Henry Hazlitt

October 17, 2016

In primitive societies religion, morals, law, customs, manners exist as an undifferentiated whole. We cannot say with confidence which came first. They came together. It is only in comparatively modern times that they have become clearly differentiated from each other; and as they have done so, they have developed different traditions.

Nowhere is this difference in tradition more striking than in that between religious ethics and manners. Too often moral codes, especially those still largely attached to religious roots, are ascetic and grim. Codes of manners, on the other hand, usually require us to be at least outwardly cheerful, agreeable, gracious, convivial—in short, a contagious source of cheer to others.

TJ Brown

October 14, 2016

I recently attended an event with a politically-oriented speech. Following the main speech, which was excellent, everyone partook in some lively post-debate discussion over beer and whiskey. Typically, whenever I attend these types of functions, I end up not only having some of the best discussions imaginable, but I enjoy them so much that I’m usually the last person to leave.

Many people are not good at persuasion.Throughout this evening bar conversation, I realized something: many people are not good at persuasion. It’s something that I see all too often when hearing other libertarians talk, but it is hardly limited to them. It’s a universal problem.

Jeffrey Tucker

October 12, 2016

A bright spot for me in this otherwise grim political year has been speaking for the regional conferences of Students for Liberty. The events are more crowded than ever, and the curiosity of the attendees is palpable and intense.

What does the idea of human liberty imply about how you should understand the changing world?Just imagine that you are 20 years old. You have only known the digital age. The first web browser was invented the year before you were born. You were 11 when the first iPhone came on the market. Uber was founded before you were legally allowed to drive. You live on your mobile applications, which are borderless and permissionless. It’s how you communicate with friends, and your communities of interest take shape and live on them. The digital world is where you live.

Richard M. Ebeling

Wednesday, October 05, 2016

In 449 B.C., the Roman government passed the Law of the Twelve Tables, regulating much of commercial, social, and family life. Some of these laws were reasonable and consistent with an economy of contract and commerce; others prescribed gruesome punishments and assigned cruel powers and privileges given to some. Other regulations fixed a maximum rate of interest on loans of approximately 8 percent. The Roman government also had the habit of periodically forgiving all interest owed in the society; that is, it legally freed private debtors from having to pay back interest due to private creditors.

Alberto Mingardi

September 12, 2016

Hillel Neuer has succeeded in getting the UN Human Rights office to delete a tweet that asked whether "market fundamentalism"--namely, "the belief in the infallibility of free market economic policies"--is "an urgent threat." I suppose it means a threat to human rights. Neuer issued a magnificent press statement:
Tellingly, the same UN human rights office has failed to issue a single tweet about this past month's dire human rights crisis in Venezuela, where millions face mass hunger in part due to attacks on the free market in the failed economic policies of the late president Hugo Chavez and his successor Nicolas Maduro, which included arbitrary seizure of businesses and private property.

Mark Hendrickson

August 26, 2016

Barack Obama's first major initiative as president -- even before Obamacare -- was his economic "stimulus" plan. At that time, businessman Donald Trump praised Obama's plan while Obama's defeated opponent in the Democratic primary race, Senator Hillary Clinton, had proposed her own "stimulus" plan to compete with Obama's.

Fast forward eight years and we find that presidential nominees Trump and Clinton remain enthusiastic endorsers of government "stimulus." Both propose to spend hundreds of billions of dollars on an "infrastructure and jobs program" that seems patterned after President Obama's $800 billion "stimulus plan."

The Federal Reserve is giving us a choice – work forever, or make sure to die before running out of money. The New York Times  just featured a spry 71-year old Judith Lister who is teaching kindergarten in Pahrump, Nevada. While Ms. Lister enjoys teaching, she admits she can’t live on her Social Security checks and needs her teacher’s pension, which she can’t collect for three years.

Bill Wirtz

As a Luxembourgish citizen who for the first eighteen years of his life has seen one prime minister and one prime minister only, I can tell you that European Commission President Jean-Claude Juncker’s tough talk isn’t worth the least bit what the media makes it seem.

Juncker, who was Prime Minister of Luxembourg for 18 years from 1995 to 2013, embodies everything that is wrong with politics as it is: a law-student who never practiced the job, becomes a party secretary in a large centre-right party (the same ideological family as Angela Merkel), gets taken under the wing of the former prime minister, and later commission president Jacques Santer, and ends up serving over 30 years in government.

Corey Iacono

Bernie Sanders has single-handedly brought the term “democratic socialism” into the contemporary American political lexicon and shaken millions of Millennials out of their apathy towards politics. Even if he does not win the Democratic nomination, his impact on American politics will be evident for years to come.

