Power & Market

A Synthetic Anarcho-Capitalist Perspective on Public Goods

Among the several misgivings non-anarcho-capitalist people might have with anarcho-capitalism, there is the issue of public goods. Public goods, in fact, are supposed to be those goods which free markets cannot efficiently supply and allocate because of two properties: non-rivalry, i.e., the fact that A’s consumption of (public) good X does not impair B’s consumption of it; and non-excludability, i.e., the fact that A, the owner of (public) good X, cannot prevent B from enjoying it as well.

So, the argument goes, public goods supposedly need to be produced by governments; otherwise, they would be underproduced or overused—that is, free markets would fail to deliver optimal (i.e., desired) quantity and allocation. However, even setting aside historical instances of private provision of alleged public goods,1 it is the theory itself—as well as the alleged necessity for their governmental production—that relies on shaky and fallacious premises, as I will briefly summarize.

First, consider that a truly non-rivalrous good is not even an economic good itself: nobody, indeed, would face the need to economize it. In fact, if both A and B can consume (public) good X without reducing the satisfaction each one of them can derive from it, then X is no longer a scarce means that must be allocated efficiently—i.e., it is no longer an object of economic choice and action. On the contrary, X could be considered a “natural condition of human welfare".2 But, if X is so abundant that neither conflicts nor tradeoffs would arise when both A and B are eager to employ it, then A and B need not worry about any potential underproduction, squandering, or misallocation of X itself. Indeed, X will always be available to A and B for whatever purpose they might need it.

That said, moreover, oftentimes so-called public goods—when scrutinized more carefully—actually feature rivalry: hence, conflicts and tradeoffs are bound to arise when it comes to their employment. Therefore, governments themselves, while allocating such goods, must be guided by some principle. Since such a principle is not (by definition) the free-market price mechanism blamed by public-goods theorists, then governmental production and allocation of public goods would require some ethical principle justifying it—that is, some justification for coerced exchange between subjects and governments, i.e., taxation and government expenditures.3 However, such an ad hoc ethical principle would be outside the realm of value-free economic theory.

Second, what about non-excludability? Here, the anarcho-capitalist answer is straightforward: governments cannot introduce coercive mechanisms preventing the depletion of (rivalrous) non-excludable goods.4 In fact, on what ground could bureaucrats maintain that depleting a scarce resource today is worse than doing so tomorrow—or in one year, in one century, etc.? Of course, they could not do so on the economic-theoretical ground.5 Why? There are two main reasons.

Reason number one: economics does not allow aggregating individual utilities into a social welfare function (utilities are, in fact, unmeasurable, and you cannot perform on them such mathematical operations as additions, averages, etc.). Hence, aprioristic assessments about the social (dis)utility of consuming a (scarce) non-excludable resource today as opposed to tomorrow—or of having a (scarce) non-excludable resource consumed by a group of people rather than a different one—cannot be performed on an economic-theoretical ground.

Reason number two: economics does not allow interpersonally comparing the utility of one person (who, say, is depleting the scarce resource today) with the utility of another one (who, say, is not eligible to deplete the resource today, and hence would be depleting it tomorrow). Thus, economics has nothing to say about the distribution of a (rivalrous) non-excludable resource among individuals—i.e., economists cannot know whether (public) good X is desired more eagerly by A or B, and thus have nothing to say about which one among A or B should be entitled to consume it.

Therefore, again, since public-goods theorists maintain that the free-market price mechanism is not suitable for allocating (scarce) non-excludable resources, then some sort of ethical justification for governmental coercive provision would be required. However, again, this moves us beyond the scope of value-free economic theory. Economic theory, in fact, cannot proffer value-judgements about the allocation, production, consumption, etc., of scarce resources—this being, instead, the realm of ethics and aesthetics.6 Economics can, at most, show the most efficient arrangement to achieve the desired allocation of resources and satisfaction of (given) ends.

Moreover, oftentimes so-called public goods are actually both rivalrous and excludable;7 hence, they can be homesteaded according to Lockean-Rothbardian ethics—i.e., the first one employing (or better: fencing) them is to become their owner. Thus, there is no need for entrusting governments with public goods’ production: the free market, once a just ethical system of assigning property rights is in place, can do that more efficiently—via the price mechanism.

Third, as we already hinted, even if such a thing as pure public goods were to exist, this would not suffice to establish the case for their governmental—i.e., coercive—production.8 In fact, governments can produce public goods only if financed via taxation. But then, what gives governments the right to take away resources from citizens—i.e., taxes—in order to produce public goods? There are, indeed, at least two issues with such an ethical stance legitimizing governmental provision of public goods.

Problem number one: government, in order to produce and allocate public goods, would invade—via taxation—the legitimately acquired property of its subjects. In fact, if I can no longer enjoy my property to the extent I deem fit—but rather government is to barge in, take it away from me, and employ it as it wish—then government becomes (against my consent) the true owner of the resource. But this would be a prima facie theft—and, unless we want to advance an ethics legitimizing theft, aggression, and invasion, we must recognize this option as deeply unethical.

