In this day and age of easy and equal access to a practically infinite supply of independent information, a serious economic crisis can potentially have intellectually beneficial consequences. It can make people start questioning the "mainstream consensus" on, say, the nature of central banks, ex nihilio credit expansions and fiat money systems. In the best-case scenario, it can lead to the cleansing of a backlog of logically incoherent technocratic experiments with the economy and their replacement with well-tried, commonsensical principles of the monetary free market (notice that this last term is by no means a tautology).
However, what should make one at best cautiously optimistic about the prospects of the above scenario taking place is the fact--most forcefully and succinctly described by Frederic Bastiat--that statism of every kind draws its strength from clientelizing its victims, which always assumes the form of pitting them and their claims against one another. Union leaders, government bond holders, welfare recipients and politically connected bank oligarchs abhor the vision of sovereign debt defaults, so they can be relied on with regard to supporting debt monetization schemes and the resultant unprecedentedly vast inflationary redistribution of fiat monies' purchasing power. Rather than endorsing the commonsensical solution mentioned earlier, which would involve short-term pain for themselves and long-term gain for everyone (except the technocratic coercion wielders), they prefer short-term gain for themselves and long-term pain for everyone. What will be the ultimate nature of this pain--a relatively quick hyperinflationary meltdown or decades of protracted recession interspersed with regularly occurring partial debt defaults of public and private institutions--remains to be seen.
Some say the former would be more desirable insofar as it would vastly speed up the intellectual turnaround necessary to counter the root causes of the current economic woes--i.e., the acceptance of the logically incoherent, inherently unsustainable system of monetary socialism. But then again, did, say, the Germans really learn their Weimar lesson? After all, we should know all too well what the only really infinite thing in this world is.
I myself would (should I already say “will”?) probably look at the unfolding of either of those scenarios with more hope than fear and more relief than gloom. The world of public finance and economic policymaking is already saturated to the brim with irremediable distortions based on decades of magical thinking, of what would be regarded by the 19th Century mainstream of the dismal science profession as “anti-economics.” There can be no more maintaining that economic development is driven by value destruction in the form of spending, consumption and massive indebtedness, rather than by value creation in the form of saving, investment and non-political entrepreneurship. There can be no more claiming that an efficient, sustainable and morally acceptable way to revive a moribund stock market or pay back sovereign debt consists in printing large quantities of colored paper tickets or creating large numbers of virtual bookkeeping entries. There can be no more obstinate chanting that water can run uphill, two plus two can equal twenty-two, and coercive busybodyism can light the way towards unceasing prosperity.
The presently ongoing spectacular unraveling of the institutional edifice grounded in dreams of monetary dictators should be welcomed as a breath of intellectual fresh air, but also as an incentive to intensify spreading the message of commonsense economics in general and sound money in particular. It has never been easier to popularize the logical science of human action (both due to modern technological possibilities and the manifest failure of all the existing alternatives) and it has never been more necessary to make it popularly known. Thus, let us not rest on our laurels in the complacency of “vindicated prophets,” but utilize this great opportunity for mass economic education to the fullest extent possible.
In concluding, let me reflect once again on the central insight of Frederic Bastiat – I believe that a somewhat underappreciated point is that it does not just describe the institutional conditions of a society-wide tragedy of the commons. More importantly, it describes the process whereby institutional coercion makes nominally private property vulnerable to such a tragedy. And there are certainly more and less pernicious forms of such coercion, the level of their respective harmfulness often corresponding to the level of their relative inconspicuousness. Hence, in the present context, Bastiat's most famous assertion needs to be expanded: It is not just the state in general, but fiat money in particular that is "the great fiction through which everybody endeavors to live at the expense of everybody else." Fiction in the most literal and insidious way imaginable.
[Reprinted from Strike-The-Root.com]
Wednesday, February 22, 2012
Saturday, February 18, 2012
Perfection as an (Endless) Discovery Procedure
The most common error made by the critics of theodicy, especially those of a secular millenialist bent: thinking of perfection (or "perfect happiness") as the state of total satisfaction, and thus total inaction, total elimination of purposes and exercises of one's will. "Perfect competition" means no competition. Here, analogously, "perfect humanity" means the obliteration of humanity, the transformation of purposive individuals into blissful vegetables.
Genuine competition is an endless process of prediction, discovery, and adaptation. Likewise, genuine perfection is an endless process of perfecting oneself and one's surroundings - constant dealing with problems, insufficiencies, vices, pains, and catastrophes. It is about endless becoming, not about unchanging being. Otherwise it turns into its own parody.
