UPDATED: "The richest 20 per cent of the world’s countries are now around 30 times richer than the poorest 20 per cent. Why? Differences in a society’s institutions."

"The richest 20 per cent of the world’s countries are now around 30 times richer than the poorest 20 per cent. Moreover, the income gap between the richest and poorest countries is persistent; although the poorest countries have become richer, they are not catching up with the most prosperous. ... Why? ... [D]ifferences in a society’s institutions. ...
    Europeans’ colonis[ed] large parts of the globe. One important explanation for the current differences in prosperity is the political and economic systems that the colonisers introduced, or chose to retain, from the sixteenth century onwards. The laureates demonstrated that this led to a reversal of fortune. The places that were, relatively speaking, the richest at their time of colonisation are now among the poorest. ...
    "In [these] colonies, the purpose was to exploit the indigenous population and extract natural resources to benefit the colonisers. In other cases [however], the colonisers built inclusive political and economic systems for the long-term benefit of European settlers. ... [These] settler colonies – needed to have inclusive economic institutions that incentivised settlers to work hard and invest in their new homeland. In turn, this led to demands for political rights that gave them a share of the profits. Of course, the early European colonies were not what we would now call democracies but, compared to the densely populated colonies to which few Europeans moved, the settler colonies provided considerably more extensive political rights. ...
    "[T]hese initial differences in colonial institutions are an important explanation for the vast differences in prosperity that we see today. ...
    "[This year's Nobel laureates in economics] have uncovered a clear chain of causality. [Mercantilist] institutions that were created to exploit the masses are bad for long-run growth, while ones that establish fundamental economic freedoms and the rule of law are good for it."

~ from the 'Popular Information' released by the Nobel Prize Committee, awarding this year's Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2024 to Daron Acemoglu, Simon Johnson and James A. Robinson. [Hat tip Conversable Economist]

UPDATE: Not everyone's happy that the Prize has gone to what economist Deirdre McCloskey calls "a B+ statist": 

McCloskey of course has her own answer to what caused the prosperity that Acemoglu et al ascribe to good institutions: a cultural change before the Industrial Revolution she calls the "bourgeois revolution." Her ideas are debated here. For what it's worth, I'm in agreement with the great Joel Mokyr who says, "Ideas mattered, but so too did institutions."

"Remember, remember, this fifth of November, Fake electors, insurrection, and plot."

 

Not that I'm voting in the US elections on November 5th — and probably wouldn't if I could — but here are seven reasons not to vote for Orange Man, laid out in The Case Against Donald Trump (Part 1). Seven! Count 'em. Precised by this pithy poetry:

Remember, remember, this fifth of November, 

Fake electors, insurrection, and plot. 

I know of no reason, the sixth of January 

Should ever be forgot.

The 'poem' 's author, Rob Tracinski, reckons "Donald Trump is unfit for the presidency on about seven different levels."

No, seriously, when I began to jot down my notes for the case against him, I identified seven major issues, any one of which would be sufficient reason to vote against him:

1. January 6, 
2. his current threats against democracy, 
3. his hostility to Ukraine, 
4. his disastrous proposals on tariffs and mass deportations, 
5. his method of thinking (or lack thereof), 
6. his unrelenting series of con-man schemes, and 
7. his repellent personality.

But, but, Kamala Harris ...

Look, the thing that most recommends her for the presidency is simply that she is not Donald Trump—and to appreciate what a compelling motive that is, we first have to survey the full scope of his threat to the country.

Read on to begin that survey. It is truly repellent.

Socialists once argued that socialism was superior to capitalism because it would deliver a higher standard of living and more consumer goods. When it became abundantly clear that this was bollocks, the socialists shifted their arguments and began to claim that socialism—while perhaps economically inferior—was superior morally and philosophically. And thus was born the post-modern denial of that outrageous success in human progress, and environmentalists' objection to it. 

Stephen Hicks writes about this in his 2004 book Explaining Postmodernism. Ludwig Von Mises was on to this a half-century before when he penned his short book The Anti-Capitalist Mentality, explaining why the intellectuals of his day so loathed the free market.... 

The Noneconomic Objections to Capitalism

by Ludwig Von Mises

1. The Argument of Happiness

Critics level two charges against capitalism: First, they say, that the possession of a motor car, a television set, and a refrigerator does not make a man happy. Secondly, they complain that there are still people who own none of these gadgets. Both propositions are correct, but neither casts blame upon the capitalistic system of social cooperation.

