Blogroll Category: Current Affairs

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Milton Friedman and Conservatives: Wrong on Education

Mises Institute - 2 hours 13 min ago
By: Jacob G. Hornberger

Once upon a time, some conservatives used to call for the abolition of the U.S. Department of Education. Lamentably, conservatives today celebrate when a “free-market advocate” like multimillionaire Betsy DeVos is appointed U.S. Secretary of Education, and they get terribly excited when she speaks at conservative conferences.

Meanwhile, even while conservatives continue to pronounce their allegiance to their favorite mantra — “free enterprise, private property, limited government” — they continue to embrace not only public schooling itself but also their favorite public-schooling fix-it program, school vouchers.

Over the years, conservatives have developed various labels for their voucher program: a “free-market approach to education,” “free enterprise in education,” or “school choice.” They have chosen those labels to make themselves and their supporters feel good about supporting vouchers.

But the labeling has always been false and fraudulent. Vouchers are nothing more than a socialist program, no different in principle from public schooling itself.

The term “free enterprise” means a system in which a private enterprise is free of government control or interference. That’s what distinguishes it from a socialist system, which connotes government control and interference with the enterprise.

A voucher system entails the government taxing people and then using the money to provide vouchers to people, which they can then redeem at government-approved private schools.

Does that sound like a system that is free from government control or interference? In reality, it’s no different in principle from food stamps, farm subsidies, Social Security, or any other welfare-state program. The government is using force to take money from Peter and giving it to Paul. That’s not “free enterprise.” That’s the opposite of free enterprise.

Conservatives say that their voucher system is based on “choice” because the voucher provides recipients with “choices.” But doesn’t the same principle apply to recipients of food stamps, farm subsidies, Social Security, and other socialist programs? Sure, the recipient of the loot has more choices because he has more money at his disposal. But let’s not forget that the person from whom the money was forcibly taken has been deprived of choices. After all, after a robber commits his dirty deed, he too has more choices with the money he has acquired. His victim, on the other hand, has been deprived of choices.

In FFF’s first year of operation, 1990, I wrote an article entitled “Letting Go of Socialism,” in which I pointed out that school vouchers were just another socialist scheme, one that was intended to make public schooling work more efficiently.

Imagine my surprise to receive a critique from none other than Milton Friedman, the Nobel Prize-winning economist who is the father of the school voucher program. Friedman leveled his critique in a speech he delivered that was entitled “Say No to Intolerance,” in which he took to task such libertarian stalwarts as Ludwig von Mises and Ayn Rand for adhering to principle.

Interesting enough, Friedman’s speech was recently reprinted in an issue of the Hoover Digest, a premier conservative publication. You can read it here.

Friedman’s critique of my article was nice enough. First pointing out that FFF was doing “good work and making an impact,” he addressed my criticism of vouchers:

But am I a statist, as I have been labeled by a number of libertarians, because some thirty years ago I suggested the use of educational vouchers as a way of easing the transition? Is that, and I quote Hornberger again, “simply a futile attempt to make socialism work more efficiently”? I don’t believe it. I don’t believe that you can simply say what the ideal is. This is what I mean by the utopian strand in libertarianism. You can-not simply describe the utopian solution, and leave it to somebody else how we get from here to there. That’s not only a practical problem. It’s a problem of the responsibilities that we have.

With all due respect to a Nobel Prize winner and a true gentleman, Milton Friedman was wrong on education then, and conservatives who continue to support vouchers are wrong today.

Notice something important, a point that conservatives have long forgotten: Friedman justified vouchers as a way to get rid of public schooling. For him, vouchers were a “transition” device — i.e., a way to get from here to there, with “there” being the end of public schooling.

That’s not what conservatives say today. They justify vouchers by saying that they will improve, not destroy, the public-schooling system. I can’t help but wonder what Friedman would say about that if he were still alive, given that his support of vouchers was based on the notion that it would serve as a way to get rid of public schooling. Would he still support vouchers if he knew that they would save public schooling and make it more efficient?

Why did conservatives end up rejecting Friedman’s justification? They came to the realization that some people would be less likely to support vouchers if they were told that their real purpose was to destroy public schooling. Therefore, to get more people to support vouchers, conservatives shifted Friedman’s justification to the exact opposite of what Friedman was saying. Conservatives began telling people that vouchers, by providing “competition,” would improve the public-schooling system. In fact, voucher proponents today, when pressed, will openly tell people that they are opposed to abolishing public schooling but only want to make it better by providing people with the means (vouchers) to leave the public-schooling system.

Almost 30 years after Friedman leveled his critique at me, there is not one instance of where his system of school vouchers have served as a “transition” to educational liberty. Time has confirmed the point I pointed out almost three decades ago — that school vouchers, no matter how they are labeled, are nothing more than a socialistic program designed to make socialism (i.e., public schooling) work more efficiently.

Friedman and conservatives have been proven wrong on education. There is only one solution to the educational morass in which Americans find themselves: Separate school and state, just as our ancestors separated church and state. Repeal all school compulsory-attendance laws and school taxes and sell off the school buildings. End all government involvement in education, including licensing of schools. Establish a total free-market educational system.

Reprinted with permission from 

Categories: Current Affairs

Reforming Marriage talks at Leicester Cathedral

Anglican Ink - 3 hours 12 min ago

Dean of Leicester reports on Bishop's plea to change marriage to meet evolving cultural circumstances

A Call for “Do-Nothing” Presidents Without Legacies

Mises Institute - 7 hours 13 min ago
By: Richard M. Ebeling
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Some in the news media and editorial page pundits are aghast that many of President Donald Trump’s executive orders and legislative proposals sent off to the United States Congress represent an attempt to undue the presidential “legacy” of Barack Obama.  The question is, why should it be presumed that presidents need to have policy legacies to leave behind after their term in office has ended?

In this particular case, many of those on the political “left” are focused on the proposals coming out of the Trump White House to repeal and replace ObamaCare – the (un)Affordable Care Act – as well as “climate change” legislation and international agreements, land use and mining regulations, and the Iran nuclear armaments deal.

Not All Presidential Legacies are “Equal” in the Eyes of the Pundits

An interesting question is whether the news pundits would be in the same public policy uproar if an immediately preceding president had been a classical liberal or libertarian and had left a “legacy” of having dismantled the interventionist-welfare state, which his successor started to intentionally reverse by once more introducing all the same regulatory and redistributive legislation that had been repealed and abolished.

Would there be the same whew and cry that that a classical liberal president’s “legacy” of a freer society for the American people was being undermined? That it was an attempt to erase the achievements of someone elected “by the people” to the highest political office in the land to move the country in the direction of laissez-faire, and therefore an affront to both that earlier president and the voters who had put him in the White House?

I doubt it, given the political sentiments of many in the media and in academia today. It would, most likely, be hailed as reversing a temporary “reactionary” lapse from the “progressive” policies that were keeping America on the “right side of history.”

This is not to say that what President Trump has proposed or is attempting to implement in any way represents a classical liberal or libertarian agenda. It is quite the opposite, in my view. His planned “legacy” is to Make American Great, Again. But making America great, as Trump perceives it, is for the United States government to direct and guide a great deal of what goes on in America, but just in different ways than those on the “progressive” left.

Fighting Over Whose Presidential Legacy Will be Left Standing

President Trump’s desired “legacy” would be Mercantilist-like trading policies under which the federal government actively influences the patterns and content of imports and exports between the United States and the rest of the world. It would be a legacy of fiscal activism in which the tax code and as well as regulations are used to induce or penalize American businesses about where and for the manufacture of what products private enterprises invest and hire within the United States or in other parts of the world. It would be a legacy of foreign political and military intervention based upon arbitrary presidential judgments concerning the best “art of the deal,” in the context of a mindset that primarily thinks of international affairs in terms of a zero-sum game in which if one nation gains then another must lose in some way.

So all that is at stake in this presidential “legacy” controversy is whose legacy will prevail over the other: Barack Obama’s “progressive” political paternalism for a more “politically correct” America, or Donald Trump’s “Make America Great, Again” political and economic nationalism of domestic and international interventionism?

Let’s remember what is the definition of a “legacy.” Various dictionaries all say that it is something that is passed down by someone who has died to someone or some others who are currently alive or not yet born. It can be money, or real property, or some other inheritance left to a later generation, such as, “the Founding Fathers left behind the legacy of the institutional protection of people’s civil liberties in the form of the Bill of Rights.”

Obsessing over Leaving a Presidential Legacy

Presidents seem to be obsessed with the “legacy” they leave behind. For example, in 1993 a number of newspapers reported that even though it was less than a year as President, Bill Clinton would sit at his desk in the Oval Office and discuss with his advisors what his legacy should be when his time as U.S. chief executive had come to an end.

There is a seemingly inescapable hubris and arrogance on the part of those who run for and win the presidency of the United States. They dream of being the “most powerful man in the World,” and the “leader of the ‘free world’,” and the one with the finger on the “nuclear button” that determines global war or peace, and the “voice of American democracy” for the rest of mankind, as well as the benevolent political “father figure” who offers aid and comfort to the survivors of natural tragedies such as hurricanes or the victims of brutal terrorist attacks or crazy-eyed mass murders who just “snapped.”

How can you be president if you have not left your mark, especially when you know that every schoolgirl and boy will know your name and learn about your presidential accomplishments in their American history books all across the country. You are going to be immortalized. You will be one of America’s political Olympian gods.

Do we not marvel at the ancient Pyramids built by the Egyptian pharaohs (with slave labor, of course)? Do we not remember Roman emperors who left amazing water aqueducts and masterful cobbled roads across Europe that were built thousands of years ago (as their means of maintaining political and military control of their empire) and that are still used in some places today? Or closer to us in time, what about Franklin D. Roosevelt, whose New Deal “saved capitalism” from its own self-destruction during the Great Depression and who then went on to “save the world” from Adolph Hitler in a global alliance with two other bigger-than-life political Olympians – Winston Churchill and Joseph Stalin (the latter, of course, a bit of a mass murderer in his own right)?

