Murray Rothbard

Weekly Wakeup 01-24-2014

Adam Magoon History, Liberty , , ,

Making this a quick copy paste job today.  It has been a busy week.

To make a long story short, read this.

Myth:  The Great Depression was caused by government inaction in the face of a failing economy.

Reality:  The Hoover administration was the most active interventionist of a non-war economy in American history.

To quote the man himself:

“[W]e might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action.

No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living have been reduced before wages have suffered.”

And to quote the Murray Rothbard about Hoover’s actions:

At St. Paul, at the end of his campaign, Hoover summarized the measures he had taken to combat the depression: higher tariffs, which had protected agriculture and prevented much unemployment, expansion of credit by the Federal Reserve, which Hoover somehow identified with ‘protection of the gold standard’; the Home Loan Bank system, providing long-term capital to building-and-loan associations and savings banks, and enabling them to expand credit and suspend foreclosures; agricultural credit banks which loaned to farmers; Reconstruction Finance Corporation (RFC) loans to banks, states, agriculture, and public works; spreading of work to prevent unemployment; the extension of construction and public works; strengthening Federal Land Banks; and, especially, inducing employers to maintain wage rates. Wage rates ‘were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.’ But was there any causal link between this fact and the highest unemployment rate in American history? This question Hoover ignored.

Hoover had, indeed, “placed humanity before money, through the sacrifice of profits and dividends before wages,” but people found it difficult to subsist or prosper on “humanity.” Hoover noted that he had made work for the unemployed, prevented foreclosures, saved banks, and “fought to retard falling prices.” It is true that “for the first time” Hoover had prevented an “immediate attack upon wages as a basis of maintaining profits,” but the result of wiping out profits and maintaining artificial wage rates was chronic, unprecedented depression. On the RFC, Hoover proclaimed, as he did for the rest of his program, “Nothing has ever been devised in our history which has done more for those whom Mr. Coolidge has aptly called the ‘common run of men and women.'” Yet, after three years of this benevolent care, the common man was worse off than ever.

Hoover staunchly upheld a protective tariff during his campaign, and declared that his administration had successfully kept American farm prices above world prices, aided by tariffs on agricultural products. He did not seem to see that this price-raising reduced foreign demand for American farm products. He hailed work-sharing without seeing that it perpetuated unemployment, and spoke proudly of the artificial expansion by business of construction “beyond present needs” at his request in 1929-30, without seeing the resulting malinvestment and business losses.

While claiming to defend the gold standard, Hoover greatly shook public confidence in the dollar and helped foster the ensuing monetary crisis by revealing in his opening campaign speech that the government had almost decided to go off the gold standard in the crisis of November, 1931—an assertion heatedly denied by conservative Democratic Senator Carter Glass.

The spirit of the Hoover policy was perhaps best summed up in a public statement made in May, before the campaign began, when he sounded a note that was to become all too familiar to Americans in later years—the military metaphor:

The battle to set our economic machine in motion in this emergency takes new forms and requires new tactics from time to time. We used such emergency powers to win the war; we can use them to fight the depression (321-323).

A (very) Quick Primer on Natural-Rights.

Adam Magoon Philosophy, Religion , , , , , , , , , ,

by Adam Magoon

The first step in understanding natural rights theory is to ask a simple but profound question.  Do you own yourself?

Well, let’s start with the definition of ownership.  Dictionary.com gives us “the act, state, or right of possessing something.” Digging deeper we find the definition of possession as “the state of having, owning, or controlling something.” The last part of that definition is key; controlling.  There is a modicum of truth in the old adage possession is 9/10ths of the law.  Nine times out of ten to own something is to control it.

Now getting back to our original question: Do you own yourself?  Well do you control your own body and mind?  We do not need to delve into psychology to answer this question.  I alone can move my arms up and down, I can choose to stand, walk, eat, think, write, create, or to do nothing at all.  I alone am in control over my body.    This is an indisputable fact.  The very act of questioning this fact proves it true; for if you do not have control over your thoughts and actions how could you possibly disagree?

Self-ownership is the cornerstone of libertarian natural rights philosophy and what the libertarian means when he uses the term “natural rights”.

To quote Murray Rothbard: “The fundamental axiom of libertarian theory is that each person must be a self-owner, and that no one has the right to interfere with such self-ownership”

Under this philosophy of self-ownership there are two important subcategories that I will just touch on for further elaboration at another time.

The Non-aggression Principle: is an ethical stance which asserts that “aggression” is inherently illegitimate. “Aggression” is defined as the “initiation” of physical force against persons or property, the threat of such, or fraud upon persons or their property.