Problem number two: what if the (public) goods that government is supplying are not goods at all for some taxpayer—being “bads” instead? That is, what if government is forcing its subjects to consume goods they actually abhor?9 For instance, I hate watching TV: were government to tax me in order to finance public provision of TV programs, then I would be dissatisfied twice—the first time being deprived of a share of my income, the second time being subjected to junk TV programs.

Fourth, and last: any coerced exchange is always suboptimal with respect to a free one. In fact, why do people (freely) exchange? They do so because they know they are psychically profiting from it. If A performs an exchange with B, then we can conclude that both A and B are happier (after the exchange) than they were beforehand—i.e., they revealed their preference for such a free exchange through their action. But things are totally different when governments are involved in coercively supplying—via taxation—public goods. As Hoppe wrote,10

“the value of the public goods is relatively lower than that of the competing private goods because if one had left the choice to the consumers (and had not forced one alternative upon them), they evidently would have preferred spending their money differently (otherwise no force would have been necessary)”.


Public-goods theory is no compelling argument against anarcho-capitalism. Public goods are, oftentimes, resources that are rivalrous; when they are not, they nonetheless can be oftentimes produced on the free market—and be rendered excludable applying the standard libertarian homesteading principle. Moreover, it is impossible to ethically justify governmental production of public goods—unless we consider as legitimate both theft and coerced dissatisfaction of consumers. Lastly, consumers would always prefer at least one private good—acquired via uncoerced free exchange—over any conceivable governmental public good—produced via coerced taxation.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

An Interview with Vaclav Klaus on Europe's Lockdowns

05/14/2021Claudio Grass

Some readers might enjoy this this interview I conducted conducted with Václav Klaus, the former Prime Minister of Czech Republic, on the current Covid-19 situation and the prospect for human freedom. He has a rich perspective and experience having spent most of his life under a communist system and shares his views freely.

This interview is was conducted as apart of a full length documentary, Planet Lockdown, and is being released in advance of the film for those that wish to learn more about the world and where we are.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

A Rights- and Logic-Based Approach to Pandemics

04/23/2021Patrick Barron

Listen to the Audio Mises Wire version of this article.

We all are too familiar with the approach to pandemics taken by governments at all levels in the US. In the name of "public safety" governments assumed "emergency powers" to restrict the citizens' right to peaceful assembly (a violation of the First Amendment to the Constitution) and to deprive citizens of property without due process of law (a violation of the Fifth Amendment to the Constitution). The Fourteenth Amendment applies these protections to the states, too. I will not repeat all the justifications that emanated from government that supposedly negated these constitutional protections. Instead I will concentrate on whether they are defensible logically, using government's own criteria as the judge. The individual will be the subject of our inquiry, not the group.

Claim No. 1: Peaceful Assembly Threatens Your Health and the Health of Others

Let's assume that government is right. If individuals assemble, they threaten one another's health in some way. But why should government make the decision about what constitutes a threat to health? What is its criteria? What is the threshold? Some individual in government makes this decision, but why should his level of acceptable risk be the group standard? Can't each individual decide how much risk he willingly assumes? Furthermore, if a person decides to assemble with like-minded individuals, what risk is that to those who do not wish to assemble? You've willingly quarantined yourself, as governments recommended. Your risk is not affected by those who do not wish to quarantine themselves. They assume more risk; yours remains the same. Even if the pandemic spreads more rapidly, it does so only among those who took the risk in the first place, not you. Again, you have not been subjected to any additional risk. This is the reasoning behind the actions of many hypocritical politicians who ignored their own orders to their constituents. They merely decided that they were willing to take additional risk, and no one suggested that they were threatening others who remained in quarantine. So, logically, the government-imposed quarantine, a.k.a. restricting the citizens' right to peaceful assembly, makes no sense.

Claim No. 2: "Nonessential" Businesses Threaten Your Health and the Health of Others

The same logic can be applied to governments' decisions to lock down "nonessential" businesses. (All businesses are essential, so that qualification is nonsense.) Government used the same rationale; i.e., that mingling with one's fellow citizens in places of business threatened the individual himself and others. But these "minglers" assumed the risk and threatened no one who did not "mingle."

The big question becomes this: Why do those who quarantine themselves insist upon forcing quarantines on others? Certainly, businesses that choose to close may do so voluntarily. Why should they be concerned over those who do not choose to close? (Actually, I am not aware of any business that voluntarily closed due to risk intolerance. But maybe such a business does exist.) Businesses can adapt their premises to allay the fears of potential customers. This seems to be happening voluntarily for those "essential businesses" that were permitted to remain open. Why should government dictate business practices to those who remain open? This is a decision for individual businesses alone. If such businesses adopt too stringent entry requirements, patronage will flow to more friendly competitors. If such businesses adopt too lenient entry requirements, the same thing will happen. There is no objective guideline for determining entry practices. In fact, the same kind of businesses may be more or less stringent, attracting more or less risk-averse clientele.

