“Occupy Wall Street” rage misdirected

These people are very upset with a particular strip of roadway in Manhattan.

The protesters are ignorant, smelly hippies.  That about sums up my take.  If you want the longer version, here it is:

The protesters are literate, and some are even educated in some specialty, but they don’t seem to understand economics at all.  Some of them blame poverty and unemployment on “Wall Street”; others blame it on rich people.  Either way, they engage in pure fantasy.

First, Wall Street.  I assume they have no beef with the street itself.  Maybe they just call rich people or corporations “Wall Street,” or at least that’s what my understanding of markets leads me to infer.  They can’t be talking about the stock market–that is, they can’t be talking intelligently about the stock market.  If you know what the stock market actually is (not a true entity, but a loose network for the free and open exchange of securitized goods) and who participates in the stock market (hundreds of millions–if not billions–of individual disparate entities, among whom nearly everyone is included, and none of whom can exercise anything close to what could objectively called coercion over the market), and the effects of a stock market on an economy (a great increase in productivity, availability of capital, and gainful employment), then you have a hard time understanding what the hell it is these people are talking about when they express rage toward Wall Street. They don’t even seem to have a workable definition of what “Wall Street” is.

Because rage toward “Wall Street” is utter nonsense, I must assume they have a serious–albeit irrational–problem with corporations and/or high net worth or high income people.  They believe rich people and/or corporations are responsible for any extant hardship experienced by “the 99%.” But the rich, the corporations, the Apples, Disneys and Microsofts have exercised no force against us; on the contrary, we have engaged in voluntary exchange with them.  We have voted with our dollars to make their owners wealthier than we are.  The fact that they become so well-to-do that they escape the hardships of the rest of us is unfair, but it is not unjust.  They have not forced us to give them our money.  Any man who gives money to Apple does so because, marginally, he values Apple’s production more than his own–not because Apple has forced him to do so.  If the people must slay a dragon, there is a convenient and sensible target; it is an entity that forces us to give it money and it has a monopoly on force, but it is not headquartered on Wall Street.

That dragon is of course the federal government, and I can sympathize with these protesters only insofar as interest groups (including corporations) control the government to meet their own ends at our expense.  However, I see no real advantage in egregious (and probably unconstitutional) measures, such as depleting the wealth of interest groups, outlawing their association, or nationalizing corporations, which seem to be the sort of unjust solutions favored by today’s demonstrators.  I do not suggest a new all-powerful leader of the flock, but instead suggest each sheep be allowed his sovereignty.  I know such an individualistic position has never been and probably never will be popular–people like to be led, lest they wander.  My policy to keep interest groups from controlling government is by binding government down under the chains of the constitution (see Jefferson’s “Opinion on the Constitutionality of a National Bank”), which would make government a thing so small and insignificant–so limited in its powers of appropriation and bestowal–that no corporation would have any interest in controlling it, because it would be unprofitable to do so.

Isabel Paterson’s God

God of the Machine

The following is a review of Isabel Paterson’s The God of the Machine, a 1943 book arguing for free market capitalism.  I wrote this for a college course called Modern Political Thought:

The year was 1943.  Hitler’s Germany was in the midst of all-out war with Stalin’s Russia and Franklin Roosevelt’s United States.  Isabel Paterson, a Canadian-American author, published The God of the Machine, which has become one of the more influential libertarian works of the twentieth century.  Paterson was a radical individualist.  Hitler and Stalin were avowed collectivists, and the well-known human suffering in Russia and Germany during their reigns was too great to be ignored.  Roosevelt’s New Deal represented by far the greatest economic intervention in American history.  The tendencies of world powers toward collectivism were Paterson’s main focuses, but societal attitudes also concerned her.  Many believed that the war economy was healthy, and some even believed that Germany and Russia had gotten it right, increasing their powers by collectivization.  John Maynard Keynes’ interventionism was emerging as the new textbook standard for economic theory.  Radical sloganeers were advancing such ideas as “property is theft” and “capitalism means war.”  Paterson addressed all of these developments.  Her book is an overview of the logic and history behind her answer to the great question that still stands before the political actor today: which interest should be the focus of our political attention, society’s or the individual’s?

