The Fallacy of the "Public Sector"

Why not give the free market a county or even a state or two, and see what it can accomplish?

by Murray N. Rothbard

We have heard a great deal in recent years of the "public sector," and solemn discussions abound through the land on whether or not the public sector should be increased vis-à-vis the "private sector." The very terminology is redolent of pure science, and indeed it emerges from the supposedly scientific, if rather grubby, world of "national-income statistics." But the concept is hardly wertfrei; in fact, it is fraught with grave, and questionable, implications.

In the first place, we may ask, "public sector" of what? Of something called the "national product." But note the hidden assumptions: that the national product is something like a pie, consisting of several "sectors," and that these sectors, public and private alike, are added to make the product of the economy as a whole. In this way, the assumption is smuggled into the analysis that the public and private sectors are equally productive, equally important, and on an equal footing altogether, and that "our" deciding on the proportions of public to private sector is about as innocuous as any individual's decision on whether to eat cake or ice cream. The State is considered to be an amiable service agency, somewhat akin to the corner grocer, or rather to the neighborhood lodge, in which "we" get together to decide how much "our government" should do for (or to) us. Even those neoclassical economists who tend to favor the free market and free society often regard the State as a generally inefficient, but still amiable, organ of social service, mechanically registering "our" values and decisions.

The Twilight of Casino Capitalism

The Libor scandal tells us time is running out for America's crony capitalists

By PATRICK J. BUCHANAN

Comes now news from across the pond that executives at one of the world’s most respected banks, Barclays, rigged Libor. Even the venerable Bank of England is apparently being investigated.

For sports fans, this is like fixing the Super Bowl or doping a horse in the Derby. But it is rather more serious. For the London Interbank Offered Rate is the benchmark interest rate for trillions in loans around the world.

Manipulate Libor a small fraction of a point, and lenders reap millions more in interest income on hundreds of billions in loans. How many more such blows to their credibility can the financial elites sustain before people turn on the capitalist system itself?

Why Economic Policy is Paralyzed

The blunder of the Sixties has had a long afterlife

By Robert Samuelson

Wondering why government can't restart the sluggish economy? Well, one reason is that we are still paying the price for the greatest blunder in domestic policy since World War II. This occurred a half-century ago and helps explain today's policy paralysis. The story -- largely unrecognized -- is worth understanding.

Until the 1960s, Americans generally believed in low inflation and balanced budgets. President John Kennedy shared the consensus but was persuaded to change his mind. His economic advisers argued that, through deficit spending and modest increases in inflation, government could raise economic growth, lower unemployment and smooth business cycles.

None of this proved true; all of it led to grief.

The House of Lords doesn’t need reforming, it needs abolishing

We don’t need to be lorded over by experts

Nick Clegg’s proposed reform of the Lords will achieve the feat of making these ‘remains of aristocratical tyranny’ even more tyrannical.

by Tim Black 

The excitement is difficult to miss. There’s a buzz, a democratic fizz in the air. In pubs and bars, community ‘hubs’ and shopping centres, people just can’t stop talking about it. That ‘it’ is, of course, the very real possibility that the UK will have a mainly elected House of Lords. I feel electrified just typing those words, ‘mainly elected’. After over a hundred years since Herbert Asquith’s Liberal government first promised it, we the people are finally getting the power we have been demanding, a second chamber ‘constituted on a popular instead of a hereditary basis’, as Lloyd George put it back in those heady pre-World War days.

The Clash of Economic Ideas

Τhe expansion of government’s role in the economy certainly did not begin with Keynes

By Lawrence H. White

At England’s stately University of Cambridge in fall 1905, a clever postgraduate mathematics student named John Maynard Keynes began his first and only course in economics. He would spend eight weeks studying under the renowned Professor Alfred Marshall. During the summer Keynes had read the then-current (third) edition of Marshall’s Principles of Economics, a synthesis of classical and new doctrines that was the leading economics textbook in the English-speaking world. Marshall was soon impressed with Keynes’s talent in economics. So was Keynes himself. “I think I am rather good at it,” he confided to an intimate friend, adding, “It is so easy and fascinating to master the principle of these things.” A week later he wrote: “Marshall is continually pestering me to turn professional Economist.”

Confusing society with the State, and altruism with collectivism

Socialism’s Prescient Critics

By Philip Vander Elst

There is a good case to be made that the birth and spread of totalitarian socialism defines the twentieth century more than anything else. That is not what most schoolchildren are taught or what most people in the West believe, but it is a justifiable conclusion. Not only was totalitarian socialism directly responsible for provoking the bloodiest war in history; it has also been the biggest single cause of internal repression and mass murder in modern times.

