Power & Market

Government Money Is No Substitute for Real Savings

06/21/2019Patrick Barron

Perhaps the most destructive premise of modern, mainstream economics is that a central bank-induced monetary/credit expansion can cause an economy to grow without adverse consequences. Let's be perfectly clear from the start: this policy has been tried by many central banks many times and all such attempts have led to economic disaster. The latest victims are the poor citizens of Venezuela, a once prosperous nation. Furthermore, we Austrian economists have sound economic science to explain why it must be so, despite the fervently held wishes of mainstream economists, politicians, and the public at large.

Born of Depression Era Keynesian economic theory which elevated "aggregate demand" as the driving force of an economy, central banks have constructed a fallacious model of how an economy works. Repeated failures of this model have served only to embolden them to double down and double down again and again, driving interest rates in some countries below zero in order to force the world to conform to their dogmatic theory. The simplest explanation of this theory is that counterfeiting money will cause people to spend and it is a dearth of spending that holds back prosperity. If people won't spend enough themselves, then it is incumbent upon government to do it for them by paying people the equivalence of digging holes in the ground and filling them back up. No, I am not making this up. Keynes himself said it! (See: book 3, chapter 10, section 6, page 129 of The General Theory).

The theory of lack of aggregate demand fails to recognize two essential facets of how an economy really works. The first is that production must precede consumption. In other words, we cannot consume what we have not first produced, and one's production constitutes one's demand either through direct or indirect exchange. This is the essence of Say's Law, which Keynes unsuccessfully attempted to refute in developing his theory of an economy driven not by production but by aggregate demand.

The second is that the structure of production is determined by time preference: the structure of production is merely all the intermediate steps that constitute production. There are fewer steps taking less overall time in an economy with a high time preference, meaning that people wish to spend most of their production-borne income in the short term. Likewise there are more steps taking more overall time in an economy with a low time preference, meaning that people wish to save more of their current income in order to have more in the future.

A simple example is that one must plant seeds in order to grow vegetables for current consumption. (Please keep in mind that what I describe is applicable for all types and levels of production.) The steps in this process are the saving of seeds from previous crops, the tilling of the soil, the planting of the seeds, the watering and perhaps fertilizing of the seeds, the spraying or covering of the young plants from the predations of birds, insects, and bacteria. You get the idea. The "structure" is the steps and the amount of production that is involved in each step. In a high-time-preference economy in which people wish to consume almost all of their crop production, saving more seeds is a waste of resources. Likewise, producing more fertilizer than is necessary for the size of the crop is also a waste of resources. Time preference is the underlying guide. However, if people are more future oriented, they will save more from current production in order to plant more crops; they will clear and till more land for the extra seeds; they will buy more fertilizer, etc. The increase in crop yields spurs a new level of production in the preservation of excess production for future consumption. The refraining from current consumption — i.e., savings — is what funds this increase in the new level of production. The preservation process takes more time, but in the end there is more to consume in the future, especially in cases of future crop failure. Think of the children's story of the ant and the grasshopper.

Substituting Money For Real Savings

Keynes thought that an economy could bypass the savings process and substitute an increase in the medium of exchange for real savings. The obvious flaw in this argument is that counterfeit money is not a substitute for saving real, fungible production. Counterfeit money is simply a watered down medium of exchange. Think of the old adage of watering down the soup when uninvited guests show up for dinner. The cook can serve more bowls of soup, but the nutritional value per bowl is less.

But monetary/credit expansion does more than just reduce the value of each monetary unit. Because the counterfeit money appears no different than existing money, entrepreneurs are fooled into believing that something real has been set aside and that people have chosen a lower time preference. With a lower interest rate level their plans for expansion appear to be achievable. Canning and/or freeze-drying facilities, for example, are constructed over a longer period of time in anticipation of an increase in sales of vegetables that may be consumed much later. Eventually the entrepreneurs realize that no such longer-term demand really exists. They have wasted time and capital, neither of which may be recovered. The workers who left jobs in businesses that served the higher time preference economy for higher paying jobs in the vegetable preservation plants must find new work. This takes time, and the ranks of the unemployed grow until the economy has once again achieved a structure of production more in tune with the people's higher time preference. Businesses lose money; the owners may even go bankrupt. Stock prices collapse. Banks may fail. Such a transition is called a recession. It is inevitable and unavoidable.

