Financial History to the Rescue: The Harder Money Wins Out

This article is part of a series on bitcoin (and bitcoiners’) arguments about money and particularly financial history. See also:

(1) ‘On Bitcoiners’ Many Troubles’, Joakim Book, NotesOnLiberty (2019-08-13)
(2): ‘Rothbard’s First Impressions on Free Banking in Scotland Were Correct’, Joakim Book,
AIER (2019-08-18)

The great monetary economist and early Nobel Laureate John Hicks used to say that monetary theory “belongs to monetary history, in a way that economic theory does not always belong to economic history.”

Today I’m going to illustrate exactly that with respect to the Bitcoiner’s (mistaken) progressivism in another episode of Financial History to the Rescue.

In the game of monetary competition, the Bitcoin maximalists posit, the “harder” money always wins out. I’ve been uneasy with the statement as it (1) isn’t clear to me what “harder” money (or money’s “hardness”) really means, and (2) probably isn’t historically true. So we end up with something that’s false, or vague – or both! Clearly unsatisfactory. As I pointed out in my overview post to this series, financial and monetary history is almost always more nuanced than what such simple generalizations allow.

Luckily enough, Saifedean Ammous at the Soho Forum debate last week, did inadvertently provide me with a useable definition – and I intend to use it to debunk the idea that money’s history is one of increased hardness. Repeatedly Saif claimed that monetary history, before the advent of central banking, showed us that the harder money always won out: whenever two monetary networks clashed (shells and silver; wampum and gold) the “harder” money won. The obvious implication is that Bitcoin, being the “hardest” money, will similarly win out. Right off the bat, there’s some serious problems here.

First, it’s not altogether clear that such “This time is not different” arguments apply. Yes, economic history teaches us not to discount what seems to be long-standing or universally applicable phenomena – but also to take notice of the institutional setting in which they happen. Outcomes specific to, say, the Classical Gold Standard, rarely generalize into our hyper-modern financial markets with inflation targeting central banks.

Second, over the twentieth century we literally went from the hardest money (gold) to the “softest” money (central bank-created fiat paper money). Sure, you can argue that this was unfair or imposed upon us from above by wars and welfare states, but discounting it as irrelevant strikes me as overly cherry-picking. If the hardest money “lost” before, what makes you think that your new fancy money will win out this time around?

Then Saif returned to the topic of hardness and defined it as a money whose supply is “the hardest to increase.” The hardness of Cowrie shells or Wampum or gold or Whale’s teeth or Rai stones or the other early money that Jevons listed and discussed in 1875, all rely on a difficult, costly and inconvenient process of extraction and/or production. Getting Rai stones from far-away islands, stringing beads together into extended strips of Wampum, or digging up gold from inaccessible patches of the earth were all cumbersome and expensive processes. In Saif’s mind, this contributed to their hardness. Their money stock were simply difficult to expand – in jargon: their money supplies were inelastic.

The early 1600s Dutch Republic struggled with another problem. As the main financial centre of the time, countless hard money (coins) from all over the world were used in Amsterdam. Estimates say over a thousand legally recognized kinds of coins – and presumably even more unrecognized coins. A prime setting for monetary competition: they were all pretty hard (Saif’s definition: difficult and costly to expand) commodity moneys, of various quality, origin, and recognition in trade.

Another feature of 17th century Amsterdam was the international environment of Bills of Exchange (circulating private credit notes). Briefly summarized, merchants across the world traded debts on Amsterdam bankers or traders, and rather than holding and transporting bullion across the world, they transported the debt of the most trustworthy and reliable Dutch financiers. As all such bills required a settlement medium in Amsterdam, trade on thin margins was very sensitive to fluctuations in prices between the commodity moneys in which their bills were denominated – and very sensitive to debasements and re-defined values by various European proto-governments.

