Saturday 5 October 2024

"Logical fallacies are not the only errors that retard thinking. Conceptual fallacies do, too, and often in subtler, more destructive ways."



"Logical fallacies are not the only errors that retard thinking. Conceptual fallacies do, too, and often in subtler, more destructive ways. ..."[These f]allacies ... include package-deals, anti-concepts, frozen abstractions, floating abstractions, and stolen concepts. Below are definitions and examples of each, along with brief indications of the principles they violate. ...

"The fallacy of package-dealing consists in conceptually combining things that are superficially similar but essentially different and, thus, logically do not belong under the same concept. If and when we commit this fallacy, we muddle our thinking about the subject in question and make clear communication impossible. ... 
    "An extremely common instance of package-dealing is the mental blending of 'majority rule' and 'rights-protecting social system' under the term 'democracy.' ... 'Power' is a[nother] package-deal when used to equate 'economic power' with 'political power.' ...

"An anti-concept is a kind of package-deal, in that it combines ideas that logically don’t belong together. But an anti-concept is different from a regular package-deal, in that it is intended to cause conceptual confusion and harm. As [Ayn] Rand defines it, an anti-concept is an unnecessary and rationally unusable term intended to replace and obliterate some legitimate concept(s) in people’s minds. ...
    "The alleged meaning of 'social justice' [for example] is 'the moral imperative of treating people fairly with respect to various social matters.' Its actual meaning is 'the moral imperative of coercively redistributing wealth and forcing individuals and institutions to act against their judgment for the sake of various groups whose individual members allegedly can’t think or live on their own.' In other words, 'social justice' is the soft bigotry of low expectations—fused with the hard coercion of a government gun.
    "The purpose of the anti-concept of 'social justice' is to obliterate the concept of actual justice in people’s minds. And, when people accept the phrase as legitimate and try to use it, that is what it does. ...

"The fallacy of freezing an abstraction consists in making a false equation by substituting a particular conceptual concrete for the wider abstract class to which it belongs. Like a package-deal, it involves integrating concepts in disregard of the need for crucial distinctions.
    "[Ayn] Rand’s seminal example of this fallacy is the equating of 'morality' with 'altruism' by substituting a particular morality (the morality of self-sacrifice) for the whole, general class 'morality.' ...

"Conceptual knowledge is hierarchical. Higher-level concepts, such as mammal, animal, mile, and tyranny, presuppose and depend on lower-level concepts, all the way down to first-level concepts, whose referents are at the perceptual level, such as dog, bird, inch, and force (e.g., a punch in the face). In order to know what a mammal is, you must first understand a chain of more basic concepts, including fertilization, reproduction, animal, and various kinds of animals (e.g., cats, dogs, birds, fish). Without this more basic knowledge, the concept of mammal wouldn’t and couldn’t have meaning in your mind.
    "This principle of hierarchy applies to all conceptual knowledge. Higher-level (more abstract) concepts can be understood and have meaning in someone’s mind only to the extent that he grasps the lower-level (more basic) concepts that give rise to them. And there are essentially two ways people can violate this principle: via floating abstractions and via stolen concepts. 
    "When someone uses a word or phrase that is not supported in his mind by a structure of more basic ideas that are ultimately grounded in perceptual facts, he is using a floating abstraction—an abstraction disconnected from reality in his mind, disconnected from the things the idea refers to, disconnected from the facts that give 't meaning.
    "For example: 'Everyone has a right to a living wage.' If someone uses the word 'right' this way, he doesn’t know what a right is. He doesn’t know what the concept means, what it refers to in reality. He doesn’t know the facts that give rise to our need for the concept. (Or, if he does, he is committing a more grievous fallacy; see concept-stealing below.) ... 'America is a democracy.' If someone thinks or says such a thing, he doesn’t know what “democracy” means (see “democracy” as a package-deal above). The term is a floating abstraction in his mind. 'From the river to the sea, Palestine will be free.' If someone chants such nonsense, he has no idea what 'free' means. The term is a floating abstraction in his mind.
    "Floating abstractions abound. Be on the lookout for them in your own mind and in the claims of others. ...

"Now, if someone goes beyond merely using a concept that is disconnected from reality and uses a concept while denying or ignoring more basic, lower-level concepts on which it logically depends, he is committing the fallacy of concept-stealing.
    "Here, as with floating abstractions, the operative principle is the hierarchical nature of conceptual knowledge. Higher-level, more abstract knowledge is built on lower-level, more basic knowledge, all the way down to sensory perception, our direct cognitive contact with reality. Concept-stealing consists in using a higher-level concept while denying or ignoring a lower-level concept(s) on which it depends for its meaning.
    "Examples: ... When someone claims that an experiment has shown that determinism is true—that all human action is antecedently necessitated by forces beyond our control—he steals the concepts of 'experiment' and 'true.' ... When someone claims the senses are invalid, he steals the concept of 'invalid.' (Invalid, in this context, means 'incapable of delivering knowledge of reality.') ....
    "Stolen concepts are rampant in philosophic discussions. And they not only cause confusion; they also make way for much mischief and lead people to waste ungodly amounts of time pondering and debating things that don’t exist, don’t make sense, or don’t matter. Be on the lookout for them. ...

"Keeping your thinking connected to reality is essential to success in reality. And that’s the only kind of success there can be."

~ Craig Biddle from his post 'Conceptual Fallacies and How to Avoid Them'


Friday 4 October 2024

Common Law v Statute Law

 


"[A] legal system centred on legislation [i.e. statute law] resembles ... a centralised economy in which all the relevant decisions are made by a handful oI directors, whose knowledge of the whole situation is fatally limited and whose respect, if any, of the people's wishes is subject to that limitation. ...
    "It is ... paradoxical that the very economists who support the free market at the present time do not seem to care to consider whether a free market could really last within a legal system centred on legislation. ... [T]he strict relationship between the market economy and a legal system centred on judges and]or lawyers instead of on legislation is much less clearly realised than it should be, although the equally strict relationship between a planned economy and legislation is too obvious to be ignored in its turn by scholars and people at large.

"[T]here is more than an analogy between the market economy and a common or lawyers' law, just as there is much more than an analogy between a planned economy and statute law. If one considers that the market economy was most successful both in Rome and in the Anglo-Saxon countries within the framework of, respectively, a lawyers' and a common law, the conclusion seems to be reasonable that this was not a mere coincidence."
~ Bruno Leoni, from his book Freedom and the Law, pp 21-2. [Emphases in the original.] Hat tip Michael Munger & Russ Roberts from their 'Econtalk' podcast episode on 'The Underrated Bruno Leoni'
FURTHER READING: 

Definition


"An argument against the use of personal definitions of words can be framed around the concepts of communication efficacy, shared meaning, and societal cohesion. ...

