Power & Market

Robert Wenzel, RIP

05/27/2021David Gordon

I am sorry to have to report that Bob Wenzel has passed away. He was the editor and publisher of the popular websites Economic Policy Journal and Target Liberty and also published an investment newsletter. I met Bob many years ago at a Mises Institute conference and was immediately impressed by his enthusiasm for Austrian economics and libertarian theory.  He would throw himself into things with unmatched tenacity; he always wanted to find the inside story on events and usually succeeded in doing so. In my many conversations with him, his quick intelligence was apparent. His interests ranged from the fine points of the Non-aggression Principle to the fallacies of Modern Monetary Theory. He was one of the leading opponents of Covid-19 masks and of compulsory vaccinations.  In my last conversation with him, he mentioned a story he was pursuing about a well-known libertarian activist. His final words, “Wow, wow, wow!” echo in my ears. I will miss him.

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Restaurant Revitalization Fund: Government Remaking American Society

The Small Business Administration creation of the Restaurant Revitalization Fund (RFA) under the American Rescue Plan Act is another government program in response to the covid pandemic that has the potential for abuse and misuse, similar to the Paycheck Protection Program (PPP). However, what is even more troubling about the RFA is the increased politicization of the application process through the adding of eligibility criteria on race and gender in a bureaucratic overreach. The RFA is the next step in government re-creating American society in a new image, an image of division based on racial and gender group mentality.

The RFA provides funding to help restaurants and other eligible businesses keep their doors open. The program provides restaurants with funding equal to their pandemic-related revenue loss up to $10 million per business and recipients are not required to repay the funding as long as funds are used for eligible uses. The RFA is another example the “rescuer twice over” policy, in Hoppe’s words, of shutting down businesses over covid fear, saving the general public from the pandemic, while at the same time rescuing businesses from bankruptcy by giving away money at a cost to taxpayer. Even more concerning is the addition of new eligibility criteria based on racial and gender group. It is an attack on the core principle of equality when the restaurant revitalization fund states:

SBA will prioritize awarding funds to small businesses at least 51 percent owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals.

The focus of the RFA on prioritizing funding based on business characteristics that have nothing to do with the ability to serve customers is bizarre. How do businesses qualify for the RFA? An applicant must self-certify on the application that they meet eligibility requirements for a socially and economically disadvantaged businesses? According to the SBA website:

  • Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
  • Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

According to an article by Inc. the SBA received 266,000 applications requesting $65 billion. About 147,000 applications came directly from women, veterans, and socially and economically disadvantaged business owners, requesting $29 billion.

The core principle of equality is put ad absurdum when a government program creates a priority group for applicants with a clear preference for groups of society over other groups that have nothing to do with the ability to provide services to consumers.

Government officials in the Small Business Administration do not seem to understand competition in a market economy or the role of government should play in the market. Officials in the SBA should read what Mises wrote in Human Action on competition, which offers a clear answer on how the RFA eligibility criteria are counter to a free market. Mises attacks governments’ willingness to interfere in the market when he writes,

[C]atallactic competition is not open to everybody in the same way. The start is much more difficult for a poor boy than for the son of a wealthy man. But consumers are not concerned about the problem of whether or not the men who shall serve them start their careers under equal conditions. They only interest is to secure the best possible satisfaction of their needs. (p. 276)

Consumers only care for good food and good service when frequenting a restaurant or bar. Consumers generally do not care what the ownership structure of the business may or may not be, because as Mises writes about consumers:

They look at the matter from the point of view of social expediency and social welfare, not from the point of view of an alleged, imaginary, and unrealizable “natural” right of every individual to compete with equal opportunity.

In all fairness, the Restaurant Revitalization Program, grants “more fortunate” restaurants that have the misfortune to be owned by more than 50 percent “more fortunate” owners to apply for a grant after the first twenty-one days. So, for example, a restaurant owned by a recent female immigrant to this country that is backed by wealthy investors who strongly believe in her idea to fund her establishment is somehow less desirable than a restaurant owned by a majority of females. How do you even self-certify that you have been subjected to racial or ethnic prejudice or cultural bias or that you are a socially disadvantaged individual? Do government officials truly believe that by prioritizing certain businesses based on the ownership structure, consumers will be better served? By introducing of those eligibility criteria, government only serves political interests at the cost of less fortunate businesses with the “incorrect” ownership structure.

In Profit and Loss Mises attacks the idea of a government bureaucrat interfering in the production decision when he writes:

Entrance into the ranks of the entrepreneurs in a market society, not sabotaged by the interference of government or other agencies resorting to violence, is open to everybody.

But more importantly, Mises makes it clear that businesses providing goods and services demanded by consumers will not have issues with funding:

Those who know how to take advantage of any business opportunity cropping up will always find the capital required. For the market is always full of capitalists anxious to find the most promising employment for their funds and in search of the ingenious newcomers, in partnership with whom they could execute the most remunerative projects.

Bureaucrats at the SBA believe they are far better equipped to make decisions about what businesses should be funded than the market. However, Mises writes that:

The task of the entrepreneur is to select from the multitude of technologically feasible projects those which will satisfy the most urgent of the not yet satisfied needs of the public. Those projects for the execution of which the capital supply does not suffice must not be carried out.