In 1609, the City of Amsterdam created the Wisselbank (initially a 100% reserve exchange bank) specifically tasked with standardizing the coinage and to insulate the bill market from currency fluctuations (through providing a ‘neutral’ unit of account for bills settlement). The Bank accepted deposit of whatever coin at the legally recognized rate (unrecognized at metal content) and delivered ”high-quality Dutch trade coins” upon withdrawal. To fund itself, it added a withdrawal fee of 1.5%, but no internal transfer fee, which made holding currency at the Bank very expensive in the short-term, but very cheap in the long-term. Merchants also avoided much of the withdrawal fee by simply trading balances with one another rather than depositing and withdrawing trade coins. In return for this cost-saving, sellers of bank balances would share a portion of the funds saved with the buyer in what’s known as the “Agio”: the price of Bank money in terms of current money outside the Bank’s accounts. This price would fluctuate like any other price on the market and would indicate the stance of liquidity demands.

In a classic example of Alchian’s monetary competition by transaction costs, Dutch merchants and financiers “outsourced” the screening and assaying of unfamiliar coins. They preferred settling their transactions through the (cheaper) medium that was deposits in the Bank.

And it gets worse for the bitcoiner’s story. In 1683, the Bank coupled its deposits with specific receipts for withdrawal; to gain access to coins, one was required both to hold balances and to purchase a receipt issued by the Bank (they also changed the pricing). Roughly speaking, the Bank became a fractional reserved bank (with capped withdrawals) overnight – and contrary to what the hardness argument would imply, the agio on Bank money rose to above par!

Two monetary historians, Stephen Quinn and William Roberds, summarize one of their many writings on the Wisselbank as follows:

“imaginary money on the Bank’s ledgers succeeded because it was more reliable than the real stuff. […] The most liquid asset in the economy was no longer coin, but a sort of ‘virtual banknote’ residing in Bank of Amsterdam accounts.”


“the evolution of the agio shows that the market valued irredeemable balances as if they were closely tied to backing trade coins” (my emphasis)

The story of the Amsterdam Wisselbank’s monetary experiments and innovations show us that monetary adaption relies on many more dimensions than “hardness.” Sometimes “hard” money is defeated by “soft” money, since the softer money brought other benefits to its users – in this case a cheap and reliable settling medium.

The lesson for bitcoin-vs-fiat-vs-FinTech is pretty clear: hard money doesn’t always “win”; and sometimes “soft” money can better serve the needs of consumers in a free market.

Financial History to the Rescue: On Bitcoiners’ Many Troubles

This article is part of a series on bitcoin (and bitcoiners’) arguments about money and particularly financial history. See also:

(2): ‘Rothbard’s First Impressions on Free Banking in Scotland Were Correct’, Joakim Book, AIER (2019-08-18)
(3): ‘The Harder Money Wins Out’, Joakim Book, NotesOnLiberty (2019-08-19)

It is unfair to expect technologically savvy bitcoiners to also be apt and well-read monetary economists. By no means do the skills and experiences of either have to overlap. Through the rise of Bitcoin with its explicit central banking challenge and attempt to become a worldwide currency, the subject matter of the two groups has unexpectedly clashed. All arguments that support or attack bitcoin is a head-first dive into monetary economics – sometimes exhuming centuries-long disputes among monetary economists and often blatantly distorts and overlooks money and banking arrangements of the past.

We can’t have that, can we.

One of the most delightful events in the libertarian world is the monthly Soho Forum debate run by Gene Epstein. Yesterday’s splendid showdown between Profs. George Selgin and Saifedean Ammous on the suitability of Bitcoin as a Medium of Exchange is bound to get some serious traction once the recording is on available only – look out for that!

A great debate for anyone interesting in monetary system and monetary economics more generally, this was probably the best and most entertaining of many Soho Forum debates I’ve watched. It’s a good format that forces speakers to engage and respond to one another’s arguments, which makes a two-hour conversation on something as technical and intricate as Bitcoin’s monetary role an absolute delight; even those of us deep into this nerdy rabbit hole can learn a lot and walk away with a trove of inspiration.

Channeling that inspiration into long-form, multi-part reviews of the relevant financial and monetary history is exactly what I’m going to do!

One question I often get regarding my research interests (banks, money and financial markets in the past) is the mildly offensive but absolutely correct question to ask: who the f— cares?! Bitcoin and the question of monetary regimes are perfect examples that make financial history relevant: the rise of crypto questions the fundamentals of monetary systems, systems that very rarely change. Naturally, the financial historian has an edge here, having a lot more nuanced knowledge about past monetary and financial arrangements and their operations. History becomes our (only) laboratory, to which the financial historian typically has a lot to contribute.