Yet it is highly likely — in fact it is almost a certainty — that central banks will fight the latest economic slowdown with the same old money printing and lowering of the interest rate. This was the conclusion drawn by Thorsten Polleit in his latest essay, published on Mises Wire: "The Fed Has No Choice But to Return to Ultra-Low Interest Rates." The Keynesians at the Fed are baffled that the world won't conform to their theory of aggregate demand. Their theory is a straightjacket from which they cannot escape intellectually. Unfortunately we all will pay the price.

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Greg Mankiw Loves the Federal Reserve—and the Labor Theory of Value

Prominent economist and super successful textbook author Greg Mankiw writes:

I have a confession to make: I love the Federal Reserve. And I suspect that, in their heart of hearts, most other economists love the Federal Reserve, too.

But why this gushing profession of love by Mankiw for the Fed?  Is it because the Fed provides valuable services to the U.S. economy? Mankiw's answer leaves this all-important question unaddressed:

The nation’s central bank employs about 20,000 Americans. They monitor the economy, develop analyses to help set monetary policy and regulate the banking system. None are paid the extraordinary salaries found at the nation’s private banks. But they do their jobs with solemnity and tenacity and without a whiff of scandal. And, most important, they do their jobs well.

Even the admittedly "unforced errors" that deepened the financial crisis "did not diminish [Mankiw's] love for our central bank." For people, "should not be judged by the standard of perfection. They should be judged by whether they are doing the best they can." On this score, Mankiw gives the Fed a "top grade."  And what constitutes the  Fed's success "as a public institution"?  There are "two ingredients" to its success.  First, the the Fed "aims 'to provide the nation with a safer, more flexible and more stable monetary and financial system.'”  Note the emphasis I place on the the word "aims."  Mankiw does not say something like "by and large, succeeds in attaining."   It appears that maximum effort in pursuit of advertised goals rather than actual results achieved is the first criterion by which Mankiw evaluates the Fed.  But Mankiw's theory of the Fed's value is even more clearly revealed in the second input to success he proposes:

The second ingredient to the Fed’s success are the talented people who dedicate their lives to it. Every year the Fed recruits new research assistants from top colleges and new staff economists from top Ph.D. programs in economics. Over the years, I have known many great students who have taken these jobs. For someone interested in economic policy, there is no better place to work.

Well, if your beloved public institution doesn't succeed in producing desired results . . . simply appeal to Ricardo's outmoded labor theory of value.

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Good Statistics, and Bad

04/12/2019Gary Galles

Suppose someone wanted to misrepresent a public policy to you. How could they do so most effectively? And who can help you resist?

It’s certainly a believable hypothetical. With two major parties who seem to disagree on everything, multiple intra-party fault-lines, and a plethora of interests who wish to turn laws and regulations in their favor, whipped together by a press in search of partisan scandal and ratings, it is hard to see how it could be otherwise. In fact, for almost every issue, it seems very likely that some, if not many, groups, will be tempted to promote their interests using techniques ranging along the spectrum from “putting one’s best foot forward” to bald-faced lies.

There are plenty of common political tricks that fall short of outright lying. For instance, one can bury desired changes in the paper avalanche of an omnibus bill, as in the Minnesota legislature’s recent attempt to sneak in enactment of the National Popular Vote project. Or one can pass vague legislation that passes the buck for what it will mean in practice to executive agencies and the courts. But such forms of subterfuge are not my interest here.

I wish to ask how people would misrepresent things in the open, rather than behind such political camouflage? As I warn my public policy students, the general principle is that people will lie to you in whatever areas you are most vulnerable.

If you are American, one of those weak spots is typically mathematics, and particularly statistics, which is why it earns its place of shame along with lies and damned lies. That is why the tricks for how to misrepresent statistics discussed in Darrell Huff’s How to Lie with Statistics still keep the book selling 65 years after its initial publication.

However, widespread ignorance goes deeper than the science of statistics itself. Very few people have a clear idea on what the data involved actually measures, under what assumptions and limitations, which can lead to careless and irresponsible usage. For instance, few people can articulate why both the employment and unemployment rates could go up at the same time, and which would be a more reliable economic indicator in such a case, when their names suggest it shouldn’t be possible.