People do not toil and trouble in order to attain perfect happiness, but in order to remove as much as possible some felt uneasiness and thus to become happier than they were before. A man who buys a television set thereby gives evidence to the effect that he thinks that the possession of this contrivance will increase his well-being and make him more content than he was without it. If it were otherwise, he would not have bought it. The task of the doctor is not to make the patient happy, but to remove his pain and to put him in better shape for the pursuit of the main concern of every living being, the fight against all factors pernicious to his life and ease.

It may be true that there are among Buddhist mendicants, living on alms in dirt and penury, some who feel perfectly happy and do not envy any nabob. However, it is a fact that for the immense majority of people such a life would appear unbearable. To them the impulse toward ceaselessly aiming at the improvement of the external conditions of existence is inwrought. ... One of the most remarkable achievements of capitalism is the drop in infant mortality. Who wants to deny that this phenomenon has at least removed one of the causes of many people’s unhappiness?

No less absurd is the second reproach thrown upon capitalism — namely, that technological and therapeutical innovations do not benefit all people. Changes in human conditions are brought about by the pioneering of the cleverest and most energetic men. They take the lead and the rest of mankind follows them little by little. The innovation is first a luxury of only a few people, until by degrees it comes into the reach of the many. 

It is not a sensible objection to the use of shoes or of forks that they spread only slowly and that even today millions do without them. The dainty ladies and gentlemen who first began to use soap were the harbingers of the big-scale production of soap for the common man. If those who have today the means to buy a television set were to abstain from the purchase because some people cannot afford it, they would not further, but hinder, the popularisation of this contrivance. 

The inherent tendency of capitalism is towards shortening the interval between the appearance of a new improvement and the moment its use becomes general.

2. The Argument of Materialism

Again there are grumblers who blame capitalism for what they call its mean materialism. They cannot help admitting that capitalism has the tendency to improve the material conditions of mankind. But, they say, it has diverted men from the higher and nobler pursuits. It feeds the bodies, but it starves the souls and the minds. It has brought about a decay of the arts. Gone are the days of the great poets, painters, sculptors and architects. Our age produces merely trash. ...

'Fallingwater,' Frank Lloyd Wright, 1936

Among those who make pretense to the appellation of educated men there is much hypocrisy. They put on an air of connoisseurship and feign enthusiasm for the art of the past and artists passed away long ago. They show no similar sympathy for the contemporary artist who still fights for recognition. Dissembled adoration for the Old Masters is with them a means to disparage and ridicule the new ones who deviate from traditional canons and create their own.

John Ruskin will be remembered — together with Carlyle, the Webbs, Bernard Shaw and some others — as one of the gravediggers of British freedom, civilisation, and prosperity. A wretched character in his private no less than in his public life, he glorified war and bloodshed and fanatically slandered the teachings of political economy which he did not understand. 

He was a bigoted detractor of the market economy and a romantic eulogist of the guilds. He paid homage to the arts of earlier centuries. But when he faced the work of a great living artist, Whistler, he dispraised it in such foul and objurgatory language that he was sued for libel and found guilty by the jury. It was the writings of Ruskin that popularised the prejudice that capitalism, apart from being a bad economic system, has substituted ugliness for beauty, pettiness for grandeur, trash for art.

'Nocturne in Black and Gold: TheFalling
Rocket,' James McNeil Whistler, 1875

As people widely disagree in the appreciation of artistic achievements, it is not possible to explode the talk about the artistic inferiority of the age of capitalism in the same apodictic way in which one may refute errors in logical reasoning or in the establishment of facts of experience. Yet no sane man would be insolent enough as to belittle the grandeur of the artistic exploits of the age of capitalism.

The preeminent art of this age of “mean materialism and money-making” was music. Wagner and Verdi, Berlioz and Bizet, Brahms and Bruckner, Hugo Wolf and Mahler, Puccini and Richard Strauss, what an illustrious cavalcade! What an era in which such masters as Schumann and Donizetti were overshadowed by still superior genius!

Then there were the great novels of Balzac, Flaubert, Maupassant, Jens Jacobsen, Proust, and the poems of Victor Hugo, Walt Whitman, Rilke, Yeats. How poor our lives would be if we had to miss the work of these giants and of many other no less sublime authors.

Let us not forget the French painters and sculptors who taught us new ways of looking at the world and enjoying light and color.

