Power & Market
“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.” — Benjamin Franklin (1706–90)
One of my Fox colleagues recently sent me an email attachment of a painting of the framers signing the Constitution of the United States. Except in this version, George Washington—who presided at the Constitutional Convention—looks at James Madison—who was the scrivener at the Convention—and says, “None of this counts if people get sick, right?”
In these days of state governors issuing daily decrees purporting to criminalize the exercise of our personal freedoms, the words put into Washington’s mouth are only mildly amusing. Had Washington actually asked such a question, Madison, of all people, would likely have responded: “No. This document protects our natural rights at all times and under all circumstances.”
It is easy, 233 years later, to offer that hypothetical response, particularly since the Supreme Court has done so already when, as readers of this column will recall, Abraham Lincoln suspended the constitutionally guaranteed writ of habeas corpus—the right to be brought before a judge upon arrest—only to be rebuked by the Supreme Court.
The famous line by Benjamin Franklin above, though uttered in a 1755 dispute between the Pennsylvania legislature and the state’s governor over taxes, nevertheless provokes a truism.
Namely that since our rights come from our humanity, not from the government, foolish people can only sacrifice their own freedoms, not the freedoms of others.
Thus, freedom can only be taken away when the government proves fault at a jury trial. This protection is called procedural due process, and it, too, is guaranteed in the Constitution.
Of what value is a constitutional guarantee if it can be violated when people get sick? If it can, it is not a guarantee; it is a fraud. Stated differently, a constitutional guarantee is only as valuable and reliable as is the fidelity to the Constitution of those in whose hands we have reposed it for safekeeping.
Because the folks in government, with very few exceptions, suffer from what St. Augustine called libido dominandi—the lust to dominate—when they are confronted with the age-old clash of personal liberty versus government force, they will nearly always come down on the side of force.
How do they get away with this? By scaring the daylights out of us. I never thought I’d see this in my lifetime, though our ancestors saw this in every generation. In America today, we have a government of fear. Machiavelli offered that men obey better when they fear you than when they love you. Sadly, he was right, and the government of America knows this.
But Madison knew this as well when he wrote the Constitution. And he knew it four years later when he wrote the Bill of Rights. He intentionally employed language to warn those who lust to dominate that, however they employ governmental powers, the Constitution is “the Supreme Law of the Land” and all government behavior in America is subject to it.
Even if the legislature of the state of New York ordered, as my friend Governor Andrew Cuomo—who as the governor, cannot write laws that incur criminal punishment—has ordered, it would be invalid as prohibited by the Constitution.
This is not a novel or an arcane argument. This is fundamental American law. Yet it is being violated right before our eyes by the very human beings we have elected to uphold it. And each of them—every governor interfering with the freedom to make one’s own choices—has taken an express oath to comply with the Constitution.
You want to bring the family to visit grandma? You want to engage in a mutually beneficial, totally voluntary commercial transaction? You want to go to work? You want to celebrate Mass? These are all now prohibited in one-third of the United States.
I tried and failed to find Mass last Sunday. When did the Catholic Church become an agent of the state? How about an outdoor Mass?
What is the nature of freedom? It is an unassailable natural claim against all others, including the government. Stated differently, it is your unconditional right to think as you wish, to say what you think, to publish what you say, to associate with whomever wishes to be with you no matter their number, to worship or not, to defend yourself, to own and use property as you see fit, to travel where you wish, to purchase from a willing seller, to be left alone. And to do all this without a government permission slip.
What is the nature of government? It is the negation of freedom. It is a monopoly of force in a designated geographic area. When elected officials fear that their base is slipping, they will feel the need to do something—anything—that will let them claim to be enhancing safety. Trampling liberty works for that odious purpose. Hence a decree commanding obedience, promising safety, and threatening punishment.
These decrees—issued by those who have no legal authority to issue them, enforced by cops who hate what they are being made to do, destructive of the freedoms that our forbears shed oceans of blood to preserve, and crushing economic prosperity by violating the laws of supply and demand—should all be rejected by an outraged populace, and challenged in court.
