Nielsio

The Theory Of Money In The Tradition Of Carl Menger. Part I

Fri, 25 Jan 2013 11:57:00 -0500

Carl Menger, Principles of Economics (1871), Chapter VIII - The Theory of Money:

“In the early stages of trade, when economizing individuals are only slowly awakening to knowledge of the economic gains that can be derived from exploitation of existing exchange opportunities, their attention is, in keeping with the simplicity of all cultural beginnings, directed only to the most obvious of these opportunities. In considering the goods he will acquire in trade, each man takes account only of their use value to himself. Hence the exchange transactions that are actually performed are restricted naturally to situations in which economizing individuals have goods in their possession that have a smaller use value to them than goods in the possession of other economizing individuals who value the same goods in reverse fashion.

… The direct provision of their requirements is the ultimate purpose of all the economic endeavors of men. The final end of their exchange operations is therefore to exchange their commodities for such goods as have use value to them. The endeavor to attain this final end has been equally characteristic of all stages of culture and is entirely correct economically. But economizing individuals, would obviously be behaving uneconomically if, in all instances in which this final end cannot be reached immediately and directly, they were to forsake approaching it altogether.

… He would therefore make the marketing of his commodities either totally impossible, or possible only with the expenditure of a great deal of time, if he were to behave so uneconomically as to wish to take in exchange for his commodities only goods that have use value to himself and not also other goods which, although they would have commodity-character to him, nevertheless have greater marketability than his own commodity. Possession of these commodities would considerably facilitate his search for persons who have just the goods he needs.”

The most basic trade is one where two individuals prefer to have, for their personal consumption, what the other has.

Besides trading what you have for what you would rather have, you can also trade what you have for something you can more easily trade for what you would rather have. This means you trade something that you are not interested in consuming yourself for something you are also not interested in consuming yourself. In deciding what to accept in this kind of trade, you must evaluate all the elements that make it more or less difficult to sell, and at what price, and compare that to the good you are considering trading away.

These elements are:

Its marketability for personal consumption
The ease with which it can circulate between individuals who do not consume it
The costs that are brought about due to its physical makeup

The causal connection between goods

Carl Menger, Principles of Economics, Chapter I-2 - The Causal Connections Between Goods:

“Our well-being at any given time, to the extent that it depends upon the satisfaction of our needs, is assured if we have at our disposal the goods required for their direct satisfaction. If, for example, we have the necessary amount of bread, we are in a position to satisfy our need for food directly.

… The same applies to all other goods that may be used directly for the satisfaction of our needs, ..

But we have not yet exhausted the list of things whose goods-character we recognize. For in addition to goods that serve our needs directly (and which will, for the sake of brevity, henceforth be called “goods of first order”) we find a large number of other things in our economy that cannot be put in any direct causal connection with the satisfaction of our needs, but which possess goods-character no less certainly than goods of first order. In our markets, next to bread and other goods capable of satisfying human needs directly, we also see quantities of flour, fuel, and salt. We find that implements and tools for the production of bread, and the skilled labor services necessary for their use, are regularly traded. All these things, or at any rate by far the greater number of them, are incapable of satisfying human needs in any direct way—for what human need could be satisfied by a specific labor service of a journeyman baker, by a baking utensil, or even by a quantity of ordinary flour? That these things are nevertheless treated as goods in human economy, just like goods of first order, is due to the fact that they serve to produce bread and other goods of first order, and hence are indirectly, even if not directly, capable of satisfying human needs.”

An individual acts to improve his state of being as compared with not acting.

A good is something from the external world that improves the state of being of an individual, as perceived by the individual. A higher order good is something that helps produce the good that can be used by the individual for his perceived improvement.

First order goods are traded on the market because there are individuals who seek them. Because of the demand for first order goods, there is a demand for higher order goods, and this is why they are produced and traded on the market.

The marketability of commodities

Carl Menger, Principles of Economics, VII-2 - The Marketability of Commodities:

”..the obvious differences in the marketability of commodities is a phenomenon of such far-reaching practical importance, the success of the economic activity of producers and merchants depending to a very great extent on a correct understanding of the influences here operative, that science cannot, in the long run, avoid an exact investigation of its nature and causes. Indeed, it is also clear that a complete and satisfactory solution to the still controversial problem of the origin of money, the most liquid of all goods, can emerge only from an investigation of this topic.”

VII-2-B - The different degrees of marketability of commodities:

“The first cause of differences in the marketability of commodities we have thus seen to be the fact that the number of persons to whom they can be sold is sometimes larger and sometimes smaller, and that the points of concentration of the persons interested in their pricing are sometimes better and sometimes less well organized. …

The second cause of differences in the marketability of commodities is thus the fact that the geographical areas within which their sale is confined are sometimes wider and sometimes narrower, and that while there are many trading points within this area at which some commodities can be sold at economic prices, there are only a few such points in the case of other commodities. …

The third cause of differences in the marketability of commodities, then, is the fact that the quantitative limits of the amounts of them that can be sold are sometimes wider and sometimes narrower, and that within these limits the quantities of some commodities brought to market can easily be sold at economic prices, while this is not true of other commodities, or at least not in the same degree. …

The fourth cause of differences in the marketability of commodities is thus the fact that the time limits within which commodities can be sold are sometimes wider and sometimes narrower, and that within these limits some commodities can be sold at economic prices at any time, while others can be sold only at more or less distant points in time.”

Goods vary in difficulty in finding someone to trade them with, for use by them. A good can have a high demand or a low demand for consumption, be sold widely or sparsely, and be sold frequently or infrequently.

VII-2-C The facility with which commodities circulate:

“Some commodities have almost the same marketability in the hands of every economizing individual. … However saleable commodities of this kind may be in the hands of their producers or certain merchants, they lose their marketability altogether, or at any rate in part, if even a suspicion arises that they have already been used or only been in unclean hands. They are therefore not suited in economic exchange to circulate from hand to hand.

Other commodities require special knowledge, skills, permits, or governmental licenses, privileges, etc., for their sale, and are not at all, or only with difficulty, saleable in the hands of an individual who cannot acquire these requisites. In any case they lose value in his hands. … Hence they are as little suited as the commodities of the previous paragraph to free circulation from hand to hand.

Moreover, commodities that must be specially fitted to the needs of the consumer to be useable at all are not saleable in an equal degree in the hands of every owner. … ..especially since these businessmen generally have facilities for fitting the commodities to the special needs of their customers. In the hands of another person, these commodities can be sold only with difficulty and almost always only at a heavy loss. These commodities too are not suited to free circulation from hand to hand.

Commodities whose prices are not well known or subject to considerable fluctuations also do not pass easily from hand to hand. A purchaser of such commodities faces the danger of “overpaying” for them, or of suffering a loss before he has passed them on due to a fall in price. … ..commodities that are subject to violent price fluctuations can circulate easily only “below the market,” since all persons who are not willing to speculate will want to protect themselves against loss. Thus commodities whose prices are uncertain or fluctuate severely are also not well suited to free circulation from hand to hand.

Thus we find that for a commodity to be capable of circulating freely it must be saleable in the widest sense of the term to every economizing individual through whose hands it may pass, and to each of these persons it must be saleable, not in one respect alone, but in all four of the senses discussed above.”

Goods vary in difficulty in finding someone to trade them with, for further trade by them. A good held by different people can attain the same market price or different prices. A good may require a special skill or license to be sold. A good may be subject to considerable fluctuation in price, which makes people who are unwilling to speculate on it only willing to pay a conservative price for it. Technological evolution is one reason why many consumer goods face quickly eroding market prices.

The periodic table of the elements

A Chemist Explains Why Gold Beat Out Lithium, Osmium, Einsteinium

The different chemical elements that exist on earth have a wide range of activity at the current temperatures and pressures that we experience. They react to varying degrees to exposure to air, such as bursting into flames or corroding. Some are a solid, some are a liquid, and some are a gas. Some are dangerously radioactive.

Most chemical elements have found their way to be useful in the production of goods. Because of the different kinds of activity, they bring with them different amounts of costs to keep them useful during transportation and storage. There are differences in the costs of discovering what the element is, and of which purity it is. There are differences in the costs of dividing up or combining an amount of elements.

Speculation

Speculation | Jeffrey Herbener explains Rothbard:

”..when Rothbard theorizes about speculation, we can usefully break his treatment into these categories. He first points out how speculation works for the individual person. The individual person is speculating with respect to the future, about the outcome of his own actions. The second category is speculations that a person makes about the actions of others that he intends to interact with. So this is where we get the market. And within that category he talks about speculation that people make on their own about what others will be doing in the market; predicting what prices will be and so on. And then he talks about speculation by the specialists in the market; they’re predicting on behalf of other people the speculative outcome of even other people’s actions.

Now the way this plays out in Man, Economy, and State is as follows. So we get this first point that all action is speculative, on page 6. Very early on, this is part of the general theory of human action; it doesn’t apply to pricing per se. But Rothbard carries this through to the section on pricings. So when we get to the section on pricings, with demand and supply, he explicitly points this out. He says: ‘Both demand and supply are speculative’. When a person has a preference rank and they say ‘I prefer an Ipad 2 to 500 dollars’, both those entries in the preference rank are speculative. The person doesn’t know before getting the Ipad 2 and using it to attain his end, what the realized value of having the Ipad 2 is. He doesn’t know until he gives up the 500 dollars, what exactly the opportunity cost is that he foregoes in the future.