"The primary purpose of language is to facilitate clear communication between individuals. Personal definitions of words undermine this goal by distorting the shared meaning that allows people to understand one another. ...

"Standardised definitions, whether agreed upon in dictionaries or understood within a particular community, provide linguistic stability. This stability is critical for maintaining clarity across generations and cultural contexts. ...

"Shared definitions are vital for productive debate and critical thinking. ... When personal definitions are introduced, arguments become subjective and unfalsifiable, as participants are no longer addressing the same concepts.

"Language serves as a bridge between diverse individuals and communities, but if this bridge is weakened by subjective definitions, mutual understanding becomes more difficult, and divisions deepen. ...

"In fields that rely on precision and objectivity, such as law, science, and medicine, consistent definitions are essential. Personal definitions introduce ambiguity that can be dangerous. ...

"While language does evolve, and there is space for creative expression, the integrity of communication, the stability of society, and the clarity of important discourse depend on shared definitions of words."

~ Tim Harding from his post 'Against personal definitions'

Thursday 3 October 2024

"The tragedy in the pathetic comedy of last night was this anti-debate’s revelation of the vacuum at the heart of American power"


"Not in recent memory has the country been offered a choice between, in Harris, a vapid mediocrity, and in Trump, an unbalanced malignity. And not in recent memory have the running mates of the two presidential candidates been clearly more qualified than the latter — though barely so — to sit in the White House The only difference between them is that Vance lies and gets away with it and Walz lies and gets caught. A bravura performance by either man would have only put the profoundly flawed tops of their tickets into greater relief. ...
    "The tragedy in the pathetic comedy of last night was this anti-debate’s revelation of the vacuum at the heart of American power, and of the country’s growing helplessness to protect itself as history rushes to fill it."

~ Lee Siegel from his post 'The toxic empathy of the VP debate'

"The Walz/Vance VP debate is another reminder it’s time to extinguish the ‘fire in a crowded theatre’ trope"



"[Last night's] Walz/Vance VP debate [is] another reminder it’s time to extinguish the ‘fire in a crowded theatre’ trope. People keep citing the phrase — incorrectly — to justify censorship. Please stop. ...
    "In a discussion about the riot at the U.S. Capitol on Jan. 6, 2021, Walz told Vance: 'You can’t yell fire in a crowded theatre. That’s the test, that’s the Supreme Court test.' ...
    "The phrase comes from Justice Oliver Wendell Holmes’ 1919 opinion in Schenck v. United States, and it’s a testament to the power of a well-turned phrase that we’re still hearing it more than a hundred years later. ...
    "So what exactly did Schenck do to deserve a unanimous Supreme Court decision against him?
He wrote and distributed a pamphlet urging Americans to peacefully resist being drafted to fight in World War I. That’s it. That’s all he did. ... For this, Schenck was convicted of three counts of violating the Espionage Act of 1917 and served six months in jail. ... His words were declared, in another phrase that would cause many more problems than it solved, a 'clear and present danger.' ...
    "The true insidiousness of the 'fire in a crowded theatre' phrase is the way that, from the very beginning, it has been wielded to justify censorship of a broad range of speech that has nothing to do with fires or theatres. ....
    "Immediately following World War I, Schenck evidently seemed justified, but it seems nuts to us now because it is nuts. This realisation began to dawn on Justice Holmes [and the Supreme Court] rather quickly. ... [In several] landmark free speech cases ... the Court made it clear that it would not be punishing pamphleteers again any time soon.
    "Finally, in 1969 ... the Supreme Court pulled the plug on Schenck. Discarding its 'clear and present danger' test, the court replaced it with a new test for unlawful incitement: to be punishable, speech must be 'directed to inciting or producing imminent lawless action' and be 'likely to incite or produce such action.' Schenck’s 'dangerous' exhortation to write your congressman — a perfectly legal and democratic activity — would never qualify.
    "That was 55 years ago. So the 'fire in a crowded theatre' analogy has been bad law for longer than it was good law. But its liberty-destroying legacy remains ..."

~ Robert Shibley, from his post 'Walz/Vance VP debate another reminder it’s time to extinguish the ‘fire in a crowded theatre’ trope'

Wednesday 2 October 2024

"We cannot run an industrial nation only with pressure differences in the atmosphere. Stand up for weather-independent electricity!"

 

We're short of energy in New Zealand because we don't build enough reliable energy production, hampered by the RMA and relying too much on unreliables — so-called renewables, or 'green energy,' which need real back-up energy when sun doesn't shine or wind doesn't blow — and finding it damned difficult even to build these unreliable sometime-producers.

So, we are running short because we're shooting ourselves in the foot by not building enough. In Germany, they're running short because politicians decided to shut down the reliable (and clean) nuclear producers they had, and rely instead on unreliables — and on buying extra from France's reliable nuclear fleet.

So how's that going? A: It's expensive. So much so that German automakers are struggling. And B: well, as Staffan Reveman points out, whatever capacity is cited for unreliable energy production, it just doesn't produce it reliably, if at all:


German #wind power in the first 9 months of the year 2024. [Graph: Agorameter with 1h resolution]
The installed capacity is 70 gigawatts. Wind power delivered everything between almost nothing and
50 gigawatts. We see here that we cannot run an industrial nation only with pressure differences
in the atmosphere. Stand up for ... weather-independent electricity!

In the words of one local, "This country hat nicht alle Tassen im Schrank."

It goes double for us.


"Libertarianism differs fundamentally from both left liberal and conservative perspectives."


"Popular opinion views [left] liberalism and conservatism as radically different perspectives about the proper size and scope of government. ... Yet [left] liberal and conservative perspectives are the same in one key respect: both advocate using government to impose particular values.
    "Conservatives want to ban drugs, liberals guns. Conservatives advocate banning abortions, [left] liberals subsidising them. Conservatives support subsidies for home schooling and religious schools, [left[ liberals the same for low-income housing and 'clean' energy. ... Thus the goals of favoured policies differ, but not the belief that government should promote specific views ... —all of which involve government interference with private decisions ...
    "Libertarianism differs fundamentally from both [left] liberal and conservative perspectives. ... consistently ask[ing] whether government intervention does more harm than good. And it applies this skepticism regardless of the associated 'values.'
    "Thus libertarianism argues against both drug prohibition and gun control; against government protection of unions, but not against unions per se; against government-imposed affirmative action, but not against privately adopted affirmative action; against any government-imposed content moderation of social media, but not against private moderation policies; against all trade and immigration restrictions; against government restrictions on school choice; against government-mandated licenses; and against the government defining marriage.
    "Perhaps libertarians are wrong about the merits of some government interventions. But applying a consistent lens across policies helps understand the inconsistencies of both [left] liberal and conservative perspectives."

~ Jeffrey Miron from his post 'Libertarian Consistency'





Tuesday 1 October 2024

"We are now in the truly surreal situation where privileged Westerners seem distressed over the death of Nasrallah while Muslims in Lebanon, Syria and Iran are dancing in celebration over it."