The market is always crammed with visionaries who want to float such impracticable and unworkable schemes. It is these dreamers who always complain about the blindness of the capitalists who are too stupid to look after their own interests.

The SBA and government in general would be wise to follow Mises’s conclusion:

The consumer chooses what, as he thinks, satisfies him best. Nobody is called upon to determine what could make another man happier or less unhappy.

The only question remaining is: Why do government officials feel the need, the right, the obligation to interfere in the market? The answer may be found in Robert Higgs’s book Against Leviathan: Government Power and Free Society. Government bureaucrats have the tendency to take advantage of “emergencies,” in this case, the covid-19 pandemic, to consolidate and grab even more power. Power to reshape the American society to their liking and preconceived ideal world of justice. The Restaurant Revitalization Program may be the first step in the governments’ desire to force individuals and business into a “perfect” society.

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Rewinding the Mainspring of Human Progress

04/07/2021Gary Galles

Henry Grady Weaver worked through many jobs on the way to becoming director of customer research for General Motors, which landed him on the November 14, 1938 Time cover. But virtually no one remembers that. Now he is best known for his short 1947 bookThe Mainspring of Human Progress, that the Ludwig von Mises Institute’s website called “the true story of progress for the human race with acute understanding of the fundamental cause: freedom itself,” which led to the fact that now “Several generations count this book as the very one that started an intellectual revolution.”

The book had an interesting background. It draws heavily from Rose Wilder Lane’s 1943 The Discovery of Freedom: Mans’s Struggle Against Authority. It became a very influential book, ranking 67th in a 1999 Modern Library readers poll of the best nonfiction books. But Lane was not satisfied with it, so despite continuing interest, she refused to allow it to be reprinted after only 1000 copies were made. That continuing interest led Weaver to ask Lane’s consent to use her ideas, but retell it in his own way, which she granted. Ironically, even though Mainspring was thus what John Hood called “an amateur’s paean to freedom and individual ingenuity,” it ranked 48th in the same poll.

Reader comments about Mainspring have included “Nothing I say will adequately describe how awesome this book is,” “If I ever gave a list of books people needed to read before they die, this would be in the top three,” and “Best book I’ve read in 5 years. A concise and condensed summary of recent Western civilization cultural ideas.” Such raves justify giving it some serious attention. As a beginning, consider some of its most insightful words.

  • Most of the major ills of the world have been caused by well meaning people who ignored the principle of individual freedom, except as applied to themselves…professional “do-gooders”… who would ruthlessly force their views on all others--with the abiding assurance that the end justifies the means.
  • What is the human purpose in society?...it is a matter of benefitting yourself by getting something you desire from another person who, at the same time, benefits himself by getting something that he desires from you…the peaceful exchange of benefits, mutual aid, co-operation--for each person’s gain. The incalculable sum of all these meetings is human society, which is simply all the individual human actions that express the brotherhood of man.
  • To discuss the welfare and responsibilities of society as an abstract whole…is an oversimplification and a fantasy. The real human world is made by persons, not by societies. The only human development is the self-development of the individual person.
  • Even today, many civilized persons…have harbored the pagan belief that the sacrifice of the individual person serves a higher good…in the false ideal of selflessness--which emphasizes conformity to the will-of-the-mass--as against the Christian virtues of self-reliance, self-improvement, self-faith, self-respect, self-discipline, and a recognition of one’s duties as well as one’s rights. Such thinking is promoted under the banner of social reform, but it gives rise to the tyrants of “do-goodism”…who slaughter…the very people who look to them for the more abundant life and for protection against harm.
  • It is highly presumptuous of any mortal man to assume that he is endowed with such fantastic ability that he can run the affairs of all his fellowmen better than they, as individuals, can run their own personal affairs.
  • Every living thing must struggle for its existence, and human beings are no exception. The thin defenses of civilization tend to obscure the stark realities; but men and women survive on this earth only because their energies constantly convert other forms of energy to satisfy human needs, and constantly attack the nonhuman energies that are dangerous to human existence.
  • In the last analysis, there can be no progress except through the more effective use of our individual energies, personal initiatives, and imaginative abilities…
  • It all comes back to the effective use of human energy…the decision to act and the action itself are always under your own control.
  • Your freedom of action may be forbidden, restricted, or prevented by force…But the fact remains that no amount of force can make you act unless you agree--perhaps with hesitation and regret--to do so.
  • Individual freedom is the natural heritage of each living person.
  • Freedom cannot be separated from responsibility.
  • Your natural freedom--your control over your own life energy--was born in you along with life itself. It is a part of life itself. No one can give it to you, nor can you give it to someone else. Nor can you hold any other person responsible for your acts. Control simply can’t be separated from responsibility; control is responsibility.
  • Man has enormous powers…to make new things and to change old things into new forms. He not only owns property but he also actually creates property…without ownership, there is little incentive to improve it.
  • Free minds are inventive minds.
  • Overlords develop their ambitious plans, enforced by the firing squad and supported by huge predatory armies…but they are contradictory to the nature of human energy. They are always at the expense of individual initiative; they always result in oppression, leading to human degradation and war.
  • In America…Free men were to have an opportunity to live their lives, plan their own affairs, and work with one another--not under the lash of coercive authority but under the discipline of enlightened self-interest and moral responsibility.
  • Americans had no overall plan. They had something more important. They had personal freedom to plan their own affairs; and the avalanche of human energy resulting from that freedom.
  • This country had been covered by...a tumultuous multitude of free men…living under the weakest government in all the world. The people who had been left to shift for themselves--who had learned the lessons of realism…were creating a new world.
  • Unrestrained majority rule always destroys freedom, puts the minority at the mercy of the mob, and works at cross-purposes to the effective use of human energy and individual initiative.

