Many reasons to ignore economics

Libertarians usually enjoy economics because economics say a lot about human behaviour and how government behavior influences human behavior.

That said, economics don't always "get it right". They rely on theory and statistics, and us humans tend to aim for other things than pluses and minuses.

However, it would benefit us a lot if more people would understand the basics of economics. For example, why do prices rise or fall? Why does a fixed salary not buy as many things today as 10 years ago? Why are people unemployed when there is plenty of work to do?

And actually, there are many people who actually benefit from this economic ignorance. Politicians are a prime example. Many of them have actually studied economics and know very well that many of their policies hurt us in the long run. However, in the short run the economic ignorance benefits the politician.

A good example is the minimum wage. In this informative article on fee.org, this is explained very well. Some years ago, the motive behind the minimum wage was outright racism. It was considered a benefit to throw out the minorities from the job market by raising the minimum wage above their usual salary.
And even today, such dubious motives color the politicians. The minimum wage is a tool, and it is applied despite the lessons of economics.

Be aware when a politician promises something for nothing. The minimum wage is such an example.

The best things in life are free

I fully support the saying that the best things in life are free.

For example, when I go to work I earn a salary and for this salary I can buy the work or products of others. This is a fully balanced relationship so in that way I am getting the services of someone for free. Sure, at first I had to perform work and get compensated, but I didn't do more than I got paid for, and what I paid for in return didn't cost me more than what I was willing to pay.

And certainly I will have to do something in exchange for something else. Otherwise, I would be mooching or stealing, and none of the transfer would be free.

Of course not all monetary transactions signal exchange of free products and services. Taxes are a payment I am forced to give, for something I might or might not want. If I get something I want - great! If not - what a shame!

But what about the sunlight, fresh air and birds singing? Isn't this something I get without doing anything in return? Of course. These are free gifts of nature, but where my consumption doesn't reduce the amount for anyone else. For free, for sure, as well.

"The" article on the upcoming financial crisis?

Is this "the" article that predicts, for the right reasons, the coming financial crisis that will make the last one seem tiny in comparison?

HERE COMES QUANTITATIVE TIGHTENING by Peter Schiff

Time will tell, but Peter Schiff is a man to pay attention to. He did, after all, predict the 2008 crisis (for the right reasons).

In the long run we are all dead

The famous economist John Maynard Keynes once said: In the long run we are all dead.

While people debate on the meaning of this quote, it stands pretty well on its own as a description of a mentality that flourishes today. Why save up for the future? Why suffer difficult times now for better ones in the future? Why prepare for old age? Why have kids? Why maintain a family? Why move out from your parents? Life is too short, right? And in the end, we are all dead. So, lets just enjoy the here and now, spend money when we have them and travel the world.

In my mind, this mentality is not something that organically sprung from the minds of young people today. Rather, I think it is a consequence of public policy.

Take recent recessions as an example (the dot-com bubble in 2000, the financial crash of 2008). They were the consequence of lose monetary policies that produced cheap money that flowed into faulty investments, resulting in major crashes. How did public policy respond to them? By doing everything possible to re-inflate the economy so that consumption and borrowing could continue. Bankrupt banks were kept alive. Money was printed so that people could borrow. Economists urged authorities to create new bubbles. Voters voted for those who promised most spending. No wonder young people don't know how to prepare for an uncertain future! If they make mistakes, they will be saved!

This is somewhat contrary to the mentality of earlier generations. The United States suffered a severe crash in 1920 that resulted in a depression the following year. What did the authorities do? Mostly nothing. Those who were bankrupt were not saved. The authorities didn't push for more consumption and borrowing. And the result was a very fast recovery.

Young people today have been poisoned into thinking only about the short term. In the end, they are all dead, but worse off than they could be.

A society needs slaves in order to function, right?

Only a few hundred years ago, the widespread notion of most people was that a society needs slaves in order to function. Those who fought against slavery were "unrealistic", "idealistic", "unpractical", "utopian" and so on. People believed that those who were against slavery had to prove that society could work without slaves before slavery could be abandoned The burden of proof was on those who fought for freedom.