Moreso than other topics, fundamental questions of monetary regimes are explicitly pitted against other possible regimes – by their nature comparative and always informed by historical experience. It takes about two-and-a-half sentences before debates over money invoke some reference to financial and monetary history – as they should, since they illustrate how some (aspect of) a different monetary regime worked. Frustratingly enough, there’s a good chance that the speaker has mindboggingly little idea of what s/he’s talking about!

That’s where I like to come in. To a roomful of aspiring monetary economists at Cato’s Alternative Money University in July this year, Randall Wright‘s response to why he does monetary economics at all (“to debunk all this B-S!”) generalizes pretty well.

I’m gonna use this post to review some of the mistakes Saifedean made yesterday – and use it going forward as an updated collection of future posts on the topic, especially as I go through Saif’s promising book, The Bitcoin Standard: The Decentralized Alternative to Central Banking. The aim here is to respectfully clarify the parts of the Bitcoin arguments where I’d like to think that I have a comparative advantage – financial and monetary history – and to better develop my understanding of the monetary theory involved.

Here are some points that came up yesterday:

  • The Monetary Progression of ‘Harder Money’: the brilliance of the past is that almost any account, no matter how persuasive and compelling, is bound to run into inconvenient historical facts. The world is more nuanced than can be reasonably captured by pithy generalization (yes, I realize the irony here). In a piece attacking this bitcoiner’s creation myth earlier this year, I wrote:

This progressively upward story is pretty compelling: better money overtake worse money until one major player unfairly took over gold – the then-best money – replacing it with something inferior that the Davids of the crypto world now intents to reverse. […] Too bad that it’s not true. Virtually every step of this monetary account is mistaken.

  • The Lender-of-Last-Resort role privately provided: Many Austrians and opponents to fractional reserve banking routinely believe that banks holding less-than-100% reserve against their deposits must have a government backing them, providing emergency liquidity when such banks are inevitably run upon. This is completely false. I can point to many different historical instances that privately accounted for such risks, from private clearinghouses to insurance, to the option-clause debate in Scottish Free Banking and contingent/unlimited liability institutions.
  • …which leads us to Scottish Free Banking. There’s a famous quip by Rothbard (“Rothbard’s Law“) that describes the tendency for economists to specialize in the fields they’re worst at: Henry George specialized in land, where his writing is appalling; Milton Friedman on Money, where he’s awful etc. I usually say that the same thing applies for Rothbard whenever he writes on Financial History. Very bad. And yes, I will go through his article ‘Myth of Free Banking in Scotland’
  • Saif made a distinction yesterday between the “Medium of Exchange” and the “Payment Mechanism” involved that struck me as misleading, and I didn’t get a chance to finish my reasoning with him in person – so I’ll flush it out in a piece later on. Happily for all you Free Banking fans, it involves note-issuing Scottish banks and the bigger questions of redeemability and outside/inside money.

Some additional housekeeping from yesterday:

  • Saif: “There was no real estate bubble on the Gold Standard”.
    • Yes, Selgin said, the Florida 1920s housing bubble leading up to the Great Depression. No, Saif correctly objected, that wasn’t a real gold standard, but a central bank-planned Gold Exchange Standard.
      Ok, fine – I’d agree with Saif here. How about the 1893 Australian banking crisis? Classical Gold Standard, no central bank, but a property boom and bubble-like collapse nonetheless.
    • A response might be “but fractional reserve banking!” but a) that’s a topic I’ll delve into much more, and b) this is started to sound like a No True Scotsman fallacy…
  • Saif: “Central banks hold gold – they don’t trust each other enough to hold currency”
    • Saif probably misspoke here, since he couldn’t possibly believe this; looking at any central bank’s balance sheet would instantly dispell such beliefs. Central banks generally hold no more than 5-8% of their assets in gold, and often a lot more than that in foreign currency-denominated asset. The ECB holds about equal parts (7-8% of assets) in gold and foreign currency. I routinely follow the weekly changes in the Riksbank’s balance sheet and even after a more extreme QE programe than the Fed’s (as % of GDP), it holds more FX than it does SEK-denominated assets (and no more than 5% in gold). The Bank of England technically doesn’t actually have any gold at all on its balance sheet, but holds gold in storage at its vaults (on behalf of other countries and the UK Treasury).

