Cantillon and Me

Cantillon and Me

10/22/2019Mark Thornton

As many of you know, I have been researching and writing about the economics of Irish economist and banker Richard Cantillon for over 20 years. He was the first to write a book about economic theory, circa 1730, coined the modern term entrepreneur, and the first to provide a supply and demand analysis of prices, as well as the basics of Austrian Business Cycle theory, along with many of the fundamental aspects of economic theory and beyond. In 2010, Chantal Saucier and I published a translation of his Essai into modern English.

Portrait of a Gentleman

I had a DNA done by Ancestry.com last year and it came back exactly as expected with the vast majority being "Irish or Scottish" and tiny amounts of western Europe and the Iberian peninsula. Today I received an update from Ancestry.com with a more refined analysis and it turns out that the majority of my DNA comes from the same place where Cantillon was born in the County Kerry area! Ancestry.com describes the area as a "perfect place for rebels and outlaws who sought refuge from British authority"!

Very satisfied with this Ancestry.com thing!

 

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Austrian Perspectives on Entrepreneurship, Strategy, and Organization, by Foss, Klein, and McCaffrey, Available Free for a Limited Time

We are happy to announce a new book by Nicolai J. Foss, Peter G. Klein, and Matthew McCaffrey, Austrian perspectives on Entrepreneurship, Strategy, and Organization, now available from Cambridge University Press. This short volume is a concise introduction to the work that's been done over the past few decades applying and extending the ideas of Austrian economics in the management disciplines. It's well-known that Austrian economics places entrepreneurship at the heart of economic theory, but Austrian work, especially the ideas of writers like Mises, also has a lot to offer scholars in disciplines like strategy and organization studies. The table of contents is as follows:

  1. Introduction
  2. What is Austrian Economics?
  3. Entrepreneurship
  4. Extensions of Entrepreneurship Theory
  5. Strategy in an Entrepreneurial Perspective
  6. The Entrepreneurial Nature of the Firm
  7. The Future of Austrian Economics in Management Research

Most important, the book is available free of charge until November 18th, so be sure to check it out!

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The Fed Looks Increasingly Concerned About Liquidity and Growth — Even If it Says Otherwise

11/02/2019Ryan McMaken

The Federal Reserve lowered its benchmark interest rate on Wednesday, cutting the target federal funds rate by 0.25 percent to a range of 0.5 to 0.75 percent.

The Fed's rate-setting committee, the FOMC, has now cut rates three times this year. The committee's rhetoric around the rate cut was the usual routine. The committee's statement indicated that " labor market remains strong and that economic activity has been rising at a moderate rate." But the official statement says something similar nearly every time the committee meets. So, there is no information here to suggests why the committee is cutting now versus all the other times the labor market is "strong" and economic strength is "moderate."

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Two members of the committee voted against the cut: Esther L. George and Eric S. Rosengren.

Rosengren voted against the measure because he wanted a bigger ate cut. George, like her predecessor Thomas Hoenig at the Kansas City Fed, is relatively hawkish — although not the extent Hoenig was.

Thus, George noted in response to the rate cut: “While weakness in manufacturing and business investment is evident, it is not clear that monetary policy is the appropriate tool to offset the risks faced by businesses in those sectors when weighted against the costs that could be associated with such action.”

In other words, George recognizes that, yes, there are downsides to expansionary monetary policy.

Although the Fed statements offer no insights, the fact the Fed continues to cut rates suggests it is working from a position of fear about the true strength of the economy. Although jobs data continues to point to expansion, a number of other indicators look less rosy. The Case-Shiller index, for example, has fallen to 2-percent growth, and appears to be headed toward zero. We have seen a similar dynamic since 2006. Moreover, new housing permit growth has been negative (year-over-year) in six of the last ten months. Tax receipt data has also been weak, with seven out of the last ten reported periods showing negative year-over-year growth.

It's true that other indicators point to strength, but if things are going so well, why cut rates?

After all, the target rate is already remarkably low even by the standards of the most recent expansion, when the Fed Funds rate was allowed to rise to over five percent.

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The Fed has justified this ultra-low-rate policy with theories about the natural interest rate, and about the alleged need to keep prices at or above two-percent inflation.

The problem is that the Fed cannot actually observe the natural interest rate and the two-percent inflation standard is a completely arbitrary standard invented in recent years.

