Category: CafeHayek

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Cafe Hayek: Varieties of “Anti-Government”

Varieties of “Anti-Government”

by Don Boudreaux on August 22, 2017

in Philosophy of Freedom

Prompted by the recent violence in Charlottesville, in my latest column in the Pittsburgh Tribune-Review I highlight some differences that ought to be kept in mind when using, or encountering, the term “anti-government.”

MD: Right away it gets scary. He is getting his thinking published. He is part of the “propaganda” arm of government. I think he writes about government’s use of “force”. Propaganda is government’s go-to tool. It only resorts to force when the polls show the effectiveness of the propaganda is not sufficient. By my poll (only 17 out of 298 people I’ve personally polled know anything about WTC7 falling down), the propaganda … and suppression of information … is working just splendidly.

A slice:

A libertarian’s – a Jeffersonian’s – “anti-government” stance reflects mainly a strong presumption against using force to direct peaceful people’s affairs.

MD: Why not leave people to direct their own affairs? Why is a government solution to issues (which always proves to be the least effective choice) always proposed first to the exclusion of all others? In my space it wouldn’t be that way. Iterative secession.

The libertarian objects first and foremost not to particular policies of a large and constitutionally unconstrained government, but to its very existence.

MD: Two issues: What does “constitutionally constrained” mean when that document is blatantly flawed … note it has no buy/sell agreement? What is “government” when it is openly occupied by our enemies … witness the mysterious collapse of WTC7? And an issue probably not covered herein: why is any level of government involved in directing anything that the level above it can deal with … the individual being at the top. Virtually 100% of what every level of government deals with today can be handled at the level just above it.

Even if such a government were today to behave in no ways that the libertarian finds objectionable, he remains opposed to it, understanding that such power is destined to be abused.

MD: So he’s saying libertarians are opposed to the camel getting his head under the tent. I wonder if he gets into why the camels want into the tent in the first place. And whose camel is it?

Of course, the libertarian is indeed “anti” many specific government policies – tariffs, subsidies, minimum wages, occupational licensing, K-12 schools’ funding and operations. This “anti-government” stance reflects no prejudice against an ethnic group, no favoritism for a culture or way of life. It reflects prejudice only against using power to secure special privileges, favoritism only for maximum scope to live, work and play as individuals peacefully choose. It is, in short, a pro-individual-liberty policy.

MD: So if governments didn’t use power to do these things, libertarians would be ok with it? If you’re pro-individual-liberty, why is there any government at all? Why isn’t everyone “pro-individual-liberty”? And why must those of us who are have to be in the same space with those who think there is a place for government. Read the Federalist Papers and at the same time read the Anti-Federalist papers.

The founding children surmised that if the states were left as separate entities their differences would result in fighting and wars. So their solution was to force them into the same space instead of letting them have their separate spaces in which to go about their separate ways. Now really? What kind of thinking is that???

Iterative secession. We took the wrong fork in the road when we formed the union. We must go back and try the other fork. This one has proven itself not to work … and globalization initiatives are proving the problem to be chronic.

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Cafe Hayek: No Monopsony in the Market for Low-Skilled Labor

MD: All economists confuse the “proper” Medium of Exchange” process with some kind of manipulation of the economy.  That’s just what they think their job is … their focus is … their expertise is … their destiny is. And they are all flat out wrong.

Money simply enables traders to effect their trading promises over time and space. Trading “is” the economy and trading over time and space is a huge part of trading (simple barter exchange in the here-and-now being the rest … unless you consider government counterfeiting) … and it is the only instance where money is created. Money is just the record of these in-process trading promises. It doesn’t exist before the promise nor after delivery for any instance of a trading promise spanning time and space. Thus, it cannot and will not inflate or deflate. And it is always in free supply. No economist needed!

If a trader (and we are all traders … with different levels of responsible behavior) can see clear to delivering on a promise over time and space, he does so of his own volition. He is free to create money to carry out his promise. If he fails (defaults), the orphaned money is reclaimed immediately by an interest collection of like amount.

Manipulation of the money process is “always” counterproductive. It should never be allowed … and with a “proper” MOE process, it cannot be accommodated … so “is” never allowed. Let’s see what kind of manipulation is being studied in this instance.

The article:

My Mercatus Center colleague Jayme Lemke (who earned her PhD in economics from George Mason University) published last year in the journal Public Choice a very nice piece of research titled “Interjurisdictional competition and the Married Women’s Property Acts.”  (This article won the 2017 Gordon Tullock Prize.)

MD: Georg Mason University is a “hotbed” for Mises Monkery. It is kind of the USA abby for the religion.

In this article, Jayme explains the timing during the 19th century of U.S. states modernizing their property law – specifically, modernizing this law to enable married women to own, use, and alienate property no differently than could men and unmarried women.  This timing, Jayme shows, is explained by the intensity with which state leaders wished to increase their states’ populations.  A state whose leaders could personally enjoy some significant gains if that state’s population increased was more likely to modernize its property law than a state whose leaders stood to gain less from a population increase.  (My summary here of Jayme’s thesis and of her principal finding do not do justice to her paper.  Do read it yourself.  It’s excellent.)

MD: The state (and the money changers that institute it) are notorious for co-opting the trading process … for their own self interest. In trading there is no gender. It is human specific in the animal kingdom, but other than that, all traders are equal (until the money changers … and the states … and the leaders they institute dictate otherwise).

One of the passages in Jayme’s paper that I found to be especially interesting and germane is the following on pages 302-303:

“[O]ne of the practices first implemented by [Massachusetts textile-mill owner Francis Cabot] Lowell and later copied by other industrialists was the active recruitment of young women.  Lowell would pay recruiters to go out into the rural areas of Massachusetts, New Hampshire, and Vermont to find female workers….  The model developed by Lowell came to be copied by aspiring industrialists across the Northeast, and beyond.”

MD: And if he could have recruited dogs or pigs or horses to be productive in his mills he would have done that. When you need to expand your labor force, you pull out all the stops. When you have the luxury of picking and choosing your labor force, you impose all the stops you think are appropriate. And it seems to be a male/female thing. Women creating enterprises have a tendency to employ women over men. And it is a race thing. Proprietors from India operating convenience stores seem to exclusively use Indians to run their stores. This isn’t rocket science. It’s about ease and predictability of control.