If not for its analyses of ancient, modern, and contemporary histories, The God of the Machine may have been criticized as a knee-jerk reactionary critique of world leaders’ current collectivist policies; Friedrich Hayek’s The Road to Serfdom was widely brushed aside by the political establishment as reactionary.  While the Nobel Laureate’s criticism of Keynesian economic theory was much more influential, Paterson published hers earlier, and she conveys the same message, that government cannot spend an economy back to health.

The individualist political philosophy was first described by John Locke, and there are clear similarities between Locke’s philosophy and Paterson’s.  Obviously both are individualists.  Both believe that government exists to protect the natural rights of life, liberty and property, and that those rights are gifts to man from God.  With respect to property, there are differences between the two thinkers.  For Locke, ownership of objects in nature is initiated when people mix their labor with those objects.  Paterson, contrarily, claims that ownership exists because of the physical laws of space and time. She explains this in a matter-of-fact manner, stating “two bodies cannot occupy the same space at the same time” (180).  Elaborating upon this obvious statement, which at first sight appears irrelevant to the matter at hand, she points out that no one would farm if his land could be used–without restraint–by anyone who stumbled upon it, nor would any family build a dwelling, if every man were permitted to come in and go out of it as he pleased; the man farms and builds for his own private purposes (180).

David Hume’s legitimate criticism of social contract theory was precisely that it was a theory.  It was based on thought experimentation, and had no historical evidence.  Locke was a social contract theorist, and Paterson accepts his theory, but she is not a social contract theorist; she is a social contract historian.  She makes little reference to an imaginary social contract, as Locke did, because, unlike Locke, she can point to a historical social contract, the United States Constitution.

The modern liberal, socialist, utilitarian, and utopian thinkers came after John Locke.  The father of classical liberalism was long dead before any opportunity to rebuff their arguments presented itself.  In The God of the Machine, Paterson plucks Locke’s intellectual sword from the grave and carries it into battle against the likes of Keynes, Jeremy Bentham, John Stuart Mill, Karl Marx and Pierre-Joseph Proudhon.

Before that battle can be understood, however, it is necessary to explore Paterson’s social philosophy.  Paterson uses a metaphor extensively throughout the book, comparing society to an electrical circuit.  She perceives individual free will as the “dynamo” in society; in the metaphor, free association and exchange is the “electricity” of the circuit.  She argues that all progress comes from individual action.  Only individuals can think–groups cannot–and “in human affairs, all that endures is what men think” (18).  Paterson’s high potential energy circuit is closed and circulating maximum energy in a free enterprise system, when men are left to think and act however they wish.  It is static under a totalitarian system, when nearly every action must be commanded or permitted (78).  Government intervention into the market is represented by a “leak” in the otherwise complete high potential energy circuit.  A free enterprise society, then, will gain more and more prosperity and power, while a totalitarian society will tend to lose both.  The society in which government is most limited will be the most powerful society, in production and in war (61). Societies that are more powerful and prosperous become that way because they devise political systems that allow the greatest freedom of human action (13). Their circuits of energy are least broken.
Paterson borrows heavily from Herbert Spencer’s ideas.  She replaces Spencer’s “social organism” with her “high potential energy circuit,” and does so with favorable results.  Spencer laboriously pursues metaphors between government types and various biological organisms, flying over the heads of readers possessing even above average biological understanding.  Paterson clarifies Spencer’s message, by using a metaphor the average person can understand, a simple electrical circuit, and she simplifies his message by condensing it.

Paterson draws her “Society of Contract” and “Society of Status” from Spencer verbatim.  The society of contract recognizes the divinely given freedom and responsibility of each individual.  In the society of contract, “society consists of individuals in voluntary association.  The rights of any person are limited only by the equal rights of another person” (41). The society status, on the other hand, institutes privilege.  In Paterson’s mind, instituting a privileged status for anyone in society will lead to a class division between rulers and subjects.  She believes the society of status works against nature.  “The logic of status,” she says, “ignores physical fact.  The vital functions of a living creature do not wait upon permission; and unless a person is already able to act of his own motion, he cannot obey a command” (42).  Paterson says that her ideal societal relationships are best exemplified in what is called today’s middle class, which is not a class at all, but a classless society of contract (49).