Those are the type of “big shoes” to fill and match for any winner of the ultimate political prize in the United States. So presidents have to think “big” about their time in office. But what does thinking “big” really mean in our political day and age? It means doing something to the American people in the name of doing something for those same people. It means imposing political programs and projects on the citizens of the United States in the name of making America “socially just” or nationalistically “great again.”

Presidential Legacies are Imposed on Everyone

It means using the power of the United States government to remold and rearrange the social, economic and cultural affairs of either large segments of the population or (more ambitiously) the entire country as a whole. Lyndon Johnson thought “big” when he was in the White House with his “Great Society” wars on “poverty,” and on “illiteracy,” on “racism,” in addition to fighting an actual war to stop “communist dominos” from falling in Southeast Asia at the cost of 55,000 American lives and possibly one million Vietnamese. (See my article, “LBJ’s Great Society as Hubris of the Social Engineer”.)

Presidential legacies, therefore, mean government planning and control over the decisions and destinies of large numbers of people. Big presidential legacies mean fewer and smaller legacies pursued by the individual men and women living and working in society. Presidential legacies require confining people within the dreams and plans of the politicians sitting in the White House, in place of the dreams and plans of the multitudes of citizens, themselves, as a free people.

Presidential legacy building is part of America’s version of government central planning. The larger a president’s legacy in the form of regulations, controls, redistributions and prohibitions –regardless of their reason and rationale by the specific occupant of the White House at any particular time – the less there is of as much room for our own individual plans and peaceful cooperative activities with others.

Presidents presume to know better, implicitly claim to be wiser, and presumptuously assert a greater concern with “righting social wrongs” than the individual members of society as we go about their associative interactions with others. There has been no president in my lifetime, and long before that, who did not represent the type of person that Adam Smith warned us about long ago in The Wealth of Nations (1776) when he said that such presidential-type ambitions “would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”

So what should be the horizon of planned accomplishment for anyone who wins appointment by the people to hold the position of President of the United States for four or eight years? I would say: To uphold and perform the duties and responsibilities specifically assigned to the presidency under a strict reading of the U.S. Constitution.

Presidents Should Only Do What the Constitution Requires

The President serves as Commander-in-Chief of the armed forces, but may not declare or make war without the consent of the Congress. With the advice and consent of the Senate, he may enter into treaties with our countries. He nominates various federal judgeship positions, including the Supreme Court, to the Senate for their affirmation or decline. He is to deliver a periodic State of the Union report to the Congress, and may suggest legislation to the Congress, but which the members of Congress are not obligated to consider, vote on or approve. And except for a few amplifications and modest enumerated extensions of such duties and responsibilities, that essentially is all the President of the United States is supposed to do under the Constitution.

In a government that was limited to the actual enumerated duties and functions assigned to the respect three branches of federal authority in the Constitution, the President of the United States would have little to do with the types of “legacy” matters that nowadays dominate the minds of those in the White House.

He should not be wielding either a phone or a pen to take executive domestic policy-making powers into his own hands involving the life, liberty and property of the American citizenry. He is not supposed to be sending off members of the armed forces to far away places to fight in undeclared wars, or training the military forces of other countries and thereby intervening into the internal affairs of other nations; or ordering the use of unmanned drones to undertake military attacks in other parts of the world (and sometimes without the permission of the countries in question) and, thereby, arbitrarily deciding who lives and who dies and what is “acceptable” human collateral damage.

The president is not supposed to be the a coercive domestic paternalist telling Americans how to live their lives, and he is not supposed to be the global policeman enforcing his own notions of international “good behavior” on the rest of mankind.

Calling For “Do-Nothing” Presidents

In other words, outside of his limited and enumerated Constitutional duties and responsibilities the chief executive of the United States federal government should be a do-nothing president. No grand “vision” for America, no “lasting legacies” to make America “great” or “socially just,” and no “moral crusades” to try to make Americans more “virtuous” or make the rest of the world “more like us.”

By only doing his narrowly defined constitutional tasks and otherwise being as “do-nothing” as possible, the President of the United States would help to leave the road clear and open for each of the estimated 326 million individual Americans to plan, direct and make their own futures, and leave behind whatever may end up being the intended or unintended “legacies” that result from their actions and numerous interactions with many others over their life times.

That is the philosophical heritage, the “legacy,” of the original and traditional “American system.” Government is not to decide what is to be left to future generations, other than upholding the political institutions that preserve a free society as captured in such documents as the Declaration of Independence and the U.S. Constitution.

For all the rest, the individual men and women in the country decide separately what will give each of them meaning, value and purpose to their own lives. And if and when they reflect upon it, they as individuals decide what they might want to leave behind to family and friends or to “society” as a whole as a remembrance of who they were, and the form that their legacy may take on.

Out of the resulting tapestry of intended and unintended individual human legacies emerges the character and quality of the societal cultures that mark off each part of the overlapping and interdependent global humanity that we all share.

It is potentially far richer and more productive for human improvement, in every imaginable way, than when one or a few ambitious human beings dream of creating their political power-based legacies as the straightjackets into which everyone else is to be made to conform and within which they are to be confined.

It is time to turn away from the legacy-leaving “do-something” president and insist upon the constitutionally limited “do-nothing” occupant of that Washington, D.C. public housing project known as the White House.

Originally published by the Future of Freedom Foundation. 

Categories: Current Affairs

Seeking More QE for Japan — Abe Calls Snap Election

Mises Institute - 7 hours 13 min ago
By: Brendan Brown

Opponents of Abe-economics — a policy whose defining characteristic these days is ever more radical monetary experimentation and a creeping but serious deterioration in the public finances — are in despair. Yet again, as in March 2015, the Japanese PM Abe has called a snap election (one year short of a full term with a campaign limited to 3 weeks), this time with the intention of crushing a potential leadership challenge within his party (the LDP) which incidentally could have brought a change in economic policy direction.

PM Abe took a gamble. The established opposition party to the LDP, the DPJ, is weak and indeed in meltdown. But the Party of Hope formed just in the last few weeks by popular governor Koike (the nationalist ex LDP defense minister, previously a television news anchor) could galvanize a protest vote. Opinion polls suggest now that the Abe's LDP will obtain indeed a large majority in the Diet following the October 22 election.

Governor Koike has gained from the corruption scandals beleaguering the PM but she articulates no alternative to Abe-economics. In fact her party’s program supports continuation of the mega-money printing program 

This time, like the last, the ostensible justification which PM Abe has advanced for a snap election is to win voter approval for his decision to over-ride already legislated fiscal discipline. In 2015 the election was called to postpone a looming increase in the consumption tax; this time it is to match that delayed tax increase (scheduled now for 2019) with a boost to social spending. 

The fact that such a rolling back of fiscal tightening is indeed saleable to a doubting public fully aware of the weak public finances is due to long-term interest rate markets having ceased to exert any constraint. They have become dysfunctional in consequence of monetary radicalism — now extending to the Bank of Japan (since September 2016) pegging long term interest rates at zero. 

Destroying Market Signals

How could there be such dysfunctionality?

After all, Paul Volcker said that he quickly learnt as Fed chief that markets are more powerful than the Fed. So how has Abe’s Bank of Japan been able to essentially shutter the signaling function of long-term rate markets?

There is no Abe black magic here Rather, the non-conventional policy instruments which are now embedded in the 2-per-cent inflation targeting regime have been remarkably effective in paralyzing markets. Monetary policy has destroyed effectively the signals and more fundamentally the decentralized information gathering process about conditions of demand and supply for loan capital which would operate in a free market under a sound money regime.

Yes, the long-term US rate market still seems to have some signaling function — at least regarding the stage of the economic growth cycle. It is dubious, though, whether long-run inflation danger registers in any meaningful way. 

The boldest Don Quixote would be cautious about leading a vigilante attack on complacency in the US long-term rate market. He would fear being run over by the next stampede of the bulls into the long-maturity Treasury market when the present episode of global asset price inflation enters its crash stage. Meanwhile, the desperate hunters for yield fleeing the negative rate income deserts in Europe and Japan have in many cases lost rationality. And the stories about these hunters excite many speculative traders around the world to bet on their continuing weighty presence.

What to Expect In the Future

Many investors suspect a new high-inflation era will arrive eventually. But they are in no hurry to make an early exit through the gates of the long-maturity US fixed rate market. Even when inflation heads higher, the Federal Reserve and other central banks will proceed glacially with official rate increases. They will cite forecasts of lower inflation ahead.

Policy normalization is not set to occur in the form of a sudden shrinking of the monetary base and a restoration of a free market in short and long-term rates. Until this returns to a normal proportion of the money supply and re-assumes zero interest bearing form there is absolutely no prospect of the Federal Reserve or any other central bank abandoning discretionary control of short-term rates where each 25bp move is Big News in favor of market determination.

Long-term Japanese government bonds, in contrast to Treasuries, have absolutely no attraction to global yield seekers — except sometimes as hedged into dollars to produce an attractive spread over Treasuries. The secret of the Abe government’s power to suppress the long-term rate at zero is having the Bank of Japan step up its purchases of long-maturity government bonds (JGBs) to such an extent as to induce some existing holders to sell. (In effect the BoJ is buying more bonds via money printing than are being issued to fund the current general government deficit). There is widespread reluctance, especially on the part of institutional holders, to shed JGBs on which they are still collecting coupons at significantly positive rates even though their price will fall in the approach to maturity.

True, global speculators could take a massive bear position. But shorting Japanese government bonds has the reputation for being the “widow’s trade.” Even so, It is not clear how at long-term rates of zero there is much anymore to lose. The fiscal arithmetic is daunting. A general government deficit now running at around 5% of GDP when the net total of government debt is at 135% and the gross total at 250% (two thirds of the difference being government loans of dubious worth) is daunting. If interest rates were to return to normal levels, the deficit together with servicing costs would balloon. 