More than 150 years ago – when transportation and communication were primitive by the standards of the early 21st century – competition nevertheless drove industrialists to spend significant resources to recruit, from distant places, low-skilled workers.  If profit-hungry industrialists went to such lengths in mid-19th-century America to locate and hire workers from jobs (then, mostly on farms) that paid those workers less than they could earn working for the recruiting industrialists, what sound reason is there to suppose that employers of low-skilled workers in America today generally possess anything that can, without laughing, be called “monopsony power” of such workers?  Answer: none.

MD: But that’s only half the story. Those workers left the farms because the industrialists offered them a better life than they had on the farm. But most of the industrial managers didn’t have to be scrupulous … so they were not scrupulous. Once they had control of those transplanted workers, they took advantage of them … because they could. That just seems to be human nature. The farmers did the same thing with their hired hands (in some cases making them total slaves).

Those who assert the existence of such monopsony power do so either because they mistakenly believe that such power exists whenever any employer faces a supply of labor that is less than perfectly elastic (that is, whenever an employer would quickly lose all of his workers of a given sort if that employer cut the pay of those workers by as little as one cent per hour), or because they ignore the active efforts of employers to find and recruit low-skilled workers.

MD: Well duh! That’s called a mature market. The grocery business has been running on razor thin margins for decades … as has the oil business.

Low-skilled worker Jones currently in job X need not himself have much gumption or stomach for actively searching out new and better employment if employers offering better-paying jobs Y and Z take steps actively to recruit Jones and other such workers.  And employers have every incentive to do such recruiting if and when there are pools of workers who are currently paid less than the value of those workers’ marginal products were those workers instead employed by the recruiting employers.

MD: When it comes to workers … and also to money, the HUL (Hour of Unskilled Labor) becomes the proper unit of measure. It never changes over time and space. It always trades for the same size hole in the ground.

And when it comes to labor, that’s as low as the scale goes … it doesn’t really ever become less than unskilled (unless you consider the case where they hire the handicapped … and supplement their lower than unskilled worth with government subsidies). Once you reach the HUL lower limit (or force it with something like a minimum wage adjustment), you move into the realm of the robot. Automation removes the need for human labor in that task altogether.

Economists seem to want to turn that which is natural into something they can manipulate … to make it rocket science. Interestingly, economists, like artists (excepting a tiny number of rock stars) work outside the domain of supply and demand. They cannot command the prices they charge for their services without government and corporate subsidies. They just aren’t needed in society. Unfortunately, when they are engaged, they become complete counterproductive and manipulative pests. They are all pulling in different directions at the same time … with greater and greater diligence and noise. Show any science that is pulling in all possible different directions as is the claimed science of economics … and politics for that matter. They are not science.

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Cafe Hayek: Assumptions of Right

Quotation of the Day…

by Don Boudreaux on August 21, 2017

… is from page 359 of the late Paul Heyne‘s insightful 1981 article “Measures of Wealth and Assumptions of Right: An Inquiry” as it is reprinted in the 2008 collection of Heyne’s writings, “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion (Geoffrey Brennan and A.M.C. Waterman, eds.) (footnote deleted):

MD: Notice how the Mises Monks never just cite an article and not its author. As in this case, there is always hyperbole … e.g. Paul Hayne’s “insightful” article. This is a Mises Monk marker.

 

Marxists have long complained that conventional economic analysis takes for granted the existing system of property rights.  The charge is fundamentally correct.

MD: Let’s see if he exposes the alternative to this? Hint: No he doesn’t.

Am I likely to paint a house that isn’t mine? Am I likely to build a house on property that isn’t mine?

 

Offers to supply goods and efforts to purchase goods always depend upon people’s expectations of what they can and may do under specific contemplated circumstances.  What a person may do expresses, in the broadest sense, that person’s property rights.

MD: Remember … a right is a defended claim. Here we have an implicit claim and no defense suggested. Do we really think we have a right being talked about here?

In order to predict, explain, or even talk intelligibly about those patterns and instances of social interaction that we call “the economy,” we must begin with people’s expectations, that is, their property rights.

MD: Why do they see the economy as a “social” interaction? If everything was an automat, would it still be a social economy? An economy is about trade. There is nothing social about trade in most cases. The purpose of advertising is to socialize it … but that’s not an attribute … it’s just a tactic

 

DBx: To avoid possible misunderstanding, I would have slightly reworded the final sentence of this quotation to read: “In order to predict, explain, or even talk intelligibly about those patterns and instances of social interaction that we call “the economy,” we must begin with people’s legitimate expectations – namely, those expectations that are widely shared and agreed to throughout the community – that is, their property rights.”

MD: Ah … now you talk about a great Misesian improvement. Add more words and say even less.

Heyne’s point is profound and important.  Obviously, we cannot possibly distinguish illegitimate coercion against others from the legitimate exercise or defense of one’s rights until we know in sufficient detail the property-rights arrangement.

MD: Which will be found in a spaghetti of conflicting laws, rather than a simple statement of principle … like the golden rule.

If I break the window of a house at 123 Elm St. and then enter, you cannot know from this physical act if I am burgling the house (and hence, violating someone’s property right) or entering the house with the permission of the homeowner (namely, in this example, myself who locked myself out of this house that I own).

What is less obvious, but no less important, is the fact that property rights boil down to shared expectations.

MD: And of course “principles” are shared expectations. Laws are not.

In modern America (as in most modern societies) ownership of a house includes the widely shared expectation that in all but extreme circumstances – for example, when the house is engulfed in fire – the right to decide who may enter the house is reserved to the homeowner.  Ultimately, this right rests on widely shared expectations.  If I, a modern American, move to some community in which the widely shared expectation is that anyone who wishes may enter unannounced into any house in that community, with or without the permission of the owner or occupants, and by whatever means, then no right of mine is violated if some stranger breaks into my house.

MD: And can we picture any collection of people who would see this behavior as adhering to the golden rule? Actually we can. Most utopian societal communal failures see things this way.

