s [economist David Henderson, another Cowen critic] article is thus confined to citations of research and anecdotes indicating how the free market and entrepreneurship would solve or alleviate the problems raised by Cowen, including traffic congestion, low-quality K-12 education, and climate change. Near the end of his article Henderson rehearses the venerable public choice argument demonstrating that the perverse incentive structure confronting politicians, bureaucrats, and voters in the political arena produces the inefficient outcomes that Cowen bemoans. This contrasts with the alignment of incentives guiding and coordinating the actions of consumers and producers in the market economy, which would conduce to a more efficient resolution of most of these problems.

Henderson does score cogent points against Cowen. But, in the end, Henderson’s version of libertarianism amounts to little more than economism, the narrow and hollow doctrine of enlisting market forces to improve social efficiency under the existing political regime. Henderson’s economistic approach to libertarianism is epitomized in Milton Friedman’s classic work Capitalism and Freedom.

Economism, an older cousin of public choice theory, is a throwback to the idea of homo economicus. Economism sees individuals as relentless rational actors, always seeking to maximize their (narrowly) economic well-being. Public choice argues for applying this focus to state actors as well, and thus for using policy as a tool for greater economic efficiency. As Salerno puts it, "economism attempts to enlist market forces to improve social efficiency under the existing political regime." It seeks to align the "incentives guiding and coordinating the actions of consumers and producers in the market economy, which would conduce to a more efficient resolution of most of these problems."

But is this wise, or even realistic? Should the state apparatus be charged with nudging humans toward more efficient (read: aggregated) economic outcomes? Does the Austrian tradition counsel economism, and does broader support for laissez-faire policy compel it? 

Of course not, says C. Jay Engel writing at Bastion magazine:

The Viennese students of civilization would never have talked in the way Cowen does. Contrary to the “free market” economic establishment, the Austrians, and especially Misesians, completely deny the neo-classical construct of homo economicus. As conservatives such as Russell Kirk rightly point out the actual unrealistic nature of this construct, the Austrians are forever exempt from the criticisms related to the “economism” of man. It is true that man does not live by bread alone, as Wilhelm Ropke echoed the Biblical phrasing; his sociological needs, fulfilled by his community setting and connection to place and kin, are often more important than a singular emphasis on his material opportunities. The Austrians recognized this more than the typical policy-advising economists of the twentieth century.   

Furthermore, we need not consider man's higher or spiritual motivations to refute such a narrow view of his conduct. As Engel explains, only the rigorously subjectivist perspective of the Austrian school offers a rational critique of economism:

no school of economic thought is as enduringly relevant as the Austrian School. Only they, with their subjective theory of value, can account for the displeasure of those Westerners who are not experiencing the mythical wonders of booming GDP. It was they who derided the absurdity of using formulas of aggregation to pronounce the successes of central economic decision making. It was the Austrians who alone among economists could account for the fact that mankind's wants were so much more complicated and complex than just a cold material prosperity could fulfill.

Subjectivism is what separates "efficiency" from real value. The cold-hearted free market economist, always portrayed as fixated on material wants, cannot win hearts and minds in the arena of social science with this bone-dry approach. On the contrary, Misesian economics is human in orientation, always focused on actors rather than aggregates. Real people act, real people imbue their actions with value knowable only to them.

Ultimately, Cowen and economism turn what ought to be robust social science into a handmaiden for state efficiency. Political liberty becomes nothing more than a mechanism for "better government." But as Dr. Salerno reminds us, this narrow view disregards the inherently predatory nature of the state itself: 

Libertarianism becomes in their hands a recipe for constraining state action in the interest of optimizing social efficiency. This economistic, hollowed-out version of libertarianism may be called “state efficiency libertarianism.”

In contrast, hard-core, muscular libertarianism begins with the insight that the state is fundamentally different in nature from society and economy, and stands wholly apart from them.

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Leonard Read on Violence, Liberty, and Love

02/03/2020Gary Galles

Virtue is widely preached and admired. Most consider themselves virtuous. Yet in our society, virtue is being progressively crowded out by coercion. That suggests a need to give more consideration to the differences between social coordination based on virtue, which is voluntary, and that based on coercion, which actually degrades what we consider good and atrophies the muscles of virtue.