Nobody ever contested that this age has encouraged all branches of scientific activities. But, say the grumblers, this was mainly the work of specialists while “synthesis” was lacking. One can hardly misconstrue in a more absurd way the teachings of modern mathematics, physics, and biology. And what about the books of philosophers like Croce, Bergson, Husserl, and Whitehead?

Each epoch has its own character in its artistic exploits. Imitation of masterworks of the past is not art; it is routine. What gives value to a work is those features in which it differs from other works. This is what is called the style of a period.

In one respect the eulogists of the past seem to be justified. The last generations did not bequeath to the future such monuments as the pyramids, the Greek temples, the Gothic cathedrals and the churches and palaces of the Renaissance and the Baroque. In the last hundred years many churches and even cathedrals were built and many more government palaces, schools and libraries. But they do not show any original conception; they reflect old styles or hybridise diverse old styles. Only in apartment houses, office buildings, and private homes have we seen something develop that may be qualified as an architectural style of our age. Although it would be mere pedantry not to appreciate the peculiar grandeur of such sights as the New York skyline, it can be admitted that modern architecture has not attained the distinction of that of past centuries.

The reasons are various. As far as religious buildings are concerned, the accentuated conservatism of the churches shuns any innovation. With the passing of dynasties and aristocracies, the impulse to construct new palaces disappeared. The wealth of entrepreneurs and capitalists is, whatever the anticapitalistic demagogues may fable, so much inferior to that of kings and princes that they cannot indulge in such luxurious construction. No one is today rich enough to plan such palaces as that of Versailles or the Escorial. The orders for the construction of government buildings do no longer emanate from despots who were free, in defiance of public opinion, to choose a master whom they themselves held in esteem and to sponsor a project that scandalised the dull majority. Committees and councils are not likely to adopt the ideas of bold pioneers. They prefer to range themselves on the safe side.

Side table by Eileen Gray, chair by Marcel Breuer

There has never been an era in which the many were prepared to do justice to contemporary art. Reverence to the great authors and artists has always been limited to small groups. What characterises capitalism is not the bad taste of the crowds, but the fact that these crowds, made prosperous by capitalism, became “consumers” of literature — of course, of trashy literature. The book market is flooded by a downpour of trivial fiction for the semi-barbarians. But this does not prevent great authors from creating imperishable works.

The critics shed tears on the alleged decay of the industrial arts. They contrast, e.g., old furniture as preserved in the castles of European aristocratic families and in the collections of the museums with the cheap things turned out by big-scale production. They fail to see that these collectors’ items were made exclusively for the well-to-do. The carved chests and the intarsia tables could not be found in the miserable huts of the poorer strata. 

Those caviling about the inexpensive furniture of the American wage earner should ... [realise that w]hen modern industry began to provide the masses with the paraphernalia of a better life, their main concern was to produce as cheaply as possible without any regard to aesthetic values. Later, when the progress of capitalism had raised the masses’ standard of living, they turned step by step to the fabrication of things which do not lack refinement and beauty. Only romantic prepossession can induce an observer to ignore the fact that more and more citizens of the capitalistic countries live in an environment which cannot be simply dismissed as ugly.

3. The Argument of Injustice

The most passionate detractors of capitalism are those who reject it on account of its alleged injustice.

It is a gratuitous pastime to depict what ought to be and is not because it is contrary to inflexible laws of the real universe. Such reveries may be considered as innocuous as long as they remain daydreams. But when their authors begin to ignore the difference between fantasy and reality, they become the most serious obstacle to human endeavours to improve the external conditions of life and well-being.

The worst of all these delusions is the idea that “nature” has bestowed upon every man certain rights. According to this doctrine nature is openhanded toward every child born. There is plenty of everything for everybody, they say. Consequently, everyone has a fair inalienable claim against all his fellowmen and against society that he should get the full portion which nature has already allotted to him. The eternal laws of natural and divine justice require that nobody should appropriate to himself what by rights belongs to other people. The poor are needy therefore only because unjust people have deprived them of their birthright. It is the task of the church and the secular authorities to prevent such spoliation and to make all people prosperous.

Every word of this doctrine is false. Nature is not bountiful but stingy. It has restricted the supply of all things indispensable for the preservation of human life. It has populated the world with animals and plants to whom the impulse to destroy human life and welfare is inwrought. It displays powers and elements whose operation is damaging to human life and to human endeavours to preserve it. Man’s survival and well-being are an achievement of the skill with which he has utilised the main instrument with which nature has equipped him — reason.