Nonetheless, the Fed continues to look relatively restrained compared to other central banks, to which its policies are in part a reaction. Other central banks have set a very low bar, to be sure, but the Fred nonetheless looks almost hawkish compared to the ECB and the Bank of Japan. Both are pursuing a negative-interest-rate policy, and even with the latest rate cut, the Fed's target rate also remains above that of the Bank of England, and equal with the Bank of Canada.

But the target rate is, of course, not the Fed's only policy tool. To address liquidity problems observed during the recent repo crisis, the Fed has stepped up purchases and added to its balance sheet.

And then there is the interest the Fed pays on reserves. On Wednesday, the FOMC also announced a cut to the interest rate "paid on required and excess reserve balances," dropping the rate from 1.8 percent to 1.55 percent, mirroring the drop in the fed funds rate. 

This keeps the interest paid on reserves at 0.2 percent below the fed funds rate. That's the biggest gap we've seen since 2008, and it suggests the Fed wants more lending in the real economy, even though it's also apparently concerned about liquidity for banks.

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This makes sense if we're in a late phase of the boom which brings increased demand for loans, but without sufficient savings and earnings at the street level to assure liquidity for banks through the marketplace. This is only a problem one encounters in an economy built on central-bank credit expansion. Central bankers no doubt are sure they can navigate these waters, but its unclear how long they can keep the current boom going.

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Bitcoin's Past Accomplishments and Future Challenges

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

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Why Income Is an Important Concept in Economics

At his entertaining blog, John Cochrane has a good thought experiment showing the flaws with conventional measures of income inequality. However, after making his great point, Cochrane summarizes by writing:

"Income" is really a fairly meaningless concept. We do not live in the Ancien Regime, or a Jane Austen novel in which people are described for life by the annual income they receive. Income varies a lot over a lifetime, and ebbs and flows for many. And "capital income" is not the same as earned income. The broad consensus theory of taxation states that capital income -- the rate of return you get to induce you to save some income for future consumption rather than to blow it all right away -- should not be taxed at all. It really isn't "income" in any meaningful sense. [Cochrane, bold added.]

I am amazed when economists, frustrated with arguments over inequality, conclude that the very concept of “income” itself is meaningless. Long-time readers may remember that I wrote a long article at Mises.org on the issue when Scott Sumner wrote an entire post arguing that “income” was a “meaningless, misleading, and pernicious concept.” (What is it with the Chicago School that makes economists jettison the very concept of income?)

Contra Cochrane and Sumner, income is actually a critical concept. As Hayek explained in his Pure Theory of Capital, income can be defined as how much one can consume without depleting capital. All of these accounting relationships are of course integral to economic calculation, upon which—as Mises showed—civilization itself depends.

In this short blog post I won’t give a full rebuttal and explanation of what income is, and how it relates to lifetime consumption (which Cochrane and Sumner do think is a meaningful concept—thank goodness). Interested readers can refer to my earlier piece. For our purposes here, let me just use an analogy to show why Cochrane and Sumner are overreacting. Imagine a PhD nutritionist surveying all the fad diet crazes and exclaiming:

"Weight" is really a fairly meaningless concept. We don’t all have the same body types, and can’t be described by a single number. Weight varies a lot over a lifetime, and ebbs and flows for many. And "fat weight" is not the same as “muscle weight.” The broad consensus theory of health states that gaining muscle weight shouldn’t be penalized at all. It really isn't "weight" in any meaningful sense.

Would the above make any sense at all? Would we excuse it by saying, “Oh, that nutritionist is just lashing out at the nonsense in the supermarket tabloids”? Of course not; we would just insist that the experts chide the novices for superficial discussions, and ask them for more nuanced analyses.

Likewise, just because politicians try to justify higher taxes through ludicrous abuses of statistics, doesn’t mean the very concept of “income” is meaningless.

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Dave Smith One-on-One with Jeff Deist

On the latest episode of Part Of The Problem, Dave Smith continues his Wednesday One-on-One interview series with Jeff Deist. Jeff and Dave discuss D.C. as "Hollywood for ugly people," Ancapistan (and how that would work in a real world setting), the future of religion in western society, and how the Fed may be responsible for lower birthrates.

Part of the Problem is available on YouTube, Google PlayApple Podcasts, and Stitcher.

Part of the Problem #501 - Jeff Deist, of The Mises Institute (Audio Fixed)

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California Has Tried Warrenomics. It's Been a Disaster.