According to The Black Book of Communism (1999), at least 94 million people were slaughtered by communist regimes during the twentieth century. This is a truly colossal figure, yet that’s the lowest estimate. Professor R. J. Rummel, in his landmark study, Death by Government (1996), puts the death toll from communism at over 105 million—and his detailed calculations do not include the human cost of communism in most of Eastern Europe or in Third World countries like Cuba and Mozambique. Even so, his figure is double the total number of casualties (military and civilian) killed on all sides during World War II.

The Enarque-in-Chief Strikes Again

Hollande Government Raises Taxes

By Pater Tenebrarum

France's public debt amounts to over € 1.8 trillion, or about € 63,000 per household. At 89% of GDP and growing, it is a far cry from the Maastricht treaty limits.

In order to pay for the trick to artificially lower the country's embarrassingly high institutional unemployment (unemployment is at 10.1% and growing, and that's according to official statistics) by letting the government hire people no-one needs, Hollande has put in place one his other election promises – or rather, election threats. On Wednesday last week, he raised taxes, aiming to bring an additional € 7.2 billion into the government's coffers.

As Reuters reports:

Hiding behind government handouts

Not so melancholic about destroying the planet

By Philip Cross

It was widely noted that the films screened at the recent Cannes film festival were a tad pessimistic about the future of mankind. Over half of the 22 official films dealt with some form of systemic collapse, mixed with a heavy dose of vengeance, clearly the psychological hangover from the 2008 financial crash. Since artists supposedly are well attuned to emerging trends in society, this bodes ill for the world’s ability to cope with its lingering economic turmoil. Of course, most artists don’t know diddly about economics, as reflected in the exalted status they extend to the proverbial “starving artist.” Try selling the ideal of a “starving economist” to my chosen profession.

Much of this artistic pessimism derives from the film Melancholia by Danish filmmaker Lars von Trier, a legend in the industry despite (or because of) never being a commercial success in North America. He laid out the apocalyptic anti-business vision that other filmmakers are now following.

Healthcare and Obamacare Explained

The Illusion of government omnipotence  

Fractional Reserves, Legal Tender, and Central Banking

Keeping our eyes on the ball

By Steven Horwitz

If you ever want to see a furious discussion break out among libertarians influenced by Austrian economics, just start talking about money and banking. Despite their agreement on so many things, they often have a variety of views on the ideal banking system and how to best understand terms like “inflation” and “deflation.” The debate over the morality and efficacy of fractional reserve banking is one of the most divisive issues. I have addressed that topic in an earlier column, but here I want to tie it into some broader issues that enter into this debate.

This discussion is prompted by Larry White’s testimony on the history and practice of fractional reserve banking before Rep. Ron Paul’s subcommittee on monetary policy in late June. White’s testimony is a concise yet thorough discussion of why fractional reserve banking came to be and why it is not at the root of monetary problems. As he points out, “[A] fractional-reserve banking system is not unstable when the banking system is free of hobbling legal restrictions and free of privileges.” U.S. history illustrates this point.

Third World America

Class War Gets Violent In Chicago

By Janet Tavakoli

On the Fourth of July, comedian Chris Rock tweeted: "Happy white peoples independence day the slaves weren't free but I'm sure they enjoyed fireworks." Chris Rock disowns the holiday with tongue-in-cheek.

Well right back at you Mr. Rock. My continental European ancestors weren't in the USA when colonists won their independence from England. My grandparents didn't even speak English when they arrived in the U.S., but according to this tweet, their whiteness took ownership of Independence Day from African Americans. Is there nothing those poor European immigrants didn't ruin for real Americans?

No Laughing Matter

But in Chicago, there are more reasons for tears than laughter. Unemployment is high in many poor African American communities, and crime rates are horrific. One can barely call them communities. For too many, parenting skills are woefully inadequate. Innocent young children out in late night and early morning hours with a parent nearby have been shot. The leading cause of death of young black men is lead poisoning. Jobs are scarce. Decent people are afraid of gangs in their so-called communities. While most of the negative results have fallen on the black community, as I've stated in earlier years, it's not a race war, it's a class war.