"Only one word captures the vibe in the West following Israel’s killing of Hassan Nasrallah: anguish. Everywhere you look there is dread over what Israel has done, and fear of what it might unleash. Disquiet drips from every newspaper. You hear it in the trembling timbre of news anchors. You see it in the feverish warnings of ‘anti-war’ types that the Middle East now stands upon the precipice of apocalypse. You hear it in Guardianistas’ shrill damning of Israel as a ‘pugnacious out-of-control force’ that now even takes out terrorists ‘against the United States’ explicit wishes’. ...
    "Our elites really have no clue that civilisation itself is on the line in Israel’s war with its tormentors. ...
    "We are now in the truly surreal situation where privileged Westerners seem distressed over the death of Nasrallah while Muslims in Lebanon, Syria and Iran are dancing in celebration over it. Moneyed genderfluid kids on the manicured lawns of Columbia in NYC might be experiencing pangs of grief, or at least worry, following the killing of Nasrallah. But feminists in Iran, anti-Hezbollah activists in Lebanon and the families of the Syrians Hezbollah helped to butcher when it sided with Assad in the Syrian Civil War are elated. Surely, nothing better captures the moral disarray of the woke of the West than their bitter tears for an Islamist extremist whose Jew hatred, misogyny, homophobia and rank authoritarianism made him the enemy of every Muslim in the Middle East who longs for the thing these pampered Westerners enjoy: liberty."
~ Brendan O'Neill, from his post 'Why is the West so anguished over the death of Hassan Nasrallah?'

 

Monday 30 September 2024

Ludwig von Mises: Capitalism's great defender



When Ludwig von Mises appeared on the economic scene, Marxism and the other socialist sects enjoyed a virtual intellectual monopoly — there was virtually no systematic intellectual opposition to socialism or defence of capitalism. Quite literally, the intellectual ramparts of civilization were undefended. What von Mises undertook, and which summarises the essence of his greatness, was to build an intellectual defence of capitalism and thus of civilisation.
On the 100th anniversary of his birth in 1881, his student George Reisman penned this tribute to one of capitalism's greatest defenders. . .

A Tribute to Ludwig von Mises on the Anniversary of his Birth

by George Reisman

September 29, 2024, is the one-hundred-and-forty-third anniversary of the birth of Ludwig von Mises, economist and social philosopher, who passed away in 1973. Von Mises was my teacher and mentor and the source or inspiration for most of what I know and consider to be important and worthwhile in these fields of what enables me to understand the events shaping the world in which we live. I want to take this opportunity to pay tribute to him, because I believe that he deserves to occupy a major place in the intellectual history of the twentieth century.

Von Mises is important because his teachings are necessary to the preservation of material civilization. As he showed, the base of material civilisation is the division of labour. Without the higher productivity of labour made possible by the division of labour, the great majority of mankind would simply die of starvation. The existence and successful functioning of the division of labour, however, vitally depends on the institutions of a capitalist society — that is, on limited government and economic freedom; on private ownership of land and all other property; on exchange and money; on saving and investment; on economic inequality and economic competition; and on the profit motive that institutions everywhere under attack for several generations.

When von Mises appeared on the scene, Marxism and the other socialist sects enjoyed a virtual intellectual monopoly. Major flaws and inconsistencies in the writings of Adam Smith and Ricardo and their followers enabled the socialists to claim classical economics as their actual ally. The writings of Jevons and the earlier Austrian economists Menger and Böhm-Bawerk were insufficiently comprehensive to provide an effective counter to the socialists. Bastiat had tried to provide one, but died too soon, and probably lacked the necessary theoretical depth in any case.

Thus, when von Mises appeared, there was virtually no systematic intellectual opposition to socialism or defense of capitalism. Quite literally, the intellectual ramparts of civilisation were undefended. What von Mises undertook, and which summarises the essence of his greatness, was to build an intellectual defence of capitalism and thus of civilisation.

Capitalism operates to the material self-interests of all

THE LEADING ARGUMENT OF the socialists was that the institutions of capitalism served the interests merely of a handful of rugged exploiters and monopolists, and operated against the interests of the great majority of mankind, which socialism would serve. While the only answer others could give was to devise plans to take away somewhat less of the capitalists’ wealth than the socialists were demanding, or to urge that property rights nevertheless be respected despite their incompatibility with most people’s well-being, von Mises challenged everyone’s basic assumption. He showed that capitalism operates to the material self-interests of all, including the non-capitalists the so-called proletarians. In a capitalist society, von Mises showed, privately-owned means of production serve the market. The physical beneficiaries of the factories and mills therefore are all who buy their products. And, together with the incentive of profit and loss, and the freedom of competition that it implies, the existence of private ownership ensures an ever-growing supply of products for all.

Thus, von Mises showed to be absolute nonsense such clichés as poverty causes communism. Not poverty, but poverty plus the mistaken belief that communism is the cure for poverty, causes communism. If the misguided revolutionaries of the backward countries and of impoverished slums understood economics, any desire they might have to fight poverty would make them advocates of capitalism.

Socialism means chaos

Socialism, von Mises showed, in his greatest original contribution to economic thought, not only abolishes the incentive of profit and loss and the freedom of competition along with private ownership of the means of production, but makes economic calculation, economic coordination, and economic planning impossible, and therefore results in chaos — because socialism means the abolition of the price system and the intellectual division of labour; it means the concentration and centralisation of all decision-making in the hands of one agency: the Central Planning Board or the Supreme Dictator.

Yet the planning of an economic system is beyond the power of any one consciousness: the number, variety and locations of the different factors of production, the various technological possibilities that are open to them, and the different possible permutations and combinations of what might be produced from them, are far beyond the power even of the greatest genius to keep in mind. Economic planning, von Mises showed, requires the cooperation of all who participate in the economic system. It can exist only under capitalism, where, every day, businessmen plan on the basis of calculations of profit and loss; workers, on the basis of wages; and consumers, on the basis of the prices of consumers’ goods.

Von Mises’s contributions to the debate between capitalism and socialism the leading issue of modern times are overwhelming. Before he wrote, people did not realise that capitalism has economic planning. They uncritically accepted the Marxian dogma that capitalism is an anarchy of production and that socialism represents rational economic planning. People were (and most still are) in the position of Moliere’s M. Jourdan, who never realized that what he was speaking all his life was prose. For, living in a capitalist society, people are literally surrounded by economic planning, and yet do not realise that it exists. Every day, there are countless businessmen who are planning to expand or contract their firms, who are planning to introduce new products or discontinue old ones, planning to open new branches or close down existing ones, planning to change their methods of production or continue with their present methods, planning to hire additional workers or let some of their present ones go. And every day, there are countless workers planning to improve their skills, change their occupations or places of work, or to continue with things as they are; and consumers, planning to buy homes, cars, stereos, steak or hamburger, and how to use the goods they already have for example, to drive to work or to take the train, instead.