Henry Grady Weaver’s The Mainspring of Human Progress drew out how poverty was almost everyone’s fate throughout world history until the evolution of capitalism made civilization possible. That is a lesson well worth remembering, because as Weaver put it:

  • One of the best ways to ensure future progress is to keep clearly in mind the things which have been responsible for our past progress, as well as the things which may have kept America from being as great as it might have been.
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Reading Between the Fed’s Lines

03/19/2021Robert Aro

The conclusion of the March Federal Open Market Committee (FOMC) meeting, on Wednesday, reiterates that low rates and perpetual increases to the money supply should now be considered permanent features of the economy. Federal Reserve Chair Powell would never say this explicitly, but the  Q & A provides further clues that the Fed has unofficially committed to this path:

We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved.

While it sounds like the accommodative stance is temporary, once his Fedspeak (“employment and inflation outcomes”) is deciphered, doubt comes to light as to how temporary the policy stance will be.

Keep in mind the keyword: transitory, meaning “not permanent.”

With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to .25% target range for the federal funds rate until labor market conditions have reached levels consistent with the committee’s assessment of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time. I would note that a transitory rise in inflation above 2%, as seems likely to occur this year, would not meet this standard.

Powell expects price inflation, measured through various inflation calculations like the CPI Index, should rise to over 2% this year, and if this were to happen it would be “transitory.” There is little explanation why this would be the case, except for a hypothetical example where supply bottlenecks are created due to the reopening of the economy, potentially causing a “one-time increase” to prices. 

Since all inflation calculations are problematic as is, this adds a new layer of cherry-picking, whereby even when the inflation data is relatively high, the Fed can dismiss it by calling it transient. This may be easy for central planners to say, but it is difficult for the general public to live through high inflation, even if it is transient.

Powell reiterates this stance through their guidance, as they continue to look for:

inflation that has reached 2% and not just on a transitory basis, and inflation that’s on track to run moderately above 2% for some time.

Further problems are created which cannot be answered; does six months of transient data equate to a moderate run of inflation for “some time,” or are they looking for a consistent twelve months of transience?

As for assessing maximum employment:

We look at a very broad range and you hear us talk all the time about participation, about employment to population… about different measures of unemployment. So it’s wages, it’s the job flows, all of those things, they go into an assessment, disparities of various groups, all of that goes into an assessment of maximum employment.

Strangely enough, what looks like a vague explanation becomes quite clear; it seems he’s saying that maximum employment will be achieved after the Fed has looked at enough data to determine that maximum employment has been achieved.

Of course, for all that’s been said about the Fed looking to achieve the appropriate unemployment and inflation rate, it seems even stranger that near the end of the Q & A, Powell says:

There was a time when there was a tight connection between unemployment and inflation. That time is long gone.

It remains unclear why he would spend a considerable amount of time discussing the two supposedly inextricably linked mandates, unemployment and inflation, but then offer the idea that the connection between them is gone.

At the conclusion of the FOMC meeting, we are assured that no rate hikes or decreases to the Fed’s asset purchase programs should happen within the next several years. However, between achieving that elusive maximum employment figure or accepting inflation data that is not transient, we should start to wonder if the Fed has any intentions of becoming less accommodative ever again.

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Remembering Tibor Machan

03/18/2021Gary Galles

My 2016 book, Lines of Liberty, brought together the words of many who have been most important in the defense of liberty over the years. But it only included those who had already passed on.

Since, then, a few stalwarts of liberty have died. Tibor Machan may have been the first, only a couple months after I completed my book. Since his insights are well worth remembering, I thought his March 18 birthday would be an appropriate time to do so.

But as someone who devoted much of his professional life to defending liberty, Machan’s work is too extensive to address compactly. He published forty books, far more scholarly papers, and still more in other forums. So, because of his lengthy connection to the Ludwig von Mises Institute, I have chosen to select some of his words from his Mises Daily articles, written between 1998 and 2005 and still accessible at his author archive.