Let Perfect Freedom Prevail

Each individual has the right to "perfect freedom" in deciding for himself how much risk he is willing to assume from any of thousands of daily risks. We practice perfect freedom every day without even thinking about it as we go about our daily lives. Each individual may choose his own risk tolerance, because his decision cannot affect those who wish to take less or even more risk. Risk-averse individuals protect themselves. Likewise, each individual business decides what is best for itself and its customers, ranging from closing down to taking no additional risk-mitigating measures at all. If customers decide that the business is not taking appropriate measures, they can stay home and/or patronize other businesses with risk-mitigating measures more attuned to their liking. In other words, there is no logical reason that our constitutionally guaranteed rights of peaceful assembly and to protection of our property need be violated in order to protect "society." Society is composed of millions upon millions of individuals, all with different risk profiles. Let perfect freedom prevail.

Image source:
When commenting, please post a concise, civil, and informative comment. Full comment policy here

At the Fed, It's "A Tale of Two Diversities"

04/20/2021Robert Aro

We often hear of this word “diversity.” In 2021, it seems this word is more important than ever when electing cabinet positions, bureaucratic appointments, or other facets of organizational structures throughout the country. Merriam-Webster defines diversity as:

the condition of having or being composed of differing elements : VARIETY

The ironic thing about diversity is it appears to create two “divergent” paths in which it can be obtained. Just last week, the Brookings Institution appeared to inadvertently fall into a “diversity trap” of sorts, when it published the article, "Diversity within the Federal Reserve System." It begins with:

A growing chorus has called on the Fed to diversify its ranks at all levels to reflect better the heterogeneity of the United States. So far most of these efforts speak to the diversity of the Fed’s principals, namely, the members of the Fed’s Board of Governors and the presidents of the twelve Federal Reserve Banks. 

This is the first, more common usage of diversity. The goal is to ensure a variety of races, genders, or other minority groups are represented. True to definition, by having various physical features, variety could be achieved. Brookings looked at the directors of the Federal Reserve banks as they are the ones responsible for choosing the president of the twelve banks across the country.

To little surprise:

We find a staggering homogeneity among them, with only recent signs of diversification. They are overwhelmingly white, overwhelmingly male, and overwhelmingly drawn from the business communities within their districts, with little participation from minorities, women …

They mention other areas of the economy such as “labor, nonprofits, the academy” with the routine push for diversity requiring more minority representation, based on physical features of the candidates.

To provide better context to the reader, as an author and a black male, I understand “diversity” from my own life experiences; however, it is important we don’t fall into such a diversity trap. While having more people of color, females, or even transgendered would bring a different physical look to the Fed, there remains the unseen and overlooked area of diversity, i.e., “intellectual diversity.” This form of diversity appears to have been ignored entirely, supplanted for aesthetic traits.

Last year, I wrote several articles about Judy Shelton, including "Why the MSM Hates Judy Shelton." While her potential appointment was the responsibility of Congress, one could suggest she may not have gotten nominated to the Fed board because she is a woman. However, studying her history such as questioning the manipulation of interest rates by the Fed, and other such ideas which go against the current mainstream economic dogma, one could argue her rejection by Congress could largely be attributed to her economic views of the free market.

While a racial/gender diverse Federal Reserve might mark a lot of societal checkboxes, and even be inspirational for those in marginalized groups, we should focus on intellectual diversity and how much it appears to be lacking in the Federal Reserve system. Whether the Fed is run by all white males or a mix of males, females and a multitude of races means absolutely nothing as long as the ideas of liberty, freedom, and Austrian economics are excluded from diversity inclusion.

We must ask ourselves: Would you feel better if your oppressor was the same race and gender identification as you? We are told diversity at the Fed is an issue that should be addressed, but it’s superficial, meant to appease popular opinion under the guise that forced inclusion matters. Nowhere are we discussing the diversity of opinions, economic understanding, or beliefs in a free society. Until a high-ranking Fed official speaks out against the Fed proposing ways to wind down its power, it doesn’t really matter who sits atop the Fed’s ivory tower, and diversity is nothing but a ruse.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

Are Police Departments Really Hiring White Supremacists?

03/30/2021Nick Hankoff

Bureaucracies always benefit from political hysterias. A big one today is that police forces are being infiltrated by white supremacists. Pursuing this bogeyman will fill bureaucratic coffers, while public security services get worse and more expensive.

It’s a cliche now that big government never lets a crisis go to waste, but the same dynamic often holds at the bureaucratic level with regard to public manias. These crises and manias are not uncommonly caused by the very institutions claiming to be the only ones capable of solving the matter.

White supremacist infiltration of police forces is one of the latest national hysterias. There’s almost no evidence to show it’s happening at all, but the media, political leaders, and their bureaucratic allies keep stoking up the general accusations, especially following the January 6 US Capitol protest and riot.