Men, cooperating under the system of the division of labour, have created all the wealth which the daydreamers consider as a free gift of nature. With regard to the “distribution” of this wealth, it is nonsensical to refer to an allegedly divine or natural principle of justice. What matters is not the allocation of portions out of a fund presented to man by nature. The problem is rather to further those social institutions which enable people to continue and to enlarge the production of all those things which they need.

The World Council of Churches, an ecumenical organisation of Protestant Churches, declared in 1948: “Justice demands that the inhabitants of Asia and Africa, for instance, should have the benefits of more machine production.” This makes sense only if one implies that the Lord presented mankind with a definite quantity of machines and expected that these contrivances will be distributed equally among the various nations. Yet the capitalistic countries were bad enough to take possession of much more of this stock than “justice” would have assigned to them and thus to deprive the inhabitants of Asia and Africa of their fair portion. What a shame!

The truth is that the accumulation of capital and its investment in machines, the source of the comparatively greater wealth of the Western peoples, are due exclusively to laissez-faire capitalism which the same document of the churches passionately misrepresents and rejects on moral grounds. 

It is not the fault of the capitalists that the poorer countries did not adopt those ideologies and policies which would have made the evolution of autochthonous capitalism possible. 

Neither is it the fault of the capitalists that the policies of these nations thwarted the attempts of foreign investors to give them “the benefits of more machine production.” No one contests that what makes hundreds of millions in these nations destitute is that they cling to primitive methods of production and miss the benefits which the employment of better tools and up-to-date technological designs could bestow upon them. But there is only one means to relieve their distress — namely, the full adoption of laissez-faire capitalism. What they need is private enterprise and the accumulation of new capital, capitalists, and entrepreneurs. It is nonsensical to blame capitalism and the capitalistic nations of the West for the plight the backward peoples have brought upon themselves. The remedy indicated is not “justice” but the substitution of sound, i.e., laissez-faire, policies for unsound policies.

It was not vain disquisitions about a vague concept of justice that raised the standard of living of the common man in the capitalistic countries to its present height, but the activities of men dubbed as “rugged individualists” and “exploiters.” The poverty of the backward nations is due to the fact that their policies of expropriation, discriminatory taxation, and foreign exchange control prevent the investment of foreign capital while their domestic policies preclude the accumulation of indigenous capital.

All those rejecting capitalism on moral grounds as an unfair system are deluded by their failure to comprehend what capital is, how it comes into existence, and how it is maintained — and what the benefits are which are derived from its employment in production processes.

The only source of the generation of additional capital goods is saving. If all the goods produced are consumed, no new capital comes into being. But if consumption lags behind production and the surplus of goods newly produced over goods consumed is utilised in further production processes, these processes are henceforth carried out by the aid of more capital goods. 

All the capital goods are intermediary goods, stages on the road that leads from the first employment of the original factors of production, i.e., natural resources and human labour, to the final turning out of goods ready for consumption. They all are perishable. They are, sooner or later, worn out in the processes of production. If all the products are consumed without replacement of the capital goods which have been used up in their production, capital is consumed. If this happens, further production will be aided only by a smaller amount of capital goods and will therefore render a smaller output per unit of the natural resources and labor employed. To prevent this sort of dissaving and disinvestment, one must dedicate a part of the productive effort to capital maintenance, to the replacement of the capital goods absorbed in the production of usable goods.

Capital is not a free gift of God or of nature. It is the outcome of a provident restriction of consumption on the part of man. It is created and increased by saving and maintained by the abstention from dissaving.

Neither have capital or capital goods in themselves the power to raise the productivity of natural resources and of human labor. Only if the fruits of saving are wisely employed or invested, do they increase the output per unit of the input of natural resources and of labor. If this is not the case, they are dissipated or wasted.

The accumulation of new capital, the maintenance of previously accumulated capital and the utilisation of capital for raising the productivity of human effort are the fruits of purposive human action. They are the outcome of the conduct of thrifty people who save and abstain from dissaving, viz., the capitalists who earn interest; and of people who succeed in utilizing the capital available for the best possible satisfaction of the needs of the consumers, viz., the entrepreneurs who earn profit.