  • With the American Revolution, some ordinary folks who thought about things decided that maybe it's individuals who matter in society.
  • “We hold these truths to be self-evident that all men are created equal and are endowed by their creator with certain unalienable rights.” That means rights that cannot be abrogated, may not be violated, not by majorities, not by kings, not by your local sheriff, not by the vice squad, by nobody.
  • Individual rights don’t mean anarchy. It means people get to do what they choose to do, so long as they do not violate other people’s rights.
  • We’re each supposed to have our rights, unalienable rights … unalienable even by a majority.
  • The freedom of the American founders is … that people in communities require first and foremost not to be thwarted in their efforts to make headway in life.
  • Others may not be conscripted into involuntary servitude.
  • Sovereignty had to lie with individuals, not with governments—that is the central point about being a citizen as distinct from a subject … consent must be obtained if one is to govern a citizen.
  • “Liberalism” … used to signify adherence to the principles of a free society … being free from the intrusions of others, including, especially, governments.
  • The price of liberty is … eternal vigilance in more ways than one. We need to be vigilant both to keep our freedom and to deal with it responsibly.
  • Private property … is one of the most beneficent institutions and certainly the bulwark against any kind of tyranny, be it that of a ruling party, a dictatorship, or even of a democratic majority.
  • Ask someone to tell you whether he or she thinks a person has exclusive authority over that which he or she owns. Those who say yes will find the scope of governmental authority in our lives to be severely limited, mainly to the protection of individual rights. Those who do not will consider it quite all right for government to take, take, and take some more, via taxation and government regulation, for whatever purposes it may have.
  • What must be kept in mind is that governments make people do what they would not otherwise want to do themselves.
  • It is private individuals working in a voluntary setting of voluntary cooperation who do the most good in the world. When government interferes, most of what results is lamentable.
  • The less power some elite has, the more likely it is that people will be pursuing goods with what they legitimately have … in trade instead of what they garner through political dealings.
  • The world can use improvement…. But the best approach excludes coercing … which only makes some people more powerful than others [by] how much force they are entitled by law to use to get their way in life.
  • The best improvement is to leave people as much to their own resources as possible.
  • Private property is anathema to socialism. The institution of the right to private property is a concrete, practical implementation of individual rights … [People] can thus act independently of the wishes of others, should they so choose, including of the wishes of the government.
  • The larger the public realm, the more … subversions of liberty.
  • Big government is not a product of the enlightenment but of socialist ideology, which has not produced civilization but barbarism.
  • Liberalism—the struggle to achieve freedom—has changed from insisting that others not exercise power over us to insisting that power be used to engineer our lives.
  • What we now are witnessing is the gradual elimination, in the name of the people … of individual sovereignty and its corollary, market decision making…. Government should not interfere even when it obtains democratic support. After all, the lynch mob adheres to majority rule, too.
  • Any collective help to eliminate unfairness introduces the most dangerous form of unfairness, namely, giving some people power over others. How do you equalize things but with equalizers? And they must be armed, otherwise some will not yield to the effort to equalize. That makes these equalizers most unequal.
  • From the start the leaders of this country had the revolutionary gall to call for more liberty for its citizenry…. This call has by now been seriously eclipsed by the call of our current leaders who do not even see the point of mentioning, let alone expanding, the protection of individual liberty as one of government’s central tasks.
  • The beginning of the corruption of the proper role of government is the transformation of a system of private property rights into a system of public ownership of valued resources. When this commences, the rights of individuals … begin to be eroded and government begins to set the agenda of society.
  • Governments use force to accomplish their goals. Force, unless used in defense … wreaks havoc in its path, even where the ostensible results seem to be grand. 
  • The only laws that can be applied uniformly and universally in society are the very few that aim to keep us free. Other so-called laws are really just edicts … since they apply selectively, not equally to us all.
  • The founders were terribly afraid of democracy as a form of tyranny…. We ought to restrict democracy to very limited functions, namely the selection of the officials who administer the law.
  • The marketplace unites people on some levels but by no means all…. The bulk accept the common medium of exchange and the ethics of commerce that should guide everyone, without any threat whatsoever to personal, cultural, or religious identity.
  • The free market has nothing at all to do with injustice as that is ordinarily understood. Injustice involves the violation of individual rights … [which] is prohibited and severely punished in a free-market society. It is precisely to prevent pervasive injustice … that the state is restricted from intervening in the workings of the society.
  • The complaint is not that the free market does anything really unjust, only that it fails to provide everyone with … what erudite academics believe would be fair.
  • The last thing we need to combat bad habits is for a bunch of people to arm themselves and enforce their idea of prudent living on the rest of us. They will be exactly what a free society must most seriously resist.
  • No such animal as capitalism exists in the USA … we have a welfare state, a highly regulated, even regimented economy … by no means as free with respect to trading goods and services as capitalist theory would require. But … those who never tire of trying to besmirch the system keep calling what we have capitalism and then finding all that’s lamentable … the fault of this non-existent but merely approximated system.
  • There may be times when more money for government is justified, but in the main, watch your pockets, because it doesn’t matter—the state will want and grab more of your money any time, peace or war, boom or bust, night or day.
  • Individualists are often charged with neglecting the community…. The charge, however, is spurious and certainly unproven, except in a perverse sense … when some folks appoint themselves as the community … and find that people of an individualist bent of mind refuse to accept their self-designation as correct.
  • Do not confuse people who are pressing their own goals … as standing for the goals of the community and those who in fact have managed, rare as that might be, to find out just what does benefit the community. There are very few in this latter group, if for no other reason than that there are very few things that truly benefit every member of a community. The American Founders thought that there really is just one such thing, namely, the protection of the unalienable rights of everyone to life, liberty and the pursuit of happiness.
  • If there is a successful vote to rid the community of the expanding tyranny of government, the liberal democrats suddenly aren’t democrats anymore.
  • In their hearts of hearts democrats are…merely opportunists who make use of the power of the majority over the minority’s rights. But should the majority not wish to go along with this plan, well down with democracy.