Facts that disprove this myth are easily outweighed by bureaucrats’ sense of opportunity to garner more taxpayer money and prestige if they pretend it is a systemic problem.

This then foments resentment among people, particularly white people but also anyone predisposed to skepticism of race-baiting. White folks who too loudly voice their opposition to these witch hunts can be more easily labeled white supremacists.

Could that be the whole point of fear mongering campaigns like this one? To create a self-fulfilling prophecy? Perhaps what’s a more likely explanation is that spawning hobgoblins can serve as a distraction from real issues that can potentially threaten the bureaucracy’s power.

Again, there is almost no evidence to support any claim of white supremacists infiltrating the police.

Earlier this month, the Office of the Director of National Intelligence released a report entitled “Domestic Violent Extremism Poses Heightened Threat in 2021.” 

In it, the only mention of law enforcement was that they, along with government personnel and facilities, are typical targets of militia violent extremists. The report also assessed the threats posed by racially or ethnically motivated violent extremists, but there was no mention of them attempting to take over police departments or even get a job in one.

Going back to October 2006, an FBI intelligence assessment titled “White Supremacist Infiltration of Law Enforcement” found “little corroborated reporting on current strategic attempts by white supremacist groups to infiltrate law enforcement communities.” 

The FBI gave itself an out, however, saying, “the possibility that infiltration has gone undetected is of great concern.”

Apparently, anything’s possible it seems if it warrants a budget increase. 

What about the protest and riot at the US Capitol though? That must’ve revealed some hidden ties of white power extremism and the police. Let’s glance at the numbers there.

Of those 324 arrested in connection to January 6, USA Today found four off-duty police officers and three former officers. That’s two percent of all those arrested. And those officers’ “ties” to white supremacy? USA Today didn’t say, despite its article running under the headline: “‘A nightmare scenario’: Extremists in police ranks spark growing concern after Capitol riot.”

A “scenario”...sparks growing concern. This is not real news. It’s fake, or if that’s too disrespectful to the pride of journalists, call it incendiary. The sub-headline partially read: “Now, charges against officers in the Capitol riot inflame fears of extremists infiltrating law.” 

Fears are certainly being inflamed. But is it the charges against officers doing that?

USA Today reports that two of the off-duty officers were subsequently fired after their social media posts were liberally interpreted to be pro-insurrection. Another officer resigned, and the fourth one was suspended without pay.

Supposedly the white supremacism connection is that these officers marched alongside members of the Oath Keepers and Proud Boys, groups which by some number of degrees are related to white supremacists. It’s a fool’s errand trying to pin down this gelatinous allegation, but most readers will assume the connection to be real and substantial, because why else would it be getting so much media attention?

What’s getting less media and political attention is the national murder rate in 2020 representing the biggest one-year increase in history, adding 20,000 more murders than in 2019, according to FBI statistics.

Obviously, there is a national policing problem. There are many policing problems. They are more tied to bureaucratism than supremacism, however. Bureaucratic supremacists are infiltrating the institutions of law and order!

The problem with government bureaucracy is its inability to precisely account for how best to deliver the goods to its consumers. In the case of policing, federal politicians and bureaucrats skew the priorities for local police, directing them to combat the War on Drugs and other such schemes.

There is no profit-loss mechanism at work with police today. The best short to medium term goal would be to localize and maximize the local community’s power as opposed to the state or federal bureaucracies. 

They have proven themselves unfit to serve, and as Ludwig von Mises put it, “he who is unfit to serve his fellow citizens wants to rule them.”

Long term goals are just as important though, and in the case of policing, they may carry just as much urgency. The total demonopolization of police must take place as soon as feasible. The infringements on individuals and their communities to organize for security as they see fit must be eliminated.

Only then will the problems of costs, lack of responsiveness, brutality, and other deficiencies be handily dealt with. The fear mongers will gin up anything they can to prevent even an inclination toward this solution, but if enough people in one area can overcome them, then these bugaboo stories might finally stop having their intended effect.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

A Review of the Fed’s Financial Statements (with Screenshots)

03/30/2021Robert Aro

After discussing the nature of the Fed’s annual audit in my previous article, I will now share the highlights of the 2020 audited financial statements. Starting with one, if not the largest, balance sheets on the planet:


As of December 31, 2020 year-end, the Fed had $7.3 trillion worth of assets, not bad for an entity who creates digital money out of thin air to buy real assets. The brunt of the balance sheet is due to nearly $5 trillion in Treasury securities and $2 trillion for mortgage-backed securities (MBS).

The nearly $7 trillion of securities stands as an account receivable balance, an asset for the Fed; this means somewhere in the world, there are entities, who effectively owe $7 trillion to the Federal Reserve. Until this $7 trillion is paid, the Fed will continue to earn interest income on this balance. Also note, despite the mortgage crisis ending over a decade ago, we find the Fed still unable to exit the mortgage market.