Some bond bulls may have convinced themselves that inflation in Japan will never rise from the present officially reported rate of under 1 % per annum — citing all the flawed forecasts in recent years. Yet basing inflation expectations in the long-run on past inflation behavior is a form of irrationality. 

Yes, the natural rhythm of prices has been downwards due to globalization, especially economic integration of Japan and China, alongside the digital technology revolution. But at some stage those disinflation forces are set most likely to weaken . Whenever that happens there is every reason to believe that the monetary and political environment in Japan will not halt the rise of reported inflation. Abe’s tool of snap elections to crush a key and divided opposition has emerged as a key weakness in Japanese democracy.

Categories: Current Affairs

Apparently Brexit isn't a problem for venture capital

Adam Smith Institute - 12 hours 12 min ago

Much has been made of the manner in which as we leave the European Union we'll leave behind all those lovely things the EU does for us. Something that's true, obviously, but we'd also like to know whether this is important.

For example, there are various EU funds which invest in varied things and we'll not be able to tap those funds:

 Draper Esprit has backed two venture capital firms that missed out on EU funding after the UK issued its formal notification to leave the bloc, as part of a new strategy of investing in funds as well as companies. Draper, a publicly listed venture capital firm, has committed money to Seedcamp and Episode1, seed funds that back early-stage start-ups. They are the first of 20 investors to which Draper plans to commit $100m over the next five years. The move is a sign that UK investors are attempting to fill the large hole left by a pause in funding from the European Investment Fund following the UK’s Article 50 notification in March.

We think that's rather interesting. The EU isn't providing the funds but private capital is. That would mean that the EU provision in the first place was simple crowding out. That is, if government doing something stops the private sector doing it, there is no argument in favour of the government doing it in the first place. In the absence of that intervention it would still get done.

Precisely that - this applies to only this instance of course but it would be interesting to see how far this is true of other matters - the private sector manages this unadorned means that not having the EU doing it is trivially unimportant. And all of that before we point out that the UK has long been a net contributor, meaning that even if the intervention were necessary it would be more efficient for the UK to do it itself, rather than paying into a common pot and getting less than 100% of contributions back.

Categories: Current Affairs

Coming of Age with Murray

Mises Institute - Mon, 16/10/2017 - 19:45
By: Hans-Hermann Hoppe
Hoppe and Rothbard at Jekyll Island in 1992

[The audio version of Professor Hoppe's keynote address presented at the Mises Institute's 35th Anniversary celebration in New York City on October 7, 2017, can be heard here.]

I first met Murray Rothbard in the summer of 1985. I was then 35 and Murray was 59. For the next ten years, until Murray’s premature death in 1995, I would be associated with Murray, first in New York City and then in Las Vegas, at UNLV, in closer, more immediate and direct contact than anyone else, except his wife Joey, of course.

Being almost as old now as Murray was at the time of his death I thought it appropriate to use this occasion to speak and reflect a bit on what I learned during my ten years with Murray.

I was already an adult when I first met Murray, not just in the biological but also in the mental and intellectual sense, and yet, I only came of age while associated with him — and I want to talk about this experience.

Before I met Murray I had already completed my Ph.D. and attained the rank of a Privatdozent (a tenured but unpaid university professor), the same rank incidentally that Ludwig von Mises once held in Vienna. Apart from my doctoral dissertation (Erkennen und Handeln), I had already completed two books. One, (Kritik der kausalwissenschaftlichen Sozialforschung) that revealed me as a Misesian, and another, about to be published in the following year, (Eigentum, Anarchie und Staat) that revealed me as a Rothbardian. I had already read all of Mises’s and Rothbard’s theoretical works. (I had not yet read Murray’s voluminous journalistic work, however, which was essentially unavailable to me at the time.) Thus, it was not my personal encounter with Murray, then, that made me a Misesian and Rothbardian. Intellectually, I was already a Misesian and Rothbardian years before I ever met Murray personally. And so, notwithstanding the fact that I am myself foremost a theoretician, I do not want to speak here about the grand Austro-libertarian intellectual edifice that Mises and, in his succession, Rothbard have handed down to us, or about my own small contributions to this system, but about my long personal experience with Murray: about the practical and existential lessons that I learned through my encounters with him and that turned me from an adult to a man who had come of age.

I moved to New York City, because I considered Murray the greatest of all social theorists, certainly of the 20th century and possibly of all times, just as I considered Mises the greatest of all economists, and, with Mises having long gone and out of the picture, I wanted to meet, get to know and work with this man, Rothbard. I still hold this view concerning the greatness of Mises and Rothbard. Indeed, even more so today than 30 years ago. And since then, there has been no second Mises or Rothbard. Not even close, and we may have to wait for a long time for this to happen.

So I moved to NYC knowing Murray’s work, but knowing almost nothing about the man. Remember, this was 1985. I was still writing in longhand and then using a mechanical typewriter, acquainting myself with a computer for the first time only during the following year at UNLV. And Murray never used a computer but stayed with an electric typewriter until the end of his life. There were no cell-phones, there were no emails, no internet, no Google, no Wikipedia, and no Youtube. At the beginning, even fax-machines did not exist. My correspondence with Murray preceding my arrival in NYC, then, was by old, regular snail-mail. Murray expressed his enthusiasm about my wish to meet and work with him and immediately offered to enlist the help of Burton Blumert, and indeed, Burt then was of instrumental help in facilitating my move from Europe to the US. (The wonderful Burt Blumert, owner of Camino Coins, and founder of the original Center for Libertarian Studies that would ultimately be merged with the Mises Institute, was one of Murray’s dearest friends and confidants. He was also a great benefactor and dear friend to me.)

I had seen some photos of Murray, I knew that he, like Mises, was Jewish, that he taught at Brooklyn Polytechnic Institute (subsequently renamed New York Polytechnic University and nowadays Polytechnic Institute of NYU), that he was the editor of the much admired Journal of Libertarian Studies, and that he was closely associated, as its academic director, with the Ludwig von Mises Institute that Lew Rockwell had recently, 35 years ago, in 1982, founded. That was about it.

And so, both unprepared, we met for the first time in Murray’s university office. Here was I, the ‘cool blonde from the North,’ to cite a popular advertisement for bitter tasting northern German beers, young, tall and athletic, somewhat unsociable, dry and with a dry sense of humor, and more on the blunt, sarcastic and confrontational side. Perfect Wehrmacht-material, if you will. And there was Murray: the ‘big-city neurotic,’ to use the German title of Woody Allen’s comedic Annie Hall, a generation older, short and round, non-athletic, even clumsy (except for typing), gregarious and hilarious, never moping but ever joyful, and, in his personal dealings (quite unlike in his writings), always non-confrontational, well-tempered or even tame. Not exactly Wehrmacht-material. Personality-wise, then, we could hardly have been more different. Indeed, we were quite an odd couple — and yet, we hit it off from the start.

Given the long, special relationship between Germans and Jews, especially during the 12-year period of Nationalsocialist Party rule in Germany, from 1933–45, I, as a young German meeting an older Jew in America, had been afraid that this history might become a potential source of tension. Not so. Quite to the contrary.

On the subject of religion itself, there was general agreement. We were both agnostics, yet with a profound interest in the sociology of religion and quite similar views on comparative religion. Yet Murray greatly deepened my understanding of the role of religion in history through his unfortunately uncompleted great work, during the last decade of his life, on the history of economic thought.

Moreover, in our countless conversations, I learned from Murray about the importance of complementing Austro-libertarian theory with revisionist history in order to come up with a truly realistic assessment of historic events and global affairs. And it was I, then, as someone who had grown up in defeated and devastated post-WWII West-Germany with the then (and still) ‘official history’ taught across all German schools and universities of (a) feeling guilty and ashamed of being German and German history and (b) believing that America and America’s democratic capitalism was ‘the greatest thing’ since or even before the invention of sliced bread, who had to revise his formerly still, despite all Austro-libertarian theory, rather naïve views about world affairs in general and US-American and German history in particular. As a matter of fact, Murray made me fundamentally change my rather rosy view of the US (despite Vietnam and all that) and helped me, for the first time, to feel consoled, content and even happy about being German, and to develop a special concern for Germany and the fate of the German people.

To my initial surprise, then, — and ultimately my great and pleasant relief — Murray was quite a Germanophile. He knew and highly appreciated the German contributions to philosophy, mathematics, science, engineering, scholarly history and literature. His beloved teacher Mises had originally written in German and was a product of German culture. Murray loved German music, he loved German baroque churches, he loved the Bavarian beer-garden atmosphere and the from-church-to-beer-garden-we-go tradition. His wife Joey was of German ancestry, her maiden-name being JoAnn Schumacher, and Joey was a member of the Richard-Wagner-Society and a lifelong opera buff. As well, most of Murray’s friends that I would eventually meet turned out to be Germanophiles.

Foremost among them Ralph Raico, the great historian of classical liberalism, who I had hoped to see again at this occasion but who sadly left us forever almost a year ago now. I met Ralph only a few months after my arrival in NYC, at a party held at Murray’s apartment on the upper Westside. I immediately took to his caustic sarcasm and over the years we developed a close friendship. Apart from our many meetings at various Mises Institute events, I still fondly remember in particular our extended joint travels in northern Italy and especially when, at a conference in Milano, sponsored by some friends and affiliates of the once (but no longer) secessionist Lega Nord, some self-proclaimed — who would have guessed that?! — “anti-fascist” demonstrators appeared in front of the conference hotel to denounce us, to our great amusement, as ‘libertari-fascisti.’ Ralph was also the one who introduced me to the revisionist scholarship concerning WWI and WWII as well as the entire interwar period, and it was Ralph, who taught me about the history of German liberalism and in particular its radical 19th century libertarian representatives that had been almost completely forgotten in contemporary Germany.

Incidentally, Lew Rockwell, too, early on showed his Germanophile credentials. When we first met in NYC in the fall of 1985, he drove a Mercedes 190, he then went astray for a few years, driving an American-made pickup truck, but ultimately returned to the fold by driving a Mini-Cooper, produced by BMW.