These challenges are best filed in federal courts, where those who have trampled our liberties will get no special quarter. I can tell you from my prior life as a judge that most state governors fear nothing more than an intellectually honest, personally courageous, constitutionally faithful federal judge.
Fight fear with fear.
China and Russia are open for business and working at close to capacity as America shutters most all business and industry in states such as Pennsylvania, New York, California, New Jersey, and Connecticut. In many cases only select manufacturing companies are allowed to operate, which means that most manufacturers will be short of parts and services necessary to produce goods.
Our leaders are creating an economic crisis and a major national security risk with limited data. The cure is far worse than any perceived impact from COVID-19. Our economy is both fragile and interdependent, an economic reality not understood by our leaders as they order mass closings of many states’ business and industry.
Thomas Sowell wrote, “There are no solutions. There are only tradeoffs.” Sowell was informing us that wise and sound judgments are imperative during any crisis.
An opinion piece by John P.A. Ioannidis, professor of medicine, epidemiology, and population health at Stanford University, is headlined, “A Fiasco In the Making? As the Coronavirus Pandemic Takes Hold, We Are Making Decisions Without Reliable Data.”
This season the flu has killed 22,000 Americans versus 388 dead from COVID-19. This the hard data available. There has been no national discussion about the flu but complete panic on the coronavirus.
The restaurant industry, which is the largest employer in America, is closed in most states. Now we will begin to witness the industries that support restaurants and hotels begin to shutter.
Marriott Corporate in Bethesda, Maryland, has furloughed 66 percent of its employees and cut the pay of the remaining employees by 20 percent. Such actions by major employers will have a devastating impact on the US economy.
The Big Three automakers and their suppliers are closed, which means hundreds of thousands of workers are laid off and at home. This will quickly lead to more layoffs and many small business failures. There is no amount of government money that can make up for an economy closed and workers staying home.
We all know that food and supplies are critical to families. Most individuals assume these products and services will be available. But as we have witnessed, when demand exceeds supply and businesses are shuttered, supply runs out.
Supply of goods and services is quickly becoming a more important national issue than the COVID-19 panic. The virus will not adversely impact most Americans, but they will sustain substantial financial losses, and at some point supplies will run out.
Schools can shut down, and sick people should stay home, along with older or at-risk individuals, until the panic subsides, but the healthy must be allowed to work.
Every family, state, city, and business can make the best decisions during this crisis, but we cannot have simplistic top-down mandates.
We are quickly moving toward a supply problem. Just-in-time inventory means we make products as needed. If the producers are closed, we run out of goods quickly.
Wiring $3,000 to most Americans may seem like a solution, but unless we have a supply of the goods families need, the money will not help. The best way for families to have income is for America to be open for business and not risk shortages and civil unrest. It is noteworthy that liquor, ammo, and guns sales are robust.
The federal government has no money and is $23 trillion in debt. Now Congress contemplates a $2 trillion economic bailout, which is pushing the limits of how much Congress can borrow and will eventually create a major financial meltdown. The solution is a robust economy producing goods, services, and financial stability.
All healthy Americans who want to work must be allowed to return to work no later than March 30. This commonsense approach will allow new production and for the healthy to support those in need.
I urge President Trump to speak to Americans from a Midwest manufacturing plant, away from the Swamp, and appeal to all governors and Americans to overcome their fears and take reasonable precautions, but allow America to open for business by March 30.
Originally published by American Spectator.
Yesterday afternoon, Butler Shaffer, one of the great pioneers of the libertarian movement, passed away, two weeks before his eighty-fifth birthday. In a column written in December 2014, he tells us, "My interest in what is now called 'libertarian' thinking was kindled in college in the late 1950s. There was no coherent philosophy by that name in those years, but I found myself attracted to such thinkers as John Locke, John Stuart Mill, the Stoics, and very much annoyed by the likes of Thomas Hobbes, Karl Marx, and my undergrad study of 'economics' taught by a prominent Keynesian. While in law school, I began my study of genuine economics with Prof. Aaron Director, and began my focused and energized inquiry into the kinds of ideas later to be described as 'libertarianism.'"