It’s also easy to forget there exists a liability side to the balance sheet, as seen below, (similar to above table, the left data column is 2020 and the right column is 2019):


When the Fed creates money to buy assets, assets increase (e.g., MBS) to account for the purchases made, while on the liability side, there exists a corresponding change to actual money supply. Per above, $2.0 trillion Federal Reserve notes are outstanding, nearly $3 trillion deposits held at the Fed, (owned by the banks), as well as $1.7 trillion of Treasury’s deposits held at the Fed. To simplify, there are $2 trillion of dollar bills in circulation and $5 trillion sitting on deposit at the Fed (mostly in digital form).

The $2 trillion of Federal Reserve notes sounds reasonable as the Fed charts Currency in Circulation, which is currently at $2.1 trillion. This is concerning when contrasted against the M2 Money Supply of nearly $20 trillion; the reason why bank runs are an ever-present threat and why central planners might favor digital currency…

The money the Fed makes is nothing short of fantastic. For the year, they made interest income of $101 billion, paying interest expenses (money on deposits/ liabilities) of just under $8 trillion.

The interest income society pays is just one cost of having a central bank. But what of the actual operating expenses? What are the “brick and mortar” costs of running the Fed?

The answer: Around $8 billion annually.


Imagine: $3.5 billion on salaries and benefits, plus another $662 million on pension costs. This is the cost required to pay economic experts who find creative ways to manage our economy as they see fit.

However, the most concerning item on the entire financial statements is the $1.778 billion to the “Board of Governors operating expenses and currency costs.” Unfortunately, there is absolutely no disclosure as to where this money is really going, other than the Board of Governors spent it in some way. The $517 million paid to the “Bureau of Consumer Financial Protection” is just another large payment to a similarly little understood government agency.

Lastly, there is the dividend of $386 million on over 600 million shares, per page 5:


Understand, the Federal Reserve has a regulation component to it. Unlike “routine” regulation, the entity forced to be regulated normally pays the government, quasi-government or self-funded entity for regulatory services. This is not the case here. Instead of the regulated entities, i.e., banks, paying the Fed for services, the banks are obligated to buy shares of the Fed, essentially “funding the Fed,” except with the added benefit that those shares have been paying out handsome dividends for over 100 years….

Even though remittances to treasury are many, multiple times larger than the dividend paid to banks, the dividend is so integral to the banks, that if the Fed doesn’t make enough money to pay its dividend, the US Treasury will not be paid!

As explained under NOTE 3) q, (page 18):

If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and maintaining surplus at an amount equal to the aggregate surplus limitation, remittances to the Treasury are suspended.

Between earning interest on deposits, borrowing at favorable rates, receiving odd bailouts from time-to-time, along with other moral hazards the Fed creates, the dividend paid to banks is just one of the many perks banks receive from the central bank. Sounds like a pretty steep price the public must pay in order to achieve that elusive 2% inflation and full employment target.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

Are the Fed’s Economic Projections Any Good?

03/23/2021Robert Aro

The Federal Reserve is barely challenged in the court of public opinion. The latest Summary of Economic Projections, which the Federal Reserve Board members as well as the bank presidents, published last week, illustrates how a handful of central planners influence the world. They start by defining “appropriate monetary policy,” in the absence of further shocks to the economy, as:

the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability.

Each participant is said to look at various data points, considering a wide variety of information, to arrive at their projections used to shape monetary policy. The specific details of their data are not disclosed to the public.

Here’s a snippet of Table 1 which shows the median figure of various predictions between 2021 to 2023, as well as the “long run,” which is not defined in the report.


The list of variables used by the Fed can be refuted in countless articles published by the Mises Institute. Just a few weeks ago, Frank Shostak wrote What Does GDP Really Tell Us?. The Unemployment Rate is a 2 min video that Mark Thornton made several years prior, still relevant as ever. Both discuss how government statisticians “concretize” a fiction into economic policy. The other two variables in the table above, the PCE and Core PCE inflation, fall under the dubious 2% inflation target, of which its origins and rationale have yet to be explained by the Fed.

Looking below at Figure 2, we find one of the most famous economic projections in the world, known as the “Dot Plot.” It illustrates the same time frame as Table 1, except it allows participants to visually plot where they expect the Federal Funds to be in the future. Here we can visualize the efforts of the Fed, specifically how they have no real accountability. If all members were to plot their dots in the long run at 4% or 0%, it will have just as little meaning as plotting between 2% and 3%, as they do below.


The last page of the report, under Forecast Uncertainty, explains how these projections aid the public on their understanding of policy actions, yet also notes:

Considerable uncertainty attends these projections… The economic and statistical models and relationships used to help produce economic forecasts are necessarily imperfect descriptions of the real world, and the future path of the economy can be affected by myriad unforeseen developments and events.