Not much has changed since then in essence. Still the burden of proof is on those who fight for freedom. Obviously nobody is arguing for slavery anymore but instead a lot of other restrictions are believed to be necessary in order to have a functioning society. Those who believe in these restrictions assume that their cause is justifiable by simply looking at the status quo. Those who want freedom need to prove them wrong, apparently.

Do we need slave in order to have a well-functioning society? No.

Do we need a state monopolized health care system? No. Do we need a government police financed with taxes? No. Do we need to limit the freedom of speech, e.g. against hate messages? No. Do we need government courts? No. Do we need anti-drug legislation? No.

I can't demonstrate how a free society looks like, no more than those who fought against slavery could, but I believe in the cause anyway. Its a principle - a moral principle.

Idealism vs. realism

Libertarians are often confused when it comes to politics. Should they fight for liberty in its ideologically purest form or practice politics as "realists", only focusing on those issues which can realistically be changed in today's political climate?

My favorite response to thoughts like these is as follows, in a quote by an anti-slavery fighter in times when slavery was considered the norm:

“Urge immediate abolition as earnestly as we may, it will, alas! be gradual abolition in the end. We have never said that slavery would be overthrown by a single blow; that it ought to be, we shall always contend.” /William Lloyd Garrison

This quote can be found in the great book For a New Liberty: The Libertarian Manifesto by Murray N. Rothbard (p. 18).

Wealth in the United States and Europe

It seems that more and more Americans are looking up to Europe. They want to take of the social democracy of high taxes and an extensive welfare system that so many European countries are famous for having.

Well I say: Wait a minute! Because social democracy is not a policy of wealth creation and rising standards of living. It is mostly about distribution of wealth that in the process becomes smaller and smaller.

This article should shed some light on the situation. The richest European country, by far, would only be the fifth richest state in the United States. The second richest country would be number 15. The poorest American state even beats countries like Italy, South-Korea, New Zealand, Japan and Spain.

When I tell this to people (here in Denmark), the reply is often great amazement or a blatant refusal or some vague excuse about having a better life. A better life for what? Of course money is not everything but as far as I can see, people want good houses, good food, good clothes and opportunities to treat their family with presents, vacations and nice things. People love their Apple-phone but don't like that Apple generates profit. People enjoy to ride in their affordable, safe, fuel-efficient car filled with nice extras but despise global competition which made their creation possible.

Europe has been lagging behind for many years and is not a model to be followed. Neither is the United States on their path to never-ending wars, welfare expansion and spending of borrowed money. But at least the United States could turn their heads to others for models before its too late.

More borders can mean more freedom

While borders can often work to inhibit the movement of goods and human beings, they can also offer opportunities for greater freedom by limiting the power and reach of existing states.

What a splendid point! We Need More Borders and More States says Ryan McMaken. Anarchism and Radical Decentralization Are the Same Thing is another message from the same author. I could not agree more. The following passage is from the American Declaration of Independance: 

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government ...

I agree. Let us abolish government. We don't even have to institute a new one. 

Taking a lot of time off affects your salary

Those who have read and understood economics know that people get paid according to their value creating abilities on the free market. This means that working people ask for pay raises or change jobs until they have obtained their free market "price" so to speak.

It follows that women or men who work fewer hours than others in order to stay more at home with their children get a lower salary than others. Their careers are quite simply shorter in number of hours used to build up value creating abilities and experience. This can be backed up by data, but really it should just be self-evident.

This baffles many. People say in a state of shock that everyone should get equal pay for "equal work", usually referring to the so-called wage gap between women who have children and others, such as non-married, childless men and women.

A good understanding of economics can clear ones mind when following the public debate on different topics. It will for example teach you that nobody wants to pay you for taking more time off than others.

Socialism in a nutshell

The following is taken from the Facebook-page of the FEE president Lawrence W. Reed, and I find it brilliant:

My take on socialism is this: Socialism only seems to work when you don't fully implement it, when you keep enough capitalism around to pay socialism's bills, at least for a time. It's the difference between milking the cow and killing it. Socialism has no theory of wealth creation; it's just a destructive, envy-driven fantasy about redistributing it after something else (and somebody else) creates it first.

I might just as well post two of my other two favorite comments on a similar topic:

The trouble with Socialism is that eventually you run out of other people's money.
- Margraet Thatcher

And:

Government is the great fiction through which everybody endeavors to live at the expense of everybody else.
- Frederic Bastiat

Anything to add?