Expectations, being what they are, can be affected by the formal legal and legislative codes, but expectations can also diverge from these codes.

MD: Which makes those codes pretty worthless, doesn’t it … especially when we get 40,000+ new ones every year.

(An example of such a divergence is the fact that in some U.S. states – I think, for instance, in Massachusetts – it remains an ‘on-the-books’ criminal offense for two adults who aren’t married to each other to have consensual sex with each other.  Yet community expectations now no longer regard such activities to be unlawful.)  Expectations change more frequently (especially in open societies) than does the formal law and the legislative codes, and expectations are always more nuanced and ‘granular’ than articulated legal rules or legislative commands can possibly be.

MD: But if were about principles rather than laws, the golden rule principle would easily address this … i.e. it’s only the business of the two people involved.

At bottom, a society’s laws are its widely shared expectations about how individuals may and may not act toward each others’ persons and toward the material things, as well as the symbols and markers, that individuals possess and use as they conduct their affairs both individually and in groups.

MD: A misstatement. Its principles, not its laws, are the widely shared expectations. Its laws are a hopelessly flawed attempt to nail down the jello which is those principles. As I’ve stated before, it would take an unlimited number of laws to nail down the principle of the golden rule.

(By the way, do watch the 1997 movie, The Castle.)

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Cafe Hayek: Political scope?

MD: Anyone who has read Ludwig von Mises has found him to just largely be a double talker. He goes on and on and on bouncing off the walls, losing sight of his subject, and just rambling. And when he does assert something, it makes no sense at all. It’s like a fractel … or pealing an onion. You can keep dissecting it, but as you do you just keep seeing the same thing … and if your fortunate it ends like an onion pealing exercise … with nothing. If you’re not fortunate it goes on without end … and becomes the Mises Monks’ religion

This is particularly evident when his subject is (or is thought to be) money. He goes into all kinds of nonsense about prices and what motivates people to trade … and then to trade again (the margins). And none of it has anything to do with money … what it is … why it is … and how it is.

As I read this “comment of the day” I’m left with the same feeling … but this time the subject is politics … whatever that is.  What do you think?

by Don Boudreaux on August 20, 2017

in Other People’s Money, Politics

 

… is from page 75 of my late Nobel laureate colleague James Buchanan’s 1986 paper “Notes on Politics as Process,” as this paper is reprinted in James M. Buchanan, Politics as Public Choice (2000), which is volume 13 of the Collected Works of James M. Buchanan:

Politics that is confined to a few and well-defined tasks cannot be seriously predatory.

The American founders seemed to recognize this simple truth.  Modern political scholars do not.

MD: I read it over and over and over … and it says nothing … absolutely nothing! Maybe we need more context. In the case of Mises, we never do. More context never helps.

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Cafe Hayek: Jeff Miron on Statues

MD: We here at Money Delusions have strong opinions on government (it is an admission of failure of principles and cooperation). The responsibility for a thing called Monetary Policy is immediately claimed by governments once they are instituted by the money changers to have just that power … to manipulate money and thus control trade … to enable their farming operation which they call the “business cycle”.

As a tactic, governments have on-going propaganda campaigns. They are like religions in that respect. They just last as long as religions … and are more numerous. Part of that propaganda campaign is to elevate their operatives to super-human status. This is almost always done posthumously.  And we see the technique on a daily basis at Cafe Hayek as these Mises Monks try to protect the sainthood of their operatives.  Boudreaux is in the process currently of securing sainthood for an operative named Jim Baldwin (whose confusions Boudreaux shares and wants to have immortalized).

Let’s review this article to see if they can see the delusions involved … and what the principle should be.

Jeff Miron on Statues

by Don Boudreaux on August 19, 2017

in Current Affairs

I post in full – and I agree in full:

Why should a city, state, or federal government put statues in public parks?

MD: Consider the principle of “all” government. Government is the last resort for dealing with issues that no level of cooperation above it can deal with itself … at the top being the individual. Government is stark evidence of cooperation’s failure to deal with the issue … i.e. problem still looking for a proper solution.

Take something as simple as recording of deeds and other legal documents. This is the role of the county clerk. With their green eye shades they maintain the books of indexes into boxes on top of boxes full of contract documents retained for public inspection. It is the process they have for facilitating  “transparency” to protect claims. The principle here is that if everyone can see the claim at any time … and for all time, then that in and of itself with defend the claim. And this is largely true. Unfortunately government has been an inept way of addressing this need. Countless such records have predictably been destroyed with the inevitable fire and water destruction of courthouses.

The government solution has failed from the get-go. In the particular case of “real property”, a private solution is found in the invention of “title insurance”. Here, a private industry has relegated the role of the county clerk as the first step (a public step) in a private process (title company real property record search). And in that process, the “transparency” principle is not even obtained. The title company’s records are not open to the public. It’s not a very cooperative solution is it!

When you see a government solution addressing any issue, you know implicitly that the issue is still not being addressed properly. On inspection you will find that “all” government involvement can be eliminated by resorting to principles rather than laws. Laws are just an attempt to nail down the jello of misunderstood issues that are easily handled with principles and transparency … the most obvious one being the golden rule. As a thought experiment, think of the number of laws you need to nail down the principle of the golden rule. Hint: Infinite … and with 40,000+ new laws every year, they are crowding that the estimate … and that is a trait of all valid principles … the number of laws required to nail them down approaches infinity.

So back to the question: “Why should a city, state, or federal government put statues in public parks? “.

What’s the principle? First comes “what is it a statue of?”. If it’s of a duck or an elk, it’s no big deal. But in most cases it is of a person. And the purpose of that statue is for the memory of that person to live after their death. And it almost never works. In less than a generation, the significance of the person depicted in the statue is forgotten totally … all that is left, as a crutch, is the plaque.

The “real” purpose is give credibility to the people who share that person’s belief. It is to get people working for (or members of the same club as)  the statue builder to think that if they behave, work for less than they’re worth, exhibit blind loyalty, etc., they too will be immortalized in marble or bronze. It is an attempt by the organization building the statue to gain “stature” for that organization. It’s just that simple. It’s a tactic.