Sanders has convinced a great number of people that things have been going very badly for the great majority of people in the United States, for a very long time. His solution? America must embrace “democratic socialism,” a socioeconomic system that seemingly works very well in the Scandinavian countries, like Sweden, which are, by some measures, better off than the United States.

Philip Zimbardo, a former president of the American Psychological Association, observed that the American soldiers who committed atrocities at the Abu Ghraib prison were not inherently evil: “The line between good and evil is permeable. Any of us can move across it… I argue that we all have the capacity for love and evil — to be Mother Teresa, to be Hitler or Saddam Hussein. It’s the situation that brings it out.”

To hold the view that all people can do good and bad is seen as somehow detracting from the legitimacy of grievances.While most of us will never behave that terribly, almost all of us have engaged in actions that we now regret. We have experienced moving across that line between love and hate. Yet many Americans now doubt that simple truth of life; they want to place large groups of people in rigid categories of good and evil.

David Gordon

Fascism: The Career of a Concept. By Paul E. Gottfried. Northern Illinois University Press, 2016. Vii + 226 pages.

Paul Gottfried’s immensely erudite survey of interpretations of fascism puts one in mind of Ludwig von Mises. Although Gottfried does not discuss Mises, readers of his excellent book will again and again be surprised and instructed at the extent to which Gottfried defends views similar to those of the great Austrian economist. Surprise, though, is not really in order. Though Mises is a classical liberal and Gottfried a conservative, both are steeped in the values and traditions of European civilization, and they interpret fascism from this perspective.

Louis Rouanet

06/21/2016

It had been a peaceful night in Europe where all the women are strong, the men are good looking, and the children are above average. Martin woke up on his EU regulated bed and looked through his EU regulated window. This night, Martin had slept like a baby thanks to the 109 EU regulations concerning pillows, the 5 EU regulations concerning pillow cases, and the 50 EU laws regulating duvets and sheets. Martin went to brush his teeth with his toothbrush regulated by 31 EU laws.

Henry Hazlitt

[Published January 27, 1964 in Newsweek. Excerpted from Business Tides: The Newsweek Era of Henry Hazlitt]

President Johnson has declared an “all-out war on human poverty.” It is a laudable aim. It has, in fact, been the aim of rulers, statesmen, economists, reformers, religious leaders — of every man of goodwill — from time immemorial. It is an aim shared by all free-enterprise economists since the time of Adam Smith and by all socialists and Communists since the time of Karl Marx. The problem does not concern the end but the means. What is the best way to abolish poverty?

Unfortunately the means Mr. Johnson recommends are dubious. He proposes more and bigger government spending programs — “to build more homes and more schools and more libraries and more hospitals than any single session of Congress in the history of our republic,” and to “budget the most Federal support in history for education, for health, for retraining the unemployed, and for helping the economically and the physically handicapped.”

Not by Inflation

Whether it is possible to do all this and still cut the total of Federal spending may be reserved for later consideration. But even on the face of his own budget projections this program will involve a combined deficit in the current and next fiscal year of $15 billion. This gap will probably be financed by inflation — i.e., by printing more money, by lowering the purchasing power of the dollar and so raising prices. This cannot help the poor. Regardless of the immediate result, the long-run result of inflation must be to distort the structure of production, and hence to slow down the rate of balanced economic growth. This cannot help the poor. For the government to borrow $15 billion now to reduce taxes $11 billion means that taxes must later be raised to a still higher level to pay off the new debt. This must discourage production and employment, and cannot help the poor.

The economic proposal by Mr. Johnson that would do most harm of all would be to impose a still higher legal penalty for overtime even than the present stiff penalty rate of 50 percent. This could only raise costs of production, lift prices, reduce sales and output, and hence reduce employment. It could not help the poor.

Mr. Johnson proposes to give Federal funds to “the chronically distressed areas of Appalachia,” to expand “area redevelopment,” to “distribute more food to the needy through a broader stamp program.” All these are merely new forms of the age-old proposal to take from the rich and give to the poor, to take from the more productive to give to the less productive. What the reformers who back such proposals forget is that you cannot “redistribute” the fruits of production without drastically reducing production itself.

For this “redistribution” reduces incentives at both ends of the economic scale. As the productive have more of their income taxed away from them, they have less incentive to exert themselves to earn it. As the poor get increased handouts and subsidies, they too have less incentive to improve their condition through their own efforts. The problem of curing poverty is difficult and two-sided. It is to mitigate the penalties of misfortune and failure without undermining the incentives to effort and success.

Restore Incentives

The way to cure poverty is not through inflation, “share-the-wealth” schemes, and socialism, but by precisely the opposite policies — by the adoption of a system of private property, freer trade, free markets, and free enterprise. It was largely because we adopted this system more fully than any other country that we became the most productive and hence the richest nation on the face of the globe. Through this system more has been done to wipe out poverty in the last two centuries than in all previous history.