Thomas Sowell , in his most recent book, Discrimination and Disparities, describes the problem as “overlooking simple but fundamental questions as to whether the numbers on which… analyses are based are in fact measuring what they seem to be measuring, or claim to be measuring,” which, in order to defend ourselves against misrepresentation, requires “much closer scrutiny at a fundamental level.” But far too few apply such careful, fundamental scrutiny.

However, there are a few people who do yeoman work in this area, providing valuable “insurance” against errors others would encourage us to make. They deserve our appreciation for toiling in that underserved area, and I would like to express thanks to several whose efforts I have particularly benefitted from.

Thomas Sowell is one such author who has provided a great deal of clarification over decades of prolific publication. For example, one common theme of his is the need to distinguish between what happens to a particular category of people (e.g., “the rich” or “the poor”), interpreted as a stable group, which lends itself to class-based conclusions, and the very different experiences of real people who move in an out of such categories over time, which upsets such analyses.

Discrimination and Disparities reiterates that theme from his earlier books. But my favorite illustration is his discussion of the famous Card and Krueger minimum wage study, which purported to overturn the conclusion that raising the minimum wage increases unemployment. It surveyed the same employers, asking how many employees they had before and after a minimum wage increase. The problem is that “you can only survey the survivors.” Anyone who went out of business, and the jobs that consequently disappeared, would not be included, so even if surveyed survivors did not reduce employment, many jobs invisible to their approach could still have been lost. To reinforce the image, he notes that a similar before-and-after survey of those who played Russian Roulette would show that no one was hurt, and cites a quip by George Stigler that if it had been used in a survey of American veterans in both 1940 and 1946, it would “prove” that “no solider was mortally wounded” during the war.

Another very prolific watchdog for statistical malfeasance is Mark J. Perry . He points out so many useful “red flags” in multiple outlets that I look forward to what is almost a one-a-day pleasure. A good example is his evisceration of “Equal Pay Day” discussions that attribute differences between median yearly incomes to unjustifiable discrimination against women “doing the same work as men.” He points out that the data fails to adjust for differences in “hours worked, marital status, number of children, education, occupation, number of years of continuous uninterrupted job experience, working conditions, work safety, workplace flexibility, family friendliness of the workplace, job security, and time spent commuting,” each of which would lead men to be paid more, on average.

Andrew Biggs is another stickler for statistical responsibility, particularly in areas connected to retirement security and retirement plans. For instance, in Forbes , he showed that a recent GAO report concluding that 48% of U.S. households aged 55 and over in 2016 “had no retirement savings” was far different from reality, as 72% of people had such savings plan, when those with traditional defined benefit pensions are counted, and 83% of married households had such savings when including those where only one had a retirement plan. Just those two changes massively changed the conclusions. And he pointed out other biases, as well.

These three people have each helped me understand measurement issues far better than before, enabling me to avoid errors that would have undermined my analyses of policy issues. I owe them thanks. But readers might also give them more attention, for similar “tutoring.” Many others have also been of use to me, and as I continue to learn, perhaps I can give a shout-out to others in the future, especially as this labor pool is still far too shallow. But mainly I wanted to put out a serious warning about ignorance not only of statistical applications and presentations, but also of the data that is often misused in reaching policy conclusions.

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Galles: Remembering Gustave de Molinari

03/08/2019Gary Galles

March 3 marked the bicentennial of Belgian-born philosopher/economist Gustave de Molinari’s birth. Based on self-ownership and the private property derived from it, he forcefully defended every form of liberty. No wonder Frederic Bastiat named Molinari his successor.

Remembering Molinari’s across-the-board defense of liberty is particularly necessary at a time Americans pay lip service to it, but constantly say “there ought to be a law” that restricts it.

His recognition that individual sovereignty is a far superior replacement for government sovereignty from the perspective of justice, respect for natural rights, and of effective social cooperation is worth revisiting on 200 years after his birthday.

Read the full article at The Orange County Register

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Gustave de Molinari's Short-Lived Flirtation with the Socialists

Some of the French economists centered around the Journal des Economistes were elected officials. For example, Louis Wolowski was elected to the Assemblée Constitutionelle in 1848;1 so was juge de Paix Frédéric Bastiat. Decades earlier, Jean-Baptiste Say and Benjamin Constant were famously defending Classical Economics in the Tribunat where they opposed Napoleon Bonaparte. Bonaparte returned the favor and expelled both of them in 1804 and 1802 respectively.2

Unlike the aforementioned economists, Gustave De Molinari never was a politician himself. However, this does not mean that he never ran for office. He had briefly attempt to join the ranks of the liberal party in 1859.