So speculation is in the very formation of demand and supply. He builds this into his pedagogy when he develops his presentation of demand and supply with the total stock, total demand analysis. So here he’s not just trying to show that prices must, of necessity, be determined just by preferences, but he explicitly brings out the speculative element in that presentation.

So the conclusion from this, of course, that he arrives at, is that prices themselves, both the level of prices in markets, and changes in prices that come through shifting demands and supplies, both of these things are speculative. Prices themselves are not like facts of nature; they’re results of human action that are based upon speculation.”

Reality is incredibly complex. In order to attain our ends, we must make predictions about the future and the effects of our possible actions, and choose among them.

A price is an exchange ratio of a trade that took place between two people. A price is the result of a bidding process, which involves two or more people. A bid is based on an individual’s goals, his understanding of the world, and his predictions about the future, all of which are changing as time goes by.

Conclusion

An economy is made up of individual seeking their personal goals. For this, they require goods, most of which are produced by others. In a monetary exchange, an individual trades away something he does not intend to use for another thing he does not intend to use. This means he must consider the value of the good to other people, which relates to how the good in the future can help other people attain their goals.

Menger emphasizes this point of a money good as a consumer or producer good in the appendix.

Carl Menger, Principles of Economics, Appendix J - History of Theories of the Origin of Money:

“I refer to the observation that the character of money as an industrial metal often completely disappears from the consciousness of economizing men because of the smoothness of operation of our trading mechanism, and that men therefore only notice its character as a means of exchange. The force of custom is so strong that the ability of a metal used as money to continue in this role is assured even when men are not directly aware of its character as an industrial metal. This observation is entirely correct. But it is also quite evident that the ability of a material to serve as money, as well as the custom on which this ability is founded, would disappear immediately, if the character of money as a material applicable to industrial purposes were destroyed by some accident. I am ready to admit that, under highly developed conditions of trade, money is regarded by many economizing men only as a token. But it is quite certain that this illusion would immediately be dispelled if the character of coins as quantities of industrial raw materials were lost.”

I will discuss issues such as fiat currency, legal tender laws, the regression question, and Bitcoin in Part II.

Libertarians Against Drunk Driving Laws?

Tue, 01 Jan 2013 21:38:00 -0500

Jeffrey Tucker has written an article on the laws and enforcement of driving under the influence of alcohol. He would like to see driving under the influence scrapped as a crime, and believes enforcing rules against reckless driving to be sufficient.

Tucker writes:

“With laws against DUI, what’s being criminalized? Not reckless driving as such. Not aggression against anyone. What’s being criminalized is the chemical make up of the blood in your body. That itself should be no crime. To make having a certain blood content illegal is essentially totalitarian.

But you say that drinking is associated with bad driving. Well, enforce the laws against reckless driving. Many more people drink and drive than drive recklessly. Some people drive even more safely after a few drinks, correcting for their delayed responses. We do this all the time, e.g. after a workout, when we are sleepy, when we are angry, whatever.

[..]

..the law has no business criminalizing associated peaceful behaviors rather than real crimes against person and property.”

Tucker recognizes the legal category of ‘endangerment’. He quotes another author who states that repeated swerving is an example of such. I would agree with that. What Tucker fails to mention is that being able to drive in your lane, at the appropriate speed and following the road rules, is not sufficient for being a safe road participant. Situations arise regularly that require quick, multifaceted, reactions. The danger of these type of situations can also be mitigated, to a large extent, by good observational awareness.

Tucker calls for the enforcement against reckless driving, which is something the state does a very bad job at, and is something they don’t appear to really care much about, or more specifically, is something that is completely impossible for them to accomplish. Public roads are a gargantuan central planning disaster. The roads are not in the right places, they are not evolving as they could be as far as rules and technology, nobody pays for how much they use it, swaths of people are driving who shouldn’t be, and no matter what your professional reputation is you are free to roam any public road in any neighborhood you wish.

Whether driving under the influence causes danger or not is a biological, empirical, and most of all entrepreneurial matter. To argue that the state should manage the roads in one way or the other is a pretense of knowledge, and is not a good position to take for libertarians. The problem of transportation can only be properly approached decentrally, through property rights.

Update:

Jeffrey has written to me:

“Thanks!

Good piece. Like a part two of mine.”

Intellectual Property For Medicinal Drugs?

Mon, 24 Dec 2012 16:39:00 -0500

Medicinal drugs are often named as an example of where intellectual property protection has an advantage for consumers. For example, in a recent video titled ‘End Software Patents’, Alex Tabarrok says:

“In an industry like pharmaceuticals, patents make sense. It costs about a billion dollars to develop the average new drug. But a generic imitation might cost just 50 cents a pill. If innovators are not able to recoup their cost of development, there will be no-one left to innovate. But does every innovative idea need a 20 year monopoly?”

He then goes on to give reasons why patents may not be a good idea in other fields. I’d like to analyze the given reason in support for patents for medicinal drugs.

A billion dollars sounds like a high number, but the reason a firm is now willing to spend that is because they expect to have concentrated benefits. If there is no expectation of such concentrated benefits, actors in society may still be willing to spend lower amounts of money and time individually for less concentrated benefits, but attain far-reaching results collectively.

Furthermore, a high stated cost in current-day development of knowledge about medicine (production and its effects), can also lead us to question if there are ways that costs can be lowered, through changing the rules of the health-care game. Health-care is a highly publicly regulated industry and enjoys rent-seeking on all levels.

Instead of favoring levels upon levels of centrally planned and controlled production of health-care (which patents are part of), why not consider allowing individuals to compete and contract freely, and build their institutions from the bottom-up. Competing drug testers, competing associations of doctors, competing hospitals and best practices, and competing real insurance (not the quasi-welfare ‘insurance’ that exists today). And all would have the freedom to change, set their own standards, and learn from each other. What would that do to the cost of developing new knowledge about drugs, and how it is dispersed?

The health-care industry is in competition with all other industries. If the health-care industry didn’t have much to offer to customers, then people would spend their money elsewhere. One clear shift away from health-care would be prevention. People would spend more resources preventing getting injured and diseases if doctors and hospitals weren’t able to provide what they can today. My point here is that there is such a thing as ‘creating (and maintaining) an industry’.

There are individuals who are directly interested in the continued development of drug (and other medical) research. They are the doctors and the people who want to sell drugs (factories and pharmacies), and also patients. Apart from the creation of the drugs themselves, what is just as important is knowledge about them and how they interact with human biologies. This means in a world without intellectual property, we can expect doctors to form close ties with and fund medical research; most likely through doctor’s associations, which will be required by customers for predictability and accountability.

As we see today, many individuals and institutions are also willing to donate to such causes.

Update:

Alex has written to me:

“Thanks. You may be interested to know that I have written a lot on cutting back FDA regulations to lower the costs of new drugs.

http://fdareview.org/

Cheers

Alex Tabarrok”

Santa Claus: A Tale Of Socialism

Wed, 05 Dec 2012 22:01:05 -0500

My wife was recently told that raising children without the tale of Santa Claus is heartless. The tale is usually presented as reality to trusting young children. What is the tale about?

Santa runs a factory on the North Pole with many ‘happy workers’. He does not partake in the international division of labor. He does not buy from any producers, he does not ship resources from overseas, he does not use any pricing, he doesn’t need producer goods from others, and no electricity or gas.. He is simply able to create everything from scratch in his one factory. Pencils? No problem. Computer tablets with nanometer-scale microchips? No problem either. Santa has an uncanny ability to stay out of trouble for trademark, patent and copyright infringement. In the tradition of Karl Marx, he has a giant beard.

Who are the recipients of all this material wealth? The children who have been ‘good’, as judged by the almighty central planner himself, who knows everything that the children have been up to.

Santa also knows and keeps track of the precise desires of the children. You only have to ask him what you want, and he’ll effortlessly adjust his production schedule, and deliver the goods for millions right on time all on the same day.

The goods are actually provided by the parents, who have to generate excess capital themselves for this kind of spending. The goods they purchase are produced all around the world, through economic cooperation among masses of people. It took the whole of humanity to get where we are now; with continual difficulty for the accumulation of capital goods because of wars and predatory governments.

The reality of production contains many great lessons about peace and cooperation among cultures and peoples. The family unit is also based on economic cooperation, compassion, and mutual benefit. All of this is glossed over and substituted in the Santa Claus myth. People who don’t tell the Santa story to their children may not be heartless and may have better stories to tell to their children.

For Tom Woods: are rights a human construction or do they exist?

Mon, 03 Dec 2012 21:08:00 -0500

In a recent video, Tom Woods brings up secession. He says:

“The question of secession is basically raising this issue: is it possible that the political unit could become so large as to be, even by government standards, dysfunctional?”

[..]

“Why would it be that the number of square feet in the United States is like a heaven-sent number? Like ‘it’s this many square feet; and if you want it to be slightly fewer square feet then there’s something wrong with you..’

The union is supposed to be a practical thing. It’s supposed to be a means to an end; not an end in itself. The union is not something we’re supposed to get down and worship, or wave incense before.. It’s a practical thing and yet the hysterics about secession.. the hysterics who have been criticizing people who consider this idea, are treating the union as if it were an object of religious veneration. This is bizarre and creepy.”

If the union is to be evaluated according to means and ends, then what about the states themselves, and then what about (libertarian) property rights? Mises and Hazlitt understood property rights as (the culmination of) chosen means by specific individuals for the achievement of their personally desired ends.