Most statues are of government workers. Most government buildings are named after government workers. Many streets are named after government workers. And who are the least capable workers among us … and make the biggest messes of the biggest things? Right … government workers. So go figure.

Doing so addresses no plausible market failure, while using taxpayers funds and, as demonstrated tragically over the past few weeks, generates controversy, polarization, and violence. Thus governments should take down all statues, regardless of their political implications.

MD:  First, most of these statues are not constructed with taxpayers funds. But they are placed on “so-called” public property. Now that we know the principle involved … giving recognition to one to garner loyalty and discipline of many, we see that the statues should never have gone up as a public symbol at all … and they are just one form of recognition and sainthood that is unprincipled … it is a tactic of a faction.

But taking them down makes a larger public statement than the statues themselves. That statement is that in an instant of time, one cooperative collection of people can disassemble what another cooperative collection of people constructed years, decades, even centuries before. For sure, they shouldn’t be able to do that more capriciously than the original initiative was done.

And what do you do when the statue was constructed privately on private property and then given over to the public? A principle should be adopted going forward that self recognition has no place in government and should not be tolerated moving forward. Of course, not tolerating government at all going forward nips that issue in the bud doesn’t it.

This is not “erasing” history but instead leaving it where it belongs, in the hands of private actors and mechanisms.

MD: Putting up statues is the first step in “distorting” history. It is a tactic … just like writing a biography … or worse, an auto-biography. The principle is that such self-aggrandizement requires no public support and should not get public support.

Historians, textbook authors, universities, learned societies, the History Channel, and many other individuals and organizations can all present their own views of history and battle for the hearts and minds of the public.

MD: All those sources just enumerated are instances of “historic revision”. It is an expected principle and by the golden rule should not be inhibited … but it should not be publicly purveyed either! In most cases it is a symbol of one government prevailing over another government … when neither government should have been allowed to exist in the first place.

Government statues are government putting its thumb on the scale, which is one step down the slippery slope of thought control.

MD: It is a tactic … and one that should be eschewed … as should be government. Look for another solution when government is proposed to deal with a cooperative issue. Such proposals should be viewed as “dead on arrival”

Brilliant, and wise.

MD: Obvious!

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Cafe Hayek: in Economics, Politics, Seen and Unseen

MD: Here at MD we are aware of far more delusions that cripple society than just the money delusion. Some are related. Some are not. Other delusions are about democracy … and about the rule of law. In commenting here, I think I’m going to be getting into delusions about law. Let’s see.

by Don Boudreaux on August 17, 2017

in Economics, Politics, Seen and Unseen

… is from page 110 of my late Nobel laureate colleague Jim Buchanan‘s 1980 paper “Rent Seeking and Profit Seeking,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

MD: Laws just plain don’t work … witness the 40,000+ new ones we get every single year. Further, take a gander at how those laws are made. To further show the falacy of laws, consider how many you must write just to embrace the simple “principle” of the golden rule. Hint: There are fewer grains of sand on all the worlds beaches. When we deal with things in a societal manner, we should deal in principles and not laws. And we shouldn’t bring things to a societal forum that can be handled in a more constrained forum. The individual is the ideal forum for addressing issues … most can be dealt with right there when you are guided by principles …. not laws.

But economists have concentrated far too much attention on efficiency and far too little on the political role of markets.

MD: Any discovery of political role reveals a flawed process. Politics has no place in trading … no place in economics. All issues in trading and economics are easily handled by the traders involved … and adherence to principles … starting with the golden rule. When you tolerate cheating, you’re going to be dealing with lots of cheating. When you classify cheating as gamesmanship you are deluding yourself.

To the extent that markets are allowed to allocated resources among uses, political allocation is not required.

MD: Bingo … even without the “allowed” qualification.

Markets minimize resort to politics.  Once markets are not allowed to work, however, or once they are interfered with in their allocative functioning, politics must enter.  And political allocation, like market allocation, involves profit seeking as a dynamic activating force.

MD: I’m perplexed how we can be in violent agreement here … and how Cafe Hayek can be so clueless about trade, traders, and money.

DBx: Many opponents of markets find the open quest for profits in market economies to be unethical or unaesthetic, and they blame markets.

MD: There is no substitute for “markets”. To attempt a substitute is just to impose another market … i.e. another playing field … with a set of rules that favors one set of traders over another. Let the traders be free to choose their own playing field … and others who claim they should not be allowed to do that can just go pound sand.

What these opponents miss is the fact that the self-interest that is typically – and even the greed that is sometimes – on display in markets is not created by commercial markets.

MD: Self interest is personal and totally natural. Anyone who claims they are not first in every question of pecking order is deluding themselves. Greed, in the final analysis, is a person’s confusion about what their self interest really is. In the end it accomplishes a goal they don’t want to attain. There is very little of use in the bible … but at least they  there tell of a guy named Ecclesiastes as “getting this concept” … in the end

Commercial markets are merely a forum in which individuals act on these motivations.

MD: Why the “commercial” qualification?

One of most profound errors committed by market opponents is to suppose that when activities are transferred from commercial markets into the realm of politics human imperfections and self-interest are replaced by superhuman perfection and altruism.

MD: Pretty peculiar isn’t it, when you stand back and observe “all” politics is sub-human, not close to perfection, and arises out of advanced selfishness … in violation of the golden rule for those practicing and imposing it. In fact, they openly oppose and refuse to comply with their own rules and those they impose on others.

But as Buchanan argues, it’s naive to suppose that the mere shifting of activities from one resource-allocation forum to another changes the underlying human motivations.  (And such shifting certainly does not change the underlying human cognitive limitations.)

MD: It changes the playing field. That’s it. But worse, it disallows others from leaving the field … just taking their ball and going home. The USA Constitution does not have the “obligatory” buy/sell agreement. You “will not” secede.

So profit seeking occurs in political settings no less than in market settings.  But the kinds of information and constraints in political settings differ greatly from those in market settings.

MD: Remember, democracy only works with less than 50 people involved. And the political setting being addressed in the case of the USA has 500,000 involved … in the “most representative” case. Ridiculous! We are tolerating a process that was DOA … and the writers of the Anti-Federalist Papers were totally aware of it. But the money changers, as always, prevailed. They’re the ones who called the meeting in the first place.