Paterson bolsters her argument with the historical example of ancient Roman civilization.  She claims that Rome failed because it was a society of status, and the bureaucracy, the privileged class, became too big (and I am unqualified to argue this point with her).  Too much energy was diverted from production into the bureaucracy, so that almost no energy was making it all the way around the circuit.  When the productive class could no longer support the bureaucracy, the bureaucracy came down on the productive class and attempted a planned economy.  Prices were fixed and the currency was debased (39).  Roman civilization was torn apart.  Paterson writes, “Men who had formerly been productive escaped to the woods and mountains as outlaws, because they must starve if they went on working” (40).

Paterson says that the founding of the United States was the first and only time a society of contract was ever attempted.  The famous principle of the Declaration of Independence, that all men are endowed by their Creator with the inalienable right to life, had never previously been used as a basis of political structure (41).  The United States was an experiment in liberty.  Paterson points out that in the United States, for the first time, freedom was recognized as an indivisible whole; to speak of various “freedoms” was to revert to European terminology (68). The proof of the society of contract’s worth was the unprecedented power and prosperity of the United States.  Paterson derides European social philosophy as “mechanistic,” saying that it forgets that each individual naturally has freedom and responsibility, and it essentially reduces people to automatons.  She blames this on the arrogance of “academic planners” and the lust for power of self-described humanitarians. (145-147)

Paterson’s objection to “academic planners” returns us to the aforementioned intellectual battle between Paterson and thinkers like Keynes, Bentham, Mill, Marx, and Proudhon.   She says that John Stuart Mill, under the banner of liberty, in fact sacrificed it to society, saying that it was only justifiable insofar as it “served the collective good.” “Then,” writes Paterson, “if a plausible argument can be put forward that it does not–and such an argument will seem plausible because there is no collective good–obviously slavery must be right” (150).

Paterson views Bentham in much the same light, as another prominent philosopher who sold out liberty to the collective good.  Bentham is famous for attempting to devise a political system according to the principle of “the greatest good for the greatest number of people.”  Paterson says that this “is a vicious phrase; for there is no unit of good which by addition or multiplication can make up a sum of good to be divided by the number of persons.  Jeremy Bentham, having adopted the phrase, spent the rest of his life trying to extract some meaning from his own words.  He meandered into almost incredible imbecilities, without ever perceiving why they couldn’t mean anything” (90).

Paterson calls Karl Marx a fool for thinking his utopian idea was an accurate prediction of the future (155).  She says Marx was a “parasitic pedant, shiftless and dishonest, he wanted to put in a claim on ‘society’ solely as a consumer” (96).  His theory of class war, she says, is “utter nonsense.”  Elaborating, she says, “it is physically impossible for ‘labor’ and ‘capital’ to engage in war on each other.  Capital is property; labor is men” (97).  She also criticizes Marx’s dialectical materialism, claiming that it “reduces verbal expression to literal nonsense” (96).  Paterson compares the phrase “dictatorship of the proletariat” to the phrase “roundness of a triangle” (96).

Keynes famously prescribed increasing government employment as a remedy for recessions.  Because recessions come with unemployment and slumping consumer demand, the theory goes that government can augment demand and employment by hiring more people, who will be consumers, multiplying demand.  In criticizing Keynes, Paterson employs reductio ad absurdum.  She brings up the example of paying a man to stand on the beach and throw pebbles into the ocean, arguing, “it would be just the same as if he were in a ‘government job,’ or on the dole; the producers have to supply his subsistence with no return, thus preventing the normal increase of jobs” (192).

Paterson says that Proudhon is responsible for “perhaps the most senseless phrase ever coined even by a collectivist” (179).  She is referring to Proudhon’s famous slogan, “property is theft.”  Clearly this statement is non-sensical, because theft presupposes property (179).  The slogan follows in the footsteps of Jean-Jacques Rousseau, who may well have agreed with its spirit, if not its words.  Both Rousseau and Proudhon saw property as an unnatural institution, and the source of inequality and unfairness.  Paterson contends otherwise, asserting that unfairness and inequality are unavoidable in any system, and that sacrificing property rights for the sake of fairness is foolish (200).  She explains, “The incidental hazard of a free society, which is that of nature, that some individuals may be temporarily unable to command a livelihood, is the permanent condition of every man living in a collective society.  In giving up freedom, the individual gets nothing in return, and gives up every chance or hope of ever getting anything” (200).