Bear with me over the next few months, as I make my way through Saif’s book and engage with these thrilling debates. Feel free to interrupt/comment on Twitter at any point if you think I’ve made a factual/empirical error, error in reasoning or in relevance to Bitcoin.

And yes, keep in mind that this is a respectful inquiry into fascinating topics with people who agree on like 92% of everything. Feel free to call me out for unnecessarily snarky and offensive thing as we go along – and welcome to the party!

On Translating Earnings From The Past

A few days ago, John Avery Jones published a great piece on the Bank of England blog (“Bank Underground”), investigating how much Jane Austen earned from her novels in the early 1800s. By using the Bank’s own archives and tracking down Austen’s purchases of “Navy Fives” (Bank of England annuities, earning 5%), Avery Jones backed out that Austen’s lifetime earnings as a writer was probably something like £631 – assuming, of course, that the funds for this investment came straight from the profits of her novels.

Being a great fan of using literature to illustrate and investigate financial markets of the past, I obviously jumped on this. I also recently looked at the American novelist Edith Wharton’s financial affairs and got very frustrated with the way commentators, museums, and scholars try to express incomes of the past in “today’s terms”, ostensibly vivifying their meaning.

For the Austen case, both Avery Jones and the Financial Times article that followed it, felt the need to “translate” those earnings via a price index, describing them as “equivalent to just over £45,000 at today’s prices”.

Hang on a minute. Only “£45,000”? For the lifetime earnings of one of the most cherished writers in the English language? That sounds bizarrely small. That figure wouldn’t even pay for the bathroom in most London apartments – and barely get you a town-house in Newcastle. The FT specifically makes a comparison with contemporary fiction writers:

“[Austen’s] finances compare badly even with those of impoverished novelists today: research last year by the Authors’ Licensing and Collecting Society found that writers whose main earnings came from adult fiction earned around £37,000 a year on average”

Running £631 through MeasuringWorth’s calculator yields real-price estimates of £45,910 (using 1815 as a starting year) – pretty close. But what I think Avery Jones did was adjusting £631 with the Bank’s CPI index in Millenium of Macroeconomic Data dataset (A.47:D), which returns a modern-day price of £45,047 – but that series ends in 2016 and so should ideally be another 7% or so from 2016 until May 2019.

 “This may not be the best answer”

Where did Avery Jones go wrong in his translation? After all, updating prices through standard price indices (CPI/RPI/PCE etc) is standard practice in economics. Here’s where:


The third line on MeasuringWorth’s result page literally tells researchers that the pure price number may not reflect the question one is asking. The preface to the main site includes a nuanced discussion about prices in the past:

“There is no single ‘correct’ measure, and economic historians use one or more different indices depending on the context of the question.”

When I first estimated Mr. Darcy’s income, this was precisely the problem I grappled with; simply translating wealth or incomes from the past to the present using a price index severely understates the meaning we’re trying to convey – i.e., how unfathomably rich this guy was. There is no doubt that Mr. Darcy was among the richest people in England at the time (his annual income some 400 times a normal worker’s salary), a well-respected and wealthy man of elevated rank. However, translating his wealth using a price index doesn’t even put him on the Times’ Rich List over the thousand wealthiest Britons today. Clearly, that won’t do.

Because we are much richer today in real terms, price indices alone do not capture the meaning we’re trying to communicate here. Higher real income – by definition – is a growth in incomes above the rise in prices. We therefore ought to use a more tangible comparison, for instance with contemporary prices of food or mansions or trips abroad; or else, using real income adjustments, such as GDP/capita or average earnings.

MeasuringWorth provides us with three other metrics over and above the misleading price-index adjustment:

Labour Earnings = £487,000
using growth in wages for the average worker, it reports how large your wage would have to be today to afford what Austen could afford on £631 in 1815. Obviously, quality adjustments and technological improvements make these comparisons somewhat silly (how many smartphones, air fares and microwaves could Austen buy?), but the figure at least takes real earnings into account.

Relative Income = £591,300
Like ‘Labour Earnings’, this adjustment builds on the insight above, but uses growth in real GDP/capita rather than wages. It more closely captures the “relative ‘prestige value’” that we’re getting at.