Left, right and the libertarian middle

We often talk about "left" and "right" in politics (or "liberal"-"conservative").

Some say that these terms are obsolete as they don't capture the reality of political discourse. Say someone is for higher taxes, more welfare but despises politicians. Is he to the left or to the right? Say someone wants lower taxes but restrictions on some private matters via government control. Is he to the right or left?

There is however a way to reconcile the terms of "left" and "right" by applying the concepts to a different degree of scepticism towards government control and meddling. Those who adore the State are those furthest to the left. Those who want a completely voluntary society are furthest to the right.

This will obviously place National-Socialists (nazis), Communists and other State-fans furthest to the left. Next to those are the left-liberals, social-democrats and other traditional leftists. In the middle we have most people - sceptical towards the State in some issues but more open to State-interference in others.

Furthers to the right are the libertarians who want to abolish the State and live in a completely voluntary society where each man is the full owner of his own body and the property belonging to it.

Another way to look at the left-right scale is by placing the libertarians in the middle. Those to the right lean towards state interference in social matters but a low degree of State-control of the economy. Those to the left lean towards government meddling in the economy but prefer the absence of the state in social issues. They meet somewhere near the middle with the libertarians who don't want any State-intervention.

I believe "left" and "right" are useful concepts but in order to be so, they must be understood in relation to the State as an entity that we either tolerate or not, or tolerate to a certain degree.

Slavery is good, they say

Slavery is a normal condition in human society. The strong chain the weak and make them work for them. The few but organised enslave the many. The group with the most advanced weapons enslaves the others with no weapons.

Before slavery was really considered a crime against humanity (or humans, to be precise), many argued for its maintenance. Some of the main arguments are summarised here, including:

• Slavery has always existed
• Every society in the past has had slavery
• The slaves can't take care of themselves
• Free people are worse off than slaves
• Getting rid of slavery will require violence
• Slaves can be made well off by providing them with free housing, good clothes and regular meals. Why take this away from them?

Does any of the above sound familiar? For me, its all the arguments we hear today against abolishing the welfare state and further the state altogether.

For me it sounds like we are told that we are worse off free than as enslaved citizens.

For me it sounds like I am being told: You are bound within the state, and are better off like this, since the state has always existed and men without a state cannot take care of themselves without inflicting violence on each other.

I say: Bullshit!

Ban heavy metal concerts?

I wonder why I haven't seen anyone proposing a ban on heavy metal concerts. Lets look at the typical arguments:

• People spend a lot of money on them (no subsidies available for this particular music, and in fact heavy taxes all around).
• People get hurt. They get stamped down, kicked and pushed.
• It's a "closed venue" for the handicapped, and very petite individuals can get seriously hurt if they enter the thickest crowd. 
• Property gets damaged and lost. Try watching your money or set of keys in a crowd during a heavy metal concert! You just have to hope they stay in place. Sometimes they don't.
• The lyrics are so nasty! They speak of death, mutilation and other nasty stuff. 
• No-one can really breath that much during a heavy metal concert, not even when they are held outside. The body mostly inhales sweat and air with little oxygen.

But wait a minute, perhaps it's not so bad after all? I mean, no-one believes that the nanny-state can help you during a heavy metal concert. People take care of each other in the black sea of a lot of people sharing very little space, while trying to bang their heads with the music.

Just a thought.

The e-cigarette: A potential target for politicians?