Genuine competition is an endless process of prediction, discovery, and adaptation. Likewise, genuine perfection is an endless process of perfecting oneself and one's surroundings - constant dealing with problems, insufficiencies, vices, pains, and catastrophes. It is about endless becoming, not about unchanging being. Otherwise it turns into its own parody.
Thursday, February 16, 2012
Some Quotes on Equality and Egalitarianism
"The principle of equality does not destroy the imagination, but lowers its flight to the level of the earth."
- Alexis de Tocqueville
"The worst form of inequality is to try to make unequal things equal."
- Aristotle
"Since nature does not endow all men with equal beauty or equal intelligence, and the faculty of volition leads men to make different choices, the egalitarians propose to abolish the “unfairness” of nature and of volition, and to establish universal equality in fact - in defiance of facts. (...) It is not equality before the law that they seek, but inequality: the establishment of an inverted social pyramid, with a new aristocracy on top — the aristocracy of non-value."
- Ayn Rand
"There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means, as De Tocqueville described it, a new form of servitude."
- Friedrich von Hayek
"A claim for equality of material position can be met only by a government with totalitarian powers."
- Friedrich von Hayek
"While under precapitalistic conditions superior men were the masters on whom the masses of the inferior had to attend, under capitalism the more gifted and more able have no means to profit from their superiority other than to serve to the best of their abilities the wishes of the majority of the less gifted."
- Ludwig von Mises
"An intellectual inferiority of the masses would manifest itself most evidently in their aiming at the abolition of the system in which they themselves are supreme and are served by the elite of the most talented men."
- Ludwig von Mises
"A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both."
- Milton Friedman
"Human life is not some sort of race or game in which each person should start from an identical mark. It is an attempt by each man to be as happy as possible. And each person could not begin from the same point, for the world has not just come into being; it is diverse and infinitely varied in its parts. The mere fact that one individual is necessarily born in a different place from someone else immediately insures that his inherited opportunity cannot be the same as his neighbor’s."
- Murray Rothbard
"The diversity of mankind is a basic postulate of our knowledge of human beings. But if mankind is diverse and individuated, then how can anyone propose equality as an ideal? (...) If each individual is unique, how else can he be made 'equal' to others than by destroying most of what is human in him and reducing human society to the mindless uniformity of the ant heap?"
- Murray Rothbard
- Alexis de Tocqueville
"The worst form of inequality is to try to make unequal things equal."
- Aristotle
"Since nature does not endow all men with equal beauty or equal intelligence, and the faculty of volition leads men to make different choices, the egalitarians propose to abolish the “unfairness” of nature and of volition, and to establish universal equality in fact - in defiance of facts. (...) It is not equality before the law that they seek, but inequality: the establishment of an inverted social pyramid, with a new aristocracy on top — the aristocracy of non-value."
- Ayn Rand
"There is all the difference in the world between treating people equally and attempting to make them equal. While the first is the condition of a free society, the second means, as De Tocqueville described it, a new form of servitude."
- Friedrich von Hayek
"A claim for equality of material position can be met only by a government with totalitarian powers."
- Friedrich von Hayek
"While under precapitalistic conditions superior men were the masters on whom the masses of the inferior had to attend, under capitalism the more gifted and more able have no means to profit from their superiority other than to serve to the best of their abilities the wishes of the majority of the less gifted."
- Ludwig von Mises
"An intellectual inferiority of the masses would manifest itself most evidently in their aiming at the abolition of the system in which they themselves are supreme and are served by the elite of the most talented men."
- Ludwig von Mises
"A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both."
- Milton Friedman
"Human life is not some sort of race or game in which each person should start from an identical mark. It is an attempt by each man to be as happy as possible. And each person could not begin from the same point, for the world has not just come into being; it is diverse and infinitely varied in its parts. The mere fact that one individual is necessarily born in a different place from someone else immediately insures that his inherited opportunity cannot be the same as his neighbor’s."
- Murray Rothbard
"The diversity of mankind is a basic postulate of our knowledge of human beings. But if mankind is diverse and individuated, then how can anyone propose equality as an ideal? (...) If each individual is unique, how else can he be made 'equal' to others than by destroying most of what is human in him and reducing human society to the mindless uniformity of the ant heap?"
- Murray Rothbard
Tuesday, February 14, 2012
Are Human Desires Unlimited or Unsatisfiable?
It is often asserted that "human desires are unlimited", and that this alone makes any concept of persistent economic equilibrium purely hypothetical and imaginary. But is this an accurate picture of human psychology? It would seem to suggest that at any given moment each of us entertains a set of clearly specifiable desires, such as the desire for apples or the desire for iPads, which, upon being satisfied, give way to a new set of this kind, and so on ad infinitum.