Neither capital (or capital goods) nor the conduct of the capitalists and entrepreneurs in dealing with capital could improve the standard of living for the rest of the people, if these noncapitalists and nonentrepreneurs did not react in a certain way. If the wage earners were to behave in the way which the spurious “iron law of wages” describes and would know of no use for their earnings other than to feed and to procreate more offspring, the increase in capital accumulated would keep pace with the increase in population figures. All the benefits derived from the accumulation of additional capital would be absorbed by multiplying the number of people. However, men do not respond to an improvement in the external conditions of their lives in the way in which rodents and germs do. They know also of other satisfactions than feeding and proliferation. Consequently, in the countries of capitalistic civilisation, the increase of capital accumulated outruns the increase in population figures. To the extent that this happens, the marginal productivity of labour is increased as against the marginal productivity of the material factors of production. There emerges a tendency toward higher wage rates. The proportion of the total output of production that goes to the wage earners is enhanced as against that which goes as interest to the capitalists and as rent to the land owners. 

To speak of the productivity of labour makes sense only if one refers to the marginal productivity of labour, i.e., to the deduction in net output to be caused by the elimination of one worker. Then it refers to a definite economic quantity, to a determinate amount of goods or its equivalent in money. The concept of a general productivity of labour as resorted to in popular talk about an allegedly natural right of the workers to claim the total increase in productivity is empty and indefinable. It is based on the illusion that it is possible to determine the shares that each of the various complementary factors of production has physically contributed to the turning out of the product. If one cuts a sheet of paper with scissors, it is impossible to ascertain quotas of the outcome to the scissors (or to each of the two blades) and to the man who handled them. To manufacture a car one needs various machines and tools, various raw materials, the labour of various manual workers and, first of all, the plan of a designer. But nobody can decide what quota of the finished car is to be physically ascribed to each of the various factors the cooperation of which was required for the production of the car.

For the sake of argument, we may for a moment set aside all the considerations which show the fallacies of the popular treatment of the problem and ask: Which of the two factors, labour or capital, caused the increase in productivity? But precisely if we put the question in this way, the answer must be: capital. What renders the total output in the present-day United States higher (per head of manpower employed) than output in earlier ages or in economically backward countries is the fact that the contemporary American worker is aided by more and better tools. If capital equipment (per head of the worker) were not more abundant than it was three hundred years ago, say, then output (per head of the worker) would not be higher. What is required to raise, in the absence of an increase in the number of workers employed, the total amount of America’s industrial output is the investment of additional capital that can only be accumulated by new saving. It is those saving and investing to whom credit is to be given for the multiplication of the productivity of the total labour force.

What raises wage rates and allots to the wage earners an ever increasing portion out of the output which has been enhanced by additional capital accumulation is the fact that the rate of capital accumulation exceeds the rate of increase in population. The official doctrine passes over this fact in silence or even denies it emphatically. But the policies of bureaucrats and labour unions clearly show that their leaders are fully aware of the correctness of the theory which they publicly smear as silly bourgeois apologetics. They are eager to restrict the number of job seekers in the whole country by occupational licensing and anti-immigration laws, and in each segment of the labour market by preventing the influx of newcomers.

That the increase in wage rates does not depend on the individual worker’s “productivity,” but on the marginal productivity of labour, is clearly demonstrated by the fact that wage rates are moving upward also for performances in which the “productivity” of the individual has not changed at all. There are many such jobs. A barber shaves a customer today precisely in the same manner his predecessors used to shave people two hundred years ago. A butler waits at the table of the British prime minister in the same way in which once butlers served Pitt and Palmerston. In agriculture some kinds of work are still performed with the same tools in the same way in which they were performed centuries ago. Yet the wage rates earned by all such workers are today much higher than they were in the past. They are higher because they are determined by the marginal productivity of labour. The employer of a butler withholds this man from employment in a factory and must therefore pay the equivalent of the increase in output which the additional employment of one man in a factory would bring about. It is not any merit on the part of the butler that causes this rise in his wages, but the fact that the increase in capital invested surpasses the increase in the number of hands.

All pseudo-economic doctrines which depreciate the role of saving and capital accumulation are absurd. What constitutes the greater wealth of a capitalistic society as against the smaller wealth of a noncapitalistic society is the fact that the available supply of capital goods is greater in the former than in the latter. 

What has improved the wage earners’ standard of living is the fact that the capital equipment per head of the men eager to earn wages has increased. It is a consequence of this fact that an ever increasing portion of the total amount of usable goods produced goes to the wage earners. None of the passionate tirades of Marx, Keynes and a host of less well known authors could show a weak point in the statement that there is only one means to raise wage rates permanently and for the benefit of all those eager to earn wages — namely, to accelerate the increase in capital available as against population. If this be “unjust,” then the blame rests with nature and not with man.