Left or Right?

In his 1864 book review of De Molinari's Cours d'économie politique, Lord Acton points out the turbid relationship between the Liegeois-born economist and the Liberal Party: "[In] 1848, he returned to his own country, and finished his course of political economy at the Musée d'Industrie of Brussels, where, we believe, he has not been altogether well treated by the Liberal ministry. This gives a personal significance to his protest against the nomenclature of the two parties, which falsely implies that the one comprises all that is religious, and the other all that loves liberty, in Belgium".3

Indeed, De Molinari wasn't the keenest on political demarcations; in earlier writings, he had presented the fluidity between the nomenclature of liberal, religious, and even socialist party structures. Historian Roderick T. Long pointed out that De Molinari favored a collaboration with the French socialist party.4 According to him, both economists and socialists favored the same principles. In his Lettre aux socialistes (1848), the anonymous author (later identified as De Molinari) stressed that both economists and socialists favored a society in which justice was prevalent for every individual member. However, both groups used a different methodology. Economists thought of liberty and freedom as the necessary means to reach said goal, as history has shown them time and time again. Socialists, on the other hand, used statist recipes with taxes.

Blanc VS Coquelin

One place Molinari clashed with the socialists, however, and thus distinguished himself as a true supporter of laissez-faire, was in his opinions on banking.

While living in Paris, De Molinari must have read his friend Charles Coquelin's research on banks. Coquelin defended a free-market approach on banking; he preached the concept that the government should have no involvement in the role of banking. Rather, banks should be left alone. After empirical research on business cycles, Coquelin concluded that banking crises were the result of privileged monopolies and governmental regulation.5

Journalist and socialist Charles Potvin, however, opposed this vision: “Mr. De Molinari views align with the following principle. Legal persons should have the opportunity to gather themselves without governmental intervention. The role of the government should be limited to registration instead of active participation, isn’t it Mr. De Molinari? (Mr. De Molinari nods in agreement). If we follow Mr. De Molinari’s vision, wouldn’t priests and bankers run Belgium?6

Potvin’s opinion on banking changed over time — whilst always remaining in the realm of radical socialism. In his biography, historian Christophe De Spiegeleer argues that Potvin shows appreciation for the works of PJ Proudhon in his essays (Du Gouvernement de soi-même, La Banque Sociale).7 Proudhon proposes "la Banque du Peuple"; a company in which the people (ipse facto: the poorest individuals within a society) could borrow a lump sum of money without paying an extra fee. The poorest individuals were shareholders as well.8 Potvin praised these "mutualistic companies" in his magnum opus Du Gouvernement de Soi-Même (1877).

However, in his exchange with De Molinari, Charles Potvin outs himself as a disciple of socialist Louis Blanc. According to Blanc, the involvement of a government in the realm of banking was of the utmost importance. According to Potvin, spontaneous order and liberty would lead to anarchy in Belgium! For this particular reason, Louis Blanc claimed it necessary to seek government intervention and lift up the competition, in favor of a single, nationalized bank.9

"Pourquoi j’ai retiré ma candidature"

In a pamphlet (Pourquoi j'ai retiré ma candidature), written a couple of days after the fulminations of Potvin against Molinari, De Molinari announced the renunciation of his candidacy. In 1855, however, he had already predicted his fate within the party. In an article "Dialogue entre un électeur et un candidat," he criticized uninformed vocal minorities that forsake their own responsibilities. In the fictional dialogue, the voter expects politicians to take care of everything; protectionism, warfare, parish relief funds, subsidizing religion, ... To which the politician responds whether the voter would favor higher taxes. How would we fund these services? To which the voter responds: “How should I know? That’s up to you and that is why we elected you!”10