Tibor Machan was not just insightful and inspirational, but a wordsmith worth remembering. That is demonstrated in this very small slice of what he wrote. But what sticks with me most is what Steven Greenhut said about him: “Tibor’s contributions to the freedom movement were as towering as the man himself…. He had a true passion for liberty and would never hesitate to express his forthright opinion.” That is because everyone who wishes to successfully advance the cause of liberty could use just such wisdom, combined with the kind of courageous, undeterred passion he exemplified.

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Remembering Brutus on the Ides of March

03/15/2021Maurus Adam

Today marks the anniversary of a fateful day in the history of the Western world. On March 15, 44 BC, a group of Roman senators assassinated Gaius Julius Caesar. Caesar, dictator for lifetime, was seen by these senators, many of whom were personally indebted to him, as a tyrant and a threat to Roman liberty. His death was supposed to restore the republic. It is well known that the assassination of Caesar succeeded, but the republic fell into a civil war and ultimately became a monarchy.

The revolting senators thought the public to be on their side in the battle against tyranny, but the public turned against them, driving them out of the city. For a long time, these men were considered traitors. The quest for liberty may be a horrible struggle where its proponents face defeat and defamation for centuries, not knowing their reputation may be restored only long after their death. Nothing illustrates this better than the fate of the driving force behind the revolt against Caesar: Marcus Iunius Brutus. It was Brutus, the classic republican, who argued against the assassination of Marcus Antonius (Mark Antony), Caesar’s general. While the others viewed Antonius as a threat, to Brutus only Caesar was the tyrant and only his death was just. Yet Brutus was condemned based on the senate-backed lex pedia, persecuted, and ultimately committed suicide after losing the Battle of Philippi against Octavian and Antonius.

The fall of the republic shows that a people can lose its liberty by voluntarily submitting themselves to tyranny. It does not need a coup d’etat to suppress freedom. The question has recently been asked in an article by Ethan Yang for the American Institute of Economic Research: do we still have the will to continue as a free society? The citizens of the Western world have submitted themselves under the yoke of the lockdowns. The need for the feeling of security has certainly caused a great many citizens to abandon the idea of liberty. The ostracism of people presenting alternative views like Dr. Sunetra Gupta is the equivalent to the Roman proscription against Caesar’s assassins.

For centuries, Brutus was considered a traitor, on the same level as Judas—Dante placed the two in the inner circle of hell in his Divine Comedy. But when people rediscovered their striving for liberty, Brutus was elevated from hell. Michelangelo’s bust, depicting Brutus with proud posture and a decisive gaze, clearly expresses the republican resentment of tyranny. Scholars argue about Brutus role in Shakespeare’s Tragedy of Julius Caesar, but it is clear that he is not the scumbag traitor he has been before, and his portrayal is likely in opposition to Elisabethan absolutism. The example of Brutus shows that not abandoning the principle of liberty, despite facing present setbacks, might ultimately prove to keep the idea of liberty alive.

But there is something else Brutus shows us: that liberty is a value. It is not simply something that comes with some poorly defined “progress”, and nothing that, as unfortunately so many of us do today, can be taken for granted. We cannot assume it to simply return when the pandemic is over, because ultimately, the decision when it is over rests on us. The importance of liberty as a value means that it is something that motivates action. We have taken it for granted, we have placed many values before liberty, hence we are losing liberty. In a time where the republic was on the verge of falling to a despot, where the people have lost the value of liberty, Brutus had to abandon his ideals of pietas and amicitias for libertas and still lost the battle. But if we can revive the ideal of liberty in our fellow humans again, if we can encourage action based on this value and the revocation of consent to the modern despotism, no Brutus needs to make a sacrifice which is appreciated only after centuries.

I value liberty. I believe it is the task of those who do so to propagate liberty, and to keep in mind that, even if we might fail in the present, we might succeed later. This is why, in times where political statements can lead to ostracism and where the government tramples on our liberty, I keep a picture of Brutus at my desk.

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Reparations and the Black-White Achievement Gap

03/15/2021Lipton Matthews

Many politicians and activists are now insisting that modern-day African Americans deserve reparations for the enslavement of black people in America prior to the Thirteenth Amendment. A prominent justification for reparations is the racial income gap, and activists think reparations will put blacks on equal footing with white Americans.

This, however, is likely to prove to be an exercise in futility because it will not solve the problems afflicting blacks that stem from culture or fatherlessness

Moreover, a major reason for the racial income gap is the achievement gap and the latter is a function of the competence gap.

The competence gap is not unique to African Americans, and it does not necessarily affect groups along ethnic lines. Appalachian whites, for example, have long suffered higher levels of poverty for similar reasons.

Nonetheless, African Americans as a group are certainly affected by a competence gap. Research has documented the academic progress of African Americans, and although they are making gains, on average they are still less educated than white Americans. If black males have the lowest graduation rate in the country, then how can we expect their earnings to be on par with white men? 