Therefore, the kinds of actions taken in one setting, and the consequences of those actions, differ from the actions and consequences in the other setting.

MD: That’s not a “therefore” qualification. You see those differences and consequences between just two traders on the same playing field negotiating the same issues … just at a different point in time. That’s called trading. It has, at most, three steps: (1) Negotiation; (2) Promise to Deliver; (3) Delivery. In many cases it doesn’t pass the first step. In the case of simple barter exchange in the here and now, steps (2) and (3) happen simultaneously on the spot. Under political influences, step (3) happens under manipulated time and space and step (2) never is used at all! It is just lied about.

One important difference is that in markets, profits are earned only through voluntary payments while in politics profits are typically extracted by forcibly transferring property from the politically weak to the politically strong.  The fact that such transfers are not overtly called “profit seeking” – and the fact that political activities are camouflaged with public-interest rhetoric – doesn’t change the underlying reality.

MD: But it’s worse. The money changers control the “improper” MOE process we all use. That is really where the problems begin and end. Allowing a “proper” MOE process to compete makes all these issues go away. There is “no political economy” in such a case.

In summary, in the market Smith profits only by building a better mousetrap or by devising a process that reduces the amount of resources used to build a familiar mousetrap.

MD: Wrong. The process allows one trader to convince another that that is the case. More trades take place under delusions than under rational choice. If that wasn’t the case, advertising would be very much different.

(Smith might do so directly, as a mousetrap producer, or indirectly, as someone who secures the financing for a mousetrap producer.)

MD: With a “proper” MOE process, the “financing” qualification is totally unnecessary. Any responsible trader can make a promise spanning time and space and create the money to carry it out in the domain of a “proper” MOE process. Deadbeat traders can too, but the more irresponsible they prove to be, the more interest load they must bear in reclaiming the defaults the make. At the limit, they preclude “themselves” from money creation privileges in the domain. They can use all the money they want … anonymously. They just can’t effectively  create it. What they create immediately is taken back by interest collections. There is nothing left to do anything with.

In politics, Jones typically profits by confiscating mousetraps from Smith or from Smith’s customers, or by confiscating the inputs that Smith would otherwise use to make mousetraps.

MD: This also happens in normal trade without politics. If Jones can manipulate Smith’s perception in the (1) Negotiation phase, Smith is putty in Jones’ hands. And if you don’t allow the (1) Negotiation phase, you have different issues entirely. Don’t make this more complicated than it needs to be.

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Cafe Hayek: In Economics, Virginia Political Economy

Quotation of the Day…

by Don Boudreaux on August 16, 2017

in Economics, Virginia Political Economy

… is from pages 48-49 of my late Nobel-laureate colleague Jim Buchanan’s 1996 paper “Economics as a Public Science,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan (footnote deleted):

MB: Again, I call attentions to all Mises Monks trait of genuflecting to their Saints. They can’t just say “the late economist Jim Buchanan”. They say “Nobel-laureate colleague Jim Buchanan.” They put their Saint on his pedestal and then link themselves to it … like any loyal acolyte is want to do..

Economists often complain about the observed fact that “everyone is his own economist,” in an expression of the view that scientific counsel fails to command the deference it seems to warrant.

MD: Economics is not a science. In fact, it is an open insult to science. And show me any real science where its scholars don’t agree with each other at all … where they all have there own pet theories … and where there are no natural principles and facts … only disputed ones. There are lots of examples out there (e.g. cosmology, psychiatry, numerology, politics) … but they just expose themselves as junk science. Yet they command high salaries … and if they can concoct the right stories, they influence things … usually in a really bad way.

In the absence of an effective exit option, however, everyone will continue to be, and should be, his own economist, at least to the extent of participating in the selection of constraints that are to be imposed collectively, constraints that affect the actions of everyone simultaneously.

MD: The only “real” economists are the traders. And we are all traders. Some traders, in addition to trading, analyze the trading process to death … yet somehow escape an obvious definition of money … and then failing to embrace  this obvious and provable definition, spread absolute nonsense!

The effective scientific community in economics is, therefore, necessarily inclusive in a sense that is not applicable in natural science.

MD: There is no “scientific” community in “economics” … effective or otherwise. There isn’t even common sense! What does this statement say? Economics is “not” natural science (which all “real” science is by the way), and therefore the oxymoron “scientific community in economics” is “inclusive”. Well, I guess if I have properly parsed the assertion … all economists are “not” scientists. Here’s one saying it directly while pretending to be a scientist.

“Doing economics,” as the specialized activity of economists, should reflect a different emphasis on the transmission of basic knowledge relative to the discovery of new knowledge at the scientific frontiers.

MD: Do we ever hear of someone “doing” chemistry … or physics … or geology? It’s not something you do. And “transmission of basic knowledge”? Economics has no such “basic knowledge” … but every economist is a transmitter just the same. And they’re not going to discover new knowledge by ignoring the obvious … beginning with what money obviously and provably is.

Because of the public features of economics noted, the activity of “doing economics” must be more akin to that observed in the behaviour of the ordinary scientist who rarely makes discoveries.

MD: … unless they are “real” scientists … who make discoveries in a very disciplined fashion … using what they call a scientific method. If economists had any similar discipline, they would know what money is by now. And when told, and given the proof, they would not respond “that is unorthodox”. Remember, a flat Earth was once orthodox. And the Earth being the center of everything was dispelled by a scientist … using the scientific method. And it still took over 200 years for the pretend scientists (religious orthodoxy) to get it! In fact they never did. They just changed their stories to reflect that they never said it was the center of everything in the first place. That’s what took 200 years! In the process, Bruno lost his head … because they were still in the process of rewriting and re-endoctrinating … i.e. re-deluding.

In modern practice, too much talented intellectual capital is used up in searches for the solutions to stylized puzzles with little or no relevance for the ongoing, necessarily receptive and sometimes boring, activity of “teaching” the long-accepted principles of the science.