The projections, like the methodology itself, are prone to bias, error, and fallacious reasoning, ultimately amounting to nothing more than guesses. Yet it’s believed this is all part of the planning process. It would be easy to reject the Dot Plot as an inconsequential forecast. But it goes much deeper and not worthy of dismissal.

These economic projections represent the work of just over a dozen bureaucrats, the vast majority of whom can hardly be identified. These unelected officials make predictions that are often wildly off. But the consequence of error, or “bad policy,” is not paid by those who are wrong.

As for the “long run,” it can be likened to a carrot on a stick, having an objective never meant to be achieved. In the absence of further shocks, we are told, rates will go up to around 2.5%, sometime after 2023. We must be cautiously incredulous as to the likelihood of achieving this.

Consider, we are now in 2021; the money supply, Fed’s balance sheet, stock market, national debt, and arguably the cost of living are all at all-time highs. Rates at 2.5% today would be unfathomable. How then do we confront the absurdity, and possible blatant lie by the Fed, that by 2024, or some time after, rates will be higher once again?

Maybe that’s why they caveat predictions with: “in the absence of further shocks.” As long as there is an ever-looming crisis, and the world remains on the edge of bankruptcy, rates can remain low, therefore the Fed can stay relevant.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

A Problem with the Fed's Dual Mandate

03/04/2021Robert Aro

It’s almost as if Federal Reserve governor Lael Brainard read the February 11 Mises article "The Fed and 'Maximum Employment'" and then rebutted with a class lecture at Harvard two weeks later. Whereas the Mises article starts by cautioning that maximum employment is used to justify the state’s interventions in our lives, the governor starts her class saying:

[What] I hope you remember from today is that economics provides powerful tools to enable you to analyze and affect the issues that matter most to you.

The problem begins here because what matters most to the economic planner is the goal of staying both in control and relevant, thereby ensuring perpetual employment income for oneself. As the Upton Sinclair quote goes:

It is difficult to get a man to understand something, when his salary depends on his not understanding it.

Brainard follows with the history of maximum employment and its roots in the Great Depression, leading to the Employment Act of 1946, which allowed government to pursue:

conditions under which there will be afforded useful employment for those able, willing, and seeking work, and to promote maximum employment, production, and purchasing power.

A lofty goal, that the government should find or create jobs for all who want to work. The mechanism as to how this was to be achieved remains unstated, but it was the measurement which was problematic. By 1950 there were discussions of “full employment,” and what this actually meant. Luckily there was an academic at the time, Dr. Palmer, who was able to shed more light on the situation.

Palmer was a professor at Wharton, a fellow of the American Statistical Association, a worldwide expert on manpower and labor mobility, and a consultant with the Office of Statistical Standards.

The Palmer’s contribution argues:

Inherent in the phenomena being measured are so many degrees and kinds of labor force activity that no single definition or classification can adequately summate them.

Thus, when it came to measuring full employment, or maximum employment, no single data point could suffice, instead, it required a wide range of data to “summate” in a manner only the planner can determine is best.

By 1977, the Federal Reserve Act was amended, giving the Fed:

the goals of maximum employment, stable prices, and moderate long-term interest rates, commonly referred to as the dual mandate.

Another present-day familiarity we see emerging from the 1970s was the notion of “full employment” being useful to minorities, as explained by one congressman:

without genuine full employment it would be impossible to eliminate racial discrimination in the provision of job opportunities.

The importance of full employment, we are told, is as pressing today as it was in 1930, 1946, and 1977, yet has lacked a proper definition for nearly one hundred years.

Ultimately, Brainard settles on the narrative of there being no single indicator of full employment and consulting a “variety of indicators that together provide a holistic picture of where we are relative to full employment.”

Ten different charts and a variety of labor market indicators are utilized to explain how they arrive at a conclusion, though each data point is rife with its own set of problems. For example, the “Labor Force Participation Rate” (LFPR) equation is defined as: (Labor Force / Population). Seems reasonable until we’re told the labor force includes people who are “actively seeking work” and population means “the working-age population.” As for what the LFPR should be or how all of the data is utilized in a way discernible to the planner, that is anyone’s guess.

Even if we don’t agree with the data metrics, it’s not the data which is the problem. The problem occurs when the data is used to justify perpetual expansion of the Fed’s balance sheet and artificially low interest rates. It’s not a question of using “better data,” it’s a question of using data to calculate the incalculable as an excuse for government intervention.

At institutions of higher learning across the country, the economics of liberty and freedom are not offered as a part of the curriculum. And why would it be? The entire apparatus of mainstream economics serves the central planner first and foremost. In a free market, they’d be at the bottom rung of society, but under socialism they continue to stay on top.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

ACB's Betrayal of Trump Continues the Red Pilling of Conservative America

02/24/2021Tho Bishop

Listen to the Audio Mises Wire version of this article.