Economist Roland Fryer has marshaled data proving that the racial income gap is primarily explained by the achievement gap and not discrimination. Earlier studies have also found that academic achievement among teenagers is responsible for variations in the racial income gap. Furthermore, Derek Neal in "Why Has Black-White Skill Convergence Stopped" suggests that the black-white skill gap can be attributed to family patterns that deter investment in human capital. As he notes: “When parents live apart, an agency problem arises. The noncustodial parent cannot be sure that transfers intended for expenditures on children are spent entirely on the child. This monitoring problem acts as a tax on investments in children…. In sum, black-white differences in norms concerning marriage may create differences in the mapping between parental human capital and investments in children that could support persistence black-white skill differences among adults across generations.”

Another contributor to the racial income gap is the reluctance of blacks to pursue majors that will result in them earning lucrative salaries. Maya Beasley in her fascinating book Opting Out: Losing the Potential of America’s Young Black Elite argues that black students exhibit a greater preference for social activism and as a result are overwhelmingly represented in socially useful, but low-paying professions. Moreover, in an interview published by Inside Higher Ed, Beasley instructs black students to form relationships with people outside of black social groups: “While black students may derive substantial value from these networks, there is also a considerable downside to their separation from the wider campus community.”

According to Beasley’s report, some black students posit that the fear of racism precluded them from socializing with white networks. Yet such assumptions are increasingly implausible as studies show that since racism is declining in America while tolerance for racist rhetoric is diminishing. However, racism is not an insurmountable obstacle for people who want to succeed. Black men like Robert Church and William Scarborough managed to excel despite the very real venom of racism in an earlier era. So, it is becoming increasingly difficult for black Americans living in a now-less-hostile environment to use racism as an excuse for refusing to pursue predominantly white fields or tapping into non-black networks.

If improving the plight of African Americans is the aim of activists and the government, then they must hold them to higher standards. Lowering quality in the name of antiracism will only succeed in making African Americans uncompetitive in the market space. Placing the blame for a economic failures squarely on racism is patronizing and rests on the assumption that blacks are incapable of helping themselves.

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Rothbard Teaches Us Never to Sacrifice the Ethics of Liberty to Make People Comfortable with the Idea

03/04/2021Daniella Bassi

This week is Murray Rothbard’s birthday. It’s an opportunity to marvel at what a remarkable theorist he was, and in my estimation The Ethics of Liberty was his greatest contribution to the world he left behind and to the countless generations that will follow. Just as most people in the world function in distorted markets, so do they live under a tangled mess of legal codes that obstructs justice, to use the US government’s ironic term, prohibiting retribution and restorative arrangements between trespassers and their victims. Never losing sight of the fact of each individual’s sovereignty and inviolability, so holy that a noncriminal must never be harmed, Rothbard revealed humanity’s most basic legal code clearly and in the context of many different scenarios and kinds of crime. In doing so, he left a peal forever ringing in dissonance against every Leviathan’s assertion that its laws, its paid strongmen, and its kept courts alone know right and wrong. He showed how law is sown in every individual—even one who is dedicated to trying to violate others—unfolding from the instinct and the need to protect his own person and appurtenances from encroachment.

Rooted in the fundamental right of property that emanates from each person, Rothbard’s ethical analysis shows what it is that has been violated (or not) and what must therefore be restored in each major type of conflict, but he never fixes or specifies retribution beyond this. He never sets a fee schedule, so to speak, never writes law himself. The result is an exposition of natural law that is so thoroughly consistent that there is no struggle to think of it as universal. Like them or not, all kinds of cultural and religious prescriptions may be layered on top of this thinnest libertarianism without a moral dilemma so long as no force is used or implied, and it’s very clear where different coercive groups curtail people’s defensive capabilities. And all over the world, in all kinds of situations where they have been forced to assume the posture of declawed cats, natural law stirs within people. They are subjected or compelled in some way, they feel it bearing down, and they finally make their escape, against all strictures, retaliating in some way or simply taking back their sovereignty and acting on decisions that they’ve been forbidden from making over their bodies and their fruit.

In consistently hewing to individual sovereignty, Rothbard came to some conclusions for which he has been heartily criticized. This is particularly true in regard to his views on parents and children—that parents cannot be compelled to raise their children because to do so would constitute slavery and that for the same reason children must never be held against their will once they’ve decided to run away. Although some have convincingly argued that parents can’t quite leave a toddler in a park and walk away forever, likening parenthood to the contract between an air pilot and his passengers (it can’t simply be broken midtrip and the passengers “dropped off” with no parachute), Rothbard’s most important insights here are that it’s immoral to force unwilling parents to raise their offspring, iniquitous to compel people to toil for an indefinite period to feed and shelter another no matter who they are, and that a person’s nonaggressive will cannot righteously be restrained, no matter how young he is, once he becomes aware of its existence and decides to wield it.

But both of these things more or less occur under most regimes. It’s very difficult for parents to freely transfer their trusteeships over their children to someone of their choosing, and of course everywhere illegal to sell those rights to someone. Children who exercise their will to freedom find their faces printed in Have You Seen Me? ads, eerily similar to the ads for runaway slaves and indentured servants. The state forces those under an arbitrary age to live, sometimes against their wishes, with the parent it deems most fit in divorce cases, and those who have been taken from their families are also effectively barred from leaving orphanages and assigned homes until an arbitrary age. Concerned efforts to ensure that early life is danger-free, using force to remove children from homes that do not meet certain standards of comfort or exhibit the affection that a group of lawmakers and state-sponsored academics deems necessary, often simply cement unsatisfactory arrangements and limit the avenues that can be taken toward improvement.