This is why the threat of violence cannot be used to negate the concept of self-ownership.  Holding a gun to my head and telling me to raise my arm does not mean you own the right to raise my arm any more than a thief owns the jewelry he stole.  Ownership cannot be transferred through violent means.

And the concept of homesteading which is best explained by John Locke:

“[E]very man has a property in his own person. This nobody has any right to but himself. The labour of his body and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature placed it in, it hath by this labour something annexed to it that excludes the common right of other men. For this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to. . . .

He that is nourished by the acorns he picked up under an oak, or the apples he gathered from the trees in the wood, has certainly appropriated them to himself. Nobody can deny but the nourishment is his. I ask then when did they begin to be his? . . . And ‘tis plain, if the first gathering made them not his, nothing else could. That labour put a distinction between them and common. That added something to them more than nature, the common mother of all, had done: and so they become his private right. And will any one say he had no right to those acorns or apples he thus appropriated, because he had not the consent of all mankind to make them his? . . . If such a consent as that was necessary, man had starved, notwithstanding the plenty God had given him. We see in commons, which remain so by compact, that ‘tis the taking part of what is common, and removing it out of the state Nature leaves it in, whichbegins the property; without which the common is of no use”

Very quickly I will also mention a couple of the more common arguments that arise when natural rights are discussed.

First, natural rights do not extend from god or any other supernatural or theological forces.  They are based on rational and philosophical thought.  They are what is known as an “a priori”  argument.  To put it simply, natural rights are a logical deduction based on a number of easily recognized facts, primarily the concept of self-ownership.

Second, governments do not, and indeed cannot, grant any rights that natural rights have not already granted.  Let’s look at a current event that everyone always seems to think about backwards; the legalization of drugs for personal consumption.  Because of the right to self-ownership each and every individual already has the right to do whatever they choose with their own body as long as they do so with their own property and do not violently harm others in the process.   Even if the U.S. government “legalized” the use of drugs tomorrow, they are not granting anyone the right to do drugs, they are merely removing their own restrictions on something that is already a right.   The idea that law comes from the state is known as ‘legal positivism’  and proponents are hard pressed to defend actions such as slavery and extermination that were made legal by many nations throughout the course of human history.

 

Recommended Reading:

http://mises.org/rothbard/ethics/ethics.asp

Freedom of Speech? No Such Thing!

Warren Gibson Culture, Current Events, Liberty , , , , , , ,

I get lots of solicitations for libertarian groups and I’m very pleased that there are so many of them these days. I can’t possibly support them all but I recently ponied up for an organization called F.I.R.E. (Freedom for Individual Rights in Education). Their focus is on fighting suppression of free speech on college campuses. Thus, for example, FIRE announces its Speech Code of the Month for October 2013:

Salem State University in Massachusetts prohibits “cultural intolerance” in its residence halls—a broad ban that threatens debate on controversial issues in a place where students often speak the most freely. Making matters worse, the policy applies not only to “actions” but also to “omissions,” broadening its scope to include not only speech but also a student’s personal decision not to speak.

It burns me up to see self-appointed fascist administrators launching attacks on individuals who dare to speak their minds in unpopular ways. And yet, there is a problem, centered on the distinction between public and private institutions. Suppose a small Baptist college decided that students would not be allowed to mock Christianity or promote Islam on campus. Could there be any objection to such a policy? Now suppose that same college decided it would not admit black students. Any thoughtful libertarian would have to defend this policy, distasteful though it may be, on grounds of freedom of association. The bottom line is clear: owners of private colleges have every right to determine whom they will admit as students or hire as faculty and how they are required to act on campus.

Now what about state colleges such as Salem State? Such institutions are “public property,” an oxymoron if we think about it. “Property” denotes the right to use or dispose of some valuable asset, implying an exclusion of non-owners or others who have not been invited to use the property. On the other hand “public” means, if anything, that anybody is allowed to use the asset and nobody is excluded. Who owns San Jose State University where I teach? The California State University Board of Trustees is the most likely candidate, but the faculty has a lot of control through the faculty unions and faculty senates. The Governor and the legislators wield a lot of influence too. The citizens own the place in theory but the connection between SJSU and the citizenry is so remote that it might as well be non-existent. The lack of clarity about who owns the place is the source of most of the idiotic, wasteful, and sometimes downright offensive policies that we see at SJSU and all other government agencies.

So what sort of speech is to be allowed at SJSU? I would say anything goes except shouting down lecturers. Objectionable behavior such as name-calling should be met with ostracism and boycotting or perhaps tit-for-tat. No need for prohibitions. But the people who have power over these matters no doubt see it differently.