Butler’s brand of libertarianism was exceptionally pure and consistent. As he explains in his superb monograph A Libertarian Critque of Intellectual Property (free here), he believed that rights stem from "the informal processes by which men and women accord to each other a respect for the inviolability of their lives — along with claims to external resources (e.g., land, food, water, etc.) necessary to sustain their lives." (p. 18) The "informal processes" that Shaffer mentions proceed without coercion. In particular, law and rights do not depend on the dictates of the state, an organization that claims a monopoly over the legitimate use of force in a territory.
In adopting this stance, Shaffer puts himself at odds with much that passes in our day for wisdom among professors of law. "In a world grounded in institutional structuring, it is often difficult to find people willing to consider the possibility that property interests could derive from any source other than an acknowledged legal authority. There is an apparent acceptance of Jeremy Bentham’s dictum that 'property is entirely the creature of law.'" (pp. 18–19) Butler explained his approach in great detail in his Boundaries of Order, a major contribution to libertarian political philosophy.
Butler taught at Southwestern Law School from 1977 to 2014 and influenced generations of students. He was a master of the Socratic method. He would sometimes read to his class a list of "progressive"-sounding measures that would usually command approval. He would then tell the students, "You just voted for Hitler!" His list had been taken from the Nazi Party platform. Butler always looked at things from an original angle, and in my many conversations with him, his ability to subject his own ideas to constant criticism and rethinking impressed me.
Butler continued to share his wisdom with us nearly to the end of his life, and his mordant criticism of the state brings to mind H. L. Mencken, a writer he greatly admired. In a column on LewRockwell.com published last August 13, he said,
Those who seek to control our lives must first gain control of our minds. If one of your neighbors went through the neighborhood with a gun, informing you that he was the sovereign authority therein, and that you were required to obey his orders, how would you respond? When, as a child, I visited my aunt and uncle on their farm, there was a retarded man in the neighborhood who informed us that he was the local sheriff and we had to do as he directed. Since he was completely harmless and pleasant, the neighbors tended to humor him and treat him with respect. But when you listen to the gaggle of Democratic Party presidential candidates with essentially the same baseless claim to run your life with policies that would be far more disruptive of your interests, you become aware that you are not hearing the voices of good-natured chuckleheads; but of men and women who fully intend to make their delusions enforceable through the coercive powers of the state.
Butler was my dear friend for many years, and now that he is gone what comes most to my mind is his sense of humor. He loved words and was a master of puns. Few things in my life brought me as much joy as a conversation with Butler, and now that is gone forever.
Butler is survived by his wonderful wife, Jane, to whom he was married for 63 years, their three daughters, and a number of grandchildren.
As I get older and people close to me pass away, the melancholy words of Ovid come to mind: Omnia perdidimus: tantummodo vita relicta est / praebat ut sensum materiamque mali — I have lost all; life alone remains / to give me the consciousness and the substance of sorrow.
Is socialism the enemy of the civilized order? It depends on what kind of socialism we are discussing. There are several varieties, not only one. If it is the version calling for government ownership and control of all the means of production, the complete nationalization of all industries, then yes, socialism is the work of the devil. All we need do to demonstrate this is mention economic basket cases like Venezuela, East Germany, Maoist China and the USSR. They produced dire poverty and the deaths of millions of innocent people.
There is a second, just as historically accurate definition of socialism as the first. It is predicated on the Marxian nostrum “From each according to his ability, to each according to his need.” If this goal is attained on a coercive basis, then, yet again, this compulsory egalitarianism is surely uncivilized. It amounts to stealing from the innocent rich. But suppose people agree to live under this principle? Ayn Rand might not like this too much, but, if it is truly voluntary, then instead of being incompatible with civilized principles, it is a paradigmatic case of them. That is, the rich agree to be “expropriated” in favor of the poor.
Are there any such institutions that actually flourish? Here are a few: the convent, monastery, kibbutz, commune, syndicalist association, cooperative. I teach at a Jesuit school, and all members of this order subscribe to the “from each, to each” philosophy. True, kibbutzim were initially subsidized by the state of Israel and are now shadows of their former selves, and Robert Owen’s commune in New Harmony, Ind., is no longer in operation. But neither does every business last forever. Then there is the average American family. It, too, lives according to this Marxian doctrine. The three-year-old girl eats, gets toys, and is clothed not in accordance with her ability to earn income, but based on her needs.