How Government Distorts Labor Markets

Malinvestment in Human Capital

By Robert P. Murphy

In a recent post at the ThinkMarkets blog, Freeman author Gerald P. O’Driscoll cited Union Pacific Railroad’s labor woes as an example of the mismatch between the skills workers possess and the skills potential employers are seeking. O’Driscoll argues that there has been an unsustainable boom in “human capital” characterized by massive malinvestments, just as Austrian economists typically claim for physical capital goods. This perspective is a useful antidote to the Keynesian analysis of our current slump and leads to radically different policy recommendations.

O’Driscoll based his post on a Wall Street Journal report that referred to “survey results showing that 83 percent of manufacturers reported a moderate or severe shortage of skilled production workers. . . . Wages for skilled labor are rising, in some cases at double-digit rates.”

The Short List

Elia Kazan Reconsidered

By Bruce Edward Walker

The short list of best American film directors will forever include Elia Kazan, whose cinematic efforts include many good films, several great ones, and a couple of immense quality that have fallen through the cracks due to poor timing, comparison to his other landmark accomplishments, or perhaps critical negligence. Identified by none other than Stanley Kubrick as “without question, the best director we have in America,” Kazan rebounded from the public relations disaster of testifying as a friendly witness before the House Committee on Un-American Activities in 1952, where he gave up the names of eight former associates with whom he shared Communist Party affiliations nearly 20 years earlier. Whatever his regrets and explanations, they were never sufficient to assuage the left’s anger, and many used his testimony as a cause célèbre, choosing to sit on their hands rather than applaud when Martin Scorsese and Robert De Niro presented him with a Lifetime Achievement Academy Award in 1998.

By 1952 Kazan’s film resume already boasted early noirs (Boomerang!, 1947;Panic in the Streets, 1950); his auspicious Hollywood debut, A Tree Grows in Brooklyn (1945); an Irish-American bildungsroman; Pinky (1949), a film about racial relations; and an Academy Award for Best Director for 1947’sGentleman’s Agreement, which dealt with the prevalence of anti-Semitism. Another film, Sea of Grass (1947), was his only misfire of the period—featuring Katherine Hepburn and Spencer Tracy in what is certainly their only unwatchable onscreen collaboration.

Europe's new fascists

Europe on the verge of a nervous breakdown

All across the continent, economies are in a tailspin as the numbers of young, jobless men swell. Are we on the brink of repeating the catastrophe of the 1930s?

By RICHARD J EVANS

A spectre is haunting Europe: the spectre of unemployment. At the latest count, there were almost 25 million people in the member states of the European Union without a job, an increase of two million on the same point in the previous year. This is well over 10 per cent of the workforce, and in some countries the situation is much worse. At the top of the list is Spain, with 25 per cent unemployed, followed by Greece, with nearly 23 per cent. Particularly hard-hit are the young. In Greece and Spain more than half the workforce below the age of 25 is without a job. The youth unemployment rate across the EU is running at 22 per cent. And there are no signs of the upward trend being reversed.

Politics and the Symptoms of a Sick Culture

Culture is more important than politics

By Jonah Goldberg

The late Senator Daniel Patrick Moynihan famously remarked, “The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself.”

I’ve always liked that quote, but I think it misleads. That two plus two equals four is not a conservative truth or a liberal truth. It’s simply the truth. (Moynihan himself recognized this when he even more famously said that people are entitled to their own opinions but not their own facts.)

Regardless, it’s true that culture is more important than politics. You could impose Sweden’s laws on the Middle East tomorrow, but you’d be well-advised not to hold your breath waiting for the Saudis to turn into the Swedes of the Arabian Peninsula.

But it’s also true that politics — specifically, government — can change cultures. It can be loud and bloody work, as with the abolition of slavery. Or the change can be more subtle. Twenty years ago, it was simply uncool to put on your seat belt. Now, everyone seems to do it reflexively. The law changed the culture, for the better.

The Man Who Rescued the German Economy

"Reform yourselves, and ye will grow out of your debt."

The last Social Democrat chancellor talks about how he cut   taxes and reformed labor markets—and how it cost him his job.

 By RAYMOND ZHONG

'Reform yourselves, and ye will grow out of your debt." So goes Germany's unwritten mantra for the European crisis. Chancellor Angela Merkel is urging Greece, Spain, Italy and the rest to shape up their economies and pay down their obligations—and withholding German money until they do.