Thinking about it more, there really isn’t any such thing as freedom of speech. Speech is not carried out in a vacuum (literally: there can be no sound waves!). If you’re speaking you are standing on someone’s property; if writing you’re using pen and paper or a computer. Land, pen, paper and computers are all resources whose owners have the right to determine who uses them and how. I have no right to invade your house and deliver a speech in your living room nor to grab your computer and compose a blog. Freedom of speech can only mean freedom to use one’s property, or the property of another who has given consent, for speaking purposes. (This, by the way, solves the fire-in-a-crowded-theater conundrum. Prohibitions on yelling “fire” are not a diminution of freedom of speech but rather a recognition of a theater owner’s right to control behavior on his property. See Rothbard’s excellent Ethics of Liberty p. 114.)

In the end, as Rothbard points out, there is no dichotomy between property rights and “civil” rights. There are only property rights, recognizing one’s own body as one’s primary form of property.

Around the Web

Brandon Christensen Current Events , , , , , , , ,
  1. The Egyptian Coup and Political Islam: Daniel Larison takes neoconservative David Brooks to task for supporting the coup and explains why the coup will only empower Islamism. Highly recommended.
  2. In which countries is ‘crude libertarianism’ most and least true? Tyler Cowen dared to ask the question, but it is his ‘comments’ section (which I am extremely jealous of) that is truly worth reading through. Grab a cup of coffee.
  3. This is why I love Murray Rothbard.
  4. Lies, Slander and Corey Robin. Philosopher Kevin Vallier explains, in depth, the Leftist penchant for dishonesty. Imagine if an associate professor (a young professor without tenure) with a libertarian or a conservative bent wrote something about Rawls or Keynes that was as fact-free and fallacious as the piece Robin wrote about Hayek. Don’t condemn. Don’t get angry. Just imagine.
  5. I’ve been listening to a lot of Sonic Youth lately (you can Google ’em yourself!).

Sardines at Midnight

Warren Gibson Economics , , , , , , , , , ,

Sardines at midnight? If the mood should strike me, I can zip down to the local Safeway store here in Belmont, California, which is open 24/7, and be back with a can in 20 minutes. My biggest problem would be choosing from among Thai, Canadian, Polish, or Norwegian sardines packed in water, olive oil, tomato-basil, or soybean oil.

So what? It’s darn near a miracle, that’s what, and would seem so to most inhabitants of today’s world and everyone in yesterday’s world. Leonard Read’s phrase “The Miracle of the Market” was only a slight exaggeration. I won’t attempt to describe how markets miraculously motivate and coordinate the actions of the thousands of people who cooperate in providing me with sardines. Nobody can do that better than Leonard Read did in his classic “I, Pencil.” If for some reason you haven’t read it, stop now and do so.

The increased quantity and quality of the conveniences available to us are really amazing. We should stop to think about them from time to time, paying special attention to the incentives that brought them about.

I have vague memories of the Fisher Brothers grocery store where my mother took me around 1950. The place was tiny and the selection limited. Looking back, I wonder about its cleanliness: The owners kept sawdust on the floor to soak up spills. Later they built a supermarket that was much larger but still only a pale precursor of today’s Safeway. A mix of union coercion, government regulation, and perhaps just plain custom kept all supermarkets closed after six p.m. Monday through Saturday and all day Sunday. A working woman had to scramble to get her shopping done before closing time or join the mob on Saturday. Continue reading →

Rare Earth Elements: Stockpile or Markets?

Warren Gibson Economics , , , , , , , , , ,

Quick, what do you know about lanthanum, praseodymium, neodymium, or dysprosium? If you said they are chemical elements, you are right: numbers 57, 59, 60, and 66, to be exact. They and their neighbors on the periodic table, collectively “rare earths,” were once mere curiosities tucked in between barium and tungsten. Now they’re having their day in the sun, thanks to new technology, as did uranium and plutonium when atomic energy was developed. The military may begin stockpiling them.

Good idea or not?

My first encounter with these elements was a project that developed high-tech shock absorbers to protect a replacement camera for the Hubble telescope during the camera’s rough ride to orbit. These devices, called M-Struts, pioneered the use of permanent magnets for shock mitigation. The only material our team found that would provide sufficient magnetic flux density (a measure of the strength of a magnetic field at a given point) was a rare earth alloy, NdFeB (neodymium-iron-boron). This material could only be procured from China.