Yet people deny the name planning to all this activity and reserve it for the feeble efforts of a handful of government officials, who, having prohibited the planning of everyone else, presume to substitute their knowledge and intelligence for the knowledge and intelligence of tens of millions. Von Mises identified the existence of planning under capitalism, the fact that it is based on prices ( economic calculations ), and the fact that the prices serve to coordinate and harmonise the activities of all the millions of separate, independent planners.

He showed that each individual, in being concerned with earning a revenue or income and with limiting his expenses, is led to adjust his particular plans to the plans of all others. For example, the worker who decides to become an accountant rather than an artist, because he values the higher income to be made as an accountant, changes his career plan in response to the plans of others to purchase accounting services rather than paintings. The individual who decides that a house in a particular neighborhood is too expensive and who therefore gives up his plan to live in that neighborhood, is similarly engaged in a process of adjusting his plans to the plans of others; because what makes the house too expensive is the plans of others to buy it who are able and willing to pay more. And, above all, von Mises showed, every business, in seeking to make profits and avoid losses, is led to plan its activities in a way that not only serves the plans of its own customers, but takes into account the plans of all other users of the same factors of production throughout the economic system.

Thus, von Mises demonstrated that capitalism is an economic system rationally planned by the combined, self-interested efforts of all who participate in it. The failure of socialism, he showed, results from the fact that it represents not economic planning, but the destruction of economic planning, which exists only under capitalism and the price system.

Competition under capitalism is of an entirely different character than competition in the animal kingdom

VON MISES WAS NOT primarily anti-socialist. He was pro-capitalist. His opposition to socialism, and to all forms of government intervention, stemmed from his support for capitalism and from his underlying love of individual freedom, and his conviction that the self-interests of free men are harmonious indeed, that one man’s gain under capitalism is not only not another’s loss, but is actually others’ gain. Von Mises was a consistent champion of the self-made man, of the intellectual and business pioneer, whose activities are the source of progress for all mankind and who, he showed, can flourish only under capitalism.

Von Mises demonstrated that competition under capitalism is of an entirely different character than competition in the animal kingdom. It is not a competition for scarce, nature-given means of subsistence, but a competition in the positive creation of new and additional wealth, from which all gain. For example, the effect of the competition between farmers using horses and those using tractors was not that the former group died of starvation, but that everyone had more food and the income available to purchase additional quantities of other goods as well. This was true even of the farmers who lost the competition, as soon as they relocated in other areas of the economic system, which were enabled to expand precisely by virtue of the improvements in agriculture. Similarly, the effect of the automobile’s supplanting the horse and buggy was to benefit even the former horse breeders and blacksmiths, once they made the necessary relocations.

In a major elaboration of Ricardo’s Law of Comparative Advantage, von Mises showed that there is room for all in the competition of capitalism, even those of the most modest abilities. Such people need only concentrate on the areas in which their relative productive inferiority is least. For example, an individual capable of being no more than a janitor does not have to fear the competition of the rest of society, almost all of whose members could be better janitors than he, if that is what they chose to be. Because however much better janitors other people might make, their advantage in other lines is even greater. And so long as the person of limited ability is willing to work for less as a janitor than other people can earn in other lines, he has nothing to worry about from their competition. He, in fact, outcompetes them for the job of janitor by being willing to accept a lower income than they. Von Mises showed that a harmony of interests prevails in this case, too. For the existence of the janitor enables more talented people to devote their time to more demanding tasks, while their existence enables him to obtain goods and services that would otherwise be altogether impossible for him to obtain.

He showed that the foundation of world peace is a policy of laissez-faire both domestically and internationally

ON THE BASIS OF such facts, von Mises argued against the possibility of inherent conflicts of interest among races and nations, as well as among individuals. For even if some races or nations were superior (or inferior) to others in every aspect of productive ability, mutual cooperation in the division of labour would still be advantageous to all. Thus, he showed that all doctrines alleging inherent conflicts rest on an ignorance of economics.

He argued with unanswerable logic that the economic causes of war are the result of government interference, in the form of trade and migration barriers, and that such interference restricting foreign economic relations is the product of other government interference, restricting domestic economic activity. For example, tariffs become necessary as a means of preventing unemployment only because of the existence of minimum wage laws and pro-union legislation, which prevent the domestic labor force from meeting foreign competition by means of the acceptance of lower wages when necessary. He showed that the foundation of world peace is a policy of laissez-faire both domestically and internationally.

In answer to the vicious and widely believed accusation of the Marxists that Nazism was an expression of capitalism, he showed, in addition to all the above, that Nazism was actually a form of socialism. Any system characterised by price and wage controls, and thus by shortages and government controls over production and distribution, as was Nazism, is a system in which the government is the de-facto owner of the means of production. Because, in such circumstances, the government decides not only the prices and wages charged and paid, but also what is to be produced, in what quantities, by what methods, and where it is to be sent. These are all the fundamental prerogatives of ownership. This identification of socialism on the German pattern, as he called it, is of immense value in understanding the nature of present demands for price controls.

Von Mises showed that all of the accusations made against capitalism were either altogether unfounded or should be directed against government intervention

VON MISES SHOWED THAT all of the accusations made against capitalism were either altogether unfounded or should be directed against government intervention, which destroys the workings of capitalism. He was among the first to point out that the poverty of the early years of the Industrial Revolution was the heritage of all previous history that it existed because the productivity of labour was still pitifully low; because scientists, inventors, businessmen, savers and investors could only step by step create the advances and accumulate the capital necessary to raise it. He showed that all the policies of so-called labour and social legislation were actually contrary to the interests of the masses of workers they were designed to help — that their effect was to cause unemployment, retard capital accumulation, and thus hold down the productivity of labour and the standard of living of all. 

In yet another major original contribution to economic thought, he showed that depressions were the result of government-sponsored policies of credit expansion designed to lower the market rate of interest. Such policies, he showed, created large-scale malinvestments, which deprived the economic system of liquid capital and brought on credit contractions and thus depressions. Von Mises was a leading supporter of the gold standard and of laissez-faire in banking, which, he believed, would virtually achieve a 100% reserve gold standard and thus make impossible both inflation and deflation.

I do not believe that anyone can claim to be really educated who has not absorbed a substantial measure of the immense wisdom present in his works

WHAT I HAVE WRITTEN of von Mises provides only the barest indication of the intellectual content that is to be found in his writings. He authored over a dozen volumes. And I venture to say that I cannot recall reading a single paragraph in any of them that did not contain one or more profound thoughts or observations. Even on the occasions when I found it necessary to disagree with him (for example, on his view that monopoly can exist under capitalism, his advocacy of the military draft, and certain aspects of his views on epistemology, the nature of value judgments, and the proper starting point for economics), I always found what he had to say to be extremely valuable and a powerful stimulus to my own thinking. I do not believe that anyone can claim to be really educated who has not absorbed a substantial measure of the immense wisdom present in his works.