Both these attempt are what I tried to do for Mr. Darcy (Attempt #2 and #3) a few years ago.

Relative Output = £2,767,000
This one is more exciting because it captures the relationship to the overall economy. If I understand MeasuringWorth’s explanation correctly, this is the number that equates the share of British GDP today with what Austen’s wealth – £631 – would have represented in 1815.

Another metric I have been experimenting with is reporting the wealth number that would put somebody in the same position in the wealth distribution of our time. For example, it takes about £2,5m to qualify for the top-1% of British wealth (~$10m in the United States) distribution today. What amount of wealth did somebody need to join the top 1% in, say, 1815? If we could find out where Austen’s wealth of £631 (provided her annuities were her only assets) rank in the distribution of 1815, we can back out a modern-day equivalent. This measure avoids many of the technical problems above for how to properly adjust for a growing economy, and how to capture inventions in a price index – and it gets to what we’re really trying to convey: how wealthy was Austen in her time?

Alas, we really don’t have those numbers. We have to dive deep into the wealth inequality rabbit hole to even get estimates (through imputed earnings, capital stocks or probate records) – and even then the assumptions we need to make are as tricky and inexact as the ones we employ for wage series or prices above.

The bottom line is pretty boring: we don’t have a panacea. There is no “single correct measure”, and the right figure depends on the question you’re asking. A reasonable approach is to provide ranges, such as MeasuringWorth does.

But it’s hard to imagine the Financial Times writing “equivalent of between £45,000 and £2,767,000 at today’s prices”…

“Ethnic Violence in Africa: Destructive Legacies of Pre-Colonial States”

Note: I’ve gotten through the first three chapters of Paul Feyerabend’s Against Method. (Rick’s initial thoughts are here, and Bill has been doing Feyerabend for awhile. These are the two you should probably follow a bit more closely throughout the summer.)

My own thoughts on Against Method are coming, but I keep getting distracted. Check out this beast of an article on how pre-colonial states in Africa continue to influence current affairs today, even though these have been absorbed into the post-colonial states we are all familiar with in Africa today. (h/t Kevin Lewis)

Snatching you up (mendicants and Gulags)

I’ll get to Feyerabend, but first Solzhenitsyn:

However, the root destruction  of religion in the country, which throughout the twenties and thirties was one of the most important goals of the GPU-NKVD, could be realized only by mass arrests of Orthodox believers. Monks and nuns, whose black habits had been a distinctive feature of Old Russian life, were intensively rounded up on every hand, placed under arrest, and sent into exile. They arrested and sentenced active laymen. The circles kept getting bigger, as they raked in ordinary believers as well, old people, and particularly women, who were the most stubborn believers of all and who, for many long years to come, would be called “nuns” in transit prisons and in camps (37).

It’s true that Christians were viciously persecuted by socialists in the USSR, and what makes matters worse is that few historians, and fewer journalists, point this out. Bishops and patriarchs living in mansions were the official targets of socialist purges, mind you, but mendicants, village priests, and old church ladies were the ones who actually got dragged away and put to work for The Cause. Why? Because they actually believed. They already had a moral compass, so there was no need for a strong state. In socialist countries, alternatives ruin plans. So in socialist countries, alternatives get snuffed out.

As I read through the Gulag Archipelago I can’t help but think of the Russia I hear about on NPR and read about online. Russia is the left’s new boogieman, for obvious reasons. But I wonder, with Solzhenitsyn in mind, just how close the Orthodox Church actually is to Putin and his henchmen. I’m sure the top brass are close to Putin, but what about the village priests and the others? Did socialism wipe out the old, more mystical Christianity that was prevalent in the Russian countryside before the Revolution? Are there any mendicants left in post-socialist Russia? All those decades of violent repression, starvation, ethnic cleansing, and forced labor, and the hierarchy of the Russian Orthodox Church hums along as if nothing ever happened. The actual believers, on the other hand, are gone, along with the unique culture they spread throughout the Russian Empire and, via the mediums of literature and art, the world.

Federation, not unilateralism, ought to be the American Libertarian’s foreign policy

This is an expanded post that stems from a conversation I have been having with Bruno and Jacques in the ‘comments’ threads. The conversation is more about the nation-state than the unilateralism/federation non-debate, but I thought that’s why it’d make a good post.