But above all it was Murray, who taught me never to trust official history, invariably written by the victors, but to conduct all historical research instead like a detective investigating a crime. Always, first and foremost and as a first approximation, follow the money in search of a motive. Who is to gain, whether in terms of money, real estate or sheer power from this measure or that? In most cases, answering this question will lead you directly to the very actor or group of actors responsible for the measure or policy under consideration. Simple as it is to ask this question, however, it is much more difficult and requires often arduous research to answer it, and to unearth, from under a huge smokescreen of seemingly high-minded rhetoric and pious propaganda, the hard facts and indicators — the money flows and welfare-gains — to actually prove a crime and to identify and ‘out’ its perpetrators. Murray was a master in this, and that at a time when you did not have access to computers, the internet and search machines such as Google. And to do this detective’s work, as I learned from Murray, you must go beyond official documents, the MSM, the big and famous names, the academic ‘stars’ and the ‘prestigious’ journals — in short: everything and everyone deemed ‘respectable’ and ‘politically correct.’ You must also, and in particular, pay attention to the work of outsiders, extremists and outcasts, i.e., to ‘disrespectable’ or ‘deplorable’ people and ‘obscure’ publication outlets that you are supposed to ignore or not even know about. To this day, I have heeded, and indeed relished following this advice. Anyone who could see my list of bookmarks of frequently visited websites would likely be surprised, and any establishmentarian or leftist in particular would likely be shocked and shudder in disgust.

With this general perspective and outlook on things, revisionists such as Murray (and myself) are regularly charged, contemptuously, as some nutty conspiracy theorists. To this charge, Murray would typically respond: First, put bluntly and sarcastically, even if one were a certified paranoid this cannot be taken as proof that no one was actually after you and your money. And second and more systematically: Conspiracies are less likely, of course, the larger the number of supposed conspirators. Also, it is naïve to assume the existence of just one big all-encompassing conspiracy run by one all-powerful group of conspirators. But conspiracies, often rival or even contradictory conspiracies, i.e., confidential efforts of various groups of people acting in concert in the pursuit of some common goal, are indeed an ever-present feature of social reality. As any action, such conspiracies can succeed or they can fail and can lead to consequences that were un-intended by the conspirators. But realistically speaking, most if not all historical events are more or less exactly what some identifiable people or group of people acting in concert intended them to be.  Indeed, to assume the opposite is to assume, incredibly, that history is nothing but a sequence of unintelligible accidents. 

Moreover, in learning from Murray about the necessity of complementing Austro-libertarian theory with revisionist history so as to gain a complete, realistic picture of the world and worldly affairs, I also received constant training from him in the art of prudent and judicious judgment and evaluation of people, actions and events. Pure theory allows us to make rather clear-cut judgments of true or false, right or wrong, and effective, leading to the goal intended, or ineffective. But many if not most actions and events provoking or eliciting our judgments do not fall into the category of matters that can be thusly evaluated. We are surrounded, or better still: encircled, by a class of people — politicians and state-agents — that, day-in and day-out, renders and enforces decisions that systematically impact and affect our property and consequently our entire conduct of life without our consent and even against our explicit protestation. In short: we are confronted by an elite of rulers, instead of, in contradistinction, an elite of agents. And confronted with politicians and political decisions, then, our judgment concerns the evaluation of, at best, second-bests. The question is not true or false, right or wrong, effective or ineffective. Rather, it is this: Given that political decisions are per se false, wrong and ineffective, which of these decisions is less false, wrong and effective and comparatively closer to the truth, the right and the good, and which person represents a lesser evil or a greater one than another. Such questions do not allow for a scientific answer, because answering them involves the comparative evaluation of countless immeasurable and incommensurable variables. And in any case, newly discovered facts about the past or future developments may well reveal any such judgment as mistaken. But the answer is also not arbitrary. What is true, right and effective is given, as fix-points, and reasons must be supplied, whether based on logic or empirical evidence, for locating various second-bests as closer or more distant to such points. Rather, judgment-making in matters such as these is a difficult art, much like entrepreneurship is not a science but an art. And just as some people are good at entrepreneurship and others bad, indicated by monetary profits or losses, then, so are some people good at judging political events and actors and others bad, gaining or losing in the reputation as wise and prudent judges.

Murray was of course not unfailing in his judgments. During the late 1960’s and early 1970’s, for instance, he misjudged the anti-war stand of the New Left as more principled than it really was, something that he afterwards readily admitted as a mistake. And I know of at least one, rather personal case, where Joey’s judgment was better and more on the mark than his. This notwithstanding however, I have not encountered anyone of sounder, subsequently vindicated judgment than Murray.    

With this I want to come to the second major lesson I learned during my long association with Murray. While the first lesson in revisionism concerned matters of practice and method, the second lesson concerned existential matters.

Before I met Murray, I knew of course that he was a radical outsider in a predominantly leftist-liberal academia and I expected (and was willing to accept for myself) that this would involve some sacrifices, i.e., that one would have to pay a price for being a Rothbardian, not only, but also in terms of money. But I was quite surprised to realize how high this price was. I knew that Brooklyn Polytechnic was not a prestigious university, yet I expected Murray to occupy there a comfortable, well-paying post. Moreover, at the time I still fancied the US as a bastion and bulwark of free enterprise and consequently expected that Murray, as the foremost intellectual champion of capitalism and the personified anti-thesis to Marx, would be held in high esteem, if not in academia then certainly outside of it, in the world of commerce and business, and accordingly be rewarded with a certain degree of affluence.

In fact, at Brooklyn Polytechnic Murray occupied a small, grungy and windowless office that he had to share with a history professor. In Germany, even research assistants enjoyed more comfortable surroundings, not to speak of full professors. Murray ranked among the lowest paid full professors at his school. Indeed, my German National Science Foundation grant at the time — a Heisenberg scholarship — turned out to be considerably higher than Murray’s university salary (something that I was too ashamed to reveal to him after I had discovered it). And Murray’s apartment in Manhattan, large and filled to the ceiling with books, was dark and run-down. Certainly nothing like the penthouse that I had imagined him to occupy. This situation improved significantly with his move in 1986, at age 60, to Las Vegas and UNLV. While my salary went down there as compared to my previous compensation, Murray’s went sharply up, but was still below 100K, and he could afford to buy a roomy but spartan house. Even as the holder of an endowed chair at UNLV, however, Murray did not have command of any research assistants or a personal secretary.

Yet Murray never complained or showed any bitterness or signs of envy but always plugged along joyfully and pushed ahead instead with his writings. This was a hard lesson for me to learn and I am still having difficulties following it at times.

A propos, Joey and Murray once told me laughingly how, at the time when they were still dating, both had expected the other to be a good catch. Joey, because Murray was Jewish, and Murray, because Joey was gentile — only to then find out that they were both wrong in their expectations.

Moreover, despite his towering achievements as an intellectual champion of free market capitalism, Murray never won any prizes, awards or honors to speak of. That he did not win a Nobel prize in economics was not surprising, of course. After all, the great Mises also did not win it. But in the US alone there existed dozens of institutions — think-tanks, foundations, business associations, research centers and universities — that professed their dedication to free markets and liberty, and yet none of them ever awarded Murray any significant prize or honorary award, all the while they showered people with money and awards who had done little more than to suggest — “daringly” — some incremental reform such as, let’s say, lowering the marginal tax rate from 35% to 30 or cutting the budget of the EPA by some percentage points, or who had simply expressed their “personal love” of “freedom” and “free enterprise” often, loudly and emphatically enough.

None of this fazed Murray in the slightest. Indeed, he expected nothing else, for reasons that I still had to learn.

What Murray realized and I still had to learn was that the most vociferous and ferocious rejection and opposition to Austro-libertarianism would not come from the traditional socialist Left, but rather from these very self-proclaimed “anti-socialist,” “limited government,” “minimal state,” “pro-private enterprise” and “pro-freedom” outfits and their intellectual mouthpieces, and above all from what has become known as the Beltway-Libertarians. They simply could not stomach the fact that Murray had demonstrated with plain logic that their doctrines were nothing but inconsistent intellectual clap-trap, and that they were all, to use Mises’s verdict vis-a-vis Milton Friedman and his company, a “bunch of socialists,” too, notwithstanding their vehement protestations to the contrary. For, as Murray argued, once you admitted the existence of a State, any State, defined as a territorial monopolist of ultimate decision making in every case of conflict, including conflicts involving the State itself, then all private property had been effectively abolished, even if it remained provisionally, qua State-grant, nominally private, and had been replaced instead by a system of “collective” or rather State-property. State, any State, means socialism, defined as “the collective ownership of factors of production.” The institution of a State is praxeologically incompatible with private property and private property based enterprise. It is the very anti-thesis of private property, and any proponent of private property and private enterprise then must, as a matter of logic, be an anarchist. In this regard (as in many others) Murray was unwilling to compromise, or “intransigent,” as his detractors would say. Because in theory, in thinking, compromise is impermissible. In everyday life, compromise is a permanent, and ubiquitous feature, of course. But in theory, compromise is the ultimate sin, a strict and absolute ‘no no.’ It is not permissible, for instance, to compromise between the two incompatible propositions that 1+1=2 or that 1+1=3 and accept that it is 2.5. Either some proposition is true or it is false. There can be no “meeting in the middle” of truth and falsehood.

Here, regarding Murray’s uncompromising radicalism, a little anecdote told by Ralph Raico seems apropos. To quote Ralph:

Murray was someone special. I recognized that fact the first night I met him. It was after the Mises seminar; a buddy of mine and I had been invited to attend, and afterwards Murray suggested we have coffee and talk. My friend and I were dazzled by the great Mises, and Murray, naturally, was pleased to see our enthusiasm. He assured us that Mises was at least the greatest economist of the century, if not the whole history of economic thought. As far as politics went, though, Murray said, lowering his voice conspiratorially: "Well, when it comes to politics, some of us consider Mises a member of the non-Communist Left." Yes, it was easy to see we'd met someone very special.