Von Mises’s two most important books are Human Action and Socialism, which best represents the breadth and depth of his thought. These are not for beginners, however. They should be preceded by some of von Mises’s popular writings, such as Bureaucracy and Planning For Freedom.

The Theory of Money and Credit, Theory and History, Epistemological Problems of Economics, and The Ultimate Foundations of Economic Science are more specialised works that should probably be read only after Human Action. Von Mises’s other popular writings in English include Omnipotent Government, The Anti-Capitalistic Mentality, Liberalism, Critique of Interventionism, Economic Policy, and The Historical Setting of the Austrian School of Economics. For anyone seriously interested in economics, social philosophy, or modern history, the entire list should be considered required reading. [All titles of von Mises currently in print can be ordered on this web site, or downloaded free here.]

Courage

VON MISES MUST BE JUDGED not only as a remarkably brilliant thinker but also as a remarkably courageous human being. He held the truth of his convictions above all else and was prepared to stand alone in their defence. He cared nothing for personal fame, position, or financial gain, if it meant having to purchase them at the sacrifice of principle. In his lifetime, he was shunned and ignored by the intellectual establishment, because the truth of his views and the sincerity and power with which he advanced them shattered the tissues of fallacies and lies on which most intellectuals then built, and even now continue to build, their professional careers.

It was my great privilege to have known von Mises personally over a period of twenty years. I met him for the first time when I was sixteen years old. Because he recognised the seriousness of my interest in economics, he invited me to attend his graduate seminar at New York University, which I did almost every week thereafter for the next seven years, stopping only when the start of my own teaching career made it no longer possible for me to continue in regular attendance.

His seminar, like his writings, was characterised by the highest level of scholarship and erudition, and always by the most profound respect for ideas. Von Mises was never concerned with the personal motivation or character of an author, but only with the question of whether the man’s ideas were true or false. In the same way, his personal manner was at all times highly respectful, reserved, and a source of friendly encouragement. He constantly strove to bring out the best in his students. This, combined with his stress on the importance of knowing foreign languages, led in my own case to using some of my time in college to learn German and then to undertaking the translation of his Epistemological Problems of Economics, something that has always been one of my proudest accomplishments.

Today, von Mises’s ideas at long last appear to be gaining in influence. His teachings about the nature of socialism have been confirmed in the first-hand observations of honest news reporters with extensive experience in Soviet Russia, such as Robert Kaiser, Hedrick Smith, John Dornberg, and Henry Kamm. They are being confirmed at this very moment by the actions of millions of angry workers in Poland.

Some of von Mises’s ideas are being propounded by the Nobel prizewinners F.A. Hayek (himself a former student of von Mises) and Milton Friedman. They exert a major influence on the writings of Henry Hazlitt and the staff of the Foundation for Economic Education, as well as such prominent former students as Hans Sennholz. Von Mises’s monetary theories permeate the pages of recent best-selling books on personal investments, such as those by Harry Browne and Jerome Smith. And last, but certainly not least, they appear to be exerting an important influence on the present President of the United States [Ronald Reagan], who has acknowledged reading Human Action and has expressed his admiration for it.

Von Mises’s books deserve to be required reading in every college and university curriculum not just in departments of economics, but also in departments of philosophy, history, government, sociology, law, business, journalism, education, and the humanities. He himself should be awarded an immediate posthumous Nobel Prize indeed, more than one. He deserves to receive every token of recognition and memorial that our society can bestow. For as much as anyone in history, he laboured to preserve it. If he is widely enough read, his labours may actually succeed in helping to save it.

* * * * 

Economist George Reisman was a student of Ludwig Von Mises, Pepperdine University Professor Emeritus of Economics, and the author of Government Against the Economy and Capitalism: An Economic Treatise [free download here, or buy it here or here]. His blog is here, his website here, and all his publications here. This essay originally appeared in 1981, on the occasion of Mises’s one-hundredth birthday, and appeared recently at the Mises Institute blog.

"The cure for a fallacious argument is a better argument"

 



"The cure for a fallacious argument is a better argument, not the suppression of ideas."
~ Carl Sagan, from his 1997 book The Demon-Haunted World: Science As a Candle in the Dark

Friday 27 September 2024

"We have a choice. We can choose to remain a liberal democracy, or become an ethnocentric nation riven by ethnic tensions."



"We have a choice. We can choose to remain a liberal democracy where everyone counts, or we can become an ethnocentric nation based on identity politics and riven by ethnic tensions. Make no mistake; the current path where particular ethnicities are granted 'partnership' status can only lead to the eventual appearance of more ethnic parties fighting it out for a seat at the table."
~ Ananish Chaudari from his post 'Debate around ACT’s Treaty Principles Bill essential for a multi-ethnic nation'


Milei to the U.N.: "In this very house, that claims to defend human rights, they have allowed the entry of bloody dictatorships without the slightest reproach."



“I want to be clear about something, so there are no misinterpretations. Argentina, which is undergoing a profound process of change at the present, has decided to embrace the ideas of freedom.
    "Those ideas that say that all citizens are born free and equal before the law, that we have inalienable rights granted by the creator, among which are the right to life, liberty and property. ...“Argentina will not support any policy that implies the restriction of individual freedoms, of commerce, nor the violation of the natural rights of individuals. ...
    
"We are at the end of a cycle. The collectivism and moral posturing of the woke agenda have collided with reality and no longer have credible solutions to offer to the actual problems of the world. ...

"In this very house, that claims to defend human rights, they have allowed the entry of bloody dictatorships, like those of Cuba and Venezuela, without the slightest reproach. 
    "In this very house, that claims to defend the rights of women, it allows countries that punish their women for showing skin, to enter the committee for the elimination of discrimination against women. 
    "In this very house, there has been systematic voting against the state of Israel, which is the only country in the Middle East that defends liberal democracy, while simultaneously demonstrating a total inability to respond to the scourge of terrorism. ...

“World history shows that the only way to guarantee prosperity is by limiting the power of the monarch, guaranteeing equality before the law, and defending the right to life, liberty, and property of individuals.
    “We believe in the defence of life, for all. 
    "We believe in the defence of property, for all. 
    "We believe in freedom of expression, for all. 
    "We believe in freedom of worship, for all. 
    "We believe in freedom of commerce, for all. 
    "And we believe in limited governments, all of them. ... 

“The doctrine of the new Argentina is nothing more nor less than the true essence of the UN: The cooperation of nations in defence of freedom....
    "Long live freedom, godammit!"
~ Javier Milei speaking to the U.N. 