  • 1. RAMBAUD, Jules, l’oeuvre économique de L. Wolowski, Paris, L. Larose & Forcel, 1882, 9-29.
  • 2. MINART, Gérard, Entrepreneur et esprit d’entreprise. L’avant-gardisme de Jean-Baptiste SAY, Paris, l’Harmattan, 2013, 158-159.
  • 3. ACTON, John Emerich Edward Dalberg, “Review of Gustave de Molinari’s Course of Political Economy (1855)”, The Home and Foreign Review, 4, 1864, 313.
  • 4. LONG, Roderick T., “Rothbard’s “Left and Right”: Forty Years Later”, Mises Institute, 2006.
  • 5. MALBRANQUE, Benoît, “Réformer les banques: les propositions originales de C. Coquelin”, Laissons Faire, 1, 2013, 20-24; DE NOUVION, Georges, Charles Coquelin. Sa vie et ses travaux, Paris, Institut Coppet, 2017 [1908], 24-25.
  • 6. "M[onsieur] De Molinari proclame ce principe: les personnes civiles ont le droit de se constituer sans l'intervention de l'Etat. [...] La personne civile vient au monde, et l'Etat enregistre [...], n'est ce pas M[onsieur de] Molinari? (De Molinari fait un signe d'approbation). La Belgique ne serait-il pas exposée à une double invasion de moines et des banquiers?"“Après l’autel le coffre-fort”, Le Bien Public, 6 juni 1859.
  • 7. DE SPIEGELEER, Een blauwe progressist. Charles Potvin (1818-1902) en het liberaal-sociale denken van zijn generatie, Gand/Brussels, Liberaal Archief, 2011.
  • 8. PROUDHON, Pierre-Joseph, “Banque du peuple: déclaration”, Le Peuple, 1849, 1-13.
  • 9. CHARRUAUD, Benoît, Louis Blanc, la république au service du Socialisme, Unpublished PhD, Université Strasbourg III. Robert Schuman, 2008, 50.
  • 10. Cela vous regarde. Nous ne vous nommons pas pour autre chose" DE MOLINARI, Gustave, “Dialogue entre un électeur et un candidat”, l’Economiste belge, 1855, 1.
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Great New Lew Rockwell Interview

09/13/2018Ryan McMaken

I've been following Lew Rockwell's work pretty closely for more than 15 years, but there's a lot of good stuff I haven't heard before in this new interview between Tom Woods and Lew. He goes a little more deeply into some of his work with Ron Paul in Congress, and Lew apparently has a new book coming out soon, called Against the Left.

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G. P. Manish Named BB&T Professor of Economic Freedom at Troy University

06/21/2018Mises Institute

Mises Institute Associated Scholar has been named the BB&T Professor of Economic Freedom within the Johnson Center for Political Economy at Troy University. Dr. Manish, a former Mises Research Fellow, has been a member of the Troy faculty since 2012. His research focuses on Austrian economics, macroeconomic theory and development economics, and  teaches a course on Advanced Austrian Economics for the university's Masters program. 

His Mises Institute work can be found here.

Dr. Manish and his wife, Dr. Malavika Nair, are regular members of the Mises University faculty. 

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Global Reaction to Trump’s Tariffs Highlights the Myth of the “Era of Free Trade”

05/31/2018Tho Bishop

Donald Trump renewed his attacks on trade this week, announcing new tariffs with China and extending his steel and aluminum tariffs to previously exempted Europe. Since this is Trump, it’s certainly possible that this is another example of “maximum pressure” designed to get some sort of concession. Should this represent a genuine long-term embrace of protectionist trade policy though, American consumers will pay the price.

Of course none of this is surprising; it’s what he explicitly campaigned on. (Unfortunately he’s been more willing to deliver on these promises than his attacks on the Fed.) It’s worth pointing out, however, that Trump’s critics – though correct in their criticism of his tariffs – often over-romanticize the global view of free trade pre-Trump. Nothing illustrates this better than the reaction to Trump’s moves.

After all, for all the flowery talk of leaders like Xi and Merkel of their dedication to free trade, their reaction to Trump’s tariffs have been to push tariffs of their own. China has tailored their retaliation to impact Trump’s voter base, while European Commission President Jean-Claude Juncker has threatened to make American icons like blue jeans and bourbon victims in an escalating trade war. Their willingness, however, to respond to bad policy with more bad policy highlights the truly shallow grasp of the benefits of trade.