California is suffering a slow but steady decline.

Bad economic policy has made the Golden State less attractive for entrepreneurs, investors, and business owners.

Punitive tax laws deserve much of the blame, particularly the 2012 decision to impose a top tax rate of 13.3 percent.

I’ve already shared some anecdotal evidence that this tax increase backfired.

But now we have some scholarly evidence from two Stanford Professors. Here’s what they investigated.

In this paper we study the question of the elasticity of the tax base with respect to taxation using microdata from the California Franchise Tax Board on the universe of California taxpayers around the implementation of Proposition 30 in 2012. This ballot initiative increased marginal income tax rates… These increases came on top of the 9.3% rate that applied to income over $48,942 for singles and $97,884 for married couples, and also in addition to the 1% mental health tax that since 2004 had applied to incomes of over $1 million. The reform therefore brought the top marginal tax rate in California to 13.3% for incomes of over $1 million.

For those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax policy.

A high measure of elasticity means a large “deadweight loss” since taxpayers are choosing to earn and/or report less income.

And that’s what the two scholars discovered.

Some high-income taxpayers responded to the big tax increase by moving.

We first study the extensive margin response to taxation, and document a substantial one-time outflow of high-earning taxpayers from California in response to Proposition 30. Defining a departure as a taxpayer who went from resident to non-resident filing status, the rate of departures in 2013 over 2012 spiked from 1.5% after the 2011 tax year to 2.125% for those primary taxpayers earning over $5 million in 2012, with a similar effect among taxpayers earning $2-5 million in 2012.

By the way, you won’t be surprised to learn that California taxpayers increasingly opted to move to states with no income tax, such as Florida, Nevada, and Texas.

Read More: People Love to Move to States Paul Krugman Hates Most

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Other taxpayers stayed in California but they chose to earn and/or report less income.

We combine these results on the extensive margin behavioral response with conclusions of analysis of the intensive margin response to Proposition 30. …we use a differences-in-differences design in which we compare upper-income California resident taxpayers to a matched sample of non-resident California filers, for which there is relatively rich data… Our estimates show a substantial intensive margin response to Proposition 30, which appears in 2012 and persists… We find that California top-earners on average report $522,000 less in taxable income than their counterfactuals in 2012, $357,000 less in 2013, and $599,000 less in 2014; this is relative to a baseline mean income of $4.15 million amongst our defined group of California top-earners in 2011. …the estimates imply an elasticity of taxable income with respect to the marginal net of tax rate of 2.5-3.3.

In the world of public finance, that’s a very high measure of elasticity.

Wonky readers may be interested in these charts showing changes in income.

Oct-21-19-Income.jpg

By the way, guess what happens when taxpayers move, or when they decide to earn less income?

The obvious answer is that politicians don’t collect as much revenue. Which is exactly what the study discovered.

A back of the envelope calculation based on our econometric estimates finds that the intensive and extensive margin responses to taxation combined to undo 45.2% of the revenue gains from taxation that otherwise would have accrued to California in the absence of behavioral responses. The intensive margin accounts for the majority of this effect, but the extensive margin comprises a non-trivial 9.5% of this total response.

We can call this the revenge of the Laffer Curve.

By the way, it’s quite likely that there has been a resurgence of both the “extensive” and “intensive” responses to California’s punitive tax regime because the 2017 tax reform restricted the deductibility of state and local taxes. This means that the federal government – for all intents and purposes – is no longer subsidizing California’s backwards fiscal system.

P.S. Makes me wonder if California politicians will turn Walter Williams’ joke into reality.

Originally published at International Liberty
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Remembering The Road to Serfdom: Individualism and Markets

10/18/2019Gary Galles

While much of Friedrich Hayek’s The Road to Serfdom focused on correcting erroneous ideas and sloppy thinking that misled (and still mislead) many to support socialistic expansions of government power, that is not all it did. It also reiterated the case for individualism and its economic manifestation—free markets. Since convincing careful thinkers requires such an affirmative case as well as defensive debunking, the book’s diamond 75th anniversary is a propitious time for Americans to remember what only individualism provides, so that we will not continue to follow a path of “replacing what works with what sounds good,” as Thomas Sowell described it.