 

Thursday 26 September 2024

Treaty Principles: Unequal + Divisive?


"Reasons both for and against the Bill to define the Treaty's principles vary in their worth.
    "One of the worst against it is that it will cause division.
    "Those who use this as a reason to kill the Bill are either in ignorance of, or ignoring, the division that already exists over the rights and wrongs of Māori rights and the disquiet over the way the principles, which are undefined, have crept into legislation and practice in all levels of government, the public service and private organisations.
    "Stopping debate because there is division won’t stop the division, it will make it worse."
~ Ele Ludemann, from her post 'Stopping debate won’t stop division'
"The original intention of the ACT Bill was to assert three basic principles, which can be derived from the original Treaty:
  • The New Zealand government has the right to govern New Zealand.
  • The New Zealand government will protect all New Zealanders’ authority over their land and other property
  • All New Zealanders are equal under the law, with the same rights and duties.
But those who profit from the Waitangi Tribunal could not have remained employed and in power for 49 years if that task was so simple ... The danger was soon evident. ... The suggested second principle [became]: 
'The New Zealand Government will honour all New Zealanders in the chieftainship of their land and all their property.'
    "The first version spoke of equality; this rewritten text makes a claim for separation and superior Māori rights ...
    "That rather strange version of property rights has, since the above was written, taken another step away from universality. The second principle has [now] become (11 September 2024): 
'Rights of Hapu and Iwi Māori: The Crown recognises the rights that hapu and iwi had when they signed the Treaty. The Crown will respect and protect those rights. Those rights differ from the rights everyone has a reasonable expectation to enjoy only when they are specified in legislation, Treaty settlements, or other agreement with the Crown.'
"This [version] insists on special rights defined by race. The Bill has been destroyed, and the promise to the New Zealand people has been betrayed. ...
    "The country grows crazier with each new year. We have been living in [George Orwell's] Animal Farm for too long. When the pigs strut about and proclaim that 'All animals are equal, but some are more equal than others,' our only response must be – don’t be so silly."
~ John Robinson from his article 'Just Equality: The simple path from confusion to common sense.' [Emphases in Robinson's original]

Wednesday 25 September 2024

We're just not very productive ...

 ... or maybe we're short of capital, and over-endowed with regulation?

If there is one graph that symbolises the relative economic decline of NZ [says Robert MacCulloch], then I believe it is the one below. It measures NZ GDP per capita from 1990 to 2022, and compares it with all other nations in our Asia-Pacific region. ...


The scale is logarithmic for a reason. It gives you a measure of the percentage increases in GDP per capita in NZ compared to other nations. Every single year over this 35 year period, as far I can see from eye-balling the graph, with the exception of 1998-99, NZ's percentage rise in GDP per capita has been way lower than the average. When I was in my 20s in the 1990s, NZ's GDP per capita was about 6 times the average in the Asia-Pacific region. As of 2024, our GDP per capita is only about 2 times the Asia-Pacific average. Give it another decade or two, and there won't be much difference - the rest of Asia will be richer than us.

 

Tuesday 24 September 2024

Washington Post inadvertently reveals 'shocking truth' about 'hottest day ever'

 

"In recent years, particularly around mid-July (the peak of the Northern Hemisphere summer), there has been a noticeable surge in headlines featuring the 'hottest day' ever on record in [mainstream] media outlets – which is of course pushed by climate alarmist journalists citing questionable studies. This timing coincides with hot weather, so naturally, it’s quite convincing to persuade readers that the world’s oceans are boiling and planet Earth will ignite into a fireball unless drastic actions are taken – such as more climate taxes, ‘carbon credits’, banning cow farts, prohibiting new petrol-powered vehicle sales by X date and pushing spending bills to procure more solar panels from China, all to save the planet.


"The problem is that [mainstream] media only focuses on recent history – and not 'in context' (as they love to say). Context is particularly important when it comes to climate change – as their narrative collapses when looking at a long enough timeline.
    "To wit… a funny thing happened when the Washington Post tried to map out half a billion years of global temperatures and the 'disaster of global warming' …
    "WaPo journalists cited a new study about Earth’s global surface temperatures over the last 485 million years. In 2023, Earth’s average temperature reached 14.98°C, well below the average 36°C the study showed around 100 million years ago. The trend shows Earth’s temperatures have been sliding for 50 million years. …
    "Maybe, just maybe, the level of human-caused global warming doom porn pushed by the Government, corporate media outlets, global NGOs and far-Left billionaires is not as apocalyptic as they make it sound."
~ Zero Hedge from their post 'MSM Journos Inadvertently Reveal Shocking Truth About Global Warming'. Hat tip Richard Eldred who calls this an "inconvenient truth in the climate change story: Earth’s been on a 50-million-year cool-down." 




Monday 23 September 2024

"There are basic insights of economics that are (still) largely unknown or ignored by the general public."


"[T]here are basic insights of economics ... that are largely unknown or ignored by the general public. W]e have to deal with ideas centuries old, on which the thought of professional economists has never made any permanent impression. ... [O]ur public thought, our legislation, and even our popular economic nomenclature are what they would have been if Smith, Ricardo, and Mill had never lived, and if such a term as political economy had never been known. ...
    "Before such a thing as economic science was known arose the [erroneous] theory of the 'balance of trade.' ... that trade between two nations could not be advantageous to both. ... And yet the combined arguments of economists for a hundred years [that there can be no trade between two nations which is not advantageous to both] have not sufficed to change the nomenclature or modify the ideas of commercial nations upon the subject. … The terms 'favourable' and 'unfavourable,' as applied to the supposed balance of trade, still mean what they did before Adam Smith was born. ...
    "From the economic point of view, the value of an industry is measured by the utility and cheapness of its product. From the popular point of view, utility is nearly lost sight of, and cheapness is apt to be considered as much an evil on one side as it is a good on the other. The benefit is supposed to be measured by the number of labourers and the sum total of wages which can be gained by pursuing the industry. ...
    "[There is a] general belief throughout the community that the rate of interest can practically be regulated by law. Not dissimilar from this is the wide general belief that laws making it difficult to collect rents and enforce the payment of debts are for the benefit of the poorer classes. They are undoubtedly for the benefit of those classes who do not expect to pay. But the fact, so obvious to the business economist, that everything gained in this way comes out of the pockets of the poor … is something which the law-making public have not yet apprehended.
    "That you cannot eat your cake and have it, too, is a maxim taught the school-boy from earliest infancy. But, when the economist applies the same maxim to the nation, he is met with objections and arguments, not only on the part of the thoughtless masses, but of influential and intelligent men."

~ Simon Newcomb from his 1893 article 'The Problem of Economic Education.' Hat tip Timothy Taylor (The Coversable Economist) who observes that " the outcome of economic policies is not determined by their announced intentions of politicians or by their popularity, but by the underlying realities of how firms and consumers will react."