Just as it does not benefit a country to respond to a neighbor increasing its own taxes to follow suit, retaliating to a new US tariffs by implementing one of their own only serves to hurt their own citizens. This is why Austrians have long lauded the benefits of unilateral free trade, while acknowledging the long term goal is genuine global free trade among all. To quote Louis Rouanet:

Instead of a top-down promotion of “free trade” driven by supranational institutions, we should consider unilateral free trade as an important part of a liberal political agenda. Sir Robert Peel, when announcing the repeal of the Corn Laws in the House of Commons in 1846, brilliantly warned: “I trust the government ... will not resume the policy which they and we have found most inconvenient, namely the haggling with foreign countries about reciprocal concessions, instead of taking that independent course which we believe to be conducive to our own interests. ... Let, therefore, our commerce be as free as our institutions. Let us proclaim commerce free, and nation after nation will follow our example.”

Unilateral free trade is a boon for both parties involved in trade regardless of whether or not one of them continues to impose tariffs. For those engaged in unilateral free trade, free trade means they need to export less to import more. In other words, it makes the free traders richer.

Naturally the global reaction to Trump’s tariffs is as unsurprising as the tariffs themselves. After all, while Merkel may have saw herself as the defender of the “liberal world order,” what she and the “globalists” Trump loves to rail against was really a “neoliberal” status long departed from the ideas of true classical liberals like Ludwig von Mises. For them, and their preferred presidential candidate, the aim is not “free trade” but managed trade – and the differences there are significant.

Of course, that powerful governmental bodies are acting hypocritical to their stated values is the least surprising move of them all. 

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Gratitude and Wonder for the Internet

04/18/2018Gary North

This is a simple video, cheap to produce, and free to post. It is about the fact of its own existence. The talking head is the remarkable investigator James Corbett.

A Moment for Wonder

We are witnessing an incomparable transformation of world civilization, and we barely recognize it. We are too busy to recognize it. We are hard-pressed to think through the implications of it for our own lives, let alone the lives of seven and a half-billion other people. But the transformation is taking place. We have gone through it, almost oblivious to the fact that we have been going through it. We almost take it for granted. That was Corbett's point.

I want to make another point. The most important unanswered question that any historian can ask is this one: what made possible, beginning around 1800, compound economic growth per capita of about 2% per annum? Historians rarely ask this question. None of the ones who have attempted to answer it have come up with a plausible answer. Yet that phenomenon has led to the creation of the world that would be completely unrecognizable to anybody born in 1800. This has taken place within the lifetime of three generations. I have come back to this point repeatedly. John Tyler was born in 1790, and he became President in 1841. I have interviewed his grandson, Lyon Tyler. Both Lyon and his brother Harrison are still alive. This is inconceivable.

The 2% per annum per capita real economic growth that has taken place over the last two centuries was imperceptible to the people living through the transformation. Year-by-year, the world got richer, and the only exception was the decade of the 1930's. Yet people did not perceive the transformation. Gadget by gadget, the world was completely changed, but people only noticed the gadgets that applied to their lives. There is more to life than the compounding of gadgets, yet the compounding of gadgets ultimately transformed the world.

Corbett's point applies to the last two decades. Here, breakthroughs were made, based on Moore's law, which have changed our lives. Moore's Law accelerates a lot more than 2% per annum. It accelerates at something close to 50% per annum. Despite this, we have lived through the repercussions since 1965 in the field of silicon technology, and we have adjusted without any problem. We barely notice what is taking place around us. We take it for granted. That's why I thought Corbett's video was impressive. Using digital technology, he made his point in such a way that we understand it. He did it simply by using a piece of digital music. At first, it was not clear what he was getting at. But, by the end of the presentation, it was clear what he was getting at.

To his sense of wonder, I add a sense of gratitude. I am a writer. Writers want to find readers. In the history of mankind, up to 1996, writers had to find either a publisher that would print and distribute their materials, or else they had to become direct response marketers who could seek out an audience through the use of mailing lists. I tried the first approach, and I failed. I tried the second approach, and I succeeded.

Today, as the extraordinary experience of Jordan Peterson indicates, all you have to be is good. Never before in the history of man has the principle outlined in Albert J. Nock's 1936 essay, "Isaiah's Job," been truer: the Remnant will seek you out. To use the words of the voice that spoke to Kevin Costner, if you build it, they will come. Warning: if it's not any good, they won't stay long unless they are crackpots. Of course, there is always a large number of crackpots. You may get an audience, but they won't be worth recruiting.