  • The essential features of…individualism…are the respect for the individual man qua man…the recognition of his own views and tastes as supreme in his own sphere…and the belief that it is desirable that men should develop their own individual gifts and bents.
  • The attitude of the liberal toward society is like that of the gardener who tends a plant and, in order to create the conditions most favorable to its growth, must know as much as possible about its structure and the way it functions.
  • The holder of coercive power should confine himself in general to creating conditions under which the knowledge and initiative of individuals are given the best scope so that they can plan most successfully.
  • The successful use of competition as the principle of social organization precludes certain types of coercive interference with economic life.
  • Planning and competition can be combined only by planning for competition but not…planning which is to be substituted for competition.
  • It is the very complexity of the division of labor under modern conditions which makes competition the only method by which such coordination can be adequately brought about.
  • Nobody can consciously balance all the considerations bearing on the decisions of so many individuals…coordination can clearly be effective only by… arrangements which convey to each agent the information he must possess in order effectively to adjust his decisions to those of others…This is precisely what the price system does under competition and what no other system even promises to accomplish.
  • The economist…His plea is for a method which effects such co-ordination without the need for an omniscient dictator.
  • The various kinds of collectivism…[refuse] to recognize autonomous spheres in which the ends of the individuals are supreme.
  • Recognition of the individual as the ultimate judge of his ends…that as far as possible his own views ought to govern his actions…forms the essence of the individualist position.
  • What are called “social ends” are…merely identical ends of many individuals…to the achievement of which individuals are willing to contribute…Common action is thus limited to the fields where people agree on common ends.
  • The clash between planning and democracy arises simply from the fact that the latter is an obstacle to the suppression of freedom which the direction of economic activity requires.
  • The more the state “plans,” the more difficult planning becomes for the individual.
  • The important question is whether the individual can foresee the action of the state…that the individual knows precisely how far he will be protected against interference from others, or whether the state is in a position to frustrate individual efforts.
  • In a planned society the Rule of Law cannot hold…the use of the government’s coercive powers will no longer be limited and determined by pre-established rules.
  • Economic control is not merely control of a sector of human life…it is the control of the means for all our ends.
  • To believe that the power which is thus conferred on the state is merely transferred to it from others is erroneous. It is a power which is newly created and which in a competitive society nobody possesses. So long as property is divided among many owners, none of them acting independently has exclusive power to determine the income and position of particular people.
  • The power which a multiple millionaire…has over me is very much less than that which the smallest fonctionnaire possesses who wields the coercive power of the state on…whether and how I am to be allowed to live or to work.
  • Contrast…two types of security: the limited one, which can be achieved for all, and which is therefore no privilege but a legitimate object of desire; and absolute security, which…if it is provided for some, it becomes a privilege at the expense of others.
  • Individualism is thus an attitude of humility…the exact opposite of that intellectual hubris which is at the root of the demand for comprehensive direction of the social process.
  • It was men’s submission to the impersonal forces of the market that…has made possible the growth of a civilization without which this could not have developed; it is by thus submitting that we are every day helping to build something that is greater than any one of us can fully comprehend.
  • If the democracies themselves abandon the supreme ideal of the freedom and the happiness of the individual…they implicitly admit that their civilization is not worth preserving.
  • It is more important to clear away the obstacles with which human folly has encumbered our path and to release the creative energy of individuals than to devise further machinery for “guiding” and “directing” them—to create conditions favorable to progress rather than to “plan progress.”

Friedrich Hayek’s The Road to Serfdom defended the individual—the only ultimate locus of choice, responsibility and morality—as the appropriate focus of efforts toward human improvement, at a time when failing to keep that focus threatened the entire world. That is a lesson we need to remember now as well, when many do not remember the horrors that can lead to, and so support constantly expanding government powers over its citizens, which is in precisely the opposite direction of what once created America as a unique beacon of hope for the world.

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The Pre-Marriage Blood Test In America Is Now Gone

10/17/2019Ryan McMaken

2019 was the year that the blood-test requirement for marriage was finally abolished in all 50 US states.

This past March, the governor of Montana signed the legislature's bill abolishing the state's requirement that women submit to blood tests to be screened for rubella prior to the granting of a marriage license.

Technically, Montana had removed the absolute mandate in 2007, but the change would only "allow brides to opt out after signing an acknowledgement of the pregnancy risks related to rubella, and only if the groom signs too. Otherwise, the female applicant must provide a medical certificate signed by a physician stating that she has been tested or is exempt for medical reasons."