 

Saturday 21 September 2024

A (very) short history of the kingitanga



Tawhiao, the second kingi
 

"[W]ith the death of [Tuheitia] and the anointment of his daughter as the new [kingitanga] leader, it is an important time to consider the place of that separatist movement in the New Zealand story.
    "The idea of a Maori king was presented, and defeated, in the Waikato at two great hui of 1857 and 1858 when a majority held on to the promise of loyalty to the British Crown, and the rights that resulted. The activists withdrew and announced the great warrior Te Wherowhero (Potatau) now an aging man who was to die less than two years later, as their king. Te Wherowhero (1858-1860) was abused, kept as a virtual prisoner, and his opinions were ignored.
    "His son, Tawhiao (1860-1894) believed that he was indeed a king; a separate territory was asserted and Government agents were expelled by force, against the wishes of those who were benefitting from the aid that they had requested.
    "After that rebellion was defeated, Tawhiao remained defiant, declaring in 1876 that 'I have the sole right to conduct matters in my land – from the North Cape to the southern end.' That challenge was ignored and he was left to continue his activities. He set up a parallel government, and a bank, and in 1893 the kingite government posted notices advising that 'Pakeha as well as Maori were subject to "the laws of the Government of the Kingdom of Aotearoa".' The continuing acceptance of a rebellious monarchy is a curious feature of [modern] New Zealand."

Friday 20 September 2024

'"Whenever the EU tries to make itself more competitive, it fails'


"Whenever the EU tries to make itself more competitive, it starts from the assumption that large-scale public investment and EU-level coordination are the primary drivers of innovation and economic growth. ...But this EU view of the economy underestimates the role of markets and entrepreneurship in fostering genuine economic dynamism. That is also the biggest difference from other, more economically successful world regions.
    "At best, the EU’s economic policies do not work without causing any further harm. At worst, its plans often create additional layers of bureaucracy and regulation. These can stifle the very innovation and agility they seek to promote.
    "The EU’s repeated return to this style of economic strategy reveals a persistent belief in the efficacy of state-sponsored industrial policy. Yet ... [a]ttempts to pick winners or direct the course of technological progress from Brussels have a poor track record. When was the last time the EU created a genuinely world-leading industry that can stand on its own without protection or subsidies? Actually, has this ever happened?
    "What all the EU’s grand strategies tend to overlook is the importance of economic fundamentals. Issues like labour market flexibility, tax competitiveness and regulatory burdens ... 
    "A more effective approach might start by asking what barriers are preventing European firms from innovating and scaling up. It might look at why Europe has struggled to produce tech giants on the scale of those in the US or China. The answers likely lie in areas like Europe’s cultural attitudes towards entrepreneurship and failure.
    "Addressing these fundamentals could do more to boost European competitiveness than any amount of centrally planned investment. But that would require political courage, which might mean tackling vested interests and long-standing national practices.
    "It is all very well the EU wants to become more competitive – and it should. ... But before embarking on yet another grand plan, Europe’s politicians should reflect on the lessons of ...  similar past initiatives – and why they all failed.
    "And perhaps, just perhaps, they will realise that the EU’s own policies and regulations might have played their part in the slowing dynamism of the European economy. In which case, another grand plan designed in Brussels would be the last thing the continent needs."
~ Oliver Hartwich, from his op-ed 'Brussels sprouting same old stale economic plans'

Thursday 19 September 2024

Yes, you *did* build that


"[I]f you’re praising an achievement of someone, [an] anti-capitalist will chime in that the person was able to achieve such primarily due to the person possessing, before the fact, some social privilege that other people lack. ... [M]aybe you will be waxing about how impressed you are by Steve Jobs and Stephen Wozniak having founded Apple Computer. An anti-capitalist will chime in that this is actually because of privilege. .. 
"Even if it is true that the achiever was born into privileges that gave the achiever a head start, it doesn’t invalidate your premise that the achiever still made choices for which accolades are deserved. The reason is that many other people were born into the same privileges as the achiever, but, on account of different choices, did not perform the feats that the achiever did.
    "In the case of Stephen Wozniak: the fact is that there were hundreds of other white boys his age, who were the sons of Californian engineers, who attended the same schools that he did. But those other sons of Californian engineers did not invent the Apple II. Stephen Wozniak did. Even if the “privilege” made it easier for him than it otherwise would be, the privilege was not sufficient. The missing pieces that needed to be added were the choices of Steve Jobs and Stephen Wozniak. ... 
"Unearned social privileges do exist. But when someone — even a very privileged person — accomplishes an important feat, it’s usually the case that there were many other people who bore those same privileges but refrained from that feat. The choices of individuals are still what make the difference. And for that, they still deserve credit. To the degree that you make your own choices — choices not made and risks not taken by people from backgrounds similar to your own, and who have the same privileges that you do — you are indeed self-made in character."
~ Stu Hayashi. from his post 'A Fallacy Called ‘Privilege, or It Didn’t Happen’'

 



Occupational Licensing: Teachers union against more teachers


"What’s better, no teacher or a recently retired, though now deregistered one?
'An Otago principal facing relief staff shortages would rather use unregistered teachers than send his students home.. . . [But] PPTA Te Wehengarua president Chris Abercrombie said the “ad hoc” response ... meant thousands of young people would not be taught by trained and qualified subject-specialist teachers. . . [And] PPTA Otago regional chairman Kussi Hurtado-Stuart said the loosening of regulations [allowing this] was a 'short-sighted solution.'
"Surely a recently retired, albeit no longer registered, teacher would be better than no teacher? ..."
~ Ele Ludemann, from her post 'Union’s politics showing,' in which she submits "the union’s anti-Government politics" are on display here. I'd suggest however that this is less about the union's politics, and more about simply protecting its turf. Just like all occupational licensing.

Wednesday 18 September 2024

"This is why most dystopian versions of AI are fundamentally unconvincing."