Leonard Read, FEE’s founder, thought long and hard about this distinction. But perhaps his most insightful discussion came in his 1950 Students of Liberty, celebrating its seventieth anniversary this year, which framed the discussion in terms of violence versus love:

  • The principle of violence finds widespread application.
  • A citizen is compelled to give of the fruits of his labor to meet…”needs” of others. Freedom of choice as to what he does with his own capital and income (property) is denied him. Freedom of choice gives way to the dictation of an authority…backed by brute force.
  • The government’s claim becomes the first lien on everything a citizen owns.
  • The reason that most of us do not think of government coercion as meaning obedience under penalty of death is because we…acquiesce before the ultimate meaning of compulsion is realized.
  • Here…government was strictly limited; that there was a minimum of organized violence.
  • Restriction and destruction by government, to be useful, must be confined to that which is bad: fraud, private violence, conspiracy, and theft or other predatory practices…in the original plan, all creative functions were to be carried on by such voluntary, cooperative, and competitive elements as the population contained. Government was to be confined to the protection of personal liberty.
  • I cannot make inspired violence square with ethical concepts. Aggressive coercion…[h]ow this brute force can be used and be considered moral, except to restrain violence otherwise initiated, is beyond my capacities to reason.
  • As a private citizen, the predatory person is only one among millions. As an agent of government he becomes one over millions.
  • I have no faith, whatever, in any “good” that can come from these measures based on violence.
  • The political means…is…communalization by force, or legal thievery. It is simply the political device by which citizens pool their votes to extort the fruits of the labor of others for the purpose of satisfying the desires of themselves, their group, their community, or their industry.
  • Communalization by violence…[can] destroy the society from which it derives its parasitical existence.
  • The cause of our ills is a reliance on the principle of violence.
  • When we as citizens turn over to the state an item in the responsibility for our welfare, the state assumes a proportionate authority over our lives.
  • The alternative to violence is love….the application of the kindly virtues in human relations such as tolerance, charity, good sportsmanship, the right of another to his views, integrity, the practice of not doing to others what you would not have them do to you, and other attributes which result in mutual trust, voluntary cooperation, and justice….Why, then, don’t we be done with violence?
  • Reason will not support the idea of the principle of love as impractical….We practice the principle of love in most of the aspects of our daily lives without recognizing it as such….But where violence once takes the place of love, most of us seem to consider the matter settled, and conclude that love has forever been ruled out as possible of application…aid on a voluntary basis has been all but forgotten as a possibility.
  • This would be a better world if a trend away from violence could be begun and a trend toward love initiated.
  • What are the conditions essential for this needed reversal in form?
  • Love prospers only in liberty. It generates and grows among free men….As violence begets violence so does one personal act of kindness beget another.
  • Authority over one’s own actions is lost precisely in the degree that responsibility is shifted to someone else….Self-improvement [is] the only practical course that there is to a greater liberty.
  • Understanding liberty is knowing how to live in a condition where voluntary efforts will be at the maximum, and the use of force against persons at the minimum.

Present-day talk and writing…for the most part is an argument for the rearrangement of the rules of violence…[But] progress is possible only when human energy is freed of restraint.

Once the reliance on self is removed, once the responsibility for a portion of our being has been assumed by another…we cease to think about or apply our ingenuity to the activities thus transferred….Creative thought is abandoned by man as a free and thus a creative agent, and assumed by man as an agent of coercion.

Understanding liberty requires that we think…of replacing violence with voluntary action.

In Students of Liberty, Leonard Read drew out the superiority of a society whose organizing principle is virtue—love voluntarily acted out in practical terms toward those we interact with—over one whose organizing principle is the threat of violence. Unfortunately, we have been heading down the wrong path. Read’s insights can help us reverse course. And the alternative is not appealing:

The principle of love prospers in a condition of liberty….[T]he principle of violence thrives in the absence of the principle of love….[T]he principle of violence is destructive of ourselves, of civilization, and of mankind.

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The Pretense of Intuition

01/30/2020Peter G. Klein

Joe's excellent critique of "state capacity libertarianism" picks up on something I also noticed when reading Tyler Cowen's piece. As Joe puts it, Cowen's ideal state is "a nonmarginal actor whose task is to achieve certain collective outcomes intuited by Cowen or some other political philosopher." Cowen provides a laundry list of societal challenges he claims only a highly capable state can solve—traffic congestion, secondary education, climate change, etc.—without discussing any in detail. Of course, each issue has been analyzed many times in the libertarian literature, using the standard concepts, theories, and frameworks such as marginal analysis, demonstrated preference, opportunity costs, Austrian price theory, comparative institutional analysis, and so on, and no evidence for "market failure" has surfaced. But Cowen's intuition tells him markets aren't good enough in one area or another. 

This is actually Cowen's long-held view. You may remember his 2014 article "The Lack of  Major Wars May Be Hurting Economic Growth," which echoed the Mariana Mazzucato position that government spending is the main source of technological progress. I remember a friendly argument with Cowen some twenty years ago about NASA, which he insisted was an example of benevolent government intervention. I brought up the standard counterarguments—theoretical (how do you measure benefits and costs, including opportunity costs?), empirical (lots of case study evidence suggesting widespread waste, fraud, and long-term negative effects on the direction of science and technology), and deontological (is it okay to coerce people to support transfer payments that they see as against their self interest?). He wasn't buying it. Space exploration is just so cool that the usual arguments don't apply.