The 2019 legislation now completely removes the requirement.

Montana was the only remaining state with a blood test requirement. As recently as 1980, though, 34 states still had laws on the books requiring blood tests before marriage. Kasey S. Buckles, Melanie Guldi, and Joseph Price provide a concise summary of the legislative trend:

Of these 34, 19 states repealed their law in the 1980s, 7 repealed in the 1990s, and 7 more repealed between 2000 and 2008, leaving only Mississippi with a BTR in 2009.

(Buckles, et al,counted the Montana "opt out" as abolition, leaving only Mississippi.)

Mississippi ended its requirement in 2012.

But why was there ever a requirement at all?

Like so many invasive procedures mandated by governments, mandatory blood tests for couples seeking marriage licenses were a product of the age of eugenics and Progressive politics — two things that often go together.

As Ruth C. Engs notes in The Progressive Era's Health Reform Movement : "'Racial improvement' through positive eugenics, such as marriage to a healthy individual, [and] blood tests for syphilis prior to marriage ... were promoted for improving the 'race,' thus leading to a healthier nation."

The rights of individuals to marry whom they wished was thus swept aside in the name of "hygiene" and public health. Blood tests took their place along with prohibitions on interracial marriage as a means of "racial improvement."

Between 1980 and 2008, abolition was more a function of medical treatment options rather than any commitment to medical freedom or marriage freedom.

Buckles, et al note:

Historically, many states have required applicants for a marriage license to obtain a blood test. These tests were for venereal diseases (most commonly syphilis), for genetic disorders (such as sickle-cell anemia), or for rubella. The tests for syphilis were part of a broad public health campaign enacted in the late 1930s by U.S. Surgeon General Thomas Parran. Parran argued that premarital testing was necessary to inform the potential marriage partner of the risk of contracting a communicable disease, and to reduce the risk of birth defects associated with syphilis. According to Brandt (1985), "by the end of 1938, twenty-six states had enacted provisions prohibiting the marriage of infected individuals." Screenings for genetic disorders and for rubella were also implemented in the interest of minimizing the risk of genetic disease or birth defects in the couple's offspring.

Buckles, et al., note that it soon became apparent that the cost of the mandate was very high and benefits were quite low:

In the case of syphilis, however, it was soon recognized that premarital blood testing was not a cost-effective way to screen for the disease. Despite reports that 10% of Americans were infected, only 1.34% of applicants in New York City's first year of testing were found to have the disease. Brandt (1985) notes that a premarital exam was "not the optimal locus for screening," since couples seeking to marry were not likely to be in the most at-risk groups, and individuals who knew they were infected could wait until the infection cleared to apply for a license. ... Nationwide, couples spent over $80 million to reveal 456 cases.

By the 1980s, sexually-transmitted diseases were far more treatable than was the case in the 1930s. This lessened the importance of alerting future sex partners about one's health status. (This theory, of course, relies partly on an assumption people rarely have sex outside marriage — a view that was rather fanciful even in the 1930s.)

Nonetheless, abolition was not just a matter of deliberation over the medical efficacy of the laws. Ordinary people never appeared to be enthusiastic about the mandates, and many resented the additional hoops they needed to jump through to carry on with their personal lives.

It should surprise no one, then, that couples actively sought to avoid the costly and time-consuming test requirements.

Blood test requirements led to couples choosing to marry in states that did not have the mandates: "it appears that about one-third of the decrease in licenses is due to couples marrying out of state, while about two-thirds choose not to marry at all."

So, it turns out the mandated blood tests worked to discourage marriage while doing little to actually identify people with disease or improve public health.

The mandate was great for the medical industry, however, since it required the payment of many millions of dollars for otherwise unnecessary medical procedures.

You'll Marry Your Sister!

Another source of confusion over mandated blood tests has been a belief held by some that blood tests were used to screen for the "marry-your-sister" problem. That is, some think that blood-test mandates exist for purposes of genetic testing.

Unlike tests for venereal disease, however, genetic testing for consanguinity is very expensive, and has never been generally mandated by states. The issue could much more cheaply and pragmatically be addressed by granting people the legal right to know who their biological parents are, when the information is available. Cases of consanguinity are generally tied to cases when a marriage partner has been adopted, abandoned, or otherwise is unaware of his or her biological parents.

Conflicting Messages on Medical Freedom

It may be, however, that the abolition of one violation of medical freedom could be replaced by another.