Paterson criticizes collectivists by analyzing their language and showing its errors.  She frequently uses “nonsense” as a descriptor of their rhetoric.  There is a tinge of hypocrisy in her critique, because she does not hold herself to the same exacting standards.  Proudhon’s “property is theft” is “senseless” to Paterson, but Paterson herself, in no uncertain terms, asserts that “profit is production,” which is evidently “senseless” to anyone with an understanding of economics (221).

Even accepting Paterson’s political principles and her criticisms of the collectivists, there remains a very important question: What is the alternative?  What political system does Paterson suggest?  Her ideal society is the “the private property, free enterprise society of contract,” but in The God of the Machine, the political apparatus responsible for protecting property and enforcing contracts is difficult to pin down.  The absence of a comprehensive, alternative political system may be the most prominent weakness of her argument.  Paterson thinks the very idea of political “leadership” is a threat to civilization, because every free man must lead his own affairs (80). She echoes classical liberals in saying that, ideally, government is a necessary evil.  Paterson explains, “since human beings will sometimes lie, shirk, break promises, fail to improve their faculties, act imprudently, seize by violence the goods of others, and even kill one another in anger or greed, government might be defined as the police organization” (69). Her ideal system seems to be liberty with a police man, a system that completes her high potential energy circuit for the machine of society, maximizing the creative use of human energy.  It requires equal protection of the laws, with privileged status for no “type” of person, be they impoverished, wealthy, numerous, or within government.  Paterson never even posits a method of determining who will make up the “police organization” that is government.

Some aspects of Paterson’s political system are clear.  She dislikes passports, or any other national identification (45).  She thinks “democracy inevitably lapses into tyranny” (16).  She favors a metal currency, saying the economist who advocates fiat money is “below the mental level of savages” because he has “forgotten how to apply number” (202).  She rejects compulsory public education as “the complete model of the totalitarian state” (258).  She also rejects licensing and regulation, which are impediments to free association (50).  However, Paterson’s political structure remains enigmatic.  As long as every individual is treated equally by the law, their natural rights are protected, and contracts are enforced, it does not concern her who governs, or how they are chosen.

Paterson, Isabel (1943). The God of the Machine. New Brunswick, NJ: Transaction Publishers. ISBN: 1560006668

The myth of excessive wealth

I sent the following letter concerning wealth to the Daily Beacon, the University of Tennessee’s student newspaper, on February 15, but it was never printed:

Sam Smith’s February 15 column was illogical and economically ignorant. He begins by declaring that the federal government spends too much. His only solution to this problem: increase taxes on the wealthy. Low taxation does not water the root of our growing federal deficit–excessive spending is its true life-source. Over the past twenty years, federal spending has tripled. Because no level of taxation can keep up with this exuberant trend, the only realistic solution is to stop the government’s spending spree.

Smith then points his wayward cannon at the “excessively” wealthy, blasting the likes of Lane Kiffin, an easy target in this media market. It is a contradiction in terms to speak of “excessive wealth”; there is no such thing. An individual who gains wealth through productivity or capital investment, regardless of selfishness, benefits everyone else in the process, by meeting the demands of consumers. Moreover, the initial investment of wealthy consumers eventually allows even the poor to enjoy life’s luxuries. If there were no one “excessively” wealthy enough to buy the first television sets, the first computers, or the first cellular phones, then inventors would have toiled fruitlessly, and no reinvestment into their innovations would have taken place. Without the “excessively” wealthy purchasing high-dollar goods, we would not know many of the technologies we enjoy cheaply today.

Smith echoes many of my professors, who complain that the football coach earns too much money. This is in truth a lament over the rights of individuals to consume freely; it assumes that people who choose to watch football are somehow guilty of injustice. To the professor of this mindset, I offer a promise: When you attract 100,000 people to pay $50 a head to sit through one of your lectures, the University of Tennessee will kindly add a zero or two to the amount on your paycheck.

Letter to the editor, 10.27.09

My following letter to the Daily Beacon, the U. of Tennessee’s student newspaper, appeared on October 27, 2009.

For an exemplary misunderstanding of economics, freedom, and human action, refer to Amien Essif’s October 19 column, “Resisting self-interest an act of freedom”.