In an earlier video, ‘Where Do Rights Come From?’, Tom said:

“The fact that we can make this argument from numerous angles, and yet it leads us to the same basic conclusion of the existence of natural rights.. I don’t think that’s a weakness, I think that’s a strength. I think that shows that it’s a truth that, that albeit perhaps from somewhat different angles, we are all approaching.. from different ways.”

It seems like Tom is trying to have it both ways: have rights be something that exists, and (at least at the level of larger political organization) have it be a constructed human means for a human end.

In his video, Tom speaks highly of Rothbard and Hoppe. Both of them have, however, written negatively on Mises’ view of subjective means and ends regarding the rules of society (link 1, link 2).

Tom speaks of ‘treating the union as an object of religious veneration’, but I believe that is the way many libertarians treat rights as.

Jeffrey Herbener and Ralph Raico on Darwinism

Thu, 08 Nov 2012 22:00:00 -0500

In a recent speech titled ‘Legacies of the Great War’, Jeffrey Herbener quoted part of a book review by Ralph Raico:

“Tooley deals deftly with the intellectual and cultural currents of pre-war Europe. Contributing to the proneness to violence were a bastardized Nietzschianism and the anarchosyndicalism of Georges Sorel, but most of all Social Darwinism — really, just Darwinism — which taught the eternal conflict among the races and tribes of the human as of other species.”

On Wikipedia we find:

In Darwin’s day there was no rigid definition of the term “Darwinism,” and it was used by opponents and proponents of Darwin’s biological theory alike to mean whatever they wanted it to in a larger context.

And:

Social Darwinism is an ideology of society that seeks to apply biological concepts of Darwinism or of evolutionary theory to sociology and politics, ..

If Raico was meaning to say that Darwin advocated Social Darwinism, then I offer the reader a written reply by Darwin to eugenicist Francis Galton:

“Though I see so much difficulty, the object seems a grand one; and you have pointed out the sole feasible, yet I fear utopian, plan of procedure in improving the human race. I should be inclined to trust more (and this is part of your plan) to disseminating and insisting on the importance of the all-important principle of inheritance.”

If Raico was meaning to say that the theory of evolution teaches “the eternal conflict among the races and tribes of the human as of other species”, then I’d like to offer the following explanation:

The passing on of genetic information through variation and selection implies the spreading and non-spreading of certain genetic information. It does not however describe a necessary conflict between the people who carry that information. If one sibling has three offspring and another sibling has one offspring, all of them can still cooperate peacefully under the division of labor. Only if one includes the aim that certain information must proliferate at the expense of other information, does one arrive at Social Darwinism.

And as Youtuber Qualiasoup says in his friendly video on evolution:

“Some people feel that an acceptance of evolution implies, or leads inevitably towards, the desire for supremacist control over the breeding of human beings. But recognizing facts about nature doesn’t mean you have any wish to apply them to social policy.. Evolution isn’t an endorsement of eugenics any more than accepting the fact that the females of numerous species kill and eat the males after mating is an endorsement of cannibalism; it’s simply a recognition of reality.”

Update:

Jeffrey has written to me:

“Dear Niels,

Of course, Darwinism doesn’t imply as a logical necessity conflict among the different species of the human race. What Raico and Tooley are pointing out is that influential intellectuals in the 19th century took it to mean just that and the results of their interpretation were harmful to the cause of liberty. Raico and Tooley are recounting what happened in history, not critiquing Darwinism as a system.

Best regards,

Jeff”

I am happy to hear Jeffrey’s clarification on this issue, but I remain unhappy with the way Raico has phrased this.

Rothbard Misunderstood And Misrepresented Mises's Morality

Mon, 15 Oct 2012 20:36:00 -0400

Murray Rothbard in Praxeology, Value Judgments, and Public Policy (1976):

The case of Mises is particularly interesting, not only because he was a leader in the modern Austrian school and in praxeology, but also because he was, of all the economists in the twentieth century, the most uncompromising and passionate adherent of laissez-faire and at the same time the most rigorous and uncompromising advocate of value-free economics and opponent of any sort of objective ethics. How then did he attempt to reconcile these two positions?

Rothbard quotes Ludwig von Mises, from Human Action (1949):

“An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If the economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate.”

Rothbard continues:

Now this is surely an ingenious attempt to allow pronouncements of “good” or “bad” by the economist without making a value judgment; for the economist is supposed to be only a praxeologist, a technician, pointing out to his readers or listeners that they will all consider a policy “bad” once he reveals its full consequences. But ingenious as it is, the attempt completely fails. For how could Mises know what the advocates of the particular policy consider desirable? How could he know what their value scales are now or what they will be when the consequences of the measure appear?

Mises says ‘if you want result p and not result g, then measure a is bad for you’. This doesn’t require Mises to know who supports p or g to make such a pronouncement.

Rothbard:

[..]

All sorts of such possibilities exist, and none of them is compatible with the assertion of Mises, as a value-free economist, that all supporters of price controls—or of any other government intervention—must concede, after learning economics, that the measure is “bad.” In fact, once Mises conceded that even a single advocate of price controls or any other interventionist measure may acknowledge the economic consequences and still favor it, he could no longer call any of these measures “bad” or “good” or even “appropriate” or “inappropriate” without inserting into his economic policy pronouncements the very value judgments that he himself held to be inadmissible as a scientist of human action.

If a person is aiming at shortages, and favors price controls because of it, then Mises would not call it bad for that person. Rothbard seems stuck in the idea that a measure either is or is not bad. Mises’ point is that the words good and bad are only meaningful in the context of subjective value. And because of subjective value, this leaves a large common ground for advocacy of laissez-faire, when an individual is aiming at the same things we are but misunderstands the consequences of certain policies or societal rules.

Mises:

“Liberalism, in its 19th century sense, is a political doctrine … As a political doctrine liberalism (in contrast to economic science) is not neutral with regard to values and ultimate ends sought by action. It assumes that all men or at least the majority of people are intent upon attaining certain goals. It gives them information about the means suitable to the realization of their plans. The champions of liberal doctrines are fully aware of the fact that their teachings are valid only for people who are committed to their valuational principles. While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness … abundance to poverty. It teaches men how to act in accordance with these valuations.”

Rothbard:

In this second variant, Mises successfully escaped the self-contradiction of being a value-free praxeologist advocating laissez-faire. Granting in this variant that the economist may not make such advocacy, he took his stand as a citizen willing to make value judgments.

[..]

..for Mises the utilitarian .. he was only willing to make the one value judgment that he joined the majority of the people in favoring their common peace, prosperity, and abundance. In this way, as an opponent of objective ethics .. he made the minimal possible degree of such judgments; true to his utilitarian position his value judgment is the desirability of fulfilling the subjectively desired goals of the bulk of the populace.

[..]

They may well decide that it is worth sacrificing a modicum of wealth and efficient production because of the high opportunity costs of not being able to enjoy an alleviation of envy, or a lust for power, or a submission to power, or, for example, the thrill of “national unity, ” which they might enjoy from a (short-lived) economic crisis.

What could Mises reply to a majority of the public who have indeed considered all the praxeological consequences and still prefer a modicum—or, for that matter, even a drastic amount—of statism in order to achieve some of their competing goals? As a utilitarian, he could not quarrel with the ethical nature of their chosen goals: for he had to confine himself to the one value judgment that he favored the majority achieving their chosen goals.

Mises did not favor the majority achieving their goals in all possible situations. Mises subjectively favored peace and prosperity. He was under the impression that the majority also favored peace and prosperity, and this provided a common ground for advocacy of laissez-faire, the unknown ideal for the achievement of peace and prosperity.

Learning How To Think | by AJ

Mon, 08 Oct 2012 18:28:00 -0400

This is a repost of the answer given by AJ to the question: ‘What lessons would you create to teach kids how to think?’.

Learning to thinking clearly is “simply” a matter of unfailingly diligent mental hygiene.

Don’t mix strong emotions with intellectual thinking (this is basic)
Keep your identity small
Identify all the unseen premises
Don’t assume (especially, never assume you can’t understand something)
Hard but indispensible: Avoid the myriad traps that words create through their vagueness - especially equivocation-based errors. This means always relentlessly seek out clearer and clearer definitions for all strategic terms upon which an argument rests.

The master key that unlocks all of the above is to divorce your intellectual thinking from your social signaling and the authority structure of society. This means way more than just demanding sources. Here’s a quote I liked regarding authority:

Authority is so deeply ingrained in our psyches that its effects are extremely subtle. People think they are not submitting to authority if they question what the teacher tells them, but the real trick is much more insidious: there’s an intellectual attitude the teacher has that the students fails to question, or even notice.

It’s not so much only that you believe in black holes, but that you view them as something to believe or disbelieve in the first place. Not so much that you believe a line is made of points, but that you let the constant equivocation among different definitions of “point” slide. It’s not so much that you accept E=mc^2, but that you go along with the reification of the word “energy” without batting an eye.

Even the rebel cannot escape. They rebel against the church, but they never lose the religious thinking habits.

To escape is like peeling away the layers of an onion. First you stop believing in the facts the authority figure is claiming, and you fancy yourself a rebel. Next you reject their theories or school of thought, believing yourself now truly independent. Then you reject their entire endeavor as fundamentally broken and set out on your own, thinking yourself fully free from authority.