The Nation-State

Nation-states are often considered to be sacred territory to conservative libertarians (see Jacques or Edwin, for example), even if they don’t use the word “sacred.” A nation-state is a geographic territory that is supposed to be made up of a single nation. Thus the French live in France, the Germans in Germany, the Greeks in Greece, etc. You can see the problem with this logic right away: what about the people who don’t fit into the idea of what a nation should be? How do religious minorities, for example, or your neighbor who speaks only Romanian, fit in? How are they a part of the nation? (Ludwig von Mises wrote one of the better critiques of the nation-state way back in 1919, using the Austro-Hungarian Empire as an example.)

Nation-states arose in Europe after centuries of horrific warfare and genocidal campaigns, such as the Holocaust, and only came into being elsewhere in the world with the fall of the European empires after World War II. These empires, which never had a good grasp on the territories they claimed as their own to begin with, rebuilt the international order around the ideas of state sovereignty and the nation-state. Part of this had to do with the fact that their own empires had reverted to a form of nation-state (the UK, France, etc., instead of the British, or French, Empire), and part of it had to do with the idea that Asians and Africans deserved a stage on the international scene. (This latter idea was pushed by left-wing Europeans and Asians and Africans who believed their colonies could easily make the transition from colony to nation-state.) The colonies of the European empires, which had been patched together slowly over hundreds of years, did not take nationality into consideration in matters of governance, unless it was to explicitly crush any notions of nationhood among the colonized.

So, the nation-states of Europe and, to a much lesser extent, North and Latin America, have a long history of violence, politics, law, and trade (among other factors) that bolster their legitimacy as organizational entities and their place in the world. The states that formed in the ashes of the European empires had no nations to speak of and entered a world order that wanted to treat these new states as if they did have such a nation.


Since there were suddenly a bunch of new states in the world without nations in them, elites in these new, post-imperial states had to begin nation-building. Barry has a great series, soon to be enshrined as a Longform essay, on Turkish nationalism here at NOL. James Gelvin, a historian at UCLA, has done some good work on nationalism in the Middle East (here is a review of one such work). Eugen Weber (UCLA) and David Bell (Princeton), both historians, have written excellent examples of how Paris went about molding people within France’s territory into French citizens.

In most of the post-imperial cases, elites were proponents of secularism and inclusivity. Elites in Iraq, Syria, and Iran, for example, made a concerted effort to protect the rights of minorities and women, even going so far as to include them in key aspects of governing these new states. Indeed, when the dictator of Iraq, Saddam Hussein, was chased from power by the Americans in 2003, Iraq’s Christians, women, and other minorities suffered most because the Hussein regime protected them from the (conservative and religious) majority. The same thing happened when the American-backed Shah of Iran was overthrown by Islamists in 1979. Elites in the post-imperial world wanted their societies to be nation-states (in fact, they needed them to be, so that they could get the attention of Western allies), but they thought they could get there through the prism of nationalism.

Minorities, rights, and nations

Nation-building in the post-imperial world has gone about as smoothly as it went in Europe. War has been an ongoing problem (most of it has been intrastate instead of interstate), and genocides have occurred. The intrastate wars are easiest to understand. Elites are trying to build a nation to populate a state (which is just a former colony of a European empire). Those that don’t fit in to the idea of what it means to be a part of X nation, perish, or are harshly oppressed (such as the Kurds in Iraq, Iran, and Syria, or the Balochs in Iran and Pakistan).

Religion has also been a problem. Most leaders in these new nation-states tried to establish secular regimes, but were also believers in democracy. Unfortunately, secularism and democracy are incompatible without liberty. If Saddam Hussein or Shah Pahlavi had tried to hold elections, Islamists would have been voted into office, just as they routinely are in Egypt and Palestine. India, a former British colony that was perhaps the most intimately connected to its imperial overlord, is sliding back into Hindu theocracy as well. Without robust protections for property rights (or “bundles of rights“), elections will continue to be oppressive for minorities thanks to religious conservatives.

This does not mean that Muslims are incapable of secular self-governance, either, as some libertarians are wont to argue. In fact, the first nation-states of Europe were governed by religious conservatives. The struggle between religious conservatives and liberals was a slow, violent evolution that eventually turned in favor of the liberals, especially after they began to secure their property rights more effectively.