The Berlin road to economic righteousness is no mere sermonizing. Germany itself has gone down it and grown stronger. Gerhard Schröder, a Social Democrat, was German chancellor from 1998 to 2005, and during his second term his government lowered taxes, revamped unemployment benefits and streamlined labor laws. Mr. Schröder's shakedown of the welfare state—dubbed Agenda 2010 when it was launched in 2003—has been credited with insulating Germany against the debt mess that would later befall Southern Europe.

The Euro Crash Refuses To Go On Vacation

Disaster under the mantel of solidarity

By Wolf Richter   

Finnish Finance Minister Jutta Urpilainen set the scene for the long European summer break when she declared that Finland was a dedicated member of the Eurozone, eager to solve the crisis, but “not at any price”; it wouldn’t agree to take on “collective responsibility for debts and risks of other countries” via a banking union. And if push came to shove: 

“We are prepared for all scenarios, including abandoning the Euro.”

A spokesperson had to do some furious backpedalling: Finland wasn’t planning to abandon the euro; such assertions were “simply wrong,” her words had been misinterpreted. Nevertheless, this was the first time ever that a government official of a triple-A rated Eurozone country publically admitted that they were making contingency plans for ditching the euro—and worse, that there was a desire to do so under certain conditions.

The road to hell, I mean the road to the euro, was paved with good intentions—and signposted with lots of warnings that at the time were ignored, downplayed, or ridiculed. But one by one, they turned out to be correct. The warnings continue, along with efforts to sweep them under the rug which is more difficult now as the dimensions of the debacle have become apparent for all to see.

Structural Pliancy

Back to the basics

Don't be fooled—it's flexible at the top

By Gonzalo Lira

A lot of people—and I am one of them—claim that personal and business freedoms are being eroded as never before. They show as evidence the roll-back of civil liberties, the over-regulation of business, the insistence on “compliance” by the various security agencies of every little rule, no matter how trivial—in short, the over-regulation of American life. 

They are right: The U.S. government is guilty of over-regulating individuals and businesses—egregiously so. 

On the other hand, a lot of other people—and I am one of them too—claim that certain persons and corporations act lawlessly as never before. They show as evidence the abuses of power of those in leadership—be it business, government, the military, or the intelligence/security aparatus—and they insist that something has to be done about it, some regulations have to be imposed. 

Progressives Vs Humans 1-0

What price clean air?

By George F. Will

The federal government is a bull that has found yet another china shop, this time in Arizona. It seems determined to inflict, for angelic motives and progressive goals, economic damage on this state. And economic and social damage on Native Americans, who over the years have experienced quite enough of that at Washington’s hands.

The gain from this pain? The most frequently cited study says “research to date . . . is inconclusive as to whether” there would be “any perceptible improvement in visibility at the Grand Canyon and other areas of concern.” The Environmental Protection Agency says that the Navajo Generating Station (NGS) is “near” 11 national parks, several of which are 175 miles distant.

The NGS on Navajo land in northern Arizona burns coal from the Kayenta Mine, which is co-owned by the Navajo and Hopi nations. The EPA is pondering whether all three units of the NGS should be required to install the “best available” emission-control technologies, perhaps costing more than $1.1 billion. More than 80 percent of the power plant’s employees are Navajo, many of whom speak Navajo to help preserve the nation’s culture. In 2007, the percentage of the Navajo Nation’s population living in poverty was 36.8.

But the Navajos, the plant and the mine that powers it may be sacrificed to this dubious environmental crusade. The new technology would reduce nitrate aerosols. They, however, are responsible for just 4 percent of what is called “light extinction” over the Grand Canyon.

Cold Turkey

Krugman Redistribution or Ponzi Scheme

by Chidem Kurdas

A nice thing about Paul Krugman, he does not mince his words. Thus his new book, End This Depression Now!, repeats as boldly as possible the central point he’s repeatedly made in hisNew York Times columns and blogs for years. Namely, governments have to spend a lot more. They have to run gigantic deficits, much more than they’re doing now. His penchant for going straight for the jugular means that the full implications of the scheme he advocates are crystal clear.

What he’s pushing is in fact an arbitrary redistribution of income and wealth. The plan is not just to suck in people’s savings but to cause the debt to disappear, as many have suspected all along. This is a scheme that would make any con man green with envy. It is as if Bernard Madoff were able to go puff! and make his customers’ claims evaporate into air, with no adverse consequence for him.

Krugman is witty, attacking “austerian” arguments for government austerity. Mario Rizzo and others have presented the “Austrian” or Hayekian reply to  the Keynesian deficit spending case made by Krugman and Brad DeLong, for instance.