 In order to understand the human world, we must first recognize that each and every person is responsible for his/her own actions.  External authorities can restrict individual actions, but cannot force individuals to act.  You picked up a newspaper today and began reading.  You are reading out of your own volition.  No government, no religion, no community, no party, no corporation, no family, no philosophy department, nor any other authority outside of yourself can force you to read this letter.  

 Human freedom is a fact that can only be escaped in the imagination, and Essif’s column is an escapist’s trip down the rabbit-hole.  He who will publicly complain about the restrictiveness of capitalism’s conveniences has strayed far from reality.

 Essif admonishes “private institutions whose first interest is making money–and I’m not talking about people.”  If he is not talking about people, he imagines the animate in the inanimate.  His column, however intriguing, becomes fictional when he asserts that corporations–and not the people within them–have any interests at all.  No corporation has ever had any interest that was not in fact a human interest.  Pick any corporation, and remove all of its human interests; you will then find it has no interests whatsoever.

 Essif says that “Nabisco, acting individually, can practically force me to buy a package of crackers.”  Forgetting the absurdity of this statement, let us examine reality.  What have the generally good, honest, hard-working people of the Nabisco corporation done?  They have fed the hungry, and they have done so by acting in their own interests.  Essif’s purchase of crackers, far from restricting his freedom, is evidence that his freedom is relatively unhindered by false authorities.

 The false authority Essif worships is the community, an entity incapable of thought or action.  So, predictably, all of his faulty logic culminates in the exaltation of communal living.  Communal life is simpler in the sense that it is less complex, but it is harder in the sense that it requires much more work.  To spend five minutes of labor on a pack of crackers would be impossible for a practicing communist, whose mere sustenance hangs often in the balance.  Essif should be free to go forth and live as he pleases, on a commune, but neither he nor anyone else should ever have the authority to force the restrictions of communal living on those of us who understand freedom and cherish it.

Respectfully,

Alex Winston

Junior in political science

Franklin D. Roosevelt’s false mandate

FDR

In my many college political science courses, I have yet to meet a professor who did not subscribe to the belief that Franklin D. Roosevelt was given a mandate by the people to institute his New Deal reforms.  Nothing could be further from the truth.  Like many elected since, President Roosevelt attained office through deception.  If the people had known what his plans were, not only would he have failed to win, he would not have received the Democratic party’s nomination.  Roosevelt ran on the promise of less government, but after winning election, he abandoned his rhetoric and his electorate, and instituted a giant bureaucracy that the people did not want.

For proof, I refer the reader to Garet Garrett’s “The Revolution Was”, a pertinent excerpt of which I will provide:

“The first three planks of the Democratic party platform read as follows: We advocate: ‘1. An immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus and eliminating extravagance, to accomplish a saving of not less than 25 per cent in the cost of Federal government…2. Maintenance of the national credit by a Federal budget annually balanced…3. A sound currency to be maintained at all hazards.’  

Mr. Roosevelt pledged himself to be bound by this platform as no President had ever before been bound by a party document.  All during the campaign he supported it with words that could not possibly be misunderstood.  He said: ‘I accuse the present Administration (Hoover’s) of being the greatest spending Administration in peace time in all American history–one which piled bureau on bureau, commission on commission, and has failed to anticipate the dire needs or reduced earning power of the people.  Bureaus and bureaucrats have been retained at the expense of the taxpayer…We are spending altogether too much money for government services which are neither practical nor necessary.  In addition to this, we are attempting too many functions and we need a simplification of what the Federal government is giving to the people.’  This he said many times.”

So when you hear a self-described intellectual claim that Roosevelt’s New Deal was an execution of the people’s will, or allowed by the electoral mandate, know that you are listening to a person who has no understanding of the 1932 election.

Free market, profit incentive eliminate racism

racism

I relay the following explanation, which I gave to an anonymous friend who believed that the free market fosters racism, and could not understand why he was wrong.

Okay, I will explain, with a preface.  Your hypothetical situation, in which many employers are racists, assumes that free people are, in large part, naturally racist and averse to being near people of other races.  It assumes that employers much prefer white employees to black ones.  If this is true (a big if), the market will tend to eliminate their racist natures.  Simply, here’s how (and remember that this situation is based on your racist assumptions, which may or may not be accurate):

All other factors being equal, demand for a white employee is much higher than demand for a black employee.   Therefore whites tend to be employed at a high wage, and blacks tend to be employed at a much lower wage, if at all.  In this context–which in its results resembles reality–imagine two manufacturers that produce the exact same product, one of which hires based on racial preference.

