Mises blog

In Frank Van Dun's paper on argumentation ethics, "Argumentation Ethics and the Philosophy of Freedom," there is a fascinating discussion about what law and courts and lawyers have become: not justice-seekers, but technical interpreters of artificial rules. Van Dun argues that equality before the law

was a great idea, but of course the powerful, the rulers and their clients, often enough intervened in court proceedings and made a mockery of the independence of the courts of law, replacing them with boards of officials whose main funciton was (and is) to see to it that their master's voice is heeded by all. The judges were replaced by "magistrates." The jurists, whose main concern is the knowledge and application of the principles of justice, were replaced with legists, whose main occupation is to know and apply their masters' wishes as these are revealed in legal edicts and codes. [here he refers to his paper The Lawful and the Legal for an etymological explication of the distinction between jurists ("ius") and legists ("lex").]

Ludwig von Mises wrote, "There is only one way that leads to an improvement of the standard of living for the wage-earning masses, viz., the increase in the amount of capital invested. All other methods, however popular they may be, are not only futile, but are actually detrimental to the well-being of those they allegedly want to benefit. … Public opinion believes that the improvement in the conditions of the wage earners is an achievement of the unions and of various legislative measures. … As long as these fallacies prevail upon the minds of the voters, it is vain to expect a resolute departure from the policies that are mistakenly called progressive." FULL ARTICLE

All We Are Sayin' Is Give Free Markets a Chance [pdf]

July 17, 2008

Given the economic and financial market "challenges" of the past year, some pundits and politicians are concluding that these challenges are the result of the failure of free markets. I would respond that we cannot determine whether free markets have failed unless we have had free markets. I do not think we have.

[…]

There is at least one group of economists that realizes the economic mischief caused by central banks — economists who belong to the Austrian school. (For information about Austrian economics, click on this link to the Ludwig von Mises Institute, http://mises.org/ or this link to Leithner and Company, a private investment firm located not in Austria, but in Australia, http://www.leithner.com.au/. I am not endorsing the political views or the investment advice of either of these entities, but I am endorsing their approach to economic analysis.)

– Paul L. Kasriel, Director of Economic Research, Northern Trust Global Economic Research

The real world is the market economy. It is making a trillion decisions every hour. The decisions are dramatic, decisive, and life changing. They deal with real stuff, not vapid promises. We see this in a crisis more than ever: the takeovers, production shifts, whole industries rising and falling, patterns of imports and exports reversing themselves, jobs changing, with tens of billions of dollars changing hands minute by minute.

Here is the pith of life. The rest of what people think matters is just white noise. FULL ARTICLE

In Nudge (Yale University Press, 2008), authors Richard Thaler and Cass Sundstein try to combine libertarianism and paternalism by arguing that a nudge — "any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives" — can benefit those nudged, while staying consistent with liberty because it does not force anyone to do anything. Nudge's argument is far from airtight. But even more devastating is its reliance on a false premise. The "market failure" examples it promises to improve are actually government failures. FULL ARTICLE

While on an evening bike ride with my oldest son, we reminisced about one of the first government meetings we attended together -- an annexation hearing before our county commissioners. Looking back, we agreed that the meeting turned out to be an invaluable opportunity to witness government in action.

At the hearing, the attorney for the petitioner -- a single property owner seeking to be annexed by the local city -- presented first. The attorney stood at the podium holding a small folder. He began, "We present the completed application and forms as required by law. We believe that we have met all legal requirements. We therefore ask that you grant the petition as filed." He sat down.

Next, a long line formed to speak against the annexation. For the next hour, as the commissioners quietly watched, my son and I listened to folks demand a claim to the petitioner's property. Not one speaker questioned the legality of the petition. We left.

Days later, I read in the paper that the hearings were scheduled to continue for two weeks. In the end, the petition -- which everyone agreed was legal -- was denied.

This singular experience showed us that government is not based on laws, it is based on arbitrary power. And that ownership of property is a dead concept in these times of positive rights.