MD: “The intellect” is not capital … especially when it is in an economist’s skull. Capital is the thing that can be exchanged for labor to achieve a certain productive goal. But what is properly being described here is Ludwig von Mises’ books. They are of no relevance to the extreme. He spends tome after tome after tome trying to explain why traders trade … but is totally clueless about what money is … as are his disciples, the Mises Monks.

DBx: Yes. Buchanan here – as in countless other parts of his vast writings – explicitly rejects the rule of experts.

MD: But clothed and fed himself with his so-called expertise. It takes a very advanced society indeed to tolerate such nonsense.

He explicitly affirms the moral and political right of everyone to participate equally in the making of collective decisions.

MD: There’s another universally misunderstood term … a “right”. A “right” is just a “defended claim”. Make no claim, you have no right. Make a claim and fail to defend it, you have no right. Throwing the word around in every conceivable context does not change that.

No technocracy, plutocracy, or autocracy for Buchanan. Democracy. Whether Buchanan was correct or incorrect in the details of his assessment of the workability of democracy is a separate question.

MD: … he says … without elaboration. Those of us here at MD know, democracy involving more than 50 people does not work. It can’t. With larger numbers, it just becomes a propaganda exercise and an “ugly” contest.

But either way, for someone such as Nancy MacLean to interpret Buchanan as being an enemy of democracy reveals that she (1) did not read Buchanan’s works carefully, or (2) hasn’t the mental acuity to understand Buchanan’s writings, or (3) intentionally misrepresents Buchanan.

MD: How long has Boudreaux been thrashing this MacLean horse? And look at him take her apart. No facts. No illustrations. Simple name calling. The Mises Monk Saints must command respect at all cost. It is truly straight out religion.

(I strongly suspect that it’s a combination of (1) and (2), for the stunning ignorance on display throughout Democracy in Chains – and in MacLean’s subsequent ad homimen-filled “defenses” of her work – seems to be both sincere and deeply rooted.)

MD: Kettle … you are black. Live with it! … said the pot.

Note also Buchanan’s plea that we professional economists spend less time solving clever puzzles and more time teaching the eternal verities of our discipline.

MD: Note: “professional economists” is “not” an oxymoron … but “economic scientist” obviously  is. There is no science in the way economics is done. But it is a profession. These people are paid … and paid handsomely … for this nonsense … and it’s pay that makes someone a professional.

He’s wise to issue this plea. Again and again and again and again conveying to students and the general public the basics of economics – for example, the reality of unintended consequences,

MD: What we have is the reality of “intended” consequences. “Inflation” is the intended consequence of the money changers … most of whom profess to be economists. With a “proper” MOE process, there “is” no inflation. It’s not an “intended” consequence. It’s a result of simple addition, subtraction, and objective discipline.

the universality of the law of demand,

MD: Which of course doesn’t apply to any economic thinking … both the Mises Monks and the Keynesians completely ignore the requirement that money maintain perpetual and perfect supply/demand balance … it’s the nature of every trade, so for sure it is the nature of a trade spanning time and space.

and the importance of the fact that nearly all decisions are made ‘at the margin’

MD: If that’s the same as saying … at the next “instance”, this is just stating the obvious … and is totally immaterial. Economists love to put out this drivel.

– is not sexy and it carries with it almost no professional rewards.

MD: Nor does eating an apple. Both are equally complicated.

Yet performing this duty successfully is the highest and finest service that a good economist can perform for humanity.

MD: What a joke! Economists performing a service for humanity? You call “improper” MOE process manipulation performing a service. You call ignorance of the obvious performing a service?

 

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Cafe Hayek: Who’d a Thunk

Who’d a-Thunk It?

by Don Boudreaux on August 14, 2017

in Reality Is Not Optional, Seen and Unseen, Work

We study the effect of minimum wage increases on employment in automatable jobs – jobs in which employers may find it easier to substitute machines for people – focusing on low-skilled workers from whom such substitution may be spurred by minimum wage increases.

MD: If we had a “proper” MOE process, those engaged in conducting these studies would be out of work. Thus, we probably can’t expect them to be supportive of a proper MOE process … and zero inflation … can we!

Based on CPS data from 1980-2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become unemployed.

MD: Those who are engaged in compiling CPS data and pondering it would be out of work with a zero inflation proper MOE process. Increasing the minimum wage does not decrease the share of automatable employment … it increases it (but that’s really what he meant to say). Instituting a “proper” MOE process will eliminate a huge number of government jobs … and financial and economics jobs in industry as well. Rather than automating away what they do (which computers continuously do), it eliminates the necessity of their work all together. When inflation is guaranteed to be zero, what is a CPS analyst to do? (1+i)^n is perpetually 1.00000. In that case, it’s not about replacement, it’s about wasted counterproductive effort in the first place. But then what are the scholars of articles like this … who haven’t been able to “get it” in the face of the “obvious” … what are they going to do?

The average effects mask significant heterogeneity by industry and demographic group, including substantive adverse effects for older, low-skilled workers in manufacturing.

MD: Automation has in fact helped “older” low skilled workers. Where they would normally become physically incapable of doing the work, they can continue to do it with hydraulic and electrical assistance … just by pushing buttons. Without the automation, they would have “taken themselves” out of the game earlier. Automation is really a boon for older unskilled … and skilled … workers. But that’s really what he meant to say … right?

The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.

MD: Well duh!

That’s the abstract of a new paper by Grace Lordan and David Neumark, titled “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs.”  (emphasis added)

Reality is not optional and the law of demand holds for low-skilled labor no less than it holds for kumquats, for yoga instruction, and for high-quality jewelry.

MD: But the mechanism is sticky and has a dead band. Eliminate the relative motion (i.e. inflation) and then the effects of the  coefficient of static friction and deadband don’t come into play at all. The static forces remain constant … they don’t build up to a point of violent release!

Indeed, the law of demand is universal.  Therefore, government diktats requiring all workers to insist on being paid at least some minimum hourly wage from employers will cause the quantities of any given kind of low-skilled labor demanded by employers to be fewer than these quantities would be in the absence of such diktats.

MD: Government cannot survive with zero inflation. That “is” what sustains all government. And that inflation is also what lets the money changers maintain their illusion of the “time value of money” and thus their demand for tribute (for their claim of being the creators of the money). With zero inflation, both money changers and the governments they institute are “high, dry, and looking for a ball player” … i.e. they’re out of business.