* * * * 

Ludwig von Mises (1881-1973) was the acknowledged leader of the Austrian School of economic thought, a prodigious originator in economic theory, and a prolific author. Mises' writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. (Some cogent quotes here from the great man.)

This post previously appeared at the Mises Blog.

"...owning oneself."

"No price is too high to pay for the privilege of owning oneself."

~ Friedrich Nietzsche. (Translation by Stephen Hicks, pictured here with the quotation on the wall at Universidad de la Libertad in Mexico, where he delivered five lectures on philosophy of economics: Property, Trade, Money, the Enlightenment, & Entrepreneurism)

 

The problem of knowledge in society

"The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate 'given' resources—if 'given' is taken to mean given to a single mind which deliberately solves the problem set by these 'data.' It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilisation of knowledge which is not given to anyone in its totality."

~ third paragraph from F.A. Hayek's Nobel Prize speech from 1972. David R. Henderson reckons the published speech "is one of the ten most important articles published in economics in the last 80 years. So, it’s worth the effort." And the most important paragraph in this article, he reckons, is this third paragraph — and the most important sentence in the whole article being this paragraph's first sentence. Henderson himself helps to untangle Hayek's German locution in his own teaching notes. With all appropriate humility, I have a go below at translating it into plain English ...

MY 'TRANSLATION':

"Specialist knowledge is distributed throughout society — knowledge of particular circumstances or opportunities, 'local knowledge' if you like, which specific separate individuals possess and which will often appear contradictory. (There is after all no such thing as a 'collective brain' that knows or can know and integrate every single discrete circumstance.)

    "Yet in a rational economic order, those specific morsels of local and focussed knowledge are being put to use at every moment across society to find, transform, produce and distribute resources for ends whose relative importance only individuals know. And from that process comes the things we each value, produced by minds none of whom can ever see the whole.

    "To put it briefly, it is a little-recognised miracle of the integrated utilisation of morsels of local knowledge, none of which is given to anyone in its totality, to create the wealth on which we all depend."

'Hurricanes Are Not Going Away; We Must Double Down on What’s Making Them More Survivable'

"Storms like Helene and Milton [and cyclones like Gabrielle] ought to drive us to recommit to and expand the very institutions that have made natural disasters more survivable for so many, not to abandon them out of some false hope that bad weather can be eliminated. ...
    "A world without dangerous weather is an imaginary ideal. Press even the most ardent climate activists, and they’ll admit as much. ... But a world with marginally better weather would still have hurricanes, wildfires, heat waves, and all the other maladies we’re so often led to believe only plague us because we burn fossil fuels. So, if we’re serious about tackling the problems caused by dangerous storms and other natural disasters, the solution lies in better adapting to bad weather, not pretending we can eliminate it.
    "Fortunately, humans are very good at adapting to bad weather. And, while we have been for most of our history, we have become incredibly good at it in the last two hundred years thanks primarily to one thing—the economic growth that resulted from the Industrial Revolution.
    "Economic growth is not just some metric for measuring business activity. It reflects the creation of the wealth that has allowed humans to not only survive but live comfortably in nearly every region on earth. Thanks to a robust energy industry and modern HVAC systems, there are bustling cities all the way from arid deserts to the frigid taiga. ...
    "This is all to say that the problems often ascribed to climate change are fundamentally problems of poverty.
    "Fortunately, we already know what solves poverty: market institutions grounded in a private property norm. Unfortunately, those are the very institutions the so-called environmentalist movement has set its sights on."

~  Connor O'Keefe from his post 'Hurricanes Are Not Going Away; We Must Double Down on What’s Making Them More Survivable'

John Key: "...he served himself and not the nation."

Cartoon by Richard McGrail from The Free Radical

"Something which has puzzled me in recent years is the ... dismissive attitude to the John Key government as wasted years. ... The light dawned when 'The Herald' published an astonishingly ignorant but revealing article by Key on why, if an American he’d vote for Trump. ... In a nutshell Key said ... Trump’s promised tax cuts would suffice to determine his vote.
    "The extraordinary thing about Key’s article was its astonishing shallowness. ... 
    "It was only after reading Key’s article that I finally comprehended [the] steadfast derision for the Key years, specifically the wasted opportunity to make meaningful and desired changes ...
    "His likeable affability aided by a wallowing Labour Party saw him able to coast along, enjoying being Prime Minister but blowing the opportunity to make meaningful change. In that sense he served himself and not the nation and ... condemnation has been 100% correct.
    "It’s now evident Key saw being Prime Minister solely in the context of a personal career highlight experience rather than any wider desire to build a better nation."