Eventually, if you’re lucky, you shake that lingering habit that you learned from the top intellectual charlatans, that of being loose with definitions. Finally you see the authority bound up in how society treats words themselves, realize not to ask what a word means but how it could be usefully defined, stop trying to prove definitions, and even embrace visual explanations when possible.

Though most will find the anti-mainstream physics examples bizarre, similar examples could be made regarding the errors of the statist attitudes of political scientists or mainstream economists. The key is that it is not merely wrong facts you have to watch out for, but the positive social association with careless thinking and language-usage habits that comes from listening to a revered authority figure make a bad argument that sounds very good.

For the child, then, the best way not to get them mired in the bad thinking habits of authorities is probably to not present anyone to the child as an authority; each person must rise or fall on his or her own coherence and clarity of explanation. No teacher or famous dead dude is any better than a random forum poster or a friend on the playground unless they can make a case clearly and have good mental hygiene habits.

Beyond that, all there is to do is let their natural curiosity bloom.

Ludwig von Mises on Science and Morality

Tue, 25 Sep 2012 18:18:00 -0400

Ludwig von Mises was a supporter of the (classical) liberal order of society, but he did not try to use science to prove that it was objectively just or good.

Science has to do with existential propositions: with the “is” and the “is not.” It is only with regard to existential propositions that there can be any question of truth versus falsity.

Value judgments, on the other hand, are not existential propositions and are not subject to proof or disproof.

Value is based on individual human perception. Some like chocolate ice cream, some like vanilla ice cream. Some like to see others suffer and some like to see others thrive.

Society is the pattern that comes about from individuals choosing cooperative means to attain their personally valued ends. If some individuals choose uncooperative means to attain their personally valued ends, they are not acting objectively ‘bad’ or ‘evil’. They are only acting at odds with the subjective ends of other individuals.

In the religious age, the wishes of The Invisible Man were taken as determining right and wrong. In modern day, without such a notion, we can observe the wishes of individuals and see if they are compatible with ours, and attempt to persuade them to act otherwise if they aren’t. The claim that they are acting ‘objectively evil’ is however invariably at odds with the notion of subjective value.

Based partially on: Why Liberalism? | by Daniel James Sanchez (also in video)

David Gordon and the Cash Register Thought Experiment

Fri, 31 Aug 2012 00:04:00 -0400

In ‘What Is Morality? The Ethics of Hazlitt’ (1 June 2012), David Gordon says:

“Suppose, you see an opportunity to steal. Let’s say, you’re in a store and you see the cash register is open and the store owner has just gone to the back, and you can just take the money out.. You have good reasons to think he won’t be able to catch you. So you might say: ‘Well, isn’t this in your immediate interest that you’d be able to get all this money? ..and nobody’s going to catch you.’

But for Hazlitt, it isn’t into your long run interest, because in order for the market.. social cooperation to function, people really have to follow these rules on a fixed basis. They have to have these rules internalized, taught to us, so that we don’t violate them, whenever we think we could get away with it. If we did that then social cooperation would break down.

So it’s in everybody’s interest that we always follow these fixed rules, even though you might think that maybe there are some cases we can get away with it. It isn’t in our interest to just calculate in each case whether you can get away with breaking the rules. What’s in our long-run interest is that we always follow the rules.

Now you might say: ‘Well, aren’t there occasions.. exceptions like famous cases that Kant discusses?’ There’s a murderer knocking on the door and he asks if a certain person he’s trying to murder is in the house, so do you have to answer yes if the person is there; do you have to tell the truth to a murderer? Most people say ‘No, you don’t’. It is an exception to the rule that you’re not supposed to lie. … So you might say: ‘Well, aren’t there some kind of exceptions to these rules?’ But Hazlitt says: maybe there are, but these too can be specified as rules.” [34m15s to 37m15s]

I understand Gordon’s take to mean the following:

Overall, the existence of social cooperation serves our individual interests; it is a means to our ends. However, if analyzed in individual scenarios, we would (with regularity) come up with a different answer, as to whether we anticipate social cooperation to serve our ends. And so, the rational anticipation of means versus ends at the individual level leads to (some or total) disintegration of society, even if these individuals are convinced of Austrian economics. To resolve this, we must act to raise the valuation of social cooperation from a means to an end in itself, in ourselves and in others.

Hans Hoppe and Stefan Molyneux have argued the same point (see here and here): that Austrian egoism leads away from social cooperation.

I’d like to offer a more precise analysis:

If one is convinced of Austrian economics (and prefers health to sickness, abundance to poverty, etc, over the medium to long run), then it is always perceived to be preferential that other people interact through the division of labor and private property. One exception could be for a partner in crime. It is this question of crime for oneself that I now first wish to discuss.

In a market society, where most people are in favor of social cooperation for others, this culminates in an environment where each individual is highly incentivized to act peacefully.

a. b.

Not only are individuals incentivized to refrain from crime, but they stand to gain from acting in those ways (and give off signals) that show social behavior.

Returning to the cash register hypothetical, we are looking at a person with a reputation, that was built up through many years. This person most likely also has a career and prospects for the future. If he does not have an income through production and trade, then he may be relying on friends and family or other institutions who are investing in him. And after this event he has many thousands of purchases (trades) he wishes to make in the future. If he were to take an amount of money, all of this would be put in jeopardy. How much money gained now, that one may or may not get away with stealing, is it worth risking ruining one’s entire future?

Another element in this scenario is that the more money is taken, the higher the risk of being found out. This is because a big amount missing may be spot upon the owner returning, and he can run outside to ask other people about who was in his store. This further lowers the potential gain by stealing.

Gordon stated in his hypothetical that the person knew he wouldn’t be found out, but is that how reality works? How do you know there is no hidden camera? How do you know when the owner returns? How do you know nobody else will walk in? How do you know nobody will recognize you as you walk out? We do not know the future, and have to constantly speculate on it.

People in society are also aware of the possibility of being harmed, and they take action on it if they perceive it’s a real risk. This is one of the functions of the immediate social group of friends and family, which are held intact if those relationships are perceived to be beneficial. People don’t just lend money to strangers, and they don’t tend to leave cash registers open and unmonitored for long amounts of time.

Another aspect is psychic loss and gain: if I am able to thrive peacefully in society, do I really want to gain at the expense of another? And if I get away with it initially, I will have to worry about being found out for a long time. Instead, if I inform the store owner that his cash register was mistakenly left open, I may make a friend.

To conclude: I don’t think that society will break down from economically enlightened individuals thinking through the situations they are in, and how it affects their ends (in either a small society or a complex one). In fact, I think quite the opposite.

In regards to partners in crime: the previous analysis applies to an individual considering crime as well as a group considering crime.

Is The Free Market A Utopia?

Tue, 21 Aug 2012 16:43:29 -0400

Jon Stewart asks:

“If we didn’t have government, we’d all be in hovercrafts, and nobody would have cancer, and broccoli would be ice-cream?”

Libertarians are not against government, they are for economic cooperation. We would like to expand the division of labor in as many areas as possible, and as such we identify government as the main roadblock.

If most people today would become anarcho-libertarians and government would cease to exist, there would be many societal functions that would desire filling, that before had not been allowed to develop into functioning market sectors. Reputation systems, arbitration, contracting, through all the different market sectors, communities, areas and terrains. Private security. Private regulation and inspection. Private education. Private transportation. Private communication. And so forth..

Human action ultimately tries to deal with the challenges presented by nature. Over time, through economic cooperation, savings, risk-taking, competition and continual trial-and-error, we make human life more pleasurable. There is no magic in the free market, but billions of people cooperating and coordinating under private property can produce things for regular consumers that would appear magical to people only a few generations ago.

A Critique of Stefan Molyneux's "Consequentialist arguments don't work"

Thu, 26 Jul 2012 21:03:00 -0400

Benjamin Powell (see some of his videos here) says: ‘I think consequentialist arguments are important to address, because most people don’t have the same burning passion that you all do and some of us in the room do, about abolishing the state; which just doesn’t resonate with them, and they’re scared of a world that they don’t know, and [..]’. [direct link]

Stefan Molyneux responds: ‘I can’t agree with that just because.. there are a couple of things that all economists agree on: minimum wage destroys jobs, tariffs suppress trade.. There are a couple of things that 90% of economists agree on. ..and these arguments have been made for the last 400 years, and we have very high minimum wages, and we have incredibly high tariffs, and we have unbelievable interferences in trade. And everyone knows, when you have free trade you get division of labor, you get .. price mechanism working well, for efficiency, you get all of these great things. Consequentialist arguments don’t work. Economics.. 400 years they’ve been trying to get the free market to work, and we’ve had a less free market now than when they first started. This would be one example of many. Consequentialist arguments don’t work.’ [direct link]

I first want to establish what Molyneux is arguing against. What is a consequentialist argument? It is an argument comprised of the consequence of the action in question. I can look at the consequence of an action in solitary: “If I eat all my marshmallows now, how will I feel?”. I can also look at the consequences of an action done by another person to yet another person: “If Paul stops Roger from using a pattern that Paul used first, how will that affect me?”. This is the category of social rules. In deciding which social rules to support, I take in consideration my goals and all of the effects of those rules, in reality. [more information here, here and here]

Molyneux here wants to make it appear as though there is currently a near unanimous belief about the effects of the different kinds of social rules, but that for some reason, people aren’t putting their support behind it.