Capitalism is likewise divided into several varieties. If it is free market capitalism we are contemplating, or as near to that system as we can approach in this vale of tears, then this—along with voluntary socialism—is the very foundation of the civilized order. All boats rise on a tide of profit maximization and untrammeled entrepreneurship, as long as personal and property rights are respected. The experiences of places with expansive economic freedom, such as the US, Switzerland, Hong Kong, Singapore—and yes, Bernie, Scandinavia too—give ample testimony to this claim.
Yet under the veneer of economic freedom, markets have their dark side, too: crony capitalism. Uber is brutalized by the taxi industry in the name of protecting the public; young women who braid hair are hassled by licensed beauticians; domestic manufacturers lust after protective tariffs; farm states tried to outlaw dyeing margarine yellow; labor unions champion minimum wage laws to price their unskilled competitors out of the market. As Adam Smith wisely said, under this type of capitalism, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
No, not all versions of socialism are the enemy of humanity and decency, nor are all types of capitalism their friend. It all depends on which variety of each we are discussing.
Published with permission of the author. Originally published on December 15 in the Wall Street Journal.
Oct. 31 marks the 11th anniversary of the release of the famous bitcoin whitepaper. It is worthwhile to take stock of the first crypto-currency’s impressive achievements to date, while also warning of the future perils it faces.
Bitcoin has defied the critics repeatedly, being declared “dead” many times over. (In this respect it’s appropriate that it was born on Halloween.) Although its price has been volatile, it’s currently trading at a market cap of $170 billion — more than McDonald’s, and comparable to CitiGroup.
Along the way, internecine battles led to a “hard fork” and the creation of “Bitcoin cash” (in August 2017), but the cryptocurrency community emerged wiser. As for the future, ironically a piece of otherwise good news — faster computing power — may pose serious problems if the promise of “quantum supremacy” should be fulfilled.
An estimated 5 percent of Americans hold bitcoin, and the global number of users is probably around 25 million. More impressive (and precise) details concern the financials: as of this writing, some 18 million bitcoins have been “mined” — the metaphorical term describing the procedure by which a new bitcoin becomes recognized as belonging to someone’s address on the blockchain — and a single bitcoin currently fetches a market price of about $9,450. For something that critics derided as a tech fad that would soon evaporate, that’s a rather impressive accomplishment.
Read more at The Hill
Things are about to get noisy in Burlington, Vermont. No, it’s not a rally for the state’s Brooklyn-born junior senator. After some pomp including a “mini air-show,” the first two of 20 F-35s have begun settling into their new home at Vermont’s Air National Guard base, located at the Burlington Airport.
The F-35s will replace a fleet of F-16s, which the Vermont Air National Guard flew for 33 years. In an interview with WCAX, a CBS-affiliated local news station, Colonel David A. Smith , Commander, 158th Fighter Wing, Vermont Air National Guard, said, “Bringing the F-35 to Vermont secures our future for decades.” According to WCAX, the Vermont Guard began lobbying for the F-35 in the mid-2000s. “When you consider significant milestones in our storied history, this one certainly rises to the top,” Smith said.
The F-35 has indeed risen to the top in terms of cost: at $1.5 trillion, it is the world’s most expensive weapons program. Earlier this year, Bloomberg reported that the F-35 jet “just got even costlier. The estimated total price for research and procurement has increased by $22 billion in current dollars adjusted for inflation, according to the Pentagon’s latest annual cost assessment of major projects.”
Despite the staggering costs, the super-stealth fighter plane is not living up to expectations. An April 2019 report by the Government Accountability Office (GAO) found that “F-35 aircraft performance is falling short of warfighter requirements – that is, aircraft cannot perform as many missions or fly as often as required.”
Initiated by the Department of Defense in 2001, the F-35 program was designed to provide “next-generation strike fighter aircraft” for the U.S. Air Force, Navy, and Marines. The GAO found that one of the most pressing issues with the program is spare parts: “DOD has spent billions of dollars on F-35 spare parts but does not have records for all the parts it has purchased, where they are, or how much they cost.” This situation, according to the GAO, risks the ability to support an expanding fleet. The U.S. plans to buy 2,500 jets total, with 700 to be purchased by foreign military.