Unlike Murray, quite a few individuals who had learned essentially everything they ever knew from Murray, in particular his Man, Economy and State, were willing to make such intellectual compromises, and they were richly rewarded for their intellectual “flexibility” and “tolerance.” But that was not Murray! And consequently, he was (and still is) ignored, excluded or denounced by the chieftains of the “limited-government-free-market-industry.” And he was essentially left without any institutional support, as a lone fighter, until the arrival of Lew Rockwell and the Mises Institute.

I experienced this Rothbard-phobia second-handedly, if you will. For as soon as word had gotten out that the new German arrival was Murray’s boy and also appeared rather “intransigent,” I found myself immediately placed on the same blacklists with him. Thus, I had quickly learned a first important real-life lesson of what it means to be a Rothbardian.

Another lesson was in humility. Murray had a huge library, had read and digested an enormous amount of literature and was consequently a humble man. He was always reluctant and highly skeptical to assume or recognize any “originality” claims. “Originality” claims, he knew, are made most frequently by people with tiny libraries and little reading. In distinct contrast, Murray was highly generous in giving credit to others. And he was equally generous in giving advice to anyone asking. Indeed, on almost any conceivable subject, he was prepared, off the top of his head, to provide you with an extensive bibliography. As well, he encouraged any sign of productivity even among his lowliest students.

While I always tried to follow this example, I could not bring myself to go quite as far as Murray did, however. Because I thought and still think that Murray’s humility was excessive, that he was humble almost to a fault. His students at Brooklyn Polytechnic, for instance, mostly engineering majors (or, as Murray described Mises’s students at NYU, “packaging majors”), had no idea who he was, because he never mentioned his own works. They were genuinely surprised to find out from me who their jolly professor was when I substituted teaching Murray’s class while he was out of town. And at UNLV the situation was not much different. While I actively promoted him as his unofficial PR-agent, Murray continued in his self-deprecation. Although he had written on almost any imaginable subject in the social sciences, he would, when he suggested or assigned term-papers to his students, mention his own related writings, if at all, only as some sort of afterthought or upon specific request.

Yet Murray’s extreme modesty had also another, unfortunate effect. When we moved to Las Vegas in 1986, we had expected to turn UNLV into a bastion of Austrian economics. At the time, UNLV’s basketball team, the Runnin’ Rebels, under coach Jerry Tarkanian, were a national powerhouse, always slightly scandalous, but impossible to overlook. We had hoped to become the Runnin’ Rebels of economics at UNLV. Several students had transferred and enrolled at the university in anticipation of such a development. But these hopes were quickly disappointed. Already at our arrival at UNLV the composition of the economics department had significantly changed, and then majority rule, democracy, set in. To balance the Austrian influence, only one year later, the department majority decided, against our opposition, to hire a no-name Marxist. I urged Murray to use his position and reputation to interfere with the university’s higher-ups and prevent this appointment. Except for Jerry Tarkanian, Murray was the only nationally recognized person at UNLV. He held the only endowed chair at the university. We knew the university’s president and provost socially and were on cordial terms with both of them. Accordingly, I believed that there was a realistic chance to overturn the department’s decision. But I could not persuade Murray of his own powers.

After this missed opportunity matters became worse. The department continued to hire anyone but an Austrian or Austrian sympathizer. Our students were mal-treated and discriminated against. The department and the dean of the business college denied me tenure (which decision was overruled by the university’s provost and president, not least because of massive student protests and the intervention of several university donors). The department chairman wrote an outrageous, nasty and insulting annual evaluation of Murray’s professorial performance (upon which the university administration forced the chairman to resign from his position). As a consequence, a second chance for us arose to turn matters around. Plans were developed and were discussed with the provost to split the department and establish a separate economics department in the College of Liberal Arts. This time Murray became involved. But the initial momentum to our advantage had been lost in the meantime, and after the first signs of resistance, Murray quickly resigned and gave up. He was not willing to take off his gloves, and our secessionist project soon fizzled out in defeat.

Only to quickly finish our UNLV saga: After Murray’s death in 1995, I continued working at UNLV for another decade in an increasingly hostile environment. The once protective university administration had changed, and I felt ever more unappreciated and out of place. Even my great popularity among students was used against me, as proof of the “danger” emanating from my teaching. In 2004, I became embroiled in a scandal. In a lecture I had hypothetically suggested that homosexuals, on average, and owing to their characteristic lack of children, had a comparatively higher degree of time-preference, i.e., of present-orientation. A cry-baby student complained, and the university’s affirmative action commissar immediately, as if he had only waited for this opportunity, initiated official proceedings against me, threatening severe punitive measures if I were not to instantly and publicly recant and apologize. “Intransigent” as I was, I refused to do so. And I am certain that it was only this steadfast refusal of mine to beg for forgiveness that, after a full year of administrative harassment, I ultimately emerged victorious from this battle with the thought police, and the university administration suffered an embarrassing defeat. A year later I resigned from my position and left UNLV and the US for good.

Coming back to Murray: Naturally, I was disappointed about the developments at UNLV. But they did not have the slightest effect on our continued cooperation. Maybe Murray had been right and more realistic all along and it was I, who had suffered from too much youthful optimism? And in any case, there was one more important lesson about the larger scheme of things that I still had to learn.

Whereas most people tend to become milder and more ‘tolerant’ in their views as they grow older, Murray grew increasingly more radical and less tolerant over time. Not in his personal dealings, as I already emphasized. In this regard Murray was and remained to the end a ‘softie,’ but in his speeches and writings. This radicalization and increasing ‘intransigence’ came in response to developments in the world of US-politics at large and in particular within the “limited-government-free-market” industry and among the so-called libertarians assembled around Washington D.C.’s Beltway. There, everywhere, a slow yet systematic drift toward the Left and leftist ideas could be observed. A drift that ever since, up to this day, has only further gained in momentum and grown in strength. Constantly, new “rights” were ‘discovered’ and adopted in particular also by so-called libertarians. “Human rights” and “civil rights,” “women rights” and “gay rights,” the “right” not to be discriminated against, the “right” to free and unrestricted immigration, the “right” to a free lunch and free health care, and the “right” to be free of unpleasant speech and thought. Murray demolished all this allegedly “humanitarian” or, to use a German term, this “Gutmenschen” talk as intellectual rubbish in demonstrating that none of these supposed “rights” were compatible with private property rights. And that, as libertarians above all people should know, only private property rights, i.e., the right of every person in the ownership of his physical body and the ownership of all external objects justly (peacefully) acquired by him, can be argumentatively defended as universal and com-possible human rights. Everything except private property rights, then, Murray demonstrated again and again, are phony, non-universalizable rights. Every call for “human rights” other than private property rights is ultimately motivated by egalitarianism and as such represents a revolt against human nature.

Moreover, Murray moved still further to the right — in accordance with Erik von Kuehneldt-Leddihn’s dictum that “the right is right” — in pointing out that in order to establish, maintain and defend a libertarian social order more is needed than the mere adherence to the non-aggression principle. The ideal of the left- or “modal”-libertarians, as Murray referred to them, of “live and let live as long as you don’t aggress against anyone else,” that sounds so appealing to adolescents in rebellion against parental authority and any social convention and control, may be sufficient for people living far apart and dealing and trading with each other only indirectly and from afar. But it is decidedly insufficient when it comes to people living in close proximity to each other, as neighbors and cohabitants of the same community. The peaceful cohabitation of neighbors and of people in regular direct contact with each other on some territory requires also a commonality of culture: of language, religion, custom and convention. There can be peaceful co-existence of different cultures on distant, physically separated territories, but multi-culturalism, cultural heterogeneity, cannot exist in one and the same place and territory without leading to diminishing social trust, increased conflict, and ultimately the destruction of anything resembling a libertarian social order.

If Murray had been ignored, neglected or resented before by the usual suspects, now, with this stand against everything deemed “politically correct,” he was vilified and met with undisguised hatred. The by now only all-too-familiar litany of denunciatory terms followed: Murray was a reactionary, a racist, a sexist, an authoritarian, an elitist, a xenophobe, a fascist and, to top it all off, a self-hating Jewish Nazi.

Murray shrugged it all off. Indeed, he laughed about it. And indeed, to the consternation of the “smear bund,” as Murray referred to the united popular front of his “anti-fascist” detractors, his influence only grew and has continued to grow still further since his death. It may not be widely recognized, but without Murray there would be no Ron Paul as we know him — and I say this without wishing thereby to diminish or belittle Ron Paul’s own, personal role and extraordinary achievements in the slightest —, there would be no Ron Paul movement, and there would be no popular or, as the “smear bund” prefers to say, no “populist” libertarian agenda.

As for me, my own views radicalized, too, along with Murray’s. My Democracy: The God That Failed was the first major documentation of this intellectual development, and if anything, my radical intolerance regarding anything left-libertarian and “politically correct” has been growing still ever since. Almost needless to say that I, too, then have been awarded the same and even a few extra honorary titles by the “smear bund” as Murray (except for the self-hating Jewish stuff). Yet I had learned to shrug all of it off, too, as I had seen Murray do it, and as Ralph Raico had always encouraged and continued to advise me. In addition, remembering a popular German saying helped me: “viel Feind, viel Ehr’.” And indeed, the ongoing success of my annual Property and Freedom Society conference-salon, now in its 12th year, held and conducted in a genuinely Rothbardian spirit, has demonstrated the utter failure of all defamation campaigns directed at me. If anything, they have helped rather than hindered me in attracting an ever larger circle of intellectual friends, affiliates and supporters.

I should add that during the last decade or so, under the wise and strict guidance of my lovely wife Gülçin, I have also made great strides in combining uncompromising intellectual radicalism with personal lovability, even though nature and natural disposition have prevented me from coming anywhere close to Murray in this regard.