If we were searching for a reason for political optimism in 2021, we were delivered another reminder of the degree to which mainstream American conservatives are waking up to what the state truly is. The latest institutional betrayal of Republican voters came from the Supreme Court, which rejected considering a lawsuit challenging late changes to Pennsylvania’s election process. The majority that voted to dismiss consideration included Trump nominees Brett Kavanaugh and Amy Coney Barrett.

Are Notorious ACB shirts getting treated like the jerseys of an athlete who just jilted a fanbase?

This was predictable, of course. Not because there wasn't a substantive issue worth addressing: the degree to which state courts can interject themselves in election law seems like a valid question—regardless of one’s opinion about the 2020 election. As Justice Clarence Thomas noted in a particularly blunt dissent, this was simply the SCOTUS avoiding the issue entirely:

That decision to rewrite the rules seems to have affected too few ballots to change the outcome of any federal election. But that may not be the case in the future. These cases provide us with an ideal opportunity to address just what authority non-legislative officials have to set election rules, and to do so well before the next election cycle. The refusal to do so is inexplicable.

Of course, this is precisely the sort of behavior that we have come to expect from spineless politicians, and that is what you find on America's highest court—politicians in robes. While it’s become more fashionable lately to mention this in recent years thanks to the particularly hammy performance of John Roberts, this has long been the case.

As Ryan McMaken has explained:

The truly political nature of the court is well documented. Its politics can take many forms. For an example of its role in political patronage, we need look no further than Earl Warren, a one-time candidate for president and governor of California, who was appointed to the court by Dwight Eisenhower. It is widely accepted that Warren’s appointment was payback for Warren’s non-opposition to Eisenhower’s nomination at the 1952 Republican convention. The proposition that Warren somehow transformed from politician to Deep Thinker after his appointment is unconvincing at best. Or we might point to the famous “switch in time that saved nine[,]” in which Justice Owen Roberts completely reversed his legal position on the New Deal in response to political threats from the Franklin Roosevelt administration. Indeed, Supreme Court justices are politicians, who behave in the manner Public Choice theory tells us they should. They seek to preserve and expand their own power.

The court, jealous of its power, and reluctant to hand down decisions that might actually cause the court to lose prestige, is at times careful to reflect the majority opinion regardless of how atrocious it might be. To see this, we need look no further than Korematsu v. United States[,] in which the court declared it perfectly legal to round up American citizens and throw them into concentration camps.

The court forever plays a careful balancing act with both the public and with other branches of the federal government in which i[t] continually pushes the bounds of federal power without rocking the boat to the point of calling its legitimacy into question among the majority of the population. Naturally, Congress and the presidency, themselves committed to untrammeled federal power, have no problem with most of this on most occasions, except perhaps in the details.

It is the last paragraph that brings us to this week’s decision. Regardless of the merits of the argument, there can be no tolerance for any major institution that invites questions over the legitimacy of the 2020 election in Joe Biden’s Americans. Particularly not one that resides in the current war zone of the American capital.

Already there are agents of the corporate press trying to spin Justice Thomas’s dissent as an act of sedition. I would be surprised if no Democrat ends up calling for his impeachment over the issue.

In terms of the incentive for a justice to build up their own prestige, none had more to gain from ruling against Florida’s first president than Kavanaugh and Barrett. Kavanaugh’s lack of principles has long been obvious to anyone who followed his career in the Bush administration. It is a testament to the repulsive treatment he received from the corporate press that they managed to make a Yale Law alum turned Beltway lawyer sympathetic.

It is also understandable to see how both could be convinced that this decision was a practical necessity for their historical reputations. In the view of America’s most powerful institutions, there is no greater stain than having Trump as a benefactor. The only way to be forgiven for this sin is to become politically useful in stopping him. With this case, the last legal challenge of 2020 is likely done.

This is yet another example of the unique value of Trump’s presidency. The failure of a conservative-aligned Supreme Court to defend Donald Trump is being properly recognized by many Americans as showing that it also cannot be trusted to defend them. Many who believed that a “conservative legal movement” could effectively defend the Constitution in DC—if only Republicans could get a true majority!—have now lost their innocence.

This invites an important question: What happens when yet another governing institution loses the faith of a large portion of the American public? While Congress has long been viewed as dysfunctional and the popularity of the presidency has largely been partisan, the Supreme Court has tended to be held up as a uniquely noble governing body. Now, we see its legitimacy questioned with increased frequency on both the left and right.

While this may be a bitter red pill for some to swallow, ultimately it is necessary medicine.

The growth of the American empire has always been dependent upon convincing the public that it is acting in its interest. When large portions of the population begin to recognize that this is an obvious lie, that the empire ultimately serves the interests of a privileged few, governing becomes more difficult. As Jefferson noted, the first step to opposing imperial rule is for people to recognize that they no longer consent to a government that is hostile to their lives, liberty, and pursuit of happiness.

In America today, there are 50 million+ Trump supporters who believe Joe Biden is a president imposed on the nation—potentially with the help of foreign powers—armed with a Democrat-controlled legislature and a Supreme Court whose credibility is now compromised.