Of course, the opportunity to witness government in action is always a great way to understand our current state. But I must warn you that afterwards you will see your neighbors in a new light.

As sent in by a reader, from here

Or so we're told over at The Smirking Chimp. I link to this only because it amazes me that such ignoramuses exist. There are layers and layers and layers of regulators all over this economy, and this person's response: More! More! More! The free market is stupid! Lack of regulation leads to financial meltdowns! (I'm going to go way out on a limb and propose that our friend has never heard of business cycle theory.)

(Oh, and did you know John McCain -- as mainstream and interventionist as they come -- favors an "unregulated" economy?)

Not even a speck of curiosity as to what might have caused it all -- probably just greed, on the part of businessmen who need to be regulated! Not one word about the Fed. And then we get this gem: "Unless you're a highly paid executive in the financial industry, you'd have to be crazy or ignorant to repeat the mantra of deregulation at this point in our history. We have deregulated to the bone and we now see the consequences. Bear Stearns, Enron, Fannie Mae, Freddy Mac, Indy Mac and the list threatens to grow to 150 other banks. Now is not the time for deregulation."

Then: "Democrats must insist on further regulation if they are going to agree to bailing out all these companies and institutions." The possibility of not bailing them out, the possibility that Fannie and "Freddy" [sic] shouldn't exist, and/or shouldn't rely on the guarantee of a taxpayer bailout as they make decisions, never occurs to this guy, who's apparently ready to bail out the fat cats while posing as a defender of all of us. Just when I can't stand the Right anymore, I'm reminded of how blockheaded and resistant to economic knowledge the Left is.

Anyone who peruses the top mainstream economics journals will quickly realize that economic theory has been crowded out by mathematical formalism. The neoclassical economists' uncompromising quest for precision in their models has been achieved at the expense of the accuracy of their predictions. The old joke of the drunk searching for his keys near the streetlight is an appropriate metaphor. FULL ARTICLE

The first 32 chapters of Robert P. Murphy's Study Guide for Human Action (complete with chapter summary, technical notes, and a brief assessment of why the chapter matters) are available in PDF:

1. Chapter_I.pdf
2. Chapter_II.pdf
3. Chapter_III.pdf
4. Chapter_IV.pdf
5. Chapter_V.pdf
6. Chapter_VI.pdf
7. Chapter_VII.pdf
8. Chapter_VIII.pdf
9. Chapter_IX.pdf
10. Chapter_X.pdf
11. Chapter_XI.pdf
12. Chapter_XII.pdf
13. Chapter_XIII.pdf
14. Chapter_XIV.pdf
15. Chapter_XV.pdf
16. Chapter_XVI.pdf

17. Chapter_XVII.pdf
18. Chapter_XVIII.pdf
19. Chapter_XIX.pdf
20. Chapter_XX.pdf
21. Chapter_XXI.pdf
22. Chapter_XXII.pdf
23. Chapter_XXIII.pdf
24. Chapter_XXIV.pdf
25. Chapter_XXV.pdf
26. Chapter_XXVI.pdf
27. Chapter_XXVII.pdf
28. Chapter_XXVIII.pdf
29. Chapter_XXIX.pdf
30. Chapter_XXX.pdf
31. Chapter_XXXI.pdf
32. Chapter_XXXII.pdf

This is the Web site of TheMiddleClass.org, which grades the voting record of Dr. Paul Broun of the 12th District of Georgia a big, fat F, for voting NAY on 13 of the 15 bills that happened to interest them in 2008 thus far.

Broun feels the government should NOT be allowed to go nosing about into things that weren't enumerated in the Constitution as its concern, offering this as an explanation for his consistent negativity.

Happily, there's one thing that's wrong on the page: the notation that his term expires in 2009. It does, of course, but the 71% majority victory he just won in the Republican primary over the party's sponsored candidate virtually guarantees he'll serve at least through 2011!