M-Struts were a one-off project that had no discernible effect on the demand curve for neodymium. But now the demand curve is crowding up against the supply curve largely because of rare earth applications in “green” energy devices such as wind turbines (extra points if you knew that). Continue reading →

Some Mistakes Have Been Made

Brandon Christensen Politics , , , , , , , ,

I just finished up the readings for a class on the history of the modern Middle East. The main book issued is one conveniently written by the professor of the course (James Gelvin) and is aptly titled The Modern Middle East: A History. Below is an excerpt that I think sums up the problems facing the Middle East today:

American policy towards the Middle East [after World War 2] was instrumental in promoting both development and the civic order development was to sustain […] To promote development, the United States adopted a multifaceted approach derived, in good measure, from its own Depression-era wartime experiences.

Ooops.

Here is Murray Rothbard’s America’s Great Depression. Now, I know libertarians are infamous for condescending suggestions to “go read a book”, but I don’t think we can really help it sometimes. Hoover’s interventionist policies and Roosevelt’s New Deal were disastrous for the American economy. Most, if not all, of the Middle East’s problems today can be traced to the institutions currently in place, and these institutions in their turn were created and codified based upon models that had entirely failed the West.

For the record, the developmentalist approach led directly to, you guessed it, economic nationalism and political despotism. You can find a convenient ranking of the world’s states based off of GDP (PPP) per capita here. According to the IMF, the US ($48,387) is ranked 6th in the world (the US also repealed or rebuked many of the Depression-era policies of the Hoover and Roosevelt administrations; the few that remain are among the most pressing problems American society faces today). The world average is $11,489. Egypt is ranked 104th, Iraq is 128th, Iran is 69th (coming in slightly above the world average at $13,053), and Syria is 118th.

Let’s Celebrate Loopholes

Warren Gibson Economics, Politics , , ,

I’ve just finished my income tax return. (Have you finished yours?) Silly me, I do it myself using TurboTax – all 59 pages of my federal return plus 80 for California. I’ve got investment income, including partnerships and foreign stock dividends, two small businesses, social security and a pittance of wage income from San Jose State University. And a bunch of deductions and credits.

The whole process puts me in a foul mood, and my wife and even the cats know to steer clear till it’s done. One reason is obvious: the mind-numbing complexity, even with TurboTax. Even more galling is the humiliation and gross indecency of dropping my pants financially. This is the land of the free?

The New York Times had an interesting article in last Sunday’s Magazine, “What’s the Easiest Way to Cheat on Your Taxes?.” The article led off with the assertion: “If economists ran the tax system, there would be virtually no exemptions or loopholes.” To which I say, just a cotton-pickin’ minute! If I ran the tax system, and assuming I couldn’t set the rate at zero, exemptions and loopholes would stay and maybe even multiply.

How can I say this after belly-aching about the complexity of my return? Simple – the complexities provide me enough tax-cutting opportunities to outweigh the damage to myself, my wife and the cats. I’ll leave the details out just in case the gentle folk at the IRS read this humble blog.

Why do I do it myself? Partly because I don’t want to spend hundreds or maybe thousands on a professional preparer, but also because his interests would not align exactly with mine. His primary goal would be to cover his rear, especially with the IRS cracking down on professional preparers. My goal is to achieve the right mix of boldness and caution in claiming deductions and credits.

A good bit of ink has been spilled (and electrons) about “fair taxes” lately. It’s unfair, says the Community Organizer in the White House, that Warren Buffett’s average tax rate (or was it his marginal rate?) is lower than his secretary’s. Conveniently overlooked is the fact that his dividend income has already been taxed at the corporate level. As Gene Epstein showed recently in Barron’s, when you add in that corporate tax you get a much different story. The rich pay a substantially higher percentage of their income than most of us on this basis.

So what is a fair tax anyway? The same percentage for everyone? No exemptions, no deductions? Why is that any fairer than a head tax – a levy of so much per person? How about a regressive head tax, since poor people tend to use more government services than rich people?

What of two people earning the exact same income? Surely fairness demands that they pay the same tax – equality before the law and all that. But suppose Mr. A is a struggling young man with lots of debt, trying to start a family while Mr. B has inherited millions. Both earn the same income but is it fair that they pay the same tax? I leave it to you.

When you get right down to it, there just isn’t any such thing as a fair tax, simply because taxes are coercive exactions – theft, if you will.

Still why wouldn’t a flat tax with no deductions be at least a small improvement, as Steve Forbes and other conservatives advocate? The late Murray Rothbard demolished that idea in The Case Against the Flat Tax. Here’s his comment:

“The closing of ‘loopholes’ under a flat tax will mean a merciless and continuing search-and-destroy mission by which the government will root out and obliterate every little hideyhole in which many of us have been able to squirrel away a bit of our own earnings and are own property, and keep them safe from the ever-expanding maw of the federal government.”

I concur. Let’s celebrate all the loopholes, not just those that protect some of our own income, but any break for anybody at all.