Rothbard, with his deft but light touch, gave two marvelously broad possibilities to the problem of unwilling families from the standpoint of parents: simple abandonment and the free sale of guardianship rights in children. This approach to solutions for the world that could be—the free world—is ideal. He leaves readers with a clear sense of right and wrong, gently points toward possible solutions for those who struggle to imagine an unmediated world, and leaves open all the possibilities that the diversity of individuals and collaboration can engender.

It should go without saying that children are not animals, which don’t have natural rights, but we can come closer to understanding that the array of possibilities that could exist in a free market for guardianship rights is vast if we consider the variety of ways that you can get a pet in the United States (for now). You can buy pets or adopt them for free from individual owners in private marketplaces like Craigslist. You can buy them from breeders, either certified by private groups like the American Kennel Club or uncertified, or just from people who have a litter on their hands. You can foster indefinitely for free, adopt at a low cost, or adopt for free from all kinds of charitable organizations—small, large, secular, with a religious feel, politically active in lobbying for intervention, or just trying to help animals find homes, etc. If you get your pet from a shelter, you often pay very little, but the organization places several conditions on how you may keep the pet—indoor, outdoor but tie-outs and the like prohibited, regular vet visits and vaccines required, must be spayed or neutered (and therefore can’t be bred), can’t be sold or given away, etc. You also often have to talk about your lifestyle, reveal where you live and work and with whom you live, and disclose whether you have experience with pets. If you don’t want to go through that, you can go to a pet store, where you will pay more, but won’t necessarily be interrogated. But there’s freedom on the selling side as well, and some pet stores and breeders also choose to ask about your lifestyle and experience. Once you get the pet, there are all kinds of options for “educating” it, from informal training by friends or part-time trainers to full-fledged training academies that charge a pretty penny. Of course, there are many groups out there that have long been agitating for the state to impose various degrees of regulation in order to limit who can breed and sell pets and to force one vision of pet ownership on all, failing to see that the problem of strays comes in large part from all the public roads and parks where pets can be abandoned without protest.

There’s no predicting the variety of arrangements that could form with a market in guardianship rights for children. They could be infinitely more varied than the many options we’ve seen with pets, since children have natural rights and their own wills. The only certainty is that wrong is wrong—that holding parents and children against their will, making their pursuit of more agreeable arrangements difficult, or outright illegal, is amoral. Full self-determination comes with all kinds of risks, foreseeable and not. A child could run away to a life of abject poverty and worse abuse; parents might sell their trusteeships and regret it for personal reasons or because the buyer wasn’t who he said he was (even if the difference doesn’t breach their contract). But even with the significant risks it entails, every minute of freedom, imperfect though it may be, is as a drop of clear water in a desert. States through time have failed spectacularly to extirpate various kinds of risk; the only thing they have made nearly sure, over and over again, is their own domination, which itself has been broken time and again in the end.

Too many thinkers in the Rothbardian tradition try to paint detailed portraits, complete with steps 1, 2, 3 … for how to live in freedom and how to make it “workable.” There’s constant talk of private insurance companies and private defense agencies, but we must be careful. The reality is that individuals act purposefully. Their actions aren’t mechanical reflexes, and they are not predictable. No one can imagine all the things that matter to different people and therefore the full range of solutions that might come to be offered in various markets. Some truths about natural rights might be uncomfortable to acknowledge for the dangers that they leave people open to, but we must not shy away from them by painting a portrait of a manicured freedom with neat options that assuage the unfaithful. To shy away from all the vicissitudes and possibilities that freedom entails, for better or worse, is to risk tripping at the finish line should people feel uncomfortable with what they might find and repeating the cycle of statism. Rothbard didn’t shy away from hard truths, and in this he continues to offer shining insight.

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Rush Limbaugh Was Great When Democrats Were in the White House

02/17/2021Ryan McMaken

Rush Limbaugh has died at age seventy. 

Whether or not one agreed with him, Limbaugh was long unavoidable for those who had any interest in political commentary—especially during the 1990s. Limbaugh had a very long career, but his peak in terms of talent and relevance was likely during the Clinton years.

In his early years, I didn't even know Limbaugh had a radio show, because I was in school when his show aired on the radio. Like many people, I only became aware of him when his syndicated television show premiered in 1992. For many of us who fancied ourselves opponents of "big government," Limbaugh seemed like a voice of consistent dissent in the early years of the Clinton administration. 

Limbaugh was relentless in his mockery of Clinton and in contradicting the administration's message. Limbaugh would even hilariously impersonate Clinton with a mock Clinton voice. 

Because he was criticizing the administration in power, Limbaugh appeared to be a true dissenter. He seemed to oppose everything the federal government was doing. He was even seemingly good on foreign policy, questioning the Clinton administration's policies in Bosnia and Iraq. In late 1993, National Review labeled Limbaugh as "the leader of the opposition." This seemed appropriate and true. 

