Obamacare’s Pyrrhic Victory

“Nothing is lost save honor.”

By PATRICK J. BUCHANAN

So said Jim Fisk after he and Jay Gould survived yet another scrape in their corrupt and storied careers in the Gilded Age

Fisk’s dismissal of honor came to mind while watching Barack Obama in Boston smugly explain how his vow—”If you like your health care plan, you can keep it!”—was now inoperative.

All along, it had been a bait-and-switch by the first hustler.

In Boston, Obama could no longer evade the truth. Hundreds of thousands of Americans who had purchased health insurance in the private market were getting notices their plans were being canceled.

That this revelation had blown a hole in his credibility did not seem to trouble Obama. Indeed, the president appeared impatient with the complaints. These were “substandard” plans anyhow, he said, the lousy offerings of “bad-apple insurers.”

“So if you’re getting one of those letters (canceling your insurance plan), just shop around in the new marketplace. … You’re going to get a better deal.”

Behind the arrogance is the reality: Obama has the veto power. No alteration of Obamacare, except for changes he approves, can be made before the winter of 2017. And by then, Obamacare will be so deeply embedded in law and practice it will be beyond repeal.

We won, you lost, was written across Obama’s face.

Yet, Obama’s victory calls to mind that of King Pyrrhus of Epirus over the Romans at Asculum as described by Plutarch. Counting up his dead friends, dead commanders and dead soldiers, the king remarked, “Once more such victory and we are undone.”

The price Obama will be a long time paying for this victory is historic and huge.

Third-Party Statism

Freeborn Americans may not gaze upon their presidents without the permission of the bureaucracy

by Mark Steyn

There's a certain amount of lingo that comes with the provision of health care. In most developed countries, these words are "doctor," "nurse," "scalpel," "appendix," that sort of thing. But American health care has its own unique vocabulary: "co-pay," "HMO," "COBRA," "doughnut hole" . . . And we're always adding to it. The latest word is "exchanges." A mere twelve months ago "exchanges" were something to do with stocks or trying to get a larger size when you're given a too-tight thong for Christmas. Now, suddenly, it's the new health-care buzzword. You go to the federal website for the "exchanges," if you can get through, and they redirect you to the state websites for the "exchanges," if they're working. In Oregon, there are some 1,700 different rules that determine eligibility for the new "exchange." In Maryland, you're advised that "we may share information provided in your application with the appropriate authorities for law enforcement and audit activities." But we're used to all that by now, aren't we? The point is it's going to be complicated, time-consuming, and in breach of almost any elementary understanding of privacy. That's what makes it quintessentially American.

Most developed nations have a public health-care system and a private health-care