I have said far too little here about Lew, and I sincerely apologize. But this I must say: Lew, apart from Murray has been one of the most important people helping me become the man that I am today. And to Murray, who I am sure is watching us today from up high, I say: thank you Murray, you are my hero, “I shall not look upon his like again,” and I hope you are happy with your student. I always felt tremendous joy when you told me “great Hans, Attaboy,” and even if I can’t hear you right now, nothing would give me greater pleasure than if you said it again right now up there, where the kings of thought are gathered.


















Categories: Current Affairs

Gary Cohn is Concerned about Wall Street Clearinghouses – Blockchain is Already Fixing it

Mises Institute - Mon, 16/10/2017 - 17:45
By: Tho Bishop

Gary Cohn, chief economic adviser to the President, voiced concern over the weekend about risk posed by Wall Street clearinghouses that became systemically important following the 2008 financial crisis.

As Bloomberg reported:

As “we get less transparency, we get less liquid assets in the clearinghouse, it does start to resonate to me to be a new systemic problem in the system,” Cohn, director of the White House’s National Economic Council, said at a banking conference in Washington on Sunday. 

Cohn isn’t the first to raise the risk. JPMorgan Chase & Co. and BlackRock Inc. have argued for years that clearinghouses pose their own threats, shifting risk to just a handful of entities. The Treasury Department’s Office of Financial Research has warned that clearinghouses used for derivatives trades can be vulnerable and potentially spread risks through the financial system.

While it is worth noting that this is another example of how the government’s response to a crisis they created made the economy as a whole more fragile, the good news for Mr. Cohn is that there is an exciting technological breakthrough that allows people to transparently move money without relying upon third parties to guard against shady counterparties: blockchain.

Even better news, blockchain technology is already being utilized to help with the very problem that Mr. Cohn has identified. As the New York Times reported this year:

The company that serves as the back end for much Wall Street trading — the Depository Trust and Clearing Corporation, or D.T.C.C. — said on Monday that it would replace one of its central databases, used by the largest banks in the world, with new software inspired by Bitcoin. The organization, based in New York, plays a role in recording and reporting nearly every stock and bond trade in the United States, as well as most valuable derivatives trades.

IBM, which has been making a big push into blockchain technology, will be leading the project for the D.T.C.C. and aims to have it fully functioning by early next year.

“This is a real tangible step into what could be a very different future for Wall Street,” Michael C. Bodson, the chief executive of the D.T.C.C., said in an interview.

Helping de-escalate the risk of third party exchanges is, of course, simply one of the many potential applications for blockchain in an increasingly complex global economy. The openness to this technology is one of the many interesting narratives at play as Donald Trump begins to take advantage of his historical opportunity to shape the Fed.

It is worth noting that Cohn, who is reported to still be on the short list of potential candidates to serve as Federal Reserve Chairman when Yellen’s tenure is up next year, was president of Goldman Sachs when the bank became one of the first major financial institutions to invest in Bitcoin. While serving in the Trump Administration, Cohn has worked alongside Director of the Office of Management and Budget Director Mick Mulvaney – who had a reputation as “the Bitcoin Congressman” as a member of the House.

Of course, the downside of crypto-savvy central banks is that the resulting policy tends to lead to bankers trying to harness its potential to increase their own power, at the expense of truly decentralized applications like Bitcoin. After all, no matter how technology may change, government and central planners' need to control does not.

Categories: Current Affairs

Just ignore the people who say Uber is a monopoly

Adam Smith Institute - Mon, 16/10/2017 - 17:31

Here’s a piece in the Financial Times that claims that Britain has lots of monopolies and that a state that believes in “private business and free markets … would bust more trusts”. The FT has a long-running vendetta against Uber (about half of its Alphaville blog is devoted to posts about it being financially unviable, overvalued, exploitative, and useless) and this adds to that pile.

Its big mistake, in my mind, is to confuse market share with market power. Market power means a firm being able to price its products above the level that would emerge in a competitive system – it requires quite a bit of speculation about what the ‘true’ competitive price should be, but maybe you know it when you see it (if this seems a bit loose to you, read Ford’s article to see the sort of approach he takes). Market share is what portion of a given market’s total revenue goes to a particular firm. 

The two are related, but different, and if you get them mixed up you’ll go awry. That’s because a firm that has a large market share might still be in a precarious position and need to price its products highly competitively to maintain its share of the market. Tesco, for example, has a large share of the grocery market – around 28%. But it has been forced to engage in a fierce price war with stores like Aldi and Lidl over the last ten years, cutting prices by 1.8% in the past year despite positive CPI inflation throughout that period. Ryanair is by some measures the largest airline in Europe, but who thinks that would stay the same if it suddenly raised its prices to British Airways levels?

The shakiness of using market share as a stand-in for market power is made clear by some of the other markets Ford says are ‘concentrated’ – mobile networks, groceries and banking. None of these really pass the smell test. You can get mobile plans that give you nearly unlimited 4G, minutes and texts for £14/month, and the big firms are investing heavily in 5G. The grocery market, as already discussed, has been getting more competitive over the last decade, and my guess is that the biggest barrier to this is the difficulty of Lidl and Aldi in getting planning permission for new stores. I admit that I am not even convinced that banking, dysfunctional in so many other ways, is uncompetitive when it comes to current accounts for ordinary consumers – many accounts will literally pay you to move and switching is easy (I’ve done it three times in the past two years). The biggest problem, as with the energy market, is that most people do not realise the benefits and easiness of switching.

So when Ford writes that “the real scandal here is the way Uber has been allowed to hoover up the London taxi market” (although he doesn’t even have data about Uber’s market share in London), the question is whether this actually harms consumers or not – and it having a large-ish market share is not proof of that. It seems very difficult to claim that Uber has any market power yet – it is barely profitable and may subsidise large parts of its service. And consumers mostly seem to love it – for example, 850,000 people have signed the petition to ‘Save Uber in London’ – which is evidence that it has not harmed them yet.

Ford doesn’t actually claim that Uber is harming consumers, merely that it might do so in future once it’s established a dominant position. But pre-emptive trust-busting is a strange idea. It asks us to prosecute businesses solely on the basis that, someday, they might do something wrong. 

Got that? You’ve come up with a great idea that gets people from point A to B quicker than anyone else, and you’re making a profit while doing it. You’re making money and you’re winning customers – indeed you’re so popular that some Financial Times writers think you need to be stopped now, before someday you raise your prices. They don’t have any evidence that you can raise your prices without new competitors coming in, and they don’t have any evidence that you’ve done anything to harm consumers yet. But they don’t like the cut of your jib. We don’t punish people because they might break the law some day, and we should ignore newspaper columnists who want to prosecute businesses because they might act monopolistically someday too.

Some say that Uber’s business model only works if it has a monopoly and that it must be engaged in ‘predatory pricing’ – it intends to keep prices artificially low until all rivals are eliminated, after which it will raise prices. The case in favour mostly rests on the fact that Uber is loss-making – why would they burn money if they didn’t expect to have some powerful position in the future? 

Firstly, Uber does not seem to need to exploit consumers to make a profit. It is (apparently) profitable in London and the United States already without causing harm to consumers, and although it might like to have a monopoly until it does there is no case for prosecuting it as one. Lots of businesses, tech firms and brick-and-mortar firms like restaurants alike, lose money for many years before they become profitable.

But maybe getting bigger gives Uber market power. This idea relies on the concept of network effects – when a business gets better the more customers it has, so the market gives a big advantage to whichever product manages to get a critical mass of users first. Think Facebook, for instance, where a large part of the appeal is simply the fact that everyone you know is on it.

Does, or could, Uber benefit from network effects in a monopolistic way? Drivers can (and in cities with multiple Uber-like services, do) have multiple ride-hailing apps running at the same time, so ‘lock-in’ even on a single evening seems unlikely. Consumers are betters off the more drivers there are, and more consumers means more drivers, but the costs of using two or more different services (Uber or black cabs, say) are very low and, in practice, the benefits of having the choice are very high to an individual. 

For the claims of predatory pricing to work (and I stress that Ford does not say this, I am making the best possible version of his argument for him here) Uber would have to have some unchallengeable position once the minicab and black cab drivers went out of business. The fact that Lyft and other services are looking to get into the London market long after Uber has established itself as the dominant app suggests that, if present at all, network effects are not very strong. If someone can show me an example of a single city where Uber, once eliminating more expensive rivals, has raised prices above what its rivals’ prices used to be, I’ll change my mine. 

Maybe Uber really is fundamentally unviable, as Ford and others at the FT insist. A lot of investors disagree, but if they're wrong, then Uber is a giant voluntary wealth transfer from investors to consumers and drivers. Who cares?

In the end, I'm pretty sceptical about armchair entrepreneurs who claim to know how Uber can and can't make money. Anyone who claims to know what these markets will look like in the future is selling baloney. Unless they knew ten years ago that taxis, of all things, were going to be a huge market for tech, why should I listen to them now? The best thing we – and regulators – can do is wait and see how Uber and similar firms end up making money, and wait and see whether they're hurting consumers in doing so.

There’s one point that Ford makes that I think does stand up, though. Regulatory barriers to entry to the London taxi market may be holding competition back – not only are would-be rivals to Uber, like Taxify, being kept out by the difficulty of getting a license, even Uber itself faces the risk of being regulated out of existence in London. Removing barriers to competition to prevent monopolies is smart. Breaking up firms that are giving consumers a good deal isn't.

Categories: Current Affairs

Why do people care about inequality?

Adam Smith Institute - Mon, 16/10/2017 - 17:24

We are often told that inequality is a big problem. Perhaps it doesn't itself slow economic growth, cause social and political instability, or set off damaging "path dependence". Perhaps CEO pay is actually reasonable! Whether or not that's true, the argument runs, people just dislike it, and since preferences are what matter, we should cut it. But it turns out people don't really dislike inequality, they just dislike unfairness.

Or so say three recent papers—two economic experiments and a review in Nature: Human Behaviour. The first (pdf) finds that people in lab experiments have a tendency, when given the option, to burn others' income when inequality rises. As an egalitarian might predict, it is low income subjects who are the burners, and high income subjects who are the burnees. But burning is substantially higher when the inequality is down to unfair rule tweaking, and lower when it's down to extra effort.