Yet another reason why secession is becoming popular.

When commenting, please post a concise, civil, and informative comment. Full comment policy here

Aggregate "Excessive" Consumption Is Not a Problem

02/15/2021Raushan Gross

The writer of a recent Forbes article doesn’t want consumers making their own choices about what to buy and how much to buy. Instead, he provides a plan for consumers to avoid what he calls excess consumerism. In other words, what the writer suggests is essentially that "excessive consumption" is terrible for you and everyone else.

To put the matter mildly, the concept of "excessive consumption" has no basis in how flesh and blood people operate in the real world. This view of excessive consumption does not account for the fact that people’s goals are not focused on buying stuff. They are making individual choices using their own income and making their own decisions to fulfill their own needs and wants. They are not seeking the judgment or moral approval of Forbes writers.

One thing is for sure, and that is people prefer to obtain what they want now rather than later. Real people have time preferences—this statement is far from new. Each of us has time preferences, and we express these preferences in the market, where we make decisions on how we spend our time and income. For example, if I asked you to choose between taking $50.00 today or $50.00 in two years, which option would you choose? If you had the option to purchase bread for $1.50 today, would you buy the same loaf of bread tomorrow for $3.00? These examples clearly show that people make their choices to satisfy their want satisfaction under personal time preferences. Unfortunately, the idea of consumerism, or excessive consumption, posed by the recent Forbes article clearly shows a widespread misunderstanding of how real people operate in the marketplace. 

The Consumer Confidence Report finds consumer confidence has improved since December 2020, including a reported an uptick in January 2021, and stated that "Consumers' expectations for the economy and jobs … advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future." This is good news for consumers and producers. Consumers are confident in the market conditions for consumption, and guess what—the customer still rules!

Let us face it, the idea of excessive consumption in the aggregate is all wrong. Those who support the notion of excessive consumption do not see human behavior as it is but rather how they think it should be. What is essential for a functioning Marketplace is not buying more than a Forbes writer believes that one may need, but how people choose to buy more or less of what they want. The market process is about consumers making personal choices using their own time and income to buy what makes them happy and is useful toward their goals. What is wrong with that? I love coffee, and I tend to buy coffee from different places, and I buy beans to make at home. Should a coffee shop owner tell me that I can only buy one bag of coffee because three bags of coffee is excessive? This is true of most things like shoes, streaming movies, exercise downloads. What may be more for one person can very well be less for someone else.

You see, when it comes to consumption, people tend to pick and choose for themselves what is excessive and what is not. The Forbes writer’s proposition is: what is excessive to me should be excessive to everyone else in the world. However, excessive consumption cannot go beyond what is produced—as we all know, there is scarcity.

Like most people, I want to buy what I deem useful, necessary and has value. For one thing, consumers are not bumbling idiots—they have goals in mind as they shop for items. Consumers are attentive to prices, needs, timing, and market conditions related to their situation. As long as excessive buying does not harm others or is illegal, they should enjoy an economic system that produces material goods for consumers' purposes and enjoyment. My enjoyment is a hot cup of joe, and you enjoy power tools or clothes. We can enjoy these things because we earn income to buy them, and they bring joy.

Let us get to the point; consumers who "buy excessively" are, in reality, exercising their freedom in the Marketplace. Consumers can determine on their own to either buy fewer or more significant amounts of bread; however, if they buy fewer amounts of bread, they will cause the incomes of wheat producers to fall. On the other hand, consumers who purchase more video game downloads raise the incomes of people employed in that industry. Moreover, the opposite effect happens when consumers are told not to make their own choices in the Marketplace. Do not buy more than two cups of coffee a day as that is excessive. Ha!

We must remember that production takes time. Rome was not built overnight, and neither were the items bought in person or online by millions of people every day. That means if less is purchased, less will be produced in the future.

Producers and manufacturers determine what to make more or less of based on market demand. Demand begets production. The market provides for those willing to buy, and people who are not willing to buy do not stimulate production. Producers accommodate mass demand with scarce resources. Consumption is a balance of scarcity and abundance, and the outcome creates more choices for consumers. You see, economic thriving does not revolve around buying stuff, it is the outcome of consumer choice.

On the whole, excessive consumption may not fulfill a Forbes writer’s desires, but it may bring true happiness for some people. People who buy—whether excessively or not—fulfill their economic role of supporting business owners and their local community. To assert that consumers should stop "excessively" buying products assumes away the prospect that people do not change shopping patterns or increase family sizes over time. I was always told that you do not bite the hand that feeds you. The market is the only social place where the coordination between consumers and producers can facilitate goals and mutually beneficial choices for everyone involved via the buying process. These "excessive" purchases fuel the economy, which helps all people flourish and live their best lives.

When commenting, please post a concise, civil, and informative comment. Full comment policy here
Shield icon power-market-v2