My graduate history professor and old friend, Art Ekirch, once said to us, "Believe ANYTHING is possible. The worst things for an historian to say are, 'That just couldn't be true' or 'I refuse to believe that'."

Our discussion - many decades ago - was whether there could have been a political conspiracy behind the assassination of President James Garfield as opposed to just a "disappointed office seeker" or, as Murray used to say, "another lone nut." As a result, I've always believed that virtually anything is possible and, indeed, I have long prided myself on my Menckenesque level of outright cynicism.

But I admit that I, a grizzled veteran, have actually been shocked this last week while reading Tim Weiner's book "Legacy of Ashes." His six-decade history of the CIA, from its beginnings as a cancerous remnant of WWII intelligence to this post-9/11 era, presents a crystal-clear picture of a federal government run amok. I have read books that have described the devastating effects of U.S. 'covert action' from Endless Enemies by Jonathan Kwitny to Blowback by Chalmers Johnson, but Weiner's book deals not with the policies and their consequences as much as with the agency itself, the decisionmakers, and the approaches it took. It's impossible to estimate how many millionaires in the world - both U.S. citizens who worked for or contracted with the CIA, and also foreign crooks, thieves and degenerates around the world - were created with billions of unaccounted-for American dollars. The critics of the Weiner book have mostly centered on a) a defense of the CIA officers and directors on the grounds that - even if they were inept - they were also patriotic and well-meaning, or b) a criticism of his failure to blame other influences, such as corporate interests and the Pentagon, for the directions and policies of the agency. No one says Weiner exaggerated.

The arrogance, the scope, the secrecy, the devastation - breathtakingly evil!

Far less than 10% of the world's oil reserves are in countries that allow private companies to operate freely, writes Jeremie T.A. Rostan. This means that the latter and, through them, consumers, are denied access to far more than 90% of the world's oil reserves. State-owned companies control more than 65% of the world's oil reserves -- e.g., in Saudi Arabia. As for the 25% left, they are mainly situated in countries such as Iran, Russia, Venezuela, etc., where, because of above-ground political factors, private Western companies have the greatest difficulties working efficiently -- as demonstrated by BP's recent problems in Russia.FULL ARTICLE

I've now got old friends I haven't spoken to in 10 and 15 years writing me to ask if they should withdraw all their money from the banking system. Of course I wouldn't dare contribute to the rumor-mongering problem that the government is stamping out.

We are right in the middle of a season of summer seminar season. Some students are attending only one seminar, and others are completing a rigorous circuit of seminars sponsored by the Institute for Humane Studies, the Independent Institute, the Cato Institute, the Mises Institute, the Foundation for Economic Education, the American Institute for Economic Research, and/or other organizations interested in building on the intellectual foundations of a free society. If you have been to one (or two, or three) of these seminars, how should you follow up and make the most of what you have learned?

If you have attended one of these seminars, you have met a lot of interesting people and been exposed to a lot of very interesting ideas. Perhaps you have taken a lot of very interesting notes. Rather than banish those notes to a hard-to-reach bookshelf or to the bottom of your sock drawer, I would like to encourage you to take those ideas, make them your own, and share them with others. Contribute to The Great Conversation. Start writing.

Trying to teach something to someone else is a great way to master it. I would recommend the following course of action. Begin with the most provocative or interesting idea you have encountered at one of the seminars, and write an article or a letter to the editor about it. Make sure it is no longer than 750 words. Why such brevity? First, brevity is the soul of wit. Second, being able to express complex ideas clearly and concisely takes a lot of practice and can never be learned perfectly. Winding, unstructured, incendiary rants can be fun, but they contribute little to The Conversation and perhaps even cause it to regress. Send the article to your campus newspaper, a local independent weekly newspaper, or another outlet. Let your ideas to raise the level of discourse.