The way to combat the remaining pockets of poverty is to keep this system; to reduce government intervention instead of increasing it; to reduce government spending and punitive taxation — in brief, to increase the incentives to the initiative, effort, risk-taking, saving, and investment that increase employment, productivity, and real wages.

Henry Hazlitt

There are basically only two ways in which economic life can be organized. The first is by the voluntary choice of families and individuals and by voluntary cooperation. This arrangement has come to be known as the free market. The other is by the orders of a dictator. This is a command economy. In its more extreme form, when an organized state expropriates the means of production, it is called socialism or communism. Economic life must be primarily organized by one system or the other.

It can, of course, be a mixture, as it unfortunately is in most nations today. But the mixture tends to be unstable. If it is a mixture of a free and a coerced economy the coerced section tends constantly to increase.

David Gordon

March 30, 2016

Entrepreneurs vs. Bureaucrats

The book is animated by a controlling vision. A successful economy depends on innovative entrepreneurs who are willing to take large risks in return for the chance at great profits. It is essential to prosperity not to hamper the efforts of these entrepreneurs through governmental efforts to tax and regulate the economy. Tamny illustrates his thesis with many stories about famous persons, as the subtitle of the book suggests.

The government, Tamny emphasizes, produces nothing on its own. It operates by taking resources away from the productive. To the objection that the government may itself use money it takes in taxes for purposes beneficial to the economy, Tamny answers that people successful in business are highly likely to be better judges of what is beneficial than bureaucrats in the government. If the bureaucrats were better able to discern profit-making opportunities, they themselves would be entrepreneurs. High level bureaucrats may earn substantial salaries, but the wealth of those in business is far greater. “If you’re so smart, why are you a bureaucrat?”

To this, one can imagine someone objecting: Even if it is right that successful entrepreneurs will raise economic productivity, does this not bring with it a great danger? What about inequality? What if the successful entrepreneurs do so well that they accumulate vastly more wealth than others? Thomas Piketty has notoriously made much of this point; but Tamny has an effective and simple answer to it. Great accumulations of wealth are desirable: the rich will invest their money, and everyone will benefit. “When the rich ‘hoard’ their wealth, it is loaned to those who need money for cars, clothes, and college tuition, not to mention the next generation of Bill Gateses, full of ideas but in need of the capital that will abound if some of society’s richest keep their wealth intact so it can pass to future generations.”

If high investment is the key to prosperity, the capital gains tax is especially to be deplored. “Investors who might risk their capital in the private sector know they might lose it all, and they face a 20 percent tax on whatever return they do get on their investment. Those same investors have the option of buying government bonds, and, though the returns are small, they’re reliable and, in the case of municipal bonds, tax-free. ... Our tax code ... puts entrepreneurs at an enormous disadvantage when they compete with the government for investors.”

Taxation is of course not the only way the government hampers the free market. Attempts by government to regulate the economy face exactly the problem that Tamny finds with taxation. Antitrust laws, for example, purport to prevent companies from gaining monopoly control of important commodities; but are not those on the scene better qualified than government “experts” to assess whether market conditions make mergers desirable? Once more, it is entrepreneurs, not government officials, who are skilled at anticipating future demand. “Mergers are ultimately about survival. Companies must adjust to an uncertain future business climate, and restraining the ability of larger businesses to act in the best interests of shareholders is counter-productive. Antitrust regulation does not foster competition so much as it reduces successful companies to sitting ducks.”

“Capitalist Societies Can Rebound from Anything”

We have so far omitted a key part of Tamny’s argument. Skilled entrepreneurs succeed, but many in business fail. The market operates by sorting out of the successful from the failures by the test of profitability. Given this fact, it is as essential that the failures be allowed to fail as it is that those who succeed be allowed to keep their profits. Attempts to prop up failures disable the market.

This vital point can be used to answer a common objection to free trade. Many people object to free trade because, in some cases, foreign competition drives domestic companies out of business, causing unemployment. To the response that expanded trade creates jobs elsewhere in the economy, the reply often given is, what about the workers who do lose their jobs? They are often unable to secure new jobs as good as those they had previously. The fact that others are better off is small solace to them.

Tamny’s account of the way the free market works makes it impossible to accept the objection just given. “In a free economy, capital migrates to talented entrepreneurs eager to pursue profitable opportunities. Innovations like the automobile, computer, and online retail services destroy jobs, but the process leads to better, higher-paying jobs ... to create jobs in abundance, we must allow the free marketplace to regularly annihilate them.” Tamny acknowledges that “the progress of job creation through job destruction does not make losing your jobless agonizing. ... Yet getting laid off is not cause for despair. Good often comes from losing your job.” Workers, like capitalists, need to be alert to new opportunities.