It seems to me that it would be more accurate to say that each of us permanently entertains a limited and largely unchanging number of vaguely specifiable desires associated with particular, oftentimes overlapping sensations and values of material, intellectual, moral, aesthetic, or interpersonal nature (power, love, belonging, gratitude, knowledge, the comfort of living space, culinary pleasure, visual pleasure, etc.), the point being that none of them can ever be really satisfied. Thus, as I see it, it is not the case that as the civilization progresses, more and more of our desires are being satisfied, only to give way to new ones, but that our essentially unchanging desires are being satisfied more and more effectively.
This observation, incidentally, appears to me to provide yet another avenue for making a cogent analytical distinction between Hayek's "knowledge problem" and Mises' "calculation problem".
If the "knowledge problem" is to be applicable to genuine concerns of economic theory, it needs to be restricted to what is logically (even if not practically) knowable. Hence, as I see it, it is applicable to the putative central planner's knowledge concerning the supply of consumer goods, producer goods of various orders, and the available technological possibilities (since this kind of knowledge constitutes a finite set of data), but not to his knowledge concerning consumer desires (since, as I argued above, these can be satisfied in a literally infinite number of ways, thus being infinitely translatable into desires for specific consumer goods, and the infinite is necessarily unknowable to any finite mind).
This, in turn, implies that if in a given economy only one will acts with respect to the disposal of producer goods, then, even if the finite mind behind it knows everything that is logically knowable to it, it is still bound to lack any intersubjective benchmark for assessing the extent to which its decisions satisfy the desires of the consuming public as compared with the extent to which they could be satisfied by the decisions of all those who would be eager to acquire the available factors of production and use them in an entrepreneurial manner were it not for the central planner's prohibition.
In other words, the calculation of profits and losses in the free enterprise system allows us to determine how closely we approach a literally infinite horizon. In view of the above, and given that any sufficiently advanced ability is indistinguishable from magic, I guess the reports of the magic of the market have not been greatly exaggerated.
It seems to me that it would be more accurate to say that each of us permanently entertains a limited and largely unchanging number of vaguely specifiable desires associated with particular, oftentimes overlapping sensations and values of material, intellectual, moral, aesthetic, or interpersonal nature (power, love, belonging, gratitude, knowledge, the comfort of living space, culinary pleasure, visual pleasure, etc.), the point being that none of them can ever be really satisfied. Thus, as I see it, it is not the case that as the civilization progresses, more and more of our desires are being satisfied, only to give way to new ones, but that our essentially unchanging desires are being satisfied more and more effectively.
This observation, incidentally, appears to me to provide yet another avenue for making a cogent analytical distinction between Hayek's "knowledge problem" and Mises' "calculation problem".
If the "knowledge problem" is to be applicable to genuine concerns of economic theory, it needs to be restricted to what is logically (even if not practically) knowable. Hence, as I see it, it is applicable to the putative central planner's knowledge concerning the supply of consumer goods, producer goods of various orders, and the available technological possibilities (since this kind of knowledge constitutes a finite set of data), but not to his knowledge concerning consumer desires (since, as I argued above, these can be satisfied in a literally infinite number of ways, thus being infinitely translatable into desires for specific consumer goods, and the infinite is necessarily unknowable to any finite mind).
This, in turn, implies that if in a given economy only one will acts with respect to the disposal of producer goods, then, even if the finite mind behind it knows everything that is logically knowable to it, it is still bound to lack any intersubjective benchmark for assessing the extent to which its decisions satisfy the desires of the consuming public as compared with the extent to which they could be satisfied by the decisions of all those who would be eager to acquire the available factors of production and use them in an entrepreneurial manner were it not for the central planner's prohibition.
In other words, the calculation of profits and losses in the free enterprise system allows us to determine how closely we approach a literally infinite horizon. In view of the above, and given that any sufficiently advanced ability is indistinguishable from magic, I guess the reports of the magic of the market have not been greatly exaggerated.
Sunday, February 12, 2012
State and Corporations - A Perfect Marriage
Corporations need the state, because only the state can, through its coercive interferences in the economy, provide them with grants, subsidies, monopoly privileges, and political contracts, by virtue of which they retain their privileged economic position and their abnormal size.
The state needs corporations, because it can use their existence and their unnatural influence as a permanent excuse for expanding its power and legitimizing such expansion in the eyes of the voting masses who fall for anti-capitalist propaganda (not to mention various gifts that politicians and bureaucrats receive from their grateful corporate allies).
In effect, the more the state grows, the more do the corporations, and vice versa, and so on until the moment when the political-corporate complex bankrupts itself by finally killing the goose that lays its golden eggs - i.e., the last remnants of the free enterprise system.