By the late nineties, I was listening to a fair amount of Limbaugh's radio show, largely because I worked as a contractor in janitorial and landscaping services. That meant a lot of driving around in my pickup truck. And that meant a lot of AM radio. 

As a clueless teenager, and later as a clueless college student, I thought that those people who opposed the regime and its schemes would always do so, regardless of who was in power. As the Clinton years ended and the Bush years began, I would learn the error of my ways.

As the Bush years began, Limbaugh suddenly took on a different tone. He was supportive of the administration's plans and programs, even when they were very similar to those of the Clinton years. Things became far worse after 9/11. At that point, Limbaugh became a full-throated defender of the administration, pushing for every scheme the White House was pushing, and advocating for a full-blown GOP-controlled police state. 

In other words, Limbaugh became insufferable. He was no longer funny or biting. He was just another shill for the regime, with a small token bit of skepticism thrown in to maintain some semblance of independence from the official messages coming out of the White House. 

Buy then, of course, I had learned my lesson. Having first begun to participate in political debates during the Clinton years, I thought that those who criticized the administration's abusive and overreaching policies did so out of some sort of principled ideological view. I thought these people agreed with me that it was important to not turn around and take the opposite positions just because "our guy" is in the White House. Thanks to Limbaugh, I learned what a hopelessly naïve position that was. 

It turns out that opposition to the regime among many of these people only matters when "their guy" is the president. The rest of the time, we're supposed to just do as we're told and push the official position, because if we don't, then we might as well be pushing for the bad guy. 

At least, that's the message that was received from Limbaugh's complete about-face in 2001, and the lesson always stuck with me. 

I never bothered to tune back in during the Obama years to see what Limbaugh was up to. I suspect he was back to pretending to be a dissenter as during the 1990s. 

To his credit, in recent years, Limbaugh showed signs of figuring out—finally—that the "deep state" is not the good guys and that all those CIA and Pentagon officials he'd been cheering for all those years were maybe not the selfless patriots he apparently long assumed them to be. He seems to have figured out that the Dick Cheneys of the world are maybe not friends of the American people. 

But for the most part, his legacy was one of being proregime when the GOP is in and being antiregime when the GOP is out. Given that he was an entertainer, of course, it's hard to fault Limbaugh too much for this. He was just giving his audience what it wanted. And what his audience wanted was a simplistic yet incoherent idea which maintained that things are mostly fine when Republicans are in office, but that the world is mess when Democrats win the White House. He was clearly very successful at delivering the message. 

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Reddit vs. the Fed: Who Understands Asset Bubbles Best?

02/02/2021Robert Aro

Federal Reserve chair Jerome Powell was asked the GameStop and asset bubble question was asked at the end of Wednesday’s committee meeting:

I know you do watch a range of assets. But from Bitcoin to corporate bonds to the stock market in general, to some of these more specific meteoric rises in stocks like GameStop. How do you address the concern that super easy monetary policy, asset purchases and zero interest rates are potentially fueling a bubble that could cause economic fallout should it burst?

Powell started with a mention of the pandemic and the need to continue his role assigned by Congress to promote maximum employment and stable prices. In his response he mentioned 9 million jobs lost last year and that monetary policy should remain accommodative in order to get “inflation back to 2% and averaging 2% over time.” They look at various factors in the economy, not just “one thing or two things,” as stated in his own words. Finally, after some Fedspeak, he addressed the question:

So if you look at what's really been driving asset prices really in the last couple of months, it isn't monetary policy. It's been expectations about vaccines. And it's also financial—sorry, fiscal policy, … the news items that have been driving asset purchases, sorry, asset values in recent months.

Surely, he isn’t suggesting it has been the hope of the vaccine and fiscal policy driving asset purchases. He didn’t specify what has driven asset prices prior to these most recent months. Luckily, he provided clarification, concluding asset bubbles are not the Fed’s doing:

So I know that monetary policy does play a role there. But that's how we look at it. And I think, you know, I think that the connection between low interest rates and asset values is probably something that's not as tight as people think, because a lot of different factors are driving asset prices at any given time.

We partially agree; low interest rates shouldn’t take the sole blame for levitating the price of bonds and real estate or for the all-time highs in the stock market. The Fed’s $7 trillion balance sheet and perpetual money creation plan should take some credit.

That’s only referring to asset prices. Per the chair, they’re looking into this issue, but it’s not really something they control, unlike increases to the cost of living through price inflation, which the Fed does take credit for. Powell noted:

So we think it's very unlikely that anything we see now would result in, you know, troubling inflation. Of course, if we did get sustained inflation at a level that was uncomfortable, we have tools for that. It's far harder to deal with too low inflation. We know what to do with higher inflation, which is that, you know, should the need arise, we would have those tools.

It’s somewhat ominous to think the Fed knows what to do with higher (price) inflation. Powell didn’t specify what exactly those tools are. They could raise interest rates. Considering how large debt loads are for members of society, whether government, hedge funds, corporations, or the average household, this would be unfathomable, not only this year, but any time ever again. If it’s any consolation, regarding a high sustained level of inflation, he said “we don’t expect to see that at all.”

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