Minimum-wage proponents fancy themselves to be champions of the poor, but these fancies are belied by the reality that minimum wages reduce the employment prospects of the very people that well-meaning minimum-wage proponents intend to help.

MD: But when you have a 4% leak in the money, how in the world are you going to keep from grinding the unskilled labor right into the dirt? Remember, we were all unskilled labor at one point in our lives.

(HT Frank Stephenson)

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Cafe Hayek: politics differs categorically from markets

Cafe Hayek: politics differs categorically from markets

MD: DBx has been working very hard on helping Jim Buchanan to become a Mises Monk saint. Lets see what pearls he brings us today.

 

… is from page 56 of my late Nobel laureate colleague Jim Buchanan‘s 1979 article “Politics Without Romance,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

But politics differs categorically from markets in that, in political competition, there are mutually exclusive sets of losers and winners.  

MD: Yeh … like with the Harlem Globe Trotters and the Washington Generals are in basketball competition.

Only one candidate or party wins; all others lose.  Only one party is the governing party.  One way of stating the basic difference here is to say that, in economic exchange, decisions are made at the margin, in terms of more or less, whereas in politics, decisions are made among mutually exclusive alternatives, in terms of all-or-none prospects.

MD: I vote that Buchanan disqualifies himself for sainthood with that quote. He didn’t know theater when it was bashing him across his nose.

DBx: In markets, consumers who don’t like, say, the service or style of Trump hotels can avoid those hotels and instead stay at the Four Seasons, Hyatt, Holiday Inn, or wherever – or not stay at hotels at all – even while other consumers continue to stay in Trump hotels.  In politics, every U.S. citizen must live under a Trump presidency if Trump convinces a significant sub-set of U.S. citizens to vote for him.

MD: That’s what you’re going to get when you employ democracy in a fashion in which it has no hope of working … i.e. with more than 50 people involved.

And unlike with hotels (and other goods and services supplied by the market), no two presidents or prime ministers or senators or governors actually perform in competition with each other side by side, at the same time, under the same circumstances.  It’s much more difficult to judge the performance of a politician than it is to judge the performance of a private business.

MD: Iterative secession. The more spaces we have, the chance we have of finding a space that is corrigible to us as individuals. Globalism is the exact wrong way to go.

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Cafe Hayek: Chicken or the egg?

Cafe Hayek: What’s a function of what?

MD: I just quickly scanned this article to see what it was about. I couldn’t believe what I was reading. Let’s pick out the Money Delusions … and logic delusions as well.

(Don Boudreaux)

… is from page 83 of my late colleague Jim Buchanan‘s pioneering August 1954 Journal of Political Economy article, “Individual Choice in Voting and the Market,” as this article is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

While it is no doubt true that both the individual’s earning and expenditure patterns are conditioned to a large degree by the average patterns of his social group,

MD: What? What came first, the chicken or the egg? Hint: Indisputably, the individual came before the group.

the distinction between this indirectly coercive effect involved in the social urge to conform and the direct and unavoidable coercion involved in collective decision seems an extremely important one.

MD: It’s easy to see “social urges” are largely (totally?) the purposeful result of “propaganda”. Polls are a “measure of the effectiveness of the propaganda”!

DBx: The collective decisions that Jim had in mind here are, of course, ones made through, and enforced by, the state.

MD: The state is the product of the money changers. The state is propagandized every bit as much as the people it claims to “govern” and openly propagandizes!

For an individual to sense an urge to conform to the expectations of others – and almost always (more than you think!) to give in to that urge – is common and natural.  This urge is part of human nature.  We are social animals.

MD: Some of us are way less social than others. Many among us are totally valueless … they are just manipulative busybodies.

(The fact that Buchanan mentioned this reality in 1954 – and did so with an “of course” – is itself evidence against the straw-man ‘free-market’ economist who allegedly believes that each real-world individual is immune to social pressures – that is, believes that each individual is neither formed by, nor is part of, society.)

MD: I repeat. Propaganda (and brain washing) plays the predominant role now. This is easy to see after a long life span (70+ years). We are a product of our teaching … and almost none of that comes from our family … as it did in more sane times. It all now comes from government and media … both instituted by money changers.

But, as Jim says, this universal urge of A to largely conform to the expectations of B and C (who are part of A’s social group) is categorically different from A being threatened with violence by B and C if A does not do as B and C command.

MD: … assured by forcing A, B, and C to share the same space … in the interest of diversity!

This difference grows even greater in those many cases in modern, legislation-using societies when B and C command A not simply to conform to the evolved expectations of the group but, instead, to obey the arbitrary will of B and C (as when, for example, B and C use threats of violence to prevent A from driving a car for hire, or when B and C command A to pay to them a punitive fee if A insists on purchasing goods from a foreign seller).

MD: We are a society of laws … 40,000+ new ones each year. If we were a society, not of laws, not of the people, but of principles (the first being the golden rule), many problems would not exist … and those that surface would be easily addressed. And we would be far better off if we had many separate spaces … instead of uniting! Read the Anti-Federalist Papers. Those people got it … and the founding “children” did not!

Iterative secession!

 

Bonus Quotation of the Day…

Posted: 09 Aug 2017 11:57 AM PDT

(Don Boudreaux)

… is from page 55 of my late Nobel laureate colleague Jim Buchanan‘s insightful 1979 article “Politics Without Romance,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty:

Once we so much as move beyond the simple committee or town-meeting setting, however, something other than the passive response of suppliers [of public goods] must be reckoned with in any theory of politics that can pretend to model reality.  Even if we take only the single step from town-meeting democracy to representative democracy, we must introduce the possible divergence between the interests of the representative or agent who is elected or appointed to act for the group and the interests of the group members themselves.

MD: Town-meetings are not even representative democracy. Democracy doesn’t work when more than 50 people are involved. WIth towns, hundreds to thousands of people are involved. If we were individuals of principles, any issue needing group attention would first be addressed by a group of 50 or less people. If the problem was beyond that scope, those 50 people would select a representative to go to the next lower group to address the issue with representatives from 50 other adjacent groups. With just six such layers, the entire population many times over can address all issues in a truly democratic fashion. In actuality, it would be rare indeed when an issue  would progress to the sixth (and bottom) group.