For decades, the government has played a game with smokers: Urged them to quit since their smoking-related diseases are a burden on the government subsidized health care system, but kept cigarettes around and extremely taxed in order to obtain revenues from them. Smokers are indeed a dying race, but they remain resilient although most of their civil freedoms disappear as soon as they light the cigarette.
It is a difficult task to estimate how much money has been spent on getting smokers to quit their addictive habit. Most of the methods used are completely decoupled from reality. Smokers should quit because they die too young – so what? Aren't the nearly-bankrupt pension systems in most countries in a dying need to get rid of some of our elders? Smokers should quit because they carry around toxic chemical that kill asthma-patients and children. Well, so do cars, many toys, the windmill-factories, the paint used to make protester-signs for Greenpeace-rallies, and so on. Smokers should quit because they are wasting their money. So is the taxpayer. Should he quit paying taxes?
Smokers remain resilient and for good reasons. First of all, nicotine is hard to kick. Second of all, smokers usually have a lot of little daily routines built around the cigarette: The first coffee cup in the morning, the break at work, the getaway from a hectic household, the relaxing effect when watching television, the holding of something in ones restless fingers, etc. The government has not seen this, but the free market did. Hence the invention of the electronic cigarette, or the e-cigarette.
The e-cigarette is usually a two-part device: A battery and a container for a liquid. The container stores the liquid and a small burner inside it heats it up so that a damp is created, and this can be inhaled. The liquid can be mixed with nicotine. The smoker can then get his “fix”. The damp contains traces of different chemicals, but in such small concentrations that the man standing next to the smoker can usually not smell anything. Compared to the cigarette, the e-cigarette is next to harmless for the user. Compared to car exhaustion, it’s probably completely harmless.
The free market invented the e-cigarette and its popularity is on the rise. Smokers find a lot of the benefits of the cigarette in the e-cigarette (e.g. something to hold in the hand, the feeling of smoke/damp coming out of the mouth, and the nicotine of course). If a smoker wants to kick his habit, he can do so by gradually decreasing the nicotine concentration in his liquid. Thus, the e-cigarette cab assist smokers to quit, although others just want to go on smoking, but without the health risks of the burnt and tar-polluted tobacco leaf and cigarette paper.
Non-smokers feel nothing. They see damp and can perhaps catch some traces of the aromas in their nostrils, but only if they stand close to the smoker and smell on purpose. Do we again have a harmony between the smokers and non-smokers?
The governments of the world have for most part not gotten around to legislate against the e-cigarette. This means that the insanely high tobacco taxes have not reached the e-cigarette yet. Smokers can thus save a lot of money. But whatever isn't legal is often de facto illegal. The black or gray market  bridges the gap in many countries. In Denmark, for example, the nicotine-blended juice is not exactly legal, but widely sold, especially on the internet, and the police seem to do little about it. In Holland, everything is available in the nearest tobacco store.
But where there is harmony and peace there is also a potential for politicians to disrupt everything and make their mark. In many countries, politicians are preparing to step in. They can’t sanction anything which resembles smoke, and see all the tax money from cigarette sales potentially evaporate (forcing them to consider such taxes and a sugar-tax and fat-tax instead to make up for the lost revenue of smoking). In their crusade they can rely on such organizations as The American Heart Association to provide a “scientific” basis for a bigger government with more rules and regulations.
The epoch of the e-cigarette will likely be short-lived. In the meanwhile, I intend to smoke with such a device. If the legislation steps in, restricts access, imposes high taxes and bans some of the nicer variants of the technology, I’ll at least have had a short period of improved health and personal finance. Time will tell what I’ll do after that.

Poverty: A choice

Why are some countries rich and others poor? I'll make a proclamation: Poverty of countries is their own choice. It is a choice between the power of the state and the richness of the people. Poverty is a selected situation, selected above economic freedom on purpose.

Lets think about the following: Denmark and Hong Kong are countries with very little natural resources. They need to buy from others to have something to sell to still others. Denmark buys steel and coal to produce stuff to sell. Hong Kong has more or less nothing other than manpower. These countries are among the richest the world, and in terms of economic freedom also among the freest.

Zimbabwe and South-Africa brim with natural resources and vast, fertile lands. They are poor and will remain so until the power elite release their grip. Their supporters need to drop their ambition for equality and opt for economic freedom instead.

(As it happens, equality is not a function of income or geography. The richest 10% and poorest 10% will own a similar portion of the total product, no matter how large the total product is. Therefore, enlarging the total product is the only way to better the lot of the poorest.)

Brazil and China are the middle-of-the-road countries. You can do business there, and can have access to nearly unlimited resources of both people and those from nature within the boundaries of those countires. However, you can't feel secure about anything. And Brazil, to name an example, has such a jungle of taxes and regulations that a whole army of people is needed just to cut through.

Poverty is a choice. Poor countries are poor by choice. Think about it. I will.