Unless the masses see things for what they are and reject voluntary servitude.
The state needs corporations, because it can use their existence and their unnatural influence as a permanent excuse for expanding its power and legitimizing such expansion in the eyes of the voting masses who fall for anti-capitalist propaganda (not to mention various gifts that politicians and bureaucrats receive from their grateful corporate allies).
In effect, the more the state grows, the more do the corporations, and vice versa, and so on until the moment when the political-corporate complex bankrupts itself by finally killing the goose that lays its golden eggs - i.e., the last remnants of the free enterprise system.
Unless the masses see things for what they are and reject voluntary servitude.
Saturday, February 11, 2012
10 Reasons Why Voluntary is Good and Coercive is Bad
1. Competitive incentives, which drive down prices and increase quality, can flourish only where property rights are respected and political barriers to entry are non-existent.
2. Ditto for the culture of low time preference, which encourages saving necessary to undertake and carry through sustainable capital investments, which increase the marginal productivity of labor.
3. Ditto for the existence of the market price system, which allows for comparing the profits and losses of engaging in any given business activity, thus enabling the rational allocation of resources from the point of view of consumer sovereignty.
4. Ditto for the existence of a horizontally integrated entrepreneurial system composed of a multitude of independent decision-making units, which allows for very quick and efficient transmission of information relating to specific circumstances of time and place.
5. Every voluntary transaction is necessarily a positive-sum game (both parties gain), while every coercive transaction is at best a zero-sum game (the coerced loses what the coercer gains).
6. It is not just the case that, unlike peaceful agents, coercive monopolies can flourish without producing any goods desired by the consuming public. In fact, they often flourish in proportion to the amount of "bads" they produce, since these provide them with endless justifications for ever further expropriations and intrusions.
7. Every act of coercion involves an implicit recognition on the part of the coercer that he enjoys the same right to free action that he denies to the coerced, thus generating a performative contradiction.
8. Only voluntary actions have moral worth, since every act of coercion reduces the coerced to a tool or a means. Thus, for instance, coercive redistribution of resources is completely bereft of charitable qualities.
9. Voluntary giving creates a culture of benevolence and gratitude. Coercive taking creates a culture of parasitism and resentment.
10. Coercivism is predicated on the threat of involuntary pain, which is an intrinsically undesirable sensation.
2. Ditto for the culture of low time preference, which encourages saving necessary to undertake and carry through sustainable capital investments, which increase the marginal productivity of labor.
3. Ditto for the existence of the market price system, which allows for comparing the profits and losses of engaging in any given business activity, thus enabling the rational allocation of resources from the point of view of consumer sovereignty.
4. Ditto for the existence of a horizontally integrated entrepreneurial system composed of a multitude of independent decision-making units, which allows for very quick and efficient transmission of information relating to specific circumstances of time and place.
5. Every voluntary transaction is necessarily a positive-sum game (both parties gain), while every coercive transaction is at best a zero-sum game (the coerced loses what the coercer gains).
6. It is not just the case that, unlike peaceful agents, coercive monopolies can flourish without producing any goods desired by the consuming public. In fact, they often flourish in proportion to the amount of "bads" they produce, since these provide them with endless justifications for ever further expropriations and intrusions.
7. Every act of coercion involves an implicit recognition on the part of the coercer that he enjoys the same right to free action that he denies to the coerced, thus generating a performative contradiction.
8. Only voluntary actions have moral worth, since every act of coercion reduces the coerced to a tool or a means. Thus, for instance, coercive redistribution of resources is completely bereft of charitable qualities.
9. Voluntary giving creates a culture of benevolence and gratitude. Coercive taking creates a culture of parasitism and resentment.
10. Coercivism is predicated on the threat of involuntary pain, which is an intrinsically undesirable sensation.
Sunday, February 5, 2012
Is Liberty the Only Value That Matters?
“Liberty isn’t the only value” he said, while pointing his gun at my head. - geoif
My response to the question "is liberty the only value that matters for libertarians?" would be the following: no, but it is clearly the most important one, by which I mean that it requires unqualified respect and constitutes a necessary precondition for the realization of any other value.
There can be no justice without liberty, since justice is equality before the (natural) law, and allowing anyone to enjoy his natural rights while violating those of others is the paradigm of unequal treatment. There can be no charity without liberty, since charity involves voluntarily giving away one's own goods, not forcibly extracting them from others and taking a commission for it. There can be no gratitude without liberty, since the feeling of coercive entitlement to someone else's wealth is the very opposite of gratitude. And so on for other values.