~ Bob Jones from his post. [Link added]

Well, that's sunk it.

 

In the absence of any cogent reason to think otherwise, and we've been given none at this stage, the direct cause of HMNZS Manuwai running onto a reef while on a simple survey, then catching fire, and then sinking, looks like nothing less than blithering incompetence. And an inquiry by the Navy about the Navy doesn't give confidence we'll ever know much more.

The author of a history of the Royal Navy in the Pacific, John McLean, observes that 

The sunken Manawanui was a survey/research vessel. It was doing survey work in Samoan waters when, under the control of Yvonne Gray, it went to the bottom of the ocean. Surveying has been an important function of the Royal New Zealand Navy since its creation in the Second World War and before that hydrographic surveys were carried out by the Royal Navy which defended the seas around our coasts until the 1940s. The centuries old principle of surveying is that the surveying vessel - or "mother ship" if you like - stays out at sea while the inshore surveying is done by the ship's small boats. That way they can get in and out of shallow waters, reefs and even river mouths. They then return to the survey vessel where the charts are drawn up. So why did Commander Gray take the large and valuable ship so close to the reef?

Given that this was a survey vessel whose commander appeared to have no idea of how to safely survey, and no clue where the ocean floor was, is there any reason not to think blithering incompetence?

To which, in the absence until then of any cogent reason to think otherwise — and in a climate of "diversity hires" — readers, writers and commentators (including Mr McLean) have been raising the issue of Commander Gray's lesbianism. Not that being a lesbian makes you unable to command a ship. But, in an era of widespread diversity hires — when the recently retired Chief of Navy Rear-Admiral David Proctor feels the need to boast that "having wahine (women) as commanding officers on more than 60%of our ships as well as heading up other important portfolios, is a realisation of that goal ['to celebrate the diversity of our personnel']" — it surely makes you more likely to be promoted to command one before you're fully competent to do so.

Which we're entitled to think has happened here. Particularly when Gray's colleague, Fiona Jameson, captain of the frigate HMNZS Te Kaha, is not just another poster girl for "inclusiveness," but also for sheer blind incompetence. As McLean observes:

Gray's ship sank while Jameson crashed Te Kaha into Auckland's Kauri Point ammunition depot, leaving a gash of more than half a metre that cost $220,000 to repair. At the time of her appointment to Te Kaha Jameson gushed, "Now as I take command with three other women [commanding officers], I get....a greater normality around wahine toa leadership". The poor thing can't even speak English properly let alone steer a ship without hitting a wharf.

Observing this from Britain where he's exploded many a PC pomposity himself, author Peter Boghossian sums up:

Highlighting that the captain of the sunk ship is a lesbian and implying that’s the cause of the crash is grossly irresponsible. Yet we will increasingly find ourselves in this predicament as we hire and promote people on characteristics other than merit. And it’s only beginning.

So it is.

Treaty Principles Debate: Have a Listen

I don't recommend many podcast episodes here at NOT PC, but here's one I reckon you should put aside some time for: it's the Working Group's latest podcast, featuring an hour-long debate over his Treaty Proinciples Bill between ACT's David Seymour, and Ngāti Toa's Helmut Modlik.

Hosted by commy bigmouth Martyn Bradbury and libertarian liquidator Damien Grant, it's worth a listen not least because the participants speak with candour, in good faith , and with humour — and (for the most part) are listening to each other. And how many political debates can you say that about today, especially this one!

Dole for developers

"[M]inisters [are] going to offer free downside price/liquidity insurance to large and established property developers. It [will] be sold as strictly 'time-limited' except that there [will], in fact, be no time limit specified. ...
    "This government (rightly) made much of inheriting a large structural fiscal deficit, and wanting to get government out of business. Instead, they jump in boots and all. And all apparently on the basis that a couple of Cabinet ministers and their Ministry of Housing and Urban Design officials know better than the market what should be built when, where, and by whom ...
    "[I]t brought to mind that old jeer about business-friendly (as opposed to pro-market) governments [helping businesses] to 'capitalise the gains and socialise the losses.' [Or that govts 'helping business' quickly corrupts into 'helping particular businesses.'] ... Plenty of people and firms will have undergone huge stress in the last couple of years, as inflation was squeezed back out of the system. It was and is a necessary adjustment. But most didn’t enjoy the favour of ministers. ...
    "[T]here is just no good or compelling analytical foundation for any sort of intervention of this sort (none are provided, and none are readily conceivable)."