On Wikipedia, I did find the following statement: “According to a 1978 article in the American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.” But then it also lists a 2000 survey where “27.9% agreed with provisos, and 26.5% disagreed”. There are actually many different schools of economic thought, with different methods and widely differing conclusions about the effects of different social rules.

The only school who consistently applies the insights from the division of labor and trade, competition and the price mechanism is the Austrian school. This school is considered to be founded in 1871 by Carl Menger with his book (in German) Principles of Economics, where he gives his marginal theory of subjective value as well as its relation to both price formation and the formation of money goods. Before Menger, the French liberal school was quite close to that understanding and the conclusions it leads to. Even though all these people had their influence, they were pioneers and were not suddenly accepted by everyone in their field, let alone by the masses; who as Etienne de la Boetie, Mises and Hoppe have pointed out, are who really determine the course of things.

To contrast, Adam Smith (born in 1723) had a far different belief about economics. He favored the state production of roads, bridges, canals, harbors, coinage, a postal service, hallmarking of gold and silver, quality regulation of wool- and linen cloth, regulation of paper money notes, regulation of bank trades, public and compulsory education, protection of intellectual property, and more.

And if we actually travel back 400 years [1612 on Wikipedia], we find:

April 11 – Edward Wightman, a radical Anabaptist, is the last person to be executed for heresy in England, by burning at the stake in Lichfield.
May 23–May 25 – A Sicilian–Neapolitan galley fleet defeats the Tunisians at La Goulette
July 22 – Four women and one man are hanged following the Northamptonshire Witch Trials in Northampton, England
August 20 – Ten ‘Pendle witches’ are hanged having been found guilty of practising witchcraft in Lancashire, England
August 26 – A Scottish mercenary force is destroyed in Norway at the Battle of Kringen
November 30 – Battle of Swally: Forces of the British East India Company and Portugal engage off the coast of India, resulting in a British victory

I wouldn’t call that much of a free market, certainly not for many around the world.

So what’s actually going on is more nuanced. The world of ideas is in a constant state of flux. Ideas spread and evolve and spread further and evolve further. Since WWII, the West has been relatively peaceful, permitting ideas to flow, and since the dawn of personal computers and the internet (with hyper two-way communication), the evolution of ideas is happening faster than ever before. For example: because religion relies on localism, the internet has been deemed the place “Where religion comes to die” [video].

To show that consequentialism (the kind that I have described here, which is the same kind that Ludwig von Mises and Henry Hazlitt espoused) doesn’t work, there must first have been a more real agreement about economic ideas.

Molyneux (continuing): ‘Consequentialists’ arguments are people’s way of saying “I want to avoid the ethical dimension to your question, so I’m going to pretend it’s about moving stuff and people around”.’

As I have explained above, I understand ethics to be the social rules that I support, which depend on my goals and my understanding of the consequences of social rules. So if we are not talking about my goals or the science of economics, then what dimension is being avoided?

I realize that there are many people who have adopted a sacrificial mentality, where they’ve learned to give up on their own goals for the sake of something external. I wish to help people give up any sort of thinking like that.

Molyneux (continuing): ‘I don’t care about the state; I could care less about the state. I want human beings to recognize that violence is immoral, in all of its forms; not just in the state, but in the family, in parenting, everywhere. Violence is immoral, and it leads to short term gains for a select number of people and long term catastrophes for everyone. I think the consequentialist argument is saying: “I don’t want to face that simple bare bold moral truth: that there’s a gun in the room which we should damn well put down if we want to call ourselves a civilized society.” So I’m not mad at you, I’m just mad at the idea. And, so, people want to avoid that. The argument is so simple: taxation is force. Done.’

‘Gains’ and ‘catastrophes’ are economic consequences.

Also, Libertarianism Is Not ‘No Gun In The Room’. The only political philosophy without a conception of property is pacifism. All other political philosophies, from state communism to anarcho-capitalism, want to use majority social pressure backed by force (guns) to enact their favored conception of property. So the argument does not end there, and it’s misleading to pretend to.

Molyneux (continuing): ‘But people want to create all these complications about, well okay.. but if somebody has a contract with some DRO agency, and that DRO agency has another cross-contract with some other DRO agency and nobody wants to pay for the roads, and maybe there’s defense agen.. ; forget all of that stuff, the violence is immoral. I don’t care who picks the cotton after we end slavery. We just have to keep thundering that slavery is immoral. That’s how these things are won. Nobody said “well, who’s gonna cook, when will women have the right to have jobs?”. That’s not how they won, no, they said “no, we want to be free and equal”. That’s moral and that’s right, and you gotta keep thundering that. I think that’s the route of what we have to go through.’

If a person does not have the insight of the division of labor, nor had the ability to think through many aspects of it, to call them ‘evil’ is nonsensical, and more than likely will cause a person to respond negatively. Why would they support something which they don’t understand has beneficial consequences for themselves and others? To demand to accept such a thing makes the person pushing for that an ideologue. Why not be nice (as opposed to thundering) and try to answer their questions or point them to good resources?

As I said in another article:

Reaching your own ideology has involved a lot of learning and evaluating. People who haven’t arrived at your ideology will likely not have come across the same ideas as you have, nor had the time to evaluate it. It is also possible that they have had different life experiences that made it harder for them to accept your ideology. For both cases, it is important to keep the discrepancies in experiences in mind.

So when you are questioned on your ideas, that means you have an opportunity to tell them something they may have never heard before. If your ideas are good, then they must be able to be transferred in a manner that does not involve pressure or other forms of manipulation.

How to not come off as a cultist

Thu, 28 Jun 2012 23:41:00 -0400

– Show that your project is part of a larger and much older tradition. There is almost no possibility that your ideology is completely new.

Ideas exhibit evolutionary patterns. We discovered ideas from others, that we combined and tweaked. And they also developed their ideas through discovery, combining, and tweaking.

When you point to that tradition, you are communicating: “I learned from these people, and maybe you will find value in them as well”. When you do not make clear reference to your tradition, then others may think you are pretending to have come up with it all yourself, or they may actually believe it.

– Point people to other current authors and resources. Just as we are only the recombiners and tweakers of ideas, each of us are also not the penultimate specialist in all areas of our ideology. Other people today make valuable contributions to our ideology, and so it makes sense to lead others there as well.

– Reaching your own ideology has involved a lot of learning and evaluating. People who haven’t arrived at your ideology will likely not have come across the same ideas as you have, nor had the time to evaluate it. It is also possible that they have had different life experiences that made it harder for them to accept your ideology. For both cases, it is important to keep the discrepancies in experiences in mind.

– Different people understand the same words to mean different things; and that is the only place where meaning lives. This means another person cannot carry a wrong meaning of a word, considering there is no right meaning of a word, only interpretations. If you notice in a discussion that different interpretations of words exist, it can be helpful to explain what you mean by not using that word. This means you try to explain your idea in a way that you think they will be easier able to understand, without demanding that they start using different meanings of words.

– If you claim in one way or the other that you are the bearer of truth, then you are claiming to be infallible. This means that you entirely stop being open to corrections in thinking and that any criticisms can be disregarded automatically. This is the height of cultism.

– In order to demonstrate that you understand that the world of ideas is evolutionary and a collaborative effort, it is important to free-license your content (allowing others to copy and remix without restrictions). This means others can build on what they think you have done well as well as take what they think you have not done well and criticize it, without fear of being impeded by you in case you do not care for their remixes or critiques.

Menger versus Mises and Rothbard on how money works

Thu, 21 Jun 2012 13:15:00 -0400

( A reading of this article on Youtube )

Through Hans Sennholz, I was pointed to the appendix of Menger’s Principles of Economics. I didn’t know about the statement he makes there before, so I’m happy to have found it. Note that the following is in complete contradiction to Rothbard (who followed Mises on money):

Adam Muller discusses the desire of men for the state and thinks that the precious metals bring about this union, giving this as his theory of the origin of money (Versuche einer neuen Theorie des Geldes, Reprint Edition, Wien, 1922, pp. 78ff.). Johann G. Hoffmann (Die Lehre vom Gelde, Berlin, 1838, p. 10) attributes the origin of money again to a contract between men. Michel Chevalier (La monnaie, in Cours d’économie politique, Paris, 1866, III, 5) does the same thing. Samuel Oppenheim’s monograph, Die Natur des Geldes, (Mainz, 1855), is of greater interest, although its importance does not consist so much in a special view of the first origin of money (pp. 4ff.), as in an exposition of the process by which a commodity that has become a means of exchange loses its original commodity character and eventually becomes a mere token of value. Although I must emphatically contradict this opinion, I nevertheless find a clearly expressed thought (or rather an observation) in Oppenheim’s argument which sufficiently explains why we encounter this mistake in the writings of many eminent economists. I refer to the observation that the character of money as an industrial metal often completely disappears from the consciousness of economizing men because of the smoothness of operation of our trading mechanism, and that men therefore only notice its character as a means of exchange. The force of custom is so strong that the ability of a metal used as money to continue in this role is assured even when men are not directly aware of its character as an industrial metal. This observation is entirely correct. But it is also quite evident that the ability of a material to serve as money, as well as the custom on which this ability is founded, would disappear immediately, if the character of money as a material applicable to industrial purposes were destroyed by some accident. I am ready to admit that, under highly developed conditions of trade, money is regarded by many economizing men only as a token. But it is quite certain that this illusion would immediately be dispelled if the character of coins as quantities of industrial raw materials were lost.