You can develop your ideas (and strengthen your social network) by sharing your drafts with the people you meet at these seminars. Even if you don't care about advancing the ideas you love, you should also write regularly because it is excellent practice for your professional life. I've been writing for a long time, but I haven't written as frequently and regularly as I should have. Also, it has taken a very long time to develop anything resembling proficiency. Nevertheless, some of my favorite wisdom on the subject comes from a chapter title in D.N. McCloskey's short volume Economical Writing: "fluency can be achieved through grit." Or, as 1986 Nobel Laureate James Buchanan once said it a little more bluntly and a little less poetically, "keep your a** in the chair."

There is value in writing that goes beyond personal development. If I remember correctly, Milton Friedman once said that he didn't expect his endeavors as a public intellectual to change the world right off the bat. Still, he continued writing in order to keep the ideas intellectually viable in the public eye.

One fear — indeed, a fear I had for a long time — is that writing for general audiences would signal that one is not a "serious scholar" or "serious student." It may be true that popular writing is a substitute for academic writing for some people, but I have been blessed in that I have found public scholarship to be a complement to rather than a substitute for research. Murray Rothbard and Walter Block are among the best examples of scholars who have blended their contributions to public debate with rigorous and active scholarly agendas. Rothbard in particular was one of the leading public expositors of libertarian ideas during the late twentieth century, and he was able to engage the public while also making important contributions to the disciplines of economics and history.

Writing is a road fraught with peril, particularly for perfectionists, but it is a road worth traveling. It has never been easier to contribute to The Conversation. With dedicated effort, you can help elevate the level of discourse and make a real difference.

The Wall Street Journal reports that

U.S. securities regulators will be "relentless" in chasing down market manipulation and fraud, including through rumor-mongering, Securities and Exchange Commission Chairman Christopher Cox promised Congress in separate remarks on Tuesday. In testimony prepared for delivery to the Senate Banking Committee, Mr. Cox said the SEC has active investigations underway into possible stock-price manipulation through "manufacturing false rumors" and short sales. Mr. Cox said in his remarks that such activity may have contributed to the rise in market volatility affecting investors. Cox's remarks didn't identify the targets of the investigations.

In testimony prepared for delivery to the Senate Banking Committee, Mr. Cox said the SEC has active investigations underway into possible stock-price manipulation through "manufacturing false rumors" and short sales. Mr. Cox said in his remarks that such activity may have contributed to the rise in market volatility affecting investors.

Cox's remarks didn't identify the targets of the investigations. The Wall Street Journal reported Tuesday that the SEC has subpoenaed more than 50 hedge fund advisors about short sales and other trades in Bear Stearns Cos., now part of J.P. MorganChase & Co., and Lehman Brothers Inc., although the funds may not necessarily be targets of the probe.

The SEC took the unusual step on Sunday of announcing it would begin an immediate examination, along with industry self-regulatory groups, of controls at brokerage firm, mutual funds and hedge funds, to prevent the spread of false rumors. The announcement came after volatile trading Friday amid fears about prospects for U.S. banks and federal housing-finance giants Fannie Mae and Freddie Mac.

No, this is not the Onion. (Thanks Wladimir Kraus)

I'll be interviewing Mises Institute senior fellow Mark Thornton for my weekly radio program beginning at 2pm ET today. We'll talk about all kinds of things: bank failures, the proposed bailouts of Fannie and Freddie, the price of gold, the drug war, and much more. Mark has written about all these things, so we can cover lots of ground. Listen here. Send in questions here. (Podcast link here; archives here.)

Seeing the dollar lose its value reminds me of growing up in Perú during the heavily inflationary 80s and early 90s. I witnessed the collapse of the currency not once but twice during that period.

Though inflation had been part of life for decades, it was not until the 1980s that the severe problems started.

Thorstein Polleit has an article coming up on MIses.org, and it quotes Mises in a way that is just too interesting not to blog ahead of time, however tacky it might be for me to loot a forthcoming article of some of its best material:

The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about. (Human Action, p. 576)

Sudha Shenoy's article (perhaps her last referred journal article?) in the Indian Journal of Business and Economics (special issue 2007) "investment Chains Through History" is now available on-line here.