The childish attitute of socialists (literally)

After I became a parent (roughly in the year 2009), I have begun to notice a lot of traits in children that can be found in the political debate among adults. Most of these are obvious, such as having no understanding of economics and expecting free stuff to rain from the heavens without any work at all (or minimal effort, such as behaving or being polite). This, of course, is understandable, and can actually be required of children. They are, after all, children, and should focus on building their social skills and grasping the basic stuff in life (such as sleep and food).

The more amazing part is the way many adults actually think like children. Some people, mostly socialists, believe we can live in a world without efforts and patience. They think we can "share the burden" by removing burden from everyone. This leads to total poverty of all. A better way to "share the burden" is to make everyone more productive, such as with capital investment (which requires savings, patience and private property).

It takes a lot of effort and work to train a sense of work ethics in children. They don't just "get it". They need to learn how to save for stuff they really want. They need to learn to work for the things they want. This is not easy for all children. Some are just spoiled and lazy and need a "kick in the ass", so to speak.

And so be it. Children are children. The more amazing part is that many grown-ups are still children in this respect.

Usually socialists.

Inflation is a policy

Inflation is a policy. And a policy can be changed. Therefore, there is no reason to give in to inflation. If one regards inflation as an evil, then one has to stop inflating. One has to balance the budget of the government. Of course, public opinion must support this; the intellectuals must help the people to understand. Given the support of public opinion, it is certainly possible for the people's elected representatives to abandon the policy of inflation.

.. says Ludwig von Mises in his Economic Policy: Thoughts for Today and Tomorrow (pp. 72-73). And there you have it! Do you hate to see your salary decrease in value, year by year, unless you get a substantial raise? Blame the government! Would you like to be able to buy just as much for your savings today and in 20 years, but you realise that you can't? Blame the government! Inflation is a policy. That's it. 

Natural economic laws

Once, during a speech which he was making at a statistical congress in Bern, [Vilfredo] Pareto spoke of 'natural economic laws,' whereupon [Gustav] Schmoller, who was present, said that there was no such thing. Pareto said nothing, but smiled and bowed. Afterward he asked Schmoller, through one of his neighbors, whether he was well acquainted with Bern. When Schmoller said yes, Pareto asked him again whether he knew of an inn where one could eat for nothing. The elegant Schmoller is supposed to have looked half pityingly and half disdainfully at the modestly dressed Pareto - although he was known to be well off - and to have answered that there were plenty of cheap restaurants, but that one had to pay something everywhere. At which Pareto said: 'So there are natural laws of political economy!'

From Rothbard's Austrian Perspective on the History of Economic Thought, Volume II (p. 459). And what a gold mine this book is! It almost makes one think that history teaches us nothing, that all the mistakes of the past are doomed to be repeated again and again, and every time this happens, something of the good of human thought is lost. One of the mistakes is to consider humans as mere robots, programmable and acting only according to the dictates of the State. This is a fallacy, and an old one. Humans have a "nature", something that you can try to stamp on, force or manipulate, but which you cannot change. The sooner we acknowledge this, the sooner we are on the highway to prosperity, peace and harmony of interest.

GDP and monetary pumping

In an age where "the GDP" is usually considered the all-important parameter to measure the "health" of an economy, the following should be kept in mind:

Remember that changes in GDP are a reflection of changes in monetary pumping: the more is pumped the greater the rate of growth of GDP. (#)

Therefore, it is sad to see robust and solid companies base their forecasts on forecasts on GDP. This is pure guess-work. An increase in GDP is more often than not harmful. A lowering GDP could even be a surer sign of an improving health of an ecomony, as monetary contraction is in many ways a cleaning process rather than the other way around.

The Art of Taxation

The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.

..said Jean-Baptise Colbert (1619-83), who, to quote Wikipedia, was "a French politician who served as the Minister of Finances of France from 1665 to 1683 under the rule of King Louis XIV". The quotation is from Murray N. Rothbard's The Austrian Perspective on the History of Economic Thought, Volume I (Economic Thought Before Adam Smith), page 246.
That being said, he was also an honest supporter of an all-embracing State, that could choke or support all forms of labour and industry as she liked.
I call him an honest Leftist. If only modern day leftists could state their attitudes as clearly as the power-crazy French politician (who receives undeserved praise in Wikipedia).