Menger recognizes that indirect trade is forward looking, and is a speculation on the future direct uses by individuals. Apples go bad rather quickly, whereas metals do so at a far lesser rate, therefore it makes sense to trade apples for some metal. I will be easier able to exchange the metal for something later, because the metal will still be in a good state, doesn’t lose it’s value if cut in parts, and so on. I am also able to easier exchange it than apples, because people recognize these properties and will therefore also accept it for non-direct use themselves. But the whole scheme relies on the fact that someone in the future actually wants to use the metal directly.

Most Austrians today believe that demand for a good as money raises its demand and thus raises its price. But demand for indirect exchange is not the same as demand for direct use. When you accept something as payment to trade it away later, you are not just a buyer, you are also a seller of the good.

So what happened with Mises and Rothbard to come to such a different conclusion? Related to this, Sennholz points out that Menger was worried about his observation that the purchasing power of the legal tender in his country was higher than the purchasing power of the metal it contained:

He was greatly alarmed by the fact that the guilder’s purchasing power exceeded the metal value of the silver guilder, which to him was an “economic anomality” harboring “the greatest dangers to the Austrian economy.”

That was in 1889. In his Principles of Economics (1871) in his chapter on the origins of money, he was quick to point out the influence of government over money:

Within the boundaries of a state, the legal order usually has an influence on the money-character of commodities which, though small, cannot be denied. The origin of money (as distinct from coin, which is only one variety of money) is, as we have seen, entirely natural and thus displays legislative influence only in the rarest instances. Money is not an invention of the state. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the state.

But if, in response to the needs of trade, a good receives the sanction of the state as money, the result will be that not only every payment to the state itself but all other payments not explicitly contracted for in other goods can be required or offered, with legally binding effect, only in units of that good. There will be the further, and especially important, result that when payment has originally been contracted for in other goods but cannot, for some reason, be made, the payment substituted can similarly be required or offered, with legally binding effect, only in units of the one particular good. Thus the sanction of the state gives a particular good the attribute of being a universal substitute in exchange, and although the state is not responsible for the existence of the money-character of the good, it is responsible for a significant improvement of its money-character.

When something is legislated into being a legal tender, it gives that item value in direct use. At certain specified moments and times, people must be in the possession of it. This explains why those items rise in exchange value over and above what the materials they contain provide in exchange value.

Menger was born in 1840, Mises in 1881 and Rothbard in 1926. Paper currency became much more free-floating in the lives of Mises and Rothbard. They sought to explain the value of pieces of paper by referring to the past, but forgot to think about legal tender laws, which operated in Austria then and to this day.

Recommended resources:

Austrian value derivation theory: Production, Sustainable and Unsustainable | by Daniel James Sanchez
The Economics of Legal Tender Laws (by Jörg Guido Hülsmann)

Request For Donation Subscriptions, And A New Channel

Tue, 27 Mar 2012 07:18:00 -0400

Hello World. My name is Niels van der Linden. I am 31 years of age and from the Netherlands.

I became a libertarian and anarcho-capitalist in 2005. In 2006, I started studying Austrian economics. In 2007, I started posting videos online; which is also the year I created the V for Voluntary symbol.

By now, I have a large library of valuable materials. The two main topics are: economics (how society works), and psychology (how the inner world works).

To get all that together I have put a lot of time, effort, and sometimes money, into creating videos, and editing those of others; which has often required getting their permission and establishing good relations.

Some of the videos that are doing well:

With that experience, I’ve been able to help other content creators as well, and continue to do so.

Another thing I’ve found the opportunity to do was start an Austrian economics subreddit (a subreddit is a forum within the social news website Reddit.com, where the starter of it becomes the moderator). This happened 6 months ago. I have determined its mission as follows:

The goal with this community is to be a place of respectful discussion, where the users feel free to communicate their thoughts, without fear of hostility.

To this end all users are asked to refrain from personal attacks and down putting statements; and instead to be cordial.

This policy (on which I moderate strictly), together with a set of guidelines that keep it usable, have allowed it to flourish. This does require a regular effort on my part to check all of the content and to keep an eye on the mood of the discussions.

(monthly unique visitors has exceeded 10K since January)

The respectful nature of the subreddit has aided in attracting some prominent Austrian scholars and promoters, and we have successfully held Ask-Me-Anything question and video sessions with John Papola, Robert Murphy, Jeffrey Tucker, and more are coming up.

At the current rate, /austrian_economics will surpass 5,000 subscribers before the end of the year.

I also moderate /vforvoluntary and /libertariancomics, and I co-moderate (after being invited) /economics and /unschool.

From 2007 on, I was able to play poker for my income, which has allowed me to do all the things I’ve mentioned. Because of government intervention in the poker market last year, that has become more difficult. What I would really like to do is become full-time dedicated to the cause of understanding political and personal liberty and spreading those ideas; in cooperation with others. I have generated a little bit of income through advertising and links, but (monthly) donations can make it really workable. The more I receive, the more of my time I will be able to spend on it.

I have created a webpage that contains my current plans and ideas regarding content; which I will keep updating. As before, everything I create will be released for free and with a free license. I will publish the amounts (and not the names) I have received in donations. I have been and remain open to all forms of communication: email, skype and in real life.

I have setup a second Youtube channel, where I will be posting the videos of myself from now on, with the aim of getting Youtube partnered.

A bit more information about myself: In the past 3 years I have spent a total of 13 weeks in the United States, traveling to 5 different states where I stayed with libertarian friends and got to learn about their environment and their life. I am in a committed long-term relationship with a fantastic Austro-libertarian girl, who is into economics and psychology as much as I am.

A Critique Of Molyneuvian Ethics (‘universally preferable behavior’)

Sun, 05 Feb 2012 00:27:00 -0500

Universally Preferable Behaviour — A Rational Proof of Secular Ethics, 2007:

“As Hume famously pointed out, it is impossible to derive an ‘ought’ from an ‘is.’ [..] It is true that if a man does not eat, he will die – we cannot logically derive from that fact a binding principle that he ought to eat. If he wants to live, then he must eat.”

Agreed. Value is subjective.

“‘Behaviour’ exists in objective reality, outside our minds – the concepts ‘ought,’ ‘should,’ and ‘preference,’ do not exist outside our minds.

However, the fact that ‘ought’ does not exist within objective reality does not mean that ‘ought’ is completely subjective.”

Either Molyneux is aiming to discuss the science of economics (starting with subjective values and then discovering how to arrive at them) or he just contradicted himself.

“[..] Thus in ethics, just as in science, mathematics, engineering and all other disciplines that compare theories to reality, valid theories must be both logically consistent and empirically verifiable.”

“[..] There are only two possibilities when it comes to moral rules, just as there are in any logical science. Either universal moral rules are valid, or they are not.”

What is a ‘moral theory’? Values are not subjective? Is Molyneux not an Austrian?

This is sounding familiar. Hans Hoppe has argued the same, namely that he wanted to turn ethics into a science, contra Mises. See my critique here: [1].

Universally Preferable Behaviour — A Rational Proof of Secular Ethics, 2007 (continuing):

“‘Universally preferable behaviour’ must be a valid concept, for five main reasons.

The first is logical: if I argue against the proposition that universally preferable behaviour is valid, I have already shown my preference for truth over falsehood …”

Truth is not a behavior.

“… – as well as a preference for correcting those who speak falsely.”

That’s a categorical statement. Preferring to speak up against one case of a perceived falsehood doesn’t mean one universally (always and everywhere) prefers to do so.

“Saying that there is no such thing as universally preferable behaviour is like shouting in someone’s ear that sound does not exist – it is innately self-contradictory. In other words, if there is no such thing as universally preferable behaviour, then one should oppose anyone who claims that there is such a thing as universally preferable behaviour. However, if one “should” do something, then one has just created universally preferable behaviour. Thus universally preferable behaviour – or moral rules – must be valid.”

As above.

This is a variation of Hoppe’s argumentation ethics, and makes the same mistake of substitution. [1]

“How else can we know that the concept of ‘moral rules’ is valid?

We can examine the question biologically as well as syllogistically.

For instance, all matter is subject to physical rules – and everything that lives is in addition subject to certain requirements, and thus, if it is alive, must have followed universally preferred behaviours. Life, for instance, requires fuel and oxygen. Any living mind, of course, is an organic part of the physical world, and so is subject to physical laws and must have followed universally preferred behaviours – to argue otherwise would require proof that consciousness is not composed of matter, and is not organic – an impossibility, since it has mass, energy, and life. Arguing that consciousness is subject to neither physical rules nor universally preferred behaviours would be like arguing that human beings are immune to gravity, and can flourish without eating.

Thus it is impossible that anyone can logically argue against universally preferable behaviour, since if he is alive to argue, he must have followed universally preferred behaviours such as breathing, eating and drinking.”

People who are alive value breathing as a means to their ends, except during underwater contests. What does that have to do with moral rules?

I’ll stop here with the proofs.

Students For Liberty Q&A with Stefan Molyneux - Porcfest 2011 ( http://www.youtube.com/watch?v=hZTuqdqWyao#t=30m17s ):

“The argument from personal well-being leads to statism. Because.. how well did Bill Clinton do from being president? How well is Barack Obama’s income and stature, and retirement…? [..] So in terms of personal well-being, people on the dark side of state power do fantastically. [..] ..the idea of individual benefit leads to the state and leads to people using the state and leads to long-term destruction. Now they would say: ‘But we don’t want that long term destruction’. But human beings don’t think three generations down the road. [..] There is no argument to be made for individual benefit; that’s just pure pragmatism, and utilitarianism… [..] You can’t ask people to sacrifice immediate gain for the sake of long-term costs to strangers they will never meet.”