After all, Montana's blood-test requirement was justified on the grounds that it prevented health problems for a third party. That is, if a woman with rubella becomes pregnant, this can have devastating effects on the developing fetus. Functionally, it was more a pre-pregnancy requirement than a pre-marriage requirement.

Just as modern treatments for STD lessened the need to test for syphilis ahead of time, the need for pre-pregnancy testing for rubella was largely supplanted by the prevalence of vaccines against rubella.  Will the repeal of the rubella blood test signal a renewed drive toward mandatory rubella vaccination in Montana? For now, efforts to remove all non-medical exemptions for vaccines are concentrated in states like New York and California. But the issue is certainly not confined only to these places.

It should not be assumed the movement toward abolishing blood tests was motivated by libertarian impulses.

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Remembering The Road to Serfdom: Collectivism and Morality

10/17/2019Gary Galles

In addition to providing crucial insights into the cleavages between social organization based on freedom and social organization based on coercion, Friedrich Hayek’s The Road to Serfdom provided many other insights. Many of them dealt with the morality of collectivism. In honor of the books 75th anniversary this year, please consider Part 2 of our considerations— Collectivism and Morality. (See Part I here.)

  • Is there a greater tragedy imaginable than that, in our endeavor consciously to shape our future in accordance with high ideals, we should in fact unwillingly produce the very opposite of what we have been striving for?
  • It seems almost as if we did not want to understand the development which has produced totalitarianism because such an understanding might destroy some of the dearest illusions to which we are determined to cling.
  • Democratic socialism…is not only unachievable, but…produces something so utterly different that few of those who now wish it would be prepared to accept the consequences.
  • [Beyond] the power to make general rules…delegation means that some authority is given power to make…arbitrary decisions.
  • Any policy aiming directly at a substantive ideal of distributive justice must lead to the destruction of the Rule of Law.
  • The question raised by economic planning is…whether it shall be we who decide what is more, and what is less, important, or whether this is to be decided by the planner.
  • The kind of state action which really would increase opportunity is almost precisely the opposite of the “planning” which is now generally advocated and practiced.
  • Although the professed aim of planning would be that man should cease to be a mere means, in fact—since it would be impossible to take account in the plan of individual likes and dislikes—the individual would more than ever become a mere means, to be used by the authority in the service of such abstractions as the “social welfare” or the “good of the community.”
  • Planning…consists essentially in depriving us of choice, in order to give us whatever fits best into the plan.
  • It soon becomes the one burning question which of the different sets of ideals shall be imposed upon all by making the whole resources of the country serve it.
  • The more we try to provide full security by interfering with the market system, the greater the insecurity becomes; and…the greater becomes the contrast between the security of those to whom it is granted as a privilege and the ever increasing insecurity of the under-privileged.
  • The democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans.
  • The ethics produced by collectivism will be altogether different from the moral ideals that lead to the demand for collectivism.
  • Socialism can be put into practice only by methods of which most socialists disapprove.
  • The practice of socialism is everywhere totalitarian.
  • The principle that the end justifies the means in individualist ethics is regarded as the denial of all morals. In collectivist ethics it becomes necessarily the supreme rule.
  • Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation…the pursuit of the common end of society can know no limits in any rights or values of any individual.
  • Since it is the supreme leader who alone determines the ends, his instruments must have no moral convictions of their own…no ideas about right or wrong which might interfere with the intentions of the leader.
  • Even the striving for equality by means of a directed economy can result only in an officially enforced inequality—an authoritarian determination of the status of each individual in the new hierarchical order.
  • Morals are of necessity a phenomenon of individual conduct…they can exist only in the sphere in which the individual is free to decide for himself...Only where we ourselves are responsible for our own interests…has our decision moral value.
  • In this sphere of individual conduct, the effect of collectivism has been almost entirely destructive.
  • A movement whose main promise is the relief from responsibility cannot but be antimoral in its effect, however lofty the ideals to which it owes its birth.
  • Injustices inflicted on individuals by government action in the interest of a group are disregarded with an indifference hardly distinguishable from callousness…the grossest violations of the most elementary rights of the individual...more and more often are countenanced.
  • Almost all the traditions and institutions in which democratic moral genius has found its most characteristic expression…are those which the progress of collectivism and its inherently centralistic tendencies are progressively destroying.
  • Neither good intentions nor efficiency of organization can preserve decency in a system in which personal freedom and individual responsibility are destroyed.
  • To imagine that the economic life of a vast area…can be directed or planned by democratic procedure betrays a complete lack of awareness of the problems such planning would raise…To undertake the direction of the economic life of people with widely divergent ideals and values is to assume responsibilities which commit one to the use of force; it is to assume a position where the best intentions cannot prevent one from being forced to act in a way which to some of those affected must appear highly immoral.
  • We shall never prevent the abuse of power if we are not prepared to limit power.