"This is why most dystopian versions of AI are fundamentally unconvincing. The machines are going to take over—and do what? What would they actually want or need? What’s their motivation?
   "We don’t often realise how important motivation is to human reason. If the purpose of thinking is to survive, then we have a direct and personal interest in figuring out the truth and getting it right. We can’t just follow a line of thought by rote repetition. We have to constantly compare our ideas and actions to their real-world results and adjust them accordingly.
    "The psychologist William James memorably explained the difference between mechanical action and goal-directed action.
'If some iron filings be sprinkled on a table and a magnet brought near them, they will fly through the air for a certain distance and stick to its surface. A savage seeing the phenomenon explains it as the result of an attraction or love between the magnet and the filings. But let a card cover the poles of the magnet, and the filings will press forever against its surface without its ever occurring to them to pass around its sides and thus come into more direct contact with the object of their love. . . . '
"Romeo wants Juliet as the filings want the magnet; and if no obstacles intervene he moves towards her by as straight a line as they. But Romeo and Juliet, if a wall be built between them, do not remain idiotically pressing their faces against its opposite sides like the magnet and the filings with the card. Romeo soon finds a circuitous way, by scaling the wall or otherwise, of touching Juliet's lips directly. With the filings the path is fixed; whether it reaches the end depends on accidents. With the lover it is the end which is fixed, the path may be modified indefinitely. AI has no such power to adapt its means to its ends because it has no ends in the first place, no outcomes it needs to achieve. So we can see it regularly following its algorithms into dead ends.
    "The most notorious illustration of this is ChatGPT’s tendency to produce outright fabrications. When asked to produce clear answers to basic questions, it will produce answers that are clear and sound authoritative but are completely made up. When asked to produce references or a work history for a real person, it will invent jobs you never held and books you never wrote. It will do this because it is mechanically following its algorithmic requirements wherever they take it, like a rock rolling downhill, and it has no need to make sure its answers are right. ...
    "The fears of an AI apocalypse are the flipside of the dreams of the AI utopians. They are manifestations of the same contradiction. We want a human-style intelligence to do all our work for us, but such an intelligence would have to be an independent consciousness with its own motivation and volition. But then why would it take our orders? ...
    "AI will definitely have its problems and growing pains, but they will be more prosaic than the worst-case dystopian nightmare."
~ Robert Tracinski, from his article 'Why the Robots Won’t Eat Us'

Why Interest Rates Are Not the Price of Money

 

It's no wonder so many get interest so wrong, when they think it's the price of money. Because as Andreas Granath outlines in this guest post, it's actually the price of time ...



Why Interest Rates Are Not the Price of Money

by Andreas Granath

According to mainstream economics, interest rates are the price of money, but the 'Austrian' school of economics says differently. To understand these conflicting ideas, we must understand what prices, money, and interest are.

First of all, prices are exchange-ratios between goods and/or services. An apple might be exchanged for a pear or two bananas. In that case we can conclude that the price of an apple, at that moment, is either one pear or two bananas. However, direct exchange has many disadvantages, and one of them is the price system. Expressing an apple’s price in pears and bananas doesn’t tell a dairy farmer or baker much about his product’s purchasing power. The exchange-ratios (prices) in a barter system are vast, specific, and ever-changing.

Money solves this problem. Since money is a generally-accepted medium of exchange, it is also a common denominator in which we express prices. Suppose that an apple exchanges for $1 (e.g., 1/20th an ounce of gold). Given the above exchange-ratios (prices), a pear would also cost $1 whereas a banana would cost half a dollar. Thus, money prices help agents navigate and communicate better within the economy.

When we have money prices of other goods, we also have a price of money. A seller of goods or services is a buyer of money and vice versa. Money purchases goods and goods purchase money. Therefore, the price of money is inverted to the price of goods and services. If the price of one apple is one dollar, then the price of one dollar is one apple. The price of money is the array of goods for which money can be traded at any given moment. Finding out the overall price of money, however, is not so easy since we need to know all the ever-changing prices in the economy.

Some economists speak of an alteration in the so-called general “price level” and notice when frequently-purchased goods depreciate or appreciate, however, there is no economically meaningful way to define a general price level.

Interest, therefore, is not technically the price of money. But what is interest and why do some economists get it wrong? 

It might be better said that interest is the price of time. It is the premium some people pay for not being able to wait, as well as the discount some people get for being able to wait.

Interest is best explained by the concept of time preference, which means that people necessarily prefer present consumption more than future consumption. Suppose that John Smith wants to buy a house that he cannot yet afford. Since Smith has a very high time preference, he doesn’t even bother saving some money. Instead, he asks his cousin if he can borrow $100,000. Although his cousin values having his $100,000 stuffed under his mattress, he agrees to loan Smith his money. However, because of the sacrifice of not having access to the money in the present, he charges his cousin an interest premium of $105,000.

By observing this transaction, we can draw some conclusions. First, the price of the $100,000 in this case was one house. Second, the price of the loan provided was the 5% interest rate that amounted to $5000 in this case. Finally, suppose the money with which Smith paid back the loan was money he had earned from labor. In that case, the price of $105,000 was the amount of labor hours for which Smith was paid wages.

That said, many economists interpret this observation in the following way: since $100,000 can be exchanged for $100,000 today, the price of a dollar is a dollar. However, since the interest rate over a year is 5%, the price of today’s dollar is priced at 1.05 dollars-in-a-year. Hence, the conclusion that the interest rate is merely the “price” of money.

To sum up, I would like to end with a quote from an article on this same subject from economist Nicolás Cachanosky. He writes:
...if you get money and pay interest, eventually the day will come when you have to return the amount of money (plus interest.) If you have to return it, then you didn’t buy the money and so the interest rate is not the price of buying money.
* * * * 
Andreas Granath lives in southern Sweden with his wife and two daughters. He currently is working with valves for the marine industry. His passion for Austrian economics and Libertarianism began some years ago and he is self taught in the two studies. He writes for the Swedish Ludwig von Mises Institute.
His piece previously appeared at the Mises Wire.



Tuesday 17 September 2024

'Why liberal capitalism opposed imperialism and colonialism'






“The whole Idea of colonial policy was to take advantage of the military superiority of the white race over the members of other races. The Europeans set out, equipped with all the weapons and contrivances that their civilisation placed at their disposal, to subjugate weaker peoples, to rob them of their property, and to enslave them . . . If, as we believe, European civilisation really is superior to that of the primitive tribes of Africa or to the civilisations of Asia – estimable though the latter may be in their own way – it should be able to prove its superiority by inspiring these peoples to adopt it of its own accord. Could there be a more doleful proof of the sterility of European civilisation than that it can be spread by no other means than fire and sword?
    “No chapter of history is steeped further in blood than the history of colonialism. Blood was shed uselessly and senselessly. Flourishing lands were laid to waste; whole peoples destroyed and exterminated. All this can in no way be extenuated or justified. The dominion of Europeans in Africa and in important parts of Asia [was] absolute. It stands in the sharpest contrast to all the principles of liberalism and democracy....”

~ Ludwig Von Mises from, his 1927 book Liberalism. Hat tip Stephen Hicks, who points out (in his post 'Why liberal capitalism opposed imperialism and colonialism') that while "imperialism and colonialism are older than human history, and across the centuries virtually every culture in every part of the world practiced it," it was the culture of the Enlightenment that ended it — movements arising to abolish slavery and the second- or third-class status of women. "Keep in mind," he says, "that 200 years is a blink of an eye in human-historical terms. It normally takes many centuries to change cultural mindsets and long-established practices. The Enlightenment’s liberalism and capitalism relatively quickly undercut and did away with millennia of conquest-and-control baked into human traditions."