The racist employer hires an all-white workforce, and pays his employees the going wage for white labor.  The profit-seeking employer hires the cheapest labor, and therefore ends up with an all-black workforce.  Labor costs are much higher for the employer who employs only whites.  This means the price of his product must also be much higher than the price of the profit-seeking employer’s identical product.  Consumers will therefore buy from the profit-seeker, with whom the racist cannot compete.  The racist manufacturer will fail, leaving all of his white employees unemployed.  This unemployment, which must happen many times over if racist employment is prevalent in society, cheapens white labor, and in short order the price of labor is determined by the price or quality of labor–not by skin color.  In this way, the price mechanism, the market, and the profit incentive eliminate racist business practices.

Keynes and the “intellectuals” v. America

Keynes destroys wealth

I wrote an email about John Maynard Keynes a couple of weeks ago that I want to share with you.  It was to my mother.  As a university instructor, she receives emails from intellectual colleagues of all fields, who often know little or nothing of economics, but strongly support Keynesian theories.  Such professors, living comfortably on the fringes of capitalistic prosperity, compare their salaries with the earnings of industrious geniuses around them, and blame free markets for their conditions, because they are too proud to blame themselves.  Mention to them that throughout history, where free markets are absent, famine and misery abound–that government noninterference produced the only society to ever avoid starvation for more than a century–and these intellectuals will not listen, for they are teachers and not learners, and in a planned society they imagine themselves to be the planners, and not the laborers.  But before they can plan, they must destroy the system that feeds everyone but makes them irrelevant: capitalism.  Their destruction is nearing completion, and they hope to take advantage of the ensuing collapse, become planners, and rule over the creative, industrious, and inventive energies within our society.

So backward are these educators’ attitudes, that they confused my educated mother (M.B.A. and J.D.) into thinking Keynes could be right.  I had to set her straight, but I could not blame her for being confused.  Even I thought Keynes was right until I started studying macroeconomics.  In my first college economics class, I answered one of my professor’s questions about recessions by accurately explaining Keynes’ theory of aggregate demand.  His response was, “they’ve got you brainwashed, don’t they?”  His firm criticism encouraged me to begin reading economic theory.  There was a time (in the 1960s and 70s) when almost every economist was Keynesian, but today Keynes’ theories are rarely taught without a healthy dose of skepticism.  This is because much of what happened in the economy of the 1970s and 80s appeared to prove Keynes wrong.  The longer I studied, the more I realized that, in America today, almost every economic barrier an individual encounters has been erected by government.  I realized that while private entities sometimes invest poorly, which hurts the economy, government often invests poorly, negligently, and with impunity, which hurts and may cripple the economy.

For any argument about suitable means to be valuable, parties must agree on suitable ends.  My end is the maximization of individual liberty.  I see this also as the maximization of justice.  I believe that every individual has rights to political and economic liberties, “life, liberty,” etc.  I believe the primary purpose of government is to protect those rights.  If that end cannot be agreed upon, then you will find my argument worthless, but knowing you to possess a liberal mind, I suspect you will gain something from my opinion.  The best economic means toward protecting individual liberty are, in my opinion, minimal taxation, fiscal responsibility, sound money, and government noninterference (peace would also help).  If his goal was to protect our rights (and I strongly suspect it was not), Keynes theory was wrong.  If his goal was to improve stability, Keynes was wrong.  If his goal was to improve justice, Keynes was wrong.  If his goal was to increase the control of the state over the everyday lives of individuals, Keynes was wrong, but successful.

Here is the email I wrote my mom:

“If in the first attempt to create a world of free men we have failed, we must try again.  The guiding principle that a policy of freedom for the individual is the only truly progressive policy remains as true today as it was in the nineteenth century.”
– F.A. Hayek, The Road to Serfdom

After reading The Road to Serfdom, F.A. Hayek’s criticism of J.M. Keynes’ General Theory, Keynes admitted, “morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.”  Keynes was praising a book, morally and philosophically, that championed laissez-faire over his own theory.  It warned that Keynes’ theory would lead to the enslavement of all mankind (save a small governing elite), and Keynes agreed with “virtually the whole of it,” morally and philosophically.