Hoppe has made the same argument. [1]

The first thing to point out is: If you have nothing to offer a person from which they can perceive to gain in personal well-being (meaning in terms of their personal subjective values, which includes their time-preference), then you are asking them to live a sacrificial life.

Furthermore: if the society I live in would turn free market, that would give me a tremendous opportunity to fulfill my personal values. That is what Austrian economics informs us. Compared with the many dangers to the integrity of society that exist today, and we see that the stakes are huge.

As I said in my critique of Hoppe’s ethics: it’s possible for a person to understand economics and still have such a high time preference to not support free markets, from his own point of view. But there are many people out there for whom the promises of a free market vastly outweigh the benefits of any subsidy. Molyneux mentions effects three generations later, and people they will never meet. But economics operates much faster than that, and effects everybody. And even if most people supported libertarianism for others and subsidies for themselves, that would still lead to a free market.

[1] http://nielsio.tumblr.com/post/16528520459/a-critique-of-hoppean-ethics-argumentation-ethics

A Critique Of Hoppean Ethics (‘argumentation ethics’)

Thu, 26 Jan 2012 13:05:00 -0500

On the Ultimate Justification of the Ethics of Private Property, -Hans Hoppe. (From: The Economics and Ethics of Private Property, 1993 & 2006. Article reprinted from 1988):

“According to Mises there exists no ultimate justification for ethical propositions in the same sense as there exists one for economic propositions. Economics can inform us whether or not certain means are appropriate for bringing about certain ends, yet whether or not the ends can be regarded as just can neither be decided by economics nor by any other science. There is no justification for choosing one rather than another end. In the last resort, which end is chosen is arbitrary from a scientific point of view and is a matter of subjective whim, incapable of any justification beyond the mere fact of simply being liked.”

Is Hoppe not an Austrian? The subjectivity of values is a central theme of Austrian Economics. Furthermore, this begs the question of a justification towards what or whom?

At the level of an individual, ends are not arbitrary. All individuals are different, and what drives them is based on their unique genes combined with their unique life history.

“Many libertarians have followed Mises on this point. Like Mises, they have abandoned the idea of a rational foundation of ethics. As he does, they make as much as possible out of the economic proposition that the libertarian private property ethic produces a higher general standard of living than any other one; that most people actually prefer higher over lower standards of living; and hence, that libertarianism should prove highly popular. But ultimately, as Mises certainly knew, such considerations can only convince somebody of libertarianism who has already accepted the “utilitarian” goal of general wealth maximization. For those who do not share this goal, they have no compelling force at all. Thus, in the final analysis, libertarianism is based on nothing but an arbitrary act of faith.”

Hoppe de-individualizes his analysis again. If person A desires a higher over a lower standard of living for himself, over the medium to long run, then we can argue from his own point of view that it will benefit him if the people besides A act according to libertarian norms, so that it would benefit him to support it.

Take Mises himself, while he was still in Europe. Social cooperation was disintegrating at an astonishing pace. Any degree that he could keep other people away from socialism and towards liberalism would benefit him personally.

From the Economics of Laissez Faire to the Ethics of Libertarianism, -Hans Hoppe. (From: The Economics and Ethics of Private Property, 1993 & 2006. Article reprinted from 1988):

“As Rothbard points out, economic analysis only establishes that laissez faire will lead to higher standards of living in the long run. In the long run, however, one will be dead. Why then would it not be quite reasonable for a person to argue that while one perfectly agreed with everything economics had to say, one was still more concerned about one’s welfare in the short run and there, clearly for no economist to deny, a privilege or a subsidy would be the nicest thing?”

It is possible for a person to be that short-term oriented. It is also possible for a person to have a longer term orientation. The fruits off a pure private capitalistic society materialize quickly. To illustrate: If I were the richest man in the world today, I would give it all up if that would give me a guarantee that the world would embrace pure capitalism.

A parameter of my gain (of which there would be dozens and dozens): I would expect to live longer because of it. I think 20 years of pure worldwide capitalism would far exceed the quality of health care provided to a lower to middle income person compared with the quality provided after 20 years of development under the current conditions to the richest man alive.

Isn’t this what Hoppe himself has encountered? While working for a publicly funded university, he was advocating for pure capitalism; with the knowledge that this wish could end the existence of that very university.

Another thing to point out is the breadth of psychic benefit. The ability to travel, the ability to enjoy communication with new people, increasing one’s understanding of reality through scientific discovery, having the knowledge that the world is cooperating instead of fighting. These are the sorts of things that a free market brings, and to many people (such as myself) they have tremendous value.

Given that I am not the richest man alive, what libertarianism has to offer me is all the much greater.

To reiterate: I argue for libertarianism not because for me it is an end in itself that is disconnected from all my other desires. Libertarianism for me is the means.

On the Ultimate Justification of the Ethics of Private Property (continuing):

“First, it must be noted that the question of what is just or unjust—or for that matter the even more general question of what is a valid proposition and what is not—only arises insofar as I am, and others are, capable of propositional exchanges, i.e., of argumentation. [..]

Second, it must be noted that argumentation does not consist of free-floating propositions but is a form of action requiring the employment of scarce means; and that the means which a person demonstrates as preferring by engaging in propositional exchanges are those of private property.

For one thing, no one could possibly propose anything, and no one could become convinced of any proposition by argumentative means, if a person’s right to make exclusive use of his physical body were not already presupposed. It is this recognition of each other’s mutually exclusive control over one’s own body which explains the distinctive character of propositional exchanges that, while one may disagree about what has been said, it is still possible to agree at least on the fact that there is disagreement.

It is also obvious that such a property right to one’s own body must be said to be justified a priori, for anyone who tried to justify any norm whatsoever would already have to presuppose the exclusive right of control over his body as a valid norm simply in order to say, ‘I propose such and such.’ ”

When person A is communicating with person B, the only things that he momentarily demonstrates as preferring is that A momentarily has enough control over his body to have the conversation, and that B momentarily has enough control over his body to have the conversation. There are many non-libertarian ethical systems compatible with that preference.

Hoppe here substitutes the smallest of freedoms (temporal conditional control) with (what he perceives as) the biggest of freedoms.

I see no inconsistency in the fact itself of a person trying to argue against libertarianism. I would suggest to take on the content of the argument itself. And most of all: I would suggest to study economics and psychology as to present the best case for it, from the point of view of other people’s own thoughts and feelings.

Who else doesn’t share Hoppe’s reasoning?:

Ludwig von Mises [1] [2] [3] [4] [5]

Henry Hazlitt [1] [3]

Harry Browne [6]

David Friedman [7]

Robert Murphy [8]

Daniel James Sanchez [1] [2] [3] [4] [5]

On Youtube:

XOmniverse [9]

Fringe Elements [10]

[1] http://mises.org/daily/5500/Why-Liberalism

[2] http://mises.org/daily/5669/A-Utilitarian-Foundation-of-Morality

[3] http://mises.org/daily/5683/In-Defense-of-Misess-Utilitarianism

[4] http://mises.org/daily/5783/Twos-Company-The-Basics-of-Property

[5] http://mises.org/daily/5790/What-Gives-Rise-to-Society

[6] http://www.fee.org/news/harry-brownes-libertarian-resolutions/

[7] http://daviddfriedman.com/Libertarian/On_Hoppe.html

[8] http://www.anti-state.com/murphy/murphy19.html

[9] http://www.youtube.com/watch?v=Gj9D2mOe0i4

[10] http://www.youtube.com/watch?v=85X9ou_QzAw

Libertarianism Is Not Based On Christianity

Mon, 09 Jan 2012 01:12:00 -0500

Libertarianism is not based on Christianity. That is to say: there are people who base their libertarianism on their Christianity.. but there are also many people who do not base their libertarianism in religion.

“For a group that doesn’t believe in evolution, it’s awfully Darwinian.”
- Jon Stewart, October 27 2011, addressing Andrew Napolitano as a libertarian (“Why is it that libertarians..”)

http://www.reddit.com/r/austrian_economics/comments/ltrg1/jon_stewarts_19_qu..

“I have accepted Jesus Christ as my personal Savior, and I endeavor every day to follow Him in all I do and in every position I advocate.”
- Ron Paul, a well known libertarian who is widely supported by other libertarians.

http://www.ronpaul2012.com/the-issues/statement-of-faith/

Christianity has been used to justify a lot of different things. What you will find, though, is that libertarians, including Christian libertarians, tend to have different economic views.

Some examples:

1. In what way is counterfeit money damaging to society? If a counterfeiter makes a perfect copy that remains unnoticed, then other people are not harmed directly, such as in theft. Instead, others are harmed indirectly because as the extra money is spent and circulates, it drives up prices compared to without the extra money. The people who get that extra money later (or not at all) suffer in their purchasing power while the people who get that extra money earlier gain in their purchasing power. This is known as the Cantillon Effect.

Libertarians observe that these effects happen not only in private counterfeiting but also in public government banking.

http://en.wikipedia.org/wiki/Counterfeit_money#Effect_on_society

http://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_theory

2. Using drugs is —by itself— a peaceful act. For example, It is full well possible for a person to use the psychoactive and recreational drug alcohol without causing harm to others. Libertarians observe that attempting to forcibly prevent others in all cases from drug usage, drug trading and drug creation, causes more harm than good.