We now are being pressured to restructure our lives. We do it voluntarily. People who use Facebook and social media, which I do not, have had to re-budget time in their lives. The way we communicate has changed. We are told that the way people get elected has changed. There is nothing that the critics can do about it. That really is the bottom line. All the handwringing about the supposed Russian involvement in American politics is essentially irrelevant. The two main candidates used the system to the hilt. Trump used it cheaper. He won. The candidates will always use the best tools available.

There is nothing anybody can do about it that is significant. The establishment doesn't like it. The people who were the pioneers of the transformation want to be in the establishment. More or less, they have been adopted by the establishment. But our lives are changing in a completely un-predictable way. The geniuses who created Facebook, Amazon, and all the other digit-based institutions have been financially successful, and they have solved little problems to make their empires grow. But they have no control over the direction in which history is moving, because, visibly, there are so many new directions in which it may be moving. So many different groups use Facebook that there is no way of knowing which group is going to be successful. Everybody has some eschatology. Everybody has some theory of the future. But, with respect to specific predictions about how old movements are going to use specific new technologies, nobody has a clue.

Let me give a recent example. Google, renamed Alphabet, has a subsidiary: Waymo. Waymo has developed the new technology of self-driving cars. I have thought myself radical in saying that I think self-driving cars are going to be widespread in 2025. Little did I know. Waymo has just ordered 20,000 self-driving Jaguars, which will be delivered between now and the end of 2020.

Waymo Live Unveil Highlights: Self-Driving Jaguar I-PACE

My wife understands their strategy. She says they're going to appeal to rich people whose time is valuable. Waymo thinks that their cars will be driving a million trips a day in 2020. If this turns out to be true, there will be tremendous pressure on everybody else whose time is valuable to either use Waymo or else buy self-driving cars of their own. Other companies, such as Uber and Lyft, are going to have to compete by using self-driving cars.

Let's talk politics. If the rich people find that self-driving cars save them money, then they are going to make certain that politicians vote for policies that will enable the spread of self-driving cars. That's another reason why Waymo is buying Jaguars. Anyway, that's my theory.

For articles on this, go herehere, and especially here.

NYC cab drivers demand action to stop suicide crisis

New York City cabbies are going to be out of business in 48 months. They see what is coming. They are desperate for politicians to save them. It will not work. Some have begun committing suicide.

This protest is futile. Moore's law is relentless. Self-driving cabs are coming. We must adjust. Despair is futile. Politics is futile. An unplanned, widespread, international process of innovation is irreversible, short of a total breakdown of world civilization. This is unlikely.

Hayek called this the spontaneous order. The free market is replacing politics in the realm of economic planning. The state is on the defensive.

The central planners are holding up signs: "Stop!" The process will not stop. They will be run over.

It is a time for gratitude, not just wonder.

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Governor of Bank of Canada Doesn't Know Canada's Own History

04/16/2018Tho Bishop

Unfortunately I will not be able it make the highly anticipated debate between Bob Murphy and George Selgin on fractional reserve banking tonight, it should be a great event between two great scholars (and former Mises Institute alums). Though I'm obviously on Team Bob tonight, I did want to point out a great tweet from Dr. Selgin over the weekend that help shows the very superficial grasp of history many central bankers have.

In a thread sparked by recent comments from Mark Carney of the Bank of England about central bank digital currency, a participant pointed to an article from Stephen S. Poloz — the head of the Bank of Canada. While explaining his skepticism of cryptocurrency, Poloz remarks that providing cash "is an absolutely vital public good, which has always been provided by the central bank." 

The problem as Selgin notes, is that central banks didn't provide cash for Cananda until the BoC was founded in 1935. Prior to that, Canada had a system of free banking and private currency — a monetary regime that proved to be far more stable than the United States under the Fed.

While this could perhaps be dismissed as simple absent mindedness on part of Poloz — his own "57 states" moment — the problem is that his entire point about the inherent "public value" of government-backed currency is directly undermined by Canada's own history. It is precisely because the record has shown that money is best left up to the market — coupled with the past decade of unprecedented monetary policy — that recent projects such as cryptocurrencies (along with private gold/silver/etc.-backed money) are so fascinating. On this point, I'll continue to shamelessly borrow from Selgin's work by pointing to his blog articles (Part 1Part 2, and Part 3) that critique a paper about what Canada's history of private bank notes might mean for cryptocurrency.

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