Keynes was a unique figure, brilliant enough to recognize his own wrongs, and proud enough to refuse to set them right.  A supporter of eugenics, he was an arrogant man who always thought himself the most clever person in the room, and on this one point, it is likely that he was always correct.  His mind, however, was poisoned by the Old World belief that there must always be two classes of people, the rulers and the ruled, but Americans believe that these classes are neither natural nor necessary, and that every man is his own ruler.  Keynes knew his theory would be, on a free people, an immoral imposition, and even admitted its ability to increase economic instability (which it has done), but like a contemptible, soul-selling politician, he dismissed an economic system of justice, honesty, and freedom for “light and transient causes,” to become a ruler, gathering fortune and fame while providing the most efficient immediate remedy to those most in need; and while all this rottenness may be crafty politics, it is bad economics.

A good economist considers not only a strategy’s short-term effects on interested groups, but its short- and long-term effects on all groups.  To joke that “in the long run we’re all dead,” as Keynes did, is an assault on posterity, and indicates his intent to rob their liberties and fortunes for the sake of temporary splurging.  We know individuals that live beyond their means are destined to live beneath them, and this is no less true of nations.  Until now, U.S. production and national wealth have increased in spite of government, because capitalism is still operating to some extent, and because by luck, a slow waitress is handling the bill for all this “aggregate demand”.  I don’t expect the Department of Treasury will leave her a tip.

There is a lot of bad economics abroad, being taught in universities, being preached in the halls of Washington, and being recorded for wiser generations to lampoon.  As Louis XIV had his divine right, Paul Krugman has his Nobel Prize.  Bad economics tells us that the government must make us better off (limit our choices), inflate the currency (steal our savings), save the X industry (kill the Y industry, and harm everyone not closely related to the X industry), increase the minimum wage (increase prices), protect our industry with tariffs (limit choices and increase prices) increase credit (increase debt), increase public works (increase taxes), create more jobs (impossible), stop technology from stealing jobs (lose opportunity for increased standard of living), achieve “full employment” (instead of full production), bail out unions (tax all others), stop foreclosures (undermine the price mechanism that guarantees short recessions), increase the velocity of money (tempt hyperinflation), and give away “free” pensions, healthcare, houses, food, and money (remove all incentives for production).  But one thing we must never, ever do, under any circumstances (according to this “economics”), is save.  There is no rhyme to bad economics.  It cherishes credit, and although savings is the only true source of credit, savings is, in their muddled minds, the bane of all good society; the only use of savings is as actual wealth that, in the absence of a gold standard, the government can steal through inflation.

The economic ideas I prefer are what Barack Obama calls “the stale political arguments which have consumed us for so long,” which “no longer apply.”  By the context of this quote in his inaugural speech, it appears Obama is attacking arguments in favor of individualism, the philosophy of John Locke, upon which the United States was founded and became prosperous.  John Locke died over three hundred years ago, so–though collectivism is much older–individualism may now be called a “stale” argument, but this is totally irrelevant.  It matters not whether an idea is new or old, but whether it is right or wrong.  I believe that collectivism is wrong and individualism is right, and as it is better to repair a wrong than persist in it, I will halt discussion of contemporary leaders to return to the informative purpose of my writing you.

Bad economics insults reason, starving and torturing the mind, and causing anxiety; but good economics informs reason, satisfying the mind’s natural appetite.  I may feed that appetite with my own words, but others have prepared portions so tasteful as to make my own attempts bland.  Morsels to follow:

  • “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” – Adam Smith
  • “Dying industries absorb labor and capital that should be released for the growing industries.  It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other.  These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits and costs.  They are solved by this system incomparably better than any group of bureaucrats could solve them.  For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day; whereas bureaucrats would try to solve it by having made for the consumers not what the consumers themselves wanted, but what the bureaucrats decided was good for them.  Yet, though the bureaucrats do not understand the quasi-automatic system of the market, they are always disturbed by it.  They are always trying to improve it or correct it, usually in the interests of some wailing pressure group.” – Henry Hazlitt
  • “It may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve.” – Henry David Thoreau
  • “The evil is inflation.  Its weapon of defense is an invisible vapor, the effect of which is to cause people to become economic alcoholics, afflicted with the delusion that they can get rich by destroying the value of money.” – Garet Garrett
  • “A government that has arrived at the ultimate goal of total power may dispense with inflation.  The power to command obedience enables it to achieve directly what formerly it could only achieve indirectly by inflation.  The consuming delusion is that because of what Americans were, this may not or cannot happen.” – Garrett
  • “Wealth brings with it its own checks and balances.  The basis of political economy is non-interference.  The only safe rule is found in the self-adjusting meter of demand and supply.  Do not legislate.  Meddle, and you snap the sinews with your sumptuary laws.  Give no bounties, make equal laws, secure life and property, and you need give no alms.  Open the doors of opportunity to talent and virtue and they will do themselves justice, and property will not be in bad hands.  In a free and just commonwealth, property rushes from the idle and imbecile to the industrious, brave and persevering.” – Ralph Waldo Emerson
  • “Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development.” – Hayek
  • “The money rate can, indeed, be kept artificially low only by continuous new injections of currency or bank credit in place of real savings.  This can create the illusion of more capital just as the addition of water can create the illusion of more milk.  But it is a policy of continuous inflation.  It obviously is a process involving cumulative danger.  The money rate will rise and a crisis will develop if the inflation is reversed, or merely brought to a halt, or even continued at a diminished rate.” – Hazlitt
  • “Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise.  They force the general taxpayer to subsidize the bad risks and to defray the losses.  They encourage people to ‘buy’ houses that they cannot afford.  They tend eventually to bring about an oversupply of houses as compared with other things.  They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion.  In brief, in the long run they do not increase overall national production but encourage malinvestment.” – Hazlitt (1946, if heeded, we may have avoided current recession)
  • “There is no subtler, no surer means of overturning the existing basis of society than to debauch its currency.  By a continuing process of inflation, governments can confiscate secretly and unobserved an important part of the wealth of their citizens.  By this means they not only confiscate, but confiscate arbitrarily, and while the process impoverishes many it actually enriches some.” – Keynes
  • “As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power.  There can be no such power in a republican government: the people have no freedom, and property no security where this practice can be acted: and the committee who shall bring in a report for this purpose, or the member who moves for it, and he who seconds it merits impeachment, and sooner or later may expect it.” – Thomas Paine
  • “Deficit spending is simply a scheme for the confiscation of wealth.  Gold stands in the way of this insidious process.  It stands as a protector of property rights.  If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” – Alan Greenspan
  • What is called economic power, while it can be used as an instrument of coercion, is, in the hands of private individuals, never exclusive or complete power, never power over the whole life of a person. But centralized as an instrument of political power it creates a degree of dependence scarcely distinguishable from slavery.” – Hayek
  • “You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less.  You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services he is capable of rendering.  In brief, for a low wage you substitute unemployment.  You do harm all around, with no comparable compensation.” – Hazlitt
  • “The question is not whether we wish to see everybody as well off as as possible.  Among men of good will such an aim can be taken for granted.  The real question concerns the proper means of achieving it.  And in trying to answer this we must never lose sight of a few elementary truisms.  We cannot distribute more wealth than is created.  We cannot in the long run pay labor as a whole more than it produces.  The best way to raise wages, therefore, is to raise marginal labor productivity.  This can be done by many methods: by an increase in capital accumulation–i.e., by an increase in the machines with which the workers are aided; by new inventions and improvements; by more efficient management on the part of employers; by more industriousness and efficiency on the part of workers; by better education and training.  The more the individual worker produces, the more he increases the wealth of the whole community.  The more he produces, the more his services are worth to consumers, and hence to employers.  And the more he is worth to employers, the more he will be paid.  Real wages come out of production, not out of government decrees.  So government policy should be directed, not to imposing more burdensome requirements on employers, but to following policies that encourage profits, that encourage employers to expand, to invest in newer and better machines to increase the productivity of workers–in brief, to encourage capital accumulation, instead of discouraging it–and to increase both employment and wage rates.” – Hazlitt
  • “‘Adequate’ relief will cause some men not to seek work at all, and will cause others to consider that they are in effect being asked to work not for the wage offered, but only for the difference between the wage and the relief payment.” – Hazlitt

“A malady… once known is half cured.” – Jefferson