But what about drug users who go on the road? Operating a vehicle while using drugs is an added element, which does threaten the safety of others. This is called reckless endangerment. In the case of roads, the solution is for the road owner to set rules for access.

http://en.wikipedia.org/wiki/Endangerment

Such economic insights may lead one to favor private property rights and freedom of exchange (libertarianism) over central planning and collectivism.

What about libertarians who oppose abortion? There are non-religious libertarians who are politically against abortion, but there are also many who favor that freedom, such as myself. As for Christian libertarians: if they are against abortion because of their religion, then they are religious first and libertarian second.

Some examples of non-religious libertarians:

- Ayn Rand, writer of The Fountainhead and Atlas Shrugged.

- Penn Jillette, host and producer of Penn & Teller: Bullshit!.

- Michael Shermer, founder of The Skeptics Society, and Editor in Chief of its magazine Skeptic.

Rules require a ruler?

Mon, 14 Nov 2011 20:06:52 -0500

Suppose there is an island with 8 people on it, who live together peacefully. Now A arrives on the island who hasn’t yet learned the advantages of voluntary cooperation.

A makes a trade with B: A’s bag of sugar for a pair of primitive shoes from B. After A has left, B finds out that the bag contains mostly sand. B has been defrauded.

A number of consequences ensue:

B writes up an account of what happened and gives it to the others on the island. The others on the island now know to be aware of A. They have a high certainty of this claim, because B stakes his reputation on it, and B has always been a trustful member of the society.

The others on the island now no longer give A any leeway. This means that they will not give him a loan or do him any favors. If A wants to trade with anyone he will have to pay upfront in full.

A will have to pay much higher prices because it is riskier for people to deal with a criminal.

A will not be hired because it is too risky to let him have any responsibilities. He may end up costing people more than he can deliver. Or he is only given work for very low pay, as the demand for his labor is extremely low.

He will be encouraged by everyone to pay B back.

A can restore his reputation if he pays back B and demonstrates that he can be trusted again. This can take a while, but all signs of goodwill will allow him more benefits from the society. For example, if he pays back B whatever he can and agrees on a payment plan for the remainder, B can announce this resolution publicly and that way A can get back on the road to recovery.

You can see that in this society, through the use of reputation and sharing of experiences, prevention of crime and resolution are the main goals.

Alternatively, B could consider getting his property back by force. There are risks involved in using force, but he may think it is worth it. B has to consider the consequences for his own reputation. If he acts unreasonable he may end up being treated differently himself by the rest of society.

In either of these cases, this society has no ruler. But it does have rules:

Don’t harm other people or their property.
Respect agreements.
Act proportional.
No person rules another person and..
..there are no taxes.

Price Theory (by LifeIsHowItIs)

Mon, 14 Nov 2011 19:42:00 -0500

There are certain properties that make a good an economic good, or a thing that is able to obtain a price, are

It must exist in scarcity
There must be a human need that the good satisfies
We must have knowledge that it will satisfy that need (oil was for most of human society not an economic good because we lacked the the knowledge/technology to apply it towards use in consumer goods or the production thereof)
We must be able to have command of that good (If there was oil on Jupiter, since we are incapable of harnessing it, it is not a “good”)

People prefer more goods to less goods. The division of labor creates specialization, which means one man doesn’t have to produce everything that he want for himself by himself. This is why we trade.

How prices are determined for economic goods:

Monopoly Producer

Start with two people: a monopolistic producer of a good and a consumer of a good.

Mr. A has one bushel of apples to sell and is the only man in the area that has it. Mr. 1 wants to purchase this bushel of apples.

For this trade to occur and therefore for a price to be established is, Mr. A and Mr. 1 to must a inverse evaluations of goods; that is, Mr. A prefers whatever good Mr. 1 is offering more highly than what he currently possesses and for Mr. 1 has the opposite evaluation, valuing the goods Mr. A is offering more highly than what he currently possesses.

Parenthesis show what an actor would like to own over what they currently do.

Mr. A is willing to give up his bushel of apples for $4 or more.
Mr. 1 is willing to pay $5 or less for a bushel of apples.

Between Mr. A and Mr. 1, there is a $1 price span at which the trade can occur; and if their bargaining power is equal, it will probably settle somewhere in the middle.

The price for one bushel of apples then becomes $4.50 in this trade. In this way, prices are set by both actors in a trade.

We are all familiar with this process as producers. When we sell our houses on the market, or try to sell or mp3 players or any other good on craigslist or ebay, what we have is an asking price. We see the term “or best offer” after houses and products sold in advertisements constantly. Producers set a floor which they will not go below; consumers set a ceiling which they will not go above.

We also know this as employees. Wages are the price set for the good of labor. Although we would be very happy to take a large sum of money for our labor, we are willing to work for $15 because (1) it is the highest price at which we can find a buyer and (2) we value $15 an hour higher than we do other options available to us for the time and energy we will spend working.

This is a very important fact of prices: Producers of any good, even monopolistic producers, cannot unilaterally set prices, although they would like to. If Mr. A would only be willing to give up his apples for $6, then an exchange would not have occurred and therefore a price not established.

Consumer Competition

We can now move to a more complex economy. Lets say Mr. A still will not sell below $4, but there are many buyers of the good. Mr. 1 is still willing to pay up to $5, Mr. 2 willing to pay $6, Mr. 3 willing to pay $8 and Mr. 4 willing only to pay $3.

Again, because Mr. A wants to get the most out of his good he will sell to the highest bidder which is Mr. 3, who is willing to pay $8. He can get a higher price because there are buyers that are willing to pay more; and because there is higher demand. Although all of the other people will not be able to buy the bushel of apples, we see that it goes to the person who is willing to pay the most We experience this directly at auction houses, on ebay, and as buyers of homes. This is the competition of consumers who bid prices up to obtain the goods they consider most valuable.

Marginal Utility

We can also see with a monopoly producer how marginal utility can play a part in how prices are set and how goods spread further into the economy. Marginal utility refers to the phenomenon that each additional unit of a good has less value than the previous one. This is because the first unit of a good goes to the satisfaction of our mostly highly value end; the second unit to the goes to the satisfaction of next most highly valued end; and the third to the satisfaction of our third most highly valued end, etc. Lets say now, instead of having only 1 bushel of apples that he is willing to sell, Mr. A has numerous bushels of apples to sell. And for simplicity sake, all buyers personal preferences of the marginal utility of a good drops at $1 intervals. This means that basket one will sell at $8 to Mr 3, basket two’s highest price it can command is then $7, which Mr. 3 also buys; then the highest price a basket can command is $6, which means both Mr. 3 and Mr. 2 can buy; then it drops to $5, which means Mr. 3, Mr. 2 and Mr. 1 can all obtain baskets of apples. Mr. 4 is only willing to pay $3, at which price the exchange would be uneconomical for Mr. A. Therefore, Mr. 4 will not obtain a bushel of apples. Even a monopolist may allow this to happen depending on what he deems the most profitable use of the good.

That being said, one way a monopolists producer such as Mr. A can keep high prices is to restrict supply. Although this may end up being economically beneficial as a monopolist, once other producers are on the market, reducing the supply of the good will help those who are selling it gain more customers and possibly get a better price, while the person who does the withholding loses out on possible profits, making it no longer a viable option.

Producer Competition

There is competition between producers, which brings prices down. Once other entrepreneurs see the profits that Mr. A is making, they will come into the market and try and get some of this profit. Now, we have Mr. B who is willing to sell what for $9, Mr. C is willing to sell for $4 and Mr. D willing to sell for $2.

As we saw from the fact that producers do not set prices, Mr. B will be unable to sell his product on the market since there is no willing buyer of a bushel of apples at $9. Because Mr. D is willing to sell his apples for only $2, probably because he has found a more efficient way to produce it, most buyers will go to him so they can get the most bang for their buck. This also means that Mr. 4 who was previously unable to economically buy apples can now do so. Once apples hits $2 because of Mr. D producing his crop more efficiently and selling it more cheaply, other producers of this good will have to learn to compete with this price. They can take his same innovations—whether it be better use of land, better use of fertilizer or pesticides, or a more efficient way to gather the crop at harvest time—and bring their prices down in this way or they can come up with new innovations. If they fail to do so, they will be pushed out of the market as producers of apples.

Large profits signify that there was an unmet need of consumers, and entrepreneurs stepped into fulfill this need. The profits those entrepreneurs obtain attract other producers, creating a competitive environment with each producer striving to have the lowest price and the best quality in order to attract more willing buyers. Profits sustaining in an area of production are due to constant innovation between competitors trying to lower their costs and therefore their prices so that they can gain a larger market share. In this way, prices are being drive down, and profits are pushed towards zero.

Resources

For a more in-depth analysis, see:

Carl Menger - The Principles of Economics, Chapter 5: The Theory of Prices ( http://mises.org/etexts/menger/five.asp )
Robert LeFevre - The Fear of High Prices ( http://mises.org/media/1157/The-Fear-of-High-Prices )
Guido Hulsmann - Value, Utility and Price ( http://www.youtube.com/watch?v=NBf60Iue5nQ )
Joseph Salerno - The Determination of Prices ( http://mises.org/media/1726/The-Determination-of-Prices )