DBx: I understand that my training as an economist ‘biases’ me.  (Can someone point to a discipline the training in which does not then ‘bias’ its practitioners?)

MD: I am biased by “engineering training” .. and rejection of religious indoctrination. I can’t think of a single one of those biases that has proved to be untrue. Of what I have seen of economics, I don’t see a single one that “is” true … beginning with their concept of what money is! And what could be more important to their focus than that?

I understand also that my bias might be especially strong given that I began reading Jim Buchanan’s works while still an undergraduate – that I later was a colleague of Buchanan’s and Tullock’s – and, indeed, that I served for several years as the Director of the Center for Study of Public Choice.  I plead guilty to being “biased.”

MD: Those who immerse themselves in religion also have such a strong … and misguided bias. Put on blinders and you “will” be blinded.

But I’ve also another plea – this one, for a clear-eyed, objective, unbiased person – say, Nancy MacLean – to tell me what is objectionable about Buchanan’s above-quoted statement?

MD: And I have one for DB … and have confronted him with it directly. He declared me to be “unorthodox” when I asked him to disprove the reality (which I prove) that “money is an in-process promise to complete a trade over time and space and is only created by traders … like you and me” and that gold “is not money” … and that “all” money is fiat (because all promises are fiat).

Why is it objectionable to do political theory with the understanding that, with representative democracy, there is a “possible divergence between the interests of the representative or agent who is elected or appointed to act for the group and the interests of the group members themselves”?  What is the better alternative to recognizing this possibility?

MD: Has it occurred to DB that democracy cannot be representative … and thus cannot be democracy … with more than 50 people involved? To have a democratic discourse and decision, “all” participants must have the exact same grasp of the details of the issue … not spoon fed to them by propagandists.

If Nancy MacLean were to write a book on principal-agent law, would she dismiss as uncharitable those legal scholars who refuse to assume that agents always and naturally represent the interests of their principals perfectly?

MD: These days, anytime I see the words “scholar” and “theory” I know I’ve waded into the swamp! This is the most inbred collection of people you will ever want to see.

More practically, if MacLean were to hire a real-estate agent to sell her house, would she simply give – or has she simply given? – that agent carte blanche to act on MacLean’s behalf however that agent chooses?  I ask these questions because I’m still amazed – no doubt due to my bias – that on page 58 of Democracy in Chains MacLean, seemingly in all seriousness, writes:

And, in their assumption that individuals always acted to advance their personal economic self-interest rather than collective goals or the common good, Buchanan’s school went further, projecting unseemly motives onto strangers about whom they knew nothing.

MD: I know not of a single instance where I acted in the interest of a collective goal in violation of a personal self-interest … economic or otherwise. And I don’t need the word “voluntarily” as a qualifier. When I am “forced” to do something (like pay taxes), I act in my self-interest by doing so … the force sees to it that it is in my self-interest that I do. They take away my stuff if I don’t.

The allegedly “unseemly motives” are nothing more than the self-interest that nearly all lawyers and all sound economists assume when doing their work.

MD: “Sound” economists? Do we see the kettle calling the pot black here again?

Indeed, these motives are identical to the motives that each of us assumes is operative in the actions of all people with whom we interact commercially.

MD: Right … they correctly call it price fixing don’t they!

All contracts that specify more than price and quantity – and perhaps even these – are written by people who MacLean would describe (were she consistent) as “projecting unseemly motives” onto others (some of whom they have met, but many of whom are “strangers about whom they know nothing”).

MD: If we were principled we wouldn’t have problems with contracts. Anyone who has created money to buy a house over time and space and used an FHA contract has consented to maintain “replacement value insurance” until the balance is paid in full. And such contracts are not modifiable … i.e. negotiable. Take it or leave it!

What is the principle? Support the insurance industry?

What should the principle be? Deliver on your trading promises. If there is any risk you won’t, insure yourself against that risk… i.e. pay an actuarially determined premium that addresses the risk of failing to deliver … not of failing to put the property back into some state already delivered on.

In my case I pay $2,000+ per year insurance on property improvements of about $130 replacement cost. Over a 30 year record of delivering on my money creation promise (i.e. returning the money I created), this actuarially suggest 1 in 2 properties within 1/2 mile of mine will be totally destroyed (fully 500 out of 1000 houses).

In my 70+ year lifetime not a single property has met this calamity. Further, when I confronted the bank and refused to buy the insurance (my balance being below the value of the underlying land that could not be destroyed), they purchased insurance … at my expense (from themselves) to meet the terms of the contract. The provisions for that are clearly laid out in the contract … violating any reasonable principle.

I then kept my own set of books and have now (by my accounting) completely delivered on my money creating promise. Yet the bank says I must continue to pay them for 3 more years … including paying for insurance for a risk they no longer even have an interest in

Over the time I have confronted them with this issue (a little over two years), 27 houses should have been destroyed. Predictably, none have been destroyed. Now, do you want to talk to me about contracts … especially those that you can’t negotiate … like an FHA contract?

I am having to sue the bank (Wells Fargo … whom I bailed out when they defaulted on their trading promises) for release of the lien … and if the jury says the contract is clear (like judges tell them to decide according to “clear” law) … the banks will prevail.

I’m counting on the jury observing that they are not only evaluating compliance with the contract … they are evaluating the validity (principles) of the contract … i.e. jury nullification. You can’t hand out leaflets on courthouse steps to tell them about this … but for darn sure “I” can inform them about it when I do this case “pro-se”.

If I engaged a lawyer, that lawyer would be disbarred for bringing forth such an argument … yet it is the first  and most obvious valid argument.

If such prudent assumptions about other people’s motives are accepted readily when we do legal analysis – and when lawyers actually practice law – what is so objectionable about using such assumptions when doing political theory?

MD: A false choice! The law is flawed on it’s face. 40,000+ new ones each year are blatant proof.

Laws can’t work when there are more of them than anyone can know … and all of them have multiple decisions (decided meanings) in conflict with each other.