The Road to Serfdom made a powerful case that collectivism, by its nature, produced moral decline, and that it remains true even for collectivism supported out of desires for moral improvement. Since the direction that a system of social organization actually changes our morality is far more important than the direction one might hope it would lead, Hayek’s insights into the dystopian results of utopian collectivist thinking still merit careful consideration, three-quarters of a century later, at a time when support for socialist government interventions is again on an upswing.

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Hustlers' High Time Preference Does Them In

10/16/2019Doug French

The movie “Hustlers” is generating Oscar buzz and box office cash.  Words like “empowering” and “so much effing fun” are describing the JLo vehicle, based on the 2015 New York Magazine article “The Hustlers at Scores,” penned by Jessica Pressler.  Ramona (Lopez) and Destiny (Constance Wu) have been described as entrepreneurial for their client fishing, drugging, and stealing exploits.    

The critics are koo koo for JLo, with Nigel Smith writing in People, “In a tweet following the premiere, Vulture‘s Hunter Harris praised the film as ‘perfect’ while predicting that Lopez will be nominated for her first Oscar for her performance.”   

“Hustlers” cost $20 million to make and is closing in on $100 million in box office receipts world-wide after only a couple weeks of showings.  There was a healthy Friday night crowd at a local theater when I saw the film, with the audience 80-90 percent female. It was a girls' night out to see JLo and company drain the credit cards of Wall Street A-holes--pre and post 2008 financial meltdown.  

While much of the movie is set in a strip club, there is little nudity.  The film, at 110 minutes is larded up with scenes of high-end shopping and champagne corks popping. The screenplay directly lifts passages from Ms. Pressler’s article, but filler was needed to make it a full-length feature.  Multiple entrances, Magnificent 7-style, are provided by JLo and co-stars, along with celebrations of big scores. Eventually, hearing Ramona call someone (everyone) “BaayyBee!” might touch your last nerve.  

The story does connect with the 2008 financial crash, but you won’t mistake it for “The Big Short” or “Margin Call.”  Ramona takes Destiny under her wing and explains the three levels of Wall Street guys--low level, honest, but no money; mid-level, somewhat dishonest, some money; those at the top who cheat people all day and have lots of money to spend at strip clubs.      

After the crash and Wall Street layoffs, strip clubs go dead in the city and the enterprising, let’s call them performers, work their old money contacts to get guys into the club.  After Ramona has a customer pass out drunk and she swipes his credit card for five grand, she has a Hayekian discovery inspiration, believing she can perfect the process. Pressler writes, 

Of course, it didn’t always work. Sometimes they’d go through the whole performance and the guy would be too tired to go out; they would offer him drugs for extra energy, but he would be too lame to take them. In the face of such situations, Samantha had come up with the innovation that was making her rich: a special drink spiked with MDMA and ketamine.

Samantha is the real life Ramona.  

This is where the entrepreneurship turned to fraud.  While these women showed some entrepreneurial can-do spirit, their high time preferences did them in.  They spent everything they made and when Ramona learns a certain customer has $50,000 available credit on his card, instead of drawing only some of it as Destiny suggests, Ramona takes all 50k.  “That’s the problem with these girls,” Rosie (the real Destiny) told (Pressler) of her cohort (Ramona/Samantha), shaking her head. “I see the forest. They just wanted a $50,000 tree.”  

The movie portrays most men as stupid or worse.  Ramona tells Destiny, while doing a lap dance, “Drain the clock, not the c--k.” The occasional good guy is viewed as a hopeless sap, who can be strung along for money as needed.  

JLo is, no doubt, extraordinary at age 50.  However, her performance is not anymore Oscar Worthy than the acting of any aging stripper hustling at any club in America.  In fact, after seeing “Hustlers” you will leave feeling the same as leaving any strip joint--cheap and sleazy.    

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