The Vermont 20, however, are on schedule for arrival in Burlington. While some residents have expressed enthusiasm about the F-35s, not everyone is optimistic. Citizen coalitions have been fighting the basing for five years, citing noise concerns and the possibility of the F-35s carrying nuclear arms. The F-35 is as much as four times louder than the F-16. The latest sound map of the area that will be affected by noise levels of 65 decibels or higher includes 2,640 dwelling units and an elementary school. Rosanne Greco, a retired Air Force colonel, had initially supported the F-35 basing in Burlington, her hometown. Then she read the Air Force’s environmental impact statement. She told Time, “All I had to do was read what the Air Force said about the impact it would have. The evidence was overwhelming it would have a very negative effect on close to 7,000 people.”
Concerns about what will happen in Vermont with the arrival of the F-35s echo Sen. Bernie Sanders’ statements at his 2020 presidential campaign kickoff rally earlier this year:
“Today, we say to the military-industrial-complex that we will not continue to spend $700 billion a year on the military – more than the next ten nations combined. We’re going to invest in affordable housing, we’re going to invest in public education, we’re going to invest in rebuilding our crumbling infrastructure – not more nuclear weapons and never-ending wars.”
Why not call on Sen. Sanders for help?
Bernie Sanders supports the basing of the F-35s in Vermont. He said, in an interview with the Wall Street Journal, that it would be a “major blow” if the weapons program did not come to Vermont. Referring to the Vermont National Guard, Sen. Sanders stated, “If they don’t have planes to fly, there ain’t going to be too much for them to do.”
Late South African economist Ludwig Lachmann once wrote, “The future is unknowable, though not unimaginable.”
What he meant is, it's beyond our ability to know what the future will bring. We cannot plan without errors, because we do not actually know anything about the future before it's already reality.
The future is not simply unknown, which suggests a lack of information, but unknowable -- what will be is uncertain. There is no information. We are, in this sense, slaves to destiny.
But while the future is unknowable, this does not mean it is hopeless. Our efforts always aim to create some specific, limited part of the future. Entrepreneurs do this more than others, as entrepreneurship scholar Saras Sarasvathy argues.
They can do this, as Lachmann notes, as the future is imaginable. Because we can imagine different futures, we can act to create the better version. We have the creative ability to draft scenarios and possible outcomes, so we can prepare for what is more likely to be. And attempt to bring it about.
We all differ in our ability to imagine the future that will be. Very often it might simply be luck. But luck is not all, and it certainly isn’t reliable. Some seem to have the ability and willingness to face the unknowable by imagining and attempting to shape it, and they're willing to bet that they’re right and put their money where their mouths are.
Entrepreneurs are in the business of creating big chunks of our future. They bear uncertainty.
Read the full article at Entrepreneur.
In a recent tweet, Philip Kotler, author of the most widely used marketing book in graduate business schools worldwide suggested that the government should be doing much more to reduce inequality.
To quote Kotler:
Income inequality keeps worsening. Four ways to keep income inequality from worsening. 1. Raise minimum wages, 2. Raise the top income tax rate, 3. Enact a wealth tax. 4. Raise estate taxes. One political party opposes all of these. The other will introduce all of them in time.— Philip Kotler (@kotl) July 30, 2019
By suggesting that the government should somehow put in place these "solutions," Professor Kotler (a student of Friedman, Samuelson, and Solow with degrees from University of Chicago and MIT), shows an incredible ignorance of some of the most fundamental economic principles that influence his (insightful, and I risk to say, mostly correct) thoughts about marketing and strategy.
Another very respected business school scholar, Henry Mintzberg, has also advocated for "raising the minimum wage, the need for government to act to stop climate change, that the ridesharing apps are making people poor and unhappy."
He even asks, on some occasion, 'how can smart people be so dumb?'
His question forces me to ask my own, "How can people that are so knowledgeable in their areas be so naïve (to say the least) in economics when the discipline is such a fundamental topic for businesses?
This kind of public positioning made by such an influential scholar highlights the importance of promoting Austrian economics in business schools.