So far, so arcane, an egalitarian might argue. Fair enough. But a second study, this time conducted in India, and accepted for publication in the QJE, finds precisely the same thing. This time the authors conduct a month-long experiment with manufacturing workers. People don't like inequality when it doesn't seem to come from unequal productivity: they don't turn up for work and they work less hard. But when it clearly comes from higher output the workers don't seem to mind.

Finally, the Nature paper:

Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality.

The recent turn against inequality may not be evidence against this trend. Recent rises in wealth inequality seem to be driven by gaps in housing wealth, exaggerated by strict rules on housing supply. If this is true, then inequality is coming from unfair rules that rig things against one group and in favour of another. If that in turn is true then the "solution" to inequality really is just to fix the problem rules that cause some of it, but leave the bits that come from fair rules and uneven inputs alone. And, who knows, this might have some pretty nice side benefits...

Categories: Current Affairs

Trump vs. Jefferson on Freedom of the Press

Mises Institute - Mon, 16/10/2017 - 17:00
By: Gary Galles

On October 11, President Trump tweeted that fake news was such a threat that someone should look into challenging network licenses on that basis. The next day, (October 12) he doubled down in a follow-up tweet that “Network news has become so partisan, distorted and fake that licenses must be challenged and, if appropriate revoked.”

Unfortunately, his tweet contained some fake news of its own. It implied that networks are licensed, when, in fact, individual stations have broadcast licenses. And the difference implies that Trump’s suggested “solution” is incapable of addressing the problem he sees. Further, his “if appropriate” suggests that there is a situation in which pulling a broadcast license is appropriate for communicating something the President doesn’t like. But if one takes freedoms of speech and the press seriously, and applies those same standards to media that did not exist in our founders’ days, there is never a time to acceptably deny Americans’ freedoms, even for “fake news.” 

The Constitution included freedoms of speech and the press because our founders knew freedom of expression was necessary to maintain liberty. They repudiated restrictions on the press because they remembered that colonial printers had been licensed, but licenses could be revoked and printers imprisoned (e.g., Ben Franklin’s brother, James). At the time, newspapers were the primary means of public communication, so they were insulated from political extortion from those who didn’t like what they printed. However, they emphasized freedom of expression, not the particular medium used. If radio, TV and the internet existed in the 1770s, the principle behind freedom of the press would have been expressed more broadly.

To see this, you need only consider some of our founding generation’s own words.

A letter sent by the Continental Congress on October 26, 1774 found that the importance of the freedom of the press “consists, besides the advancement of truth, science, morality, and arts in general, in its diffusion of liberal sentiments on the administration of Government, its ready communication of thoughts between subjects…whereby oppressive officers are shamed or intimidated into more honourable and just modes of conducting affairs.”

John Adams argued, “Liberty cannot be preserved without a general knowledge among the people…of the characters and conduct of their rulers,” which is why his distant cousin, Samuel Adams, found that “there is nothing so fretting and vexatious, nothing so terrible to tyrants…as a free press.”

Fisher Ames wrote that “freedom of the press…is a precocious pest, and a necessary mischief, and there would be no liberty without it.” George Mason said, “The freedom of the press is one of the bulwarks of liberty, and can never be restrained but by despotic governments.” James Madison, “the Father of the Constitution,” asserted, “To the press alone, checkered as it is with abuses, the world is indebted for all the triumphs which have been gained by reason and humanity, over error and oppression.”

Thomas Jefferson, our founder who wrote most prolifically about our freedoms, asserted that “our liberty depends on the freedom of the press, and that cannot be limited without being lost.” He also said, “I am...for freedom of the press, and against all violations of the Constitution to silence by force and not by reason the complaints or criticisms, just or unjust, of our citizens against the conduct of their agents.” Further, “that man may be governed by reason and truth” required that we “leave open to him all the avenues to truth. The most effectual hitherto found, is the freedom of the press. It is, therefore, the first shut up by those who fear the investigation of their actions.” Therefore, “the only security of all is in a free press. The force of public opinion cannot be resisted, when permitted freely to be expressed. The agitation it produces must be submitted to. It is necessary, to keep the waters pure.” In fact, Jefferson concluded that “were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.”

The founders’ insistence on freedom of the press, at a time when papers were often highly partisan rather than “balanced,” applies just as much to the far broader range of media that is now influential. That has always made some in Washington want to shackle the freedom of expression of “unfriendlies,” as was the case with the Fairness Doctrine, which targeted talk radio (but not newspapers and television, which were sharply left-leaning), until Ronald Reagan killed it in 1987.

President Trump’s proposal of imposing politically-motivated punishments for those whose reporting he doesn’t like falls very close to the fruit of the Fairness Doctrine tree, at odds with American liberty. In fact, it echoes the Soviet ideal more than ours. As Vladimir Lenin put it: “Why should freedom of speech and freedom of press be allowed? Why should a government… allow itself to be criticized? I would not allow opposition by lethal weapons. Ideas are much more fatal things than guns. Why should any man be allowed to…disseminate pernicious opinions calculated to embarrass the government?”

Lenin was right that ideas are ultimately more fatal to government abuses than guns. That is why Americans must defend our freedoms of expression beyond merely freedom of the print media.

What Trump suggests cannot be reconciled with a central freedom that once defined America. And it would come with a very high price tag to our country. In John F. Kennedy’s words, “a nation that is afraid to let its people judge the truth and falsehood in an open market is afraid of its people.” And, as the late Supreme Court Justice William Douglas once put it, “Restriction of free thought and free speech is the most dangerous of all subversions. It is the one un-American act that could most easily defeat us.”

Categories: Current Affairs

The Fed Is Confused about What Drives Inflation

Mises Institute - Mon, 16/10/2017 - 12:00
By: Frank Shostak

On October 4 2017, the former governor of the Federal Reserve Daniel Tarullo in a speech at the Brookings think-tank in Washington said Fed policy makers do not have a reliable theory of what drives inflation. According to Tarullo, central bankers should pay less attention to theoretical models and more to actual data. However, how is it possible to make any sense of the data without having a reliable theory?

The Importance of Theory

One purpose of a theory is to enable one to ascertain the definition of a phenomenon that is subject to investigation.The correct definition attempts to identify the essence of the phenomenon (i.e., the key parts that drives the phenomenon). For instance, the definition of human action is not that people are engaged in all sorts of activities, but that they are engaged in purposeful activities - it is purpose that gives rise to an action.

So when Tarullo states that Fed policy makers do not know the causes that drive inflation he basically says that Fed policy makers have not as yet established the correct definition of inflation.

Is it then valid to be practical, as suggested by Tarullo, to focus only on the data to understand what inflation is all about? If Fed policy makers respond to changes in price indices without establishing what drives these changes this runs the risk of making things much worse.

Attempting to Define what Inflation Is All about

The subject matter of inflation is embezzlement by means of diluting the purchasing power of individuals. The source for this act of embezzlement is increases in money supply out of “thin air.” The increase in money out of “thin air” sets in motion an exchange of nothing for something or the diversion of real wealth from wealth generators to the holders of the newly created money.

As a rule the diversion of real wealth by means of increases in money out of “thin air” tends to be manifested by general increases in prices. However, if the rate of increase in money supply corresponds to the growth rate of goods and services then no general increase in prices will emerge.

Irrespective of the fact that no general increase in prices took place, inflation here is not depicted by unchanged prices but by the increases in money supply.

Hence, drawing conclusions from supposedly stable price indices (i.e., being practical as suggested by Tarullo), results in the complete misreading of the economic map.

This has in fact been the case in the past. By defining inflation as increases in price indices rather than increases in money supply, the onset of the Great Depressions of 1930’s caught most economists by surprise since price indexes were stable at that time.

On this Rothbard wrote (America’s Great Depression, p. 153),

The fact that general prices were more or less stable during the 1920’s told most economists that there was no inflationary threat, and therefore the events of the great depression caught them completely unaware.

According to Mises:

Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term "inflation" to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation.

The popular definition cannot explain why inflation is bad news

If inflation would have been just a general rise in prices then why is it regarded as bad news? What kind of damage does it do? Mainstream economists maintain that inflation, which they label as a general rise in prices, causes speculative buying which generates waste.

Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners. It also causes a misallocation of resources, so it is claimed.

Despite all these assertions regarding the side effects of inflation, mainstream economics doesn’t tell us how all these bad effects are caused. Why should a general rise in prices hurt some groups of people and not others?Why should a general rise in prices weaken real economic growth? Or how does inflation lead to the misallocation of resources? Moreover, if inflation is just a rise in prices, surely it is possible to offset its effects by adjusting everybody’s incomes in the economy in accordance with this general price increase.

However, if we accept that inflation is about rises in money supply and not a rise in prices then all the above assertions can be easily explained. It is not the symptoms of a disease but rather the disease itself that causes the physical damage. Likewise it is not a general rise in prices but rises in money supply that inflicts the physical damage on wealth generators.

Since increases in money supply set in motion an exchange of nothing for something, it diverts real funding away from wealth generators towards the holders of the newly created money. It is this that sets in motion the misallocation of resources and not price rises as such.

Moreover, the beneficiaries of the newly created money i.e. money "out of thin air", are always the first recipients of money. For they benefit from diverting a greater portion of wealth to themselves. Obviously those who don’t receive any of the newly created money or get it last will find that what is left for them is a diminished portion of the real pool of wealth.

Furthermore, real incomes fall not because of general rises in prices but because of increases in money supply i.e. inflation depletes the real pool of wealth thereby undermining the production of real wealth i.e. lowering real incomes. General rises in prices, which follow rises in money supply, only points to the erosion of money's purchasing power – however general rises in prices by themselves do not undermine the formation of real wealth as such.