Federation, status quo, imperialism

My argument is that it would better – i.e. more libertarian – to make citizens out of these post-imperial states, rather than members of a nation, by incorporating them into federal or confederal systems that have experience with large, disparate, democratically-governed populations. The United States should just start inviting people from all over the world to petition for statehood within its federation. The elites trying to govern the failed nation-states of the post-imperial world would not appreciate this, of course, but who cares? They would be better off as citizens, too.

Imperialism is still a bad idea. It was bad when Adam Smith railed against it in 1776. It was bad when F.A. Hayek pointed out its moral failings in 1960. It is still bad today, in 2019.

The status quo is somewhere in between imperialism and federation. In my view, the status quo leans toward the latter, at least when it comes to the United States (the polity where I am a citizen). The invasion and occupation of Iraq wasn’t quite old-style imperialism, but neither was it an attempt at federation between at least two separate polities. One good thing that I thought was a lesson learned from the Iraqi disaster is that invading and occupying a foreign country is a bad idea. It’s an even worse idea when you declare that your enemy is the regime of a failed nation-state rather than the people living in it. That’s no way to fight a war. (This is a brutal notion, but a realistic one. If you’re going to invade and occupy a foreign country, and impose your will upon its inhabitants, and consider yourself a free and open society, you’re going to need a population that hates everything about that foreign country. If your population does not hate everything, or even just a few things, about said foreign country, why on earth would you invade and occupy it?)

Post script

I got my copy of Paul Feyerabend‘s Against Method in the mail last week. I’ll be blogging my thoughts as I read through it. Rick has already started in. Federico has some excellent stuff on the philosophy of science coming up, too. And, of course, Bill has already been blogging about Feyerabend. You’ll be hearing more from him, too. Andrei also has some thoughts on Feyerabend. Hopefully, some of the other Notewriters will chime in as well!

Back in Brazil: more impressions

Another thing that calls my attention in Brazil (or rather, in Rio de Janeiro) are the crazy traffic jams. All day long, traffic moves painfully slowly. Really. There is no rush hour. Every hour is rush. The reason is not hard to understand: there are way too many buildings for too few streets and poor options in mass transportation.

Thinking about this, I came across this excellent text. It is in Portuguese, so for those who can’t read it, I’ll summarize. Basically, zoning laws in Rio de Janeiro through the 20th century were completely crazy, following a very nasty relationship between politicians and real state companies. A company wanted to build taller buildings and profit, the city hall would not oppose, especially when a luxurious apartment was waiting for the mayor. The result is that old neighborhoods like Tijuca and Botafogo simply have no space on the streets for so many cars.

But what is the problem with many tall buildings? That’s what New York is all about, and I simply love the Big Apple! Well, that’s true, but NY has something that Rio doesn’t: a great mass transit system. Rio has four subway lines. Or three. Wait, maybe it’s just one. Here is the thing: on paper, Rio has four subway lines, which already makes no sense, since it only has lines 1, 2 and 4. Line 3 was planned but never built. Line 4 is just an extension of line 1, and line 2 trains enter line 1 (!). Although the system was privatized in the 1990s, it is very clear that it maintains a very suspicious connection with the state government. Sergio Cabral, Rio’s former governor, and presently in jail, was married to a lawyer who defended the Metro company. It is also clear that bus companies subsidize politicians who maintain their interests. In sum, Cariocas are hostages to a terrible public transport system that favors a criminous relationship between big companies and politicians.

Rio ends up representing very well a problem we see all over Brazil: people believe this is capitalism. Because of that, they vote for socialist parties. It should be painfully obvious from the examples of USSR, Cuba, Venezuela, Nicaragua, North Korea, China, Vietnam, Eastern Europe, and so many others that socialism simply doesn’t work. But here is the thing: people in Rio (and actually in Brazil and Latin America in general) suffered and suffer so much under crony capitalists that they can’t help but thinking that socialism might be the answer.

Hear, World! Socialism failed, just like Mises predicted. But as long as people suffer under crony capitalists, it will still be appealing, be it in a poor neighborhood or a college campus in the US, be it in a poor country in Latin America. The job is not done. Freedom isn’t free. We still have a long way to go freeing people from evil.