Every good deed requires voluntary intention and respect for the voluntary intentions of others. Every act of coercion destroys the moral worth of one's intentions by trampling over the intentions of others, by their instrumental and exploitative treatment, which necessarily constitutes the dehumanization of their owners, the essential features of human beings being free will, purposiveness and self-ownership.
Putting things this way, libertarianism seems to me not only not to exclude values other than liberty, but also - in contrast to every coercive doctrine - to give them the proper respect they deserve - that is, not treat them as excuses for one's envy, lust of power or any other vice in virtue's clothing.
My response to the question "is liberty the only value that matters for libertarians?" would be the following: no, but it is clearly the most important one, by which I mean that it requires unqualified respect and constitutes a necessary precondition for the realization of any other value.
There can be no justice without liberty, since justice is equality before the (natural) law, and allowing anyone to enjoy his natural rights while violating those of others is the paradigm of unequal treatment. There can be no charity without liberty, since charity involves voluntarily giving away one's own goods, not forcibly extracting them from others and taking a commission for it. There can be no gratitude without liberty, since the feeling of coercive entitlement to someone else's wealth is the very opposite of gratitude. And so on for other values.
Every good deed requires voluntary intention and respect for the voluntary intentions of others. Every act of coercion destroys the moral worth of one's intentions by trampling over the intentions of others, by their instrumental and exploitative treatment, which necessarily constitutes the dehumanization of their owners, the essential features of human beings being free will, purposiveness and self-ownership.
Putting things this way, libertarianism seems to me not only not to exclude values other than liberty, but also - in contrast to every coercive doctrine - to give them the proper respect they deserve - that is, not treat them as excuses for one's envy, lust of power or any other vice in virtue's clothing.
Saturday, February 4, 2012
Price Signals - Signalling What and Why?
I must confess that I fail to grasp the import of Hayek's oft-repeated point about "prices communicating information". Hayek says that thanks to the existence of "price signals", a consumer or an entrepreneur need not enquire as to whether the demand for a given good increased or its supply decreased - he simply knows that a rise in its price means that it has to be economized. But why should prices be particularly effective in communicating this kind of information?
Imagine that instead of prices, market participants were to rely on short bits of verbal communication such as: "supply down, demand the same" or "supply the same, demand up". Would such a system work as effectively as the one we are familiar with? No, but not because the relevant information regarding "the specific circumstances of time and place" would not be communicated sufficiently smoothly, but because the form in which it would be communicated would not allow for performing cost-benefit calculations. The usefulness of prices does not stem from the fact that they communicate information (since everything communicates information), but from the fact that they embody consumer choices and entrepreneurial anticipations expressed in the form of intersubjective, numerical exchange ratios.
Sometimes Hayek is more precise and talks about prices communicating "decentralized information". But from the above example it clearly follows that the benefits of decentralization could be utilized in a system without prices as well, even though in their absence those "knowledge benefits" would not translate into economic efficiency. There is no question that quick and reliable transmission of information that results from decentralization is one of the great strengths of the free market economy, but it is logically independent of its other great strength - its reliance on the price system.
Still, it has to be noted that one is of no use without the other - from the catallactic point of view, decentralized information not expressible in terms of prices is as worthless as "prices" issued by a centralized, monopolistic agency.
Many of the points touched upon above were of course made in the dehomogenization debate, but I am not sure whether it specifically addressed the concept of "price signals".
Imagine that instead of prices, market participants were to rely on short bits of verbal communication such as: "supply down, demand the same" or "supply the same, demand up". Would such a system work as effectively as the one we are familiar with? No, but not because the relevant information regarding "the specific circumstances of time and place" would not be communicated sufficiently smoothly, but because the form in which it would be communicated would not allow for performing cost-benefit calculations. The usefulness of prices does not stem from the fact that they communicate information (since everything communicates information), but from the fact that they embody consumer choices and entrepreneurial anticipations expressed in the form of intersubjective, numerical exchange ratios.
Sometimes Hayek is more precise and talks about prices communicating "decentralized information". But from the above example it clearly follows that the benefits of decentralization could be utilized in a system without prices as well, even though in their absence those "knowledge benefits" would not translate into economic efficiency. There is no question that quick and reliable transmission of information that results from decentralization is one of the great strengths of the free market economy, but it is logically independent of its other great strength - its reliance on the price system.
Still, it has to be noted that one is of no use without the other - from the catallactic point of view, decentralized information not expressible in terms of prices is as worthless as "prices" issued by a centralized, monopolistic agency.
Many of the points touched upon above were of course made in the dehomogenization debate, but I am not sure whether it specifically addressed the concept of "price signals".
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