In a manner showing great insight, Tamny applies the point about falling businesses to the financial crisis of 2008. According to Ben Bernanke, Timothy Geithner, and many others, only the massive bailouts of financial institutions in response to the collapse of the housing market saved the economy from disaster. Tamny reverses this contention. It was essential to the proper working of the market to allow the businesses that had acted recklessly to fail. Had this been done, the economy could have quickly readjusted. “Capitalist societies can rebound from anything. In particular, they can bounce back from bank failures that do not exterminate human capital or destroy their infrastructure. An interfering government is the only barrier to any society’s revival, and that is why the global economy cratered amid all the government intervention in 2008.”

Gold, Money, and the State

So far there has been little reason to dissent from the author’s principal arguments. In monetary theory though, he makes what seems to me an incorrect claim; but fortunately, his main policy prescription can be restated in a better way. Tamny rightly calls for sound money. He rejects as misguided inflationary efforts to reduce our “unfavorable” balance of trade. As he points out, a trade deficit is not at all to be feared. “All trade balances. Trade ‘deficits’ with producers from near and far away are the rewards for everyone’s productivity.”

So far, so good; but he errs when he compares the dollar to a measuring rod that must not change. “Just as the foot is never long or short, money should be neither strong nor weak. The foot is a standardized tool to measure actual things, and money should have the same constancy.” What is his argument for this view? As he points out, people want money, not for its own sake, but in order to purchase goods and services. (We set aside a few exceptions.) He thinks that from this fact, if the government follows the proper policy, the value of money can be kept constant. Relative prices of goods and services will change, to reflect changes in their supply and demand. Money can then serve as a measuring rod, to enable people to assess these changes in relative prices. It does not follow, though, that because money is demanded as a means to get other things, there is no independent demand for money at all. In the free market, money is a commodity whose price can change.

Even if Tamny is wrong on this point, though, his main message can be salvaged. It is entirely desirable that the monetary commodity be one unlikely to be subject to substantial fluctuations in price. The gold standard abundantly meets this requirement, and this gives Tamny all that he can reasonably want. To speak of measuring rods merely darkens counsel, as Mises long ago pointed out. “Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. So long as the subjective theory of value is accepted, this question of measurement cannot arise.” (Mises, Theory of Money and Credit, chapter 2.)

The book’s many insights far exceed in importance this disagreement about money as a measure of value. Popular Economics is an outstanding book that, if read widely, will greatly improve public understanding of basic economic truths.

Scott Sumner

March 20, 2016

Suppose you wanted to switch to socialism — what would be the ideal place to do so? You'd want a country with extremely high quality civil servants.

That would be France.

You'd want a country where socialism is not a dirty word, and capitalism is.

That would be France.

You'd want a country with the Socialist party in power, a party that was committed to enact the ideas of Thomas Piketty.

That would be France.

So how did things work out in France, when they tried to adopt a Bernie Sanders/Thomas Piketty approach to taxes?

Peter St. Onge

February 15, 2016

Is innovation slowing? Will it stop? A new paper by one Jonathan Huebner in the awesomely-named journal Technological Forecasting & Social Change argues that innovation is slowing, indeed it’s halved in the past hundred years.

Because Huebner is a physicist, he naturally looks for abstract and generalizable reasons. These take him to dark places: he worries that technology has an “economic limit” or perhaps that our brains have a limit we’re bumping against. He concludes, “The rate of innovation reached a peak over a hundred years ago and is now in decline. This decline is most likely due to an economic limit of technology or a limit of the human brain that we are approaching.”

Malthus was wrong, and Julian Simon was right

Marian L. Tupy

January 14, 2016

Last week, the World Bank updated its commodity database, which tracks the price of commodities going back to 1960. Over the last 55 years, the world’s population has increased by 143 percent. Over the same time period, real average annual per capita income in the world rose by 163 percent. What happened to the price of commodities?

Frank Shostak

January 5, 2016

On Wednesday December 16, 2015, Federal Reserve Bank policymakers raised the federal funds rate target by 0.25 percent to 0.5 percent for the first time since December 2008. There is the possibility that the target could be lifted gradually to 1.25 percent by December next year.

Frank Shostak

December 21, 2015

According to the Austrian business cycle theory (ABCT) the artificial lowering of interest rates by the central bank leads to a misallocation of resources because businesses undertake various capital projects that — prior to the lowering of interest rates —weren’t considered as viable. This misallocation of resources is commonly described as an economic boom.

As a rule, businessmen discover their error once the central bank — which was instrumental in the artificial lowering of interest rates — reverses its stance, which in turn brings to a halt capital expansion and an ensuing economic bust.

From the ABCT one can infer that the artificial lowering of interest rates sets a trap for businessmen by luring them into unsustainable business activities that are only exposed once the central bank tightens its interest rate stance.