The comments from Kotler and Mintzberg remind me of a talk Murray Rothbard’s gave in the early '90s on "The Future of Austrian Economics." Rothbard advocated for Austrian economists to spread their ideas outside academia, identifying business people as a particularly important audience. These are people that actually see the market process unfold and end up understanding that actors and firms all belong to a complex web of interactions.
Particularly now, I think it is important to act upon Rothbard's suggestion, in particular by targeting business schools.
Business students take courses in Strategy and Marketing that are based (although this is hardly mentioned directly) on sound economics principles. For example, people (not collectives) act, preferences are subjective, the market is dynamic, the influence of government policies over businesses exists and is very heavy, markets are interconnected, etc.
Those same students are exposed to various blends of economic thinking that lack much practical use. For example, textbooks by monetarists, Keynesians, and even Marxists are common textbooks all over the globe. Instead, what these future professionals need is a more logical approach to economic thinking.
Fortunately, we are making progress in this area.
The Economics for Entrepreneurs podcast, hosted by Hunter Hastings, melds the sound economic thinking of the Austrian school, with discussions of strategy, marketing, and entrepreneurship, among others. Several scholars associated with the Mises Institute teach at business programs (see for instance Peter Klein, Per Bylund, and Matt McCaffrey.) Social media groups have also arisen, such as "Mises For Business" and “Management Scholars for Free Markets.” There's is also a great number of academic papers being published synthesizing concepts in Austrian economics, management, and business strategy. These are areas that already have a lot in common, and we can build on that.
At the same time, there is still a lot of room to grow.
Apart from Marketing and Strategy, there are many other areas that business schools can learn from studying praxeology and catallactics. Entrepreneurship and innovation are some of the most obvious areas where Austrians can contribute, other topics such as human resources and finance are also very strong candidates for potential research. Accounting is another area where Austrians have also begun to contribute. With a personal background in industrial engineering, I even think fields like operations could gain a lot from the understanding of matters such as the business cycle and especially insights of the structure of capital.
To sum up, there is a lot of misunderstanding and bad economics being taught to business students, forcing many into courses claiming that theory in economics is useless, and that ‘data’ solves it all. In such programs, we are in desperate need for an Austrian revolution.
With the robust understanding of the market process that the Austrians are able to provide, business students, future entrepreneurs, and business professionals will be better prepared to operate their businesses and to better understand their consumers, competitors, and their macro environment. By talking to those people, moreover, we will be able to open the door to the other parts of Austro-libertarian thinking and, as a consequence, to bring more people to believe in individual liberties against central power coercion.
Powerline reports the results of a survey of ideological bias in philosophy. “The more right-leaning the participant, the more hostility they reported personally experiencing from colleagues, and, overall, the more left-leaning the participant, the less hostility they reported personally experiencing.” The hostility was no mere matter of dislike experienced by the conservatives. It carried over to hiring decisions and evaluating papers and grant applications. The more left-leaning the philosopher, the more likely was such bias held to be justified. The author of the post wrongly thinks that such bias is an instance of “epistemic closure,” but that is a technical term, not a synonym for “closed-mindedness.” But this is a minor failing in an informative post.
President Donald Trump’s plan to give an Independence Day televised address from the Lincoln Memorial has outraged manypundits and plenty of normal Americans, too. There has rarely been a shortage of political buncombe on July Fourth but Trump could, as usual, break all records.
For Trump’s extravaganza, the Pentagon is bringing out of mothballs some World War II-era Sherman tanks. Though the gun turrets look impressive, Allied soldiers nicknamed Sherman tanks “Ronsons” because they were death traps that "light first every time” in clashes with better built German tanks. But that painful fact, like many others, will be swept under the rug.
The Washington Post condemned Trump’s “gaudy display of military hardware that is more in keeping with a banana republic than the world’s oldest democracy.” Regrettably, the Post’s indignation over a few tanks does not extend to the fact that American troops are now fighting in 14 foreign nations. But the real problem is not the military relics; it's exalting government power and politicians on a day meant to celebrate individual liberty.
The Fourth of July in Washington has been going downhill ever since 9/11.
Read the full article at USA Today