As a result of an erroneous definition of inflation, some economists argue that low inflation is a precondition for healthy economic growth. For them inflation is bad news only when it reaches high figures (See George Akerlof, William Dickens, and George Perry: "Near Rational Wage and Price Setting and the Long Run Phillips Curve.") If a general rise in prices is the outcome of a rising money stock, how can it benefit the economy if it is stabilized at a low level? Surely the rising money stock that dilutes the real pool of wealth cannot be good for economic growth. 

Friedman's Misleading View of Inflation

Some economists like Milton Friedman maintain that if inflation is expected then it will be harmless (Dollars and Deficits p47-48).

The problem, according to Friedman, is with unexpected inflation, which causes a misallocation of resources and weakens the economy.

According to Friedman if a general rise in prices can be stabilized by means of a fixed rate of monetary injections, people will then adjust their conduct accordingly.

Consequently, according to Friedman, expected general price rises, which he calls expected inflation, will be harmless with no real effect.

Observe that for Friedman bad side effects are not caused by rises in money supply but by its outcome — a rise in prices.

Friedman regards money supply as a tool that can stabilize general rises in prices and thereby promote real economic growth. According to this way of thinking all that is required is fixing the rate of money growth and the rest will follow suit.

It is overlooked by the distinguished professor that fixing the money supply growth rate does not alter the fact that money supply continues to expand.

This in turn means that it will continue the diversion of resources from wealth producers to non-wealth producers even if prices of goods remain stable. In short, the policy of stabilizing prices is likely to generate more instability. 

Categories: Current Affairs

Strengthen the Commonwealth of Nations, as well as Neoliberalism

Adam Smith Institute - Mon, 16/10/2017 - 11:03

In my earlier post, Strengthen Neoliberalism and Change the World, I argued that proponents of neoliberalism should encourage societies to share experiences of different policies. No trying thing, you might think: get some people in a room and away you go.

But how do we make sharing effective? By its nature, sharing’s most useful when it’s between people in similar situations: how could we ensure that citizens of countries with similar values and systems of government to the UK that are sharing with us? What would help is a network that the UK is already a part of: the Commonwealth of Nations.

The Commonwealth is a global organisation with 52 member-states that are mostly former territories of the British Empire. Citizens of its members amount to nearly a third of the world’s population. It’s voluntary by nature: members have no responsibilities to each other. Their shared British legacy mean they are united by language, history, culture and values.

A funny basis to group countries by, some might say. Indeed, Commonwealth members put special effort into strengthening their bonds, particularly their shared values. In 2011, members signed the Commonwealth Charter signed: it sets out sixteen core beliefs for members, including democracy, human rights and the rule of law. The Commonwealth has seen success promoting the values in its Charter. Its biggest ‘win’ was the ending of apartheid in South Africa, the Commonwealth’s role was underlined when the country rejoined in 1994.

However, the Commonwealth hasn’t always been great at promoting liberalism. Major failures include permitting the 2013 CHOGM to be held in Sri Lanka, even though its government had been accused of major war crimes at the end of its civil war. Moreover, homosexual acts between consenting adults remain illegal in a majority of Commonwealth members. Finally, the Commonwealth hasn’t succeeded in other areas like trade: there’s no Commonwealth free trade agreement, for example. This inability to find ways to contribute has caused some to question the Commonwealth’s relevance in the modern world.

I started this post by asking what would make sharing of policy experiences more effective at strengthening neoliberalism. The Commonwealth of Nations provides a network of countries that could underpin worthwhile sharing. However, questions about its relevance suggest we should look more closely at its record. If sharing policy experiences strengthens neoliberalism; perhaps it would strengthen the Commonwealth, as well.

Categories: Current Affairs

If only we could get Jeremy Corbyn to understand about capital

Adam Smith Institute - Mon, 16/10/2017 - 07:01

Jeremy Corbyn has suggested that all those gig economy companies should be replaced by cooperatives. Which some will applaud as a no doubt lovely idea - except to do so is to entirely misunderstand the role of capital in these things.

Jeremy Corbyn has suggested that 'gig economy' contracts should be replaced by cooperatives as he accused the Conservatives of presiding over a "broken" economic model.

We don't suggest that our current model is entirely peachy, that there's nothing to be one to improve the structure of the economy. We do insist though that some attention has to be paid to reality:

Mr Corbyn suggested "gig economy" firms like ride-hailing service Uber or food delivery firm Deliveroo could be replaced by co-operatives, in which drivers collectively set pay and conditions and share or reinvest the profits from their work.

We're entirely fine with cooperatives - if that's how you wish to organise yourself then great, you do that. We are indeed liberals after all. We're entirely fine with the existence of John Lewis, with farmers' cooperatives, with any method of organisation that it pleases people to partake in. We only insist that those different forms of organisation must compete against the others in the market.

However, that reality bit. Firstly, there's that slightly worrying idea that what Jezza means is a forcible change in that structure. Even in the absence of that we come to the second objection. Why aren't these firms cooperatives, why is it that they've adopted that capitalist model?

Because they've all been making great gaping losses as they start up, meaning that they've needed capital to exist. And that's the problem with cooperatives, the only capital, by definition, that is available to them is what the workers are bringing to the table themselves. Uber has swallowed however many billions it is and still makes gargantuan losses. Deliveroo being smaller has consumed less of that capital but it's still rather more than we expect a grouping of would be bicycle couriers to be able to chip in.

All of which is what the capital part of capitalism is about, allows. The ability for a new business to build itself by using outside capital, not just what the workers themselves can provide. This is true whether we look to government to provide the capital or private markets.It's still an outside source of that necessary capital and there is and should be a price for the provision of it.

As above, we're fine with cooperatives. But it's just one of those reflections of reality that the model isn't going to work with anything which is capital hungry. Precisely because capital in large quantities is not something which the workforce can bring to the table. Capital light projects like three building a new app, sure, that can and is done. But businesses which swallow hundreds of million to billion to grow just cannot be financed on the cooperative model.

Which is rather the point of this very capital part of capitalism. It's the only way we've got o mobilising the savings and investments of thousands and millions of people into large scale organisations.

Categories: Current Affairs

Unjustly imprisoned in Nigeria by his family for becoming a Christian

Anglican Ink - Mon, 16/10/2017 - 02:10

Fulani Christian pastor jailed for his faith

Pastoral letter from the bishops of the Reformed Episcopal Church on women's order

Anglican Ink - Mon, 16/10/2017 - 01:12

[REC] retains its conviction that the threefold-ordained ministry of bishop, presbyter, and deacon are reserved for males only

‘Rebuild My Church’: A Reflection by Archbishop Fred Hiltz on Primates’ Meeting 2017

Anglican Ink - Sun, 15/10/2017 - 14:42

Canadian archbishop offers his views on the future of the Anglican way

Bishop worships at the altar of the State

Anglican Ink - Sun, 15/10/2017 - 14:37

Jules Gomes comments on the Bishop of Buckingham's call to remove legal protections from the CoE in the face of pro-gay pressure from the govt

Amazingly, sometimes government isn't very good at doing things

Adam Smith Institute - Sun, 15/10/2017 - 07:01

We agree that we are biased upon this point but even so it is still true that at times government isn't very good at doing things. As with this between the Coastguard and the RNLI:

Lives are being put at risk at sea because of a delay in launching lifeboats after emergency calls to the coastguard, according to senior RNLI crew. They believe a shortage of experienced staff and poor operating procedures at the Maritime and Coastguard Agency (MCA) are leading to slow responses and potentially fatal decisions.

Delays and inefficiencies between two arms of the State aren't going to surprise anyone rich in years or experience of dealing with said State. However, in what will be a surprise to non-Britons, the Royal National Lifeboat Institution is a private sector, entirely charity supported, organisation. The Coastguard is government in its glory.

There is a larger point than just to point to inefficiency. Which is that of public goods. No one does negotiate their rescue from peril on the sea (although there is much private and Admiralty law on the rescuing of assets, such as ships abandoned etc) at the time they need rescuing. The network of those able to perform rescues is a public good. The normal reaction to which is that if it's a public good, non-excludable and non-rivalrous, then government must provide it.

Which isn't, as we can see here, true. The existence of a public good is certainly a time when we should think about whether government can or should be involved. But that is not to then make that leap to State provision.

In parts of the literature you will see that lighthouses are the obvious example of when government must. No one can charge for lights, therefore in the absence of the ability of private provision government must perform the task. Which is to entirely miss that the lighthouse system for the British Isles was and is (it's a little more complex today but only recently) a private not for profit organisation, Trinity House. Enter a British or Irish port and you pay dues, some for the port, some for "lights." Those who pass by get the guidance for free, those who dock pay. Whatever else we might think about it it does in fact work.

The existence of a public good is a very good time to start thinking about government involvement, entirely so. But that is not a sufficient reason for government to either be involved nor to provide the good or service. As with the herd immunity provided by general vaccination, there are different ways to achieve the goal. The NHS performs and pays for all child vaccinations, the US systems insist they must be performed privately before a child enters school. Both work in that sense of producing that herd immunity. 

As to which system is used where and when we think a large part of it is due to historical happenstance. Lifeboats and lighthouses really got organised in Britain during the near laissez faire times of the Victorian era. Thus we've a private system of provision. The NHS was the nationalisation of the previously extant medical care system (the NHS completed its first new hospital in 1963, 15 years after NHS creation) just because post-war Britain did seem to think that government should and could do everything. Thus much of how we provide these various public goods is dependent upon just what was the idea du jour of the time we started to address that problem.

Leading to the thought that we might profitably have a proper rethink of exactly how we do address these problems. Many are insisting today that the State should be doing more - all those calls for nationalisation - but we could equally, perhaps more in fact, profitably be pondering what is it that government does do but shouldn't be? 


Categories: Current Affairs

Statement on cancelled sale of Newport Beach property

Anglican Ink - Sun, 15/10/2017 - 01:49

Though sale cancelled, bishop will only permit St James Newport Beach to be reopened as a bishop's chapel

St James the Great still locked out

Anglican Ink - Sun, 15/10/2017 - 01:41

Sale of Newport Beach parish falls through, however bishop will not allow the congregation to return


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