Many influential writers and thinkers are like this, relying on intuition over analysis and evidence. "I can't explain exactly why this case is different (e.g., immune from public choice considerations), it just is." It's a common problem among academics, elite media, government officials, etc. "People are biased and highly irrational, except for me and my friends." "Inequality is wrong and should be addressed through redistribution, except in the case of academic positions at elite universities or slots in the top journals." "Powerful special interests have too much influence on policy, except for antitrust which is apolitical." Watch for this.

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Thanks to the Anti–Gig Economy Craze, Freelance Writers Are Getting Hurt

01/28/2020José Niño

Libby Emmons and David Marcus at the New York Post put a spotlight on the ongoing crusade against the gig economy. They began by citing California Assembly Bill 5, which was designed to put the clamps on the gig economy.

Ostensibly marketed as a bill to reign in rideshare companies like Uber by forcing them to provide independent contractors the same benefits as employees, the law is now poised to harm freelance writers.

This law limits the number of articles a freelancer can sell to a media outlet without occupying a formal employee position to thirty-five. However, a rising number of journalists in the twenty-first century make a living by writing frequently for a few outlets. The damage is already starting to crop up, with news and opinion website Vox cutting two hundred of its California freelancers at one of its outlets.

Such legislation is not just staying in the Golden State. New iterations are being considered in New York and New Jersey. The law might be based in the good intention of protecting gig laborers by providing them with the rights of traditional employees; however, as we’ve repeatedly seen with legislative overreach these days, there are plenty of second- and third-order effects that come about because of these interventions.

Indeed, the gig economy is a transformational advancement in socioeconomic affairs, one that people are still adjusting to as we speak. There will obviously be growing pains as people transition into these work structures. However, politicians who carelessly demagogue these situations make things worse when they scribble legislation that ends up creating unintended consequences.

Ultimately, freelance writing is an enhancement of free speech: dissident voices have the freedom to choose what outlets they write for, often outside of the legacy media’s control. The flexibility that freelance work has given writers could be in jeopardy thanks to such legislation. That extra income that could go to making rent, paying for school, or investing in self-education will now evaporate just because a bunch of politicians supposedly know better and have to save their constituents from the perceived bugaboos of the free market.

New York and New Jersey are now considering their own versions of antigig bills, although the content of such bills remains to be seen. Should these bills target freelance writers like the one in California does, it will only consolidate the legacy media’s power and prevent independent voices from providing a unique perspective in an otherwise stagnant media domain.

Originally published by Advocates for Self-Government.

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Economics: The "Other Side" of Politics

01/24/2020Per Bylund

The realm of politics is to coordinate solutions beyond what decentralized actors and organizations can themselves achieve. This is done through the power of the state (coercion). Thus, the scope and use of politics as a means is strictly limited to where it is the better solution for society and its constituents. 

This means that the boundary of the proper use of politics and the state is identified by what can (and will) be coordinated through decentralized means. In other words, the boundary of politics is composed by our understanding for the mechanisms behind spontaneous orders and their emergence. 

Chief among these is the price mechanism and economic calculation. 

In other words, the "other side" of politics, which suggests where and to what extent the powers of the state should and can be used, is economics and, more broadly, economic literacy.

Economic theory explains how markets, the nondirected and unplanned coordination of decentralized efforts, work. Where markets work, and where the market order does not pose a problem that is unsolvable by market actors themselves, there is no reason for politics—other than as prescribed by the minority normative position that coercion is somehow preferred over voluntarism.

There are of course issues involved with defining the exact boundary of the proper realm of politics, and which issues are actual problems.

There is also a problem of "insiders" in the political system having more or less unlimited interest in expanding their sphere of influence (if not power). But the underlying problem, especially in democracies, is widespread economic illiteracy: if we do not (or will not) understand how markets work and how beneficial orders can arise spontaneously out of the actions of self-interested actors, whether individuals or families or businesses, then we undermine, expand, and will even dissolve the boundary of the proper realm for politics.

In other words, to use Franz Oppenheimer's old but insightful dichotomy, we invite the political means (coercion), along with the inefficiency and unproductive (if not destructive) incentive structures, to take over the proper space of the economic means (voluntarism).

That's problematic for all of us, if not for society overall, and poses an ethical problem, since the vast majority does not hold the position that "coercion is preferable to voluntarism."

A problem that can only be solved by learning how markets work, studying sound economics, and gaining economic literacy. 

As Mises put it:

Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence. (Human Action)

The social function of economic science consists precisely in developing sound economic theories and in exploding the fallacies of vicious reasoning. In the pursuit of this task the economist incurs the deadly enmity of all mountebanks and charlatans whose shortcuts to an earthly paradise he debunks. (Economic Freedom and Interventionism)

Formatted from Twitter @PerBylund

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