~ Michael Reddell from his post 'Public policy just keeps on worsening'

It's the new unimproved, coerced Public Interest Journalism Fund

"The skirmishing continues between the mainstream media and Google (along with other major platforms) about the [so-called] Fair Digital News Bargaining Bill (or should that be the Coerced and Compelled News Media Subsidy Bill). ...
    "[W]hen the Bill was reported back from the Select Committee, the recommendation was that it go no further. Minister Goldsmith ignored that advice and decided to go ahead with the Bill, much to the consternation of the large digital platforms and the undisguised glee of the [to-be subsidised] mainstream media. ...
    "Google ... [has] been transparent with the Government that ... if the Bill is enacted Google will remove itself from the playing field and will hide [New Zealand] news stories from search results. ... Google would also discontinue its current voluntary agreements through which it partners with and provides some financial support to news publishers
    "[T]he [so-called] Fair Digital News Bargaining Bill is coercive in nature. It compels platforms to negotiate with mainstream media for a means of payment for linking to or aggregating their content. If agreement cannot be reached a regulator steps in and determines what payment should be made. Failure to comply attracts civil penalties.
    "This is neither fair – in that it is compelled and is backed by coercion and the power of the State – nor is it bargaining in that in the final analysis a regulator may fix a payment by diktat. ... [A 'tax' to pay a coerced media subsidy.]
    "[T]here is a solution ... but it lies in existing law, rather than in the creation of a new regulatory bureaucracy backed by a Bill the name of which is in direct contradiction to what it proposes to do. ... [T]he Platforms are ... “free-riding” on the content created by mainstream media ... directly or indirectly without the permission of the 'owner' of that content. Basically that amounts to copyright infringement and the Copyright Act 1993 provides for remedies for infringement as well as a licensing structure that enables a centralised body to administer payment of licensing fees for use of material. APRA for example looks after payments for the music industry. ...
    "The problem for mainstream media, if it insists on proceeding to support the [Bill] is that it will shoot itself in the foot. Whether they like it or not, most of mainstream media traffic is generated through platforms such as Facebook or Google. Should the platforms leave the news aggregation space, traffic to dedicated mainstream media sites will diminish and advertisers will be less likely to place content where the eyeballs seeing it are diminishing. If the [so-called] Fair Digital News Bargaining Bill is enacted, it may well be a Pyrrhic victory for media."

~ David Harvey from his post 'Google vs Media'

Remembering October 7

"The first anniversary of the October 7 attacks by Hamas against Israel is approaching. Not a day since has passed when the consequences and after-shocks of that terrible day have not been felt around the world. More than any other event in living memory, it has polarised and divided people everywhere.
    "Eight weeks after the attacks, I was invited to the Israeli Embassy in Wellington to watch the 47 minutes of footage compiled by the Israeli Government called 'Bearing Witness.' ... Did watching 'Bearing Witness' alter any of my opinions? Yes, it did.
    "I expected to see men, women and children slaughtered but the level of hatred and barbarity was incomprehensible. Often the mutilation continued after the victim was killed as if that were only one stage in a process that would continue until what was left was unrecognizable. We saw 139 killings or bodies but in many cases the bodies were so disfigured or burned that they ceased to look human. ...
    "It does, I think, at least partially explain Israel’s ferocious response in the year that has followed the attacks. In my view, anyone in the Israeli government or military who viewed that footage would conclude that they face an immediate existential threat. Their enemies do not simply wish to take territory or wage a war – killing was not enough. Their enemies that day wished for the elimination of every Jewish man, woman and child until nothing remained but dust. That was the point that I did not fully appreciate until I saw this footage. ...
    "October 7 and Israel’s response will undoubtedly be debated for a lifetime. Hopefully we will live to see a peaceful resolution to this most intractable of conflicts."

~ Philip Crump from his post 'Bearing Witness to October 7'

"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'

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: 

• 'When Friedrich Hayek Met Bruno Leoni' - Todd Zywicki, LAW & LIBERTY

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'

"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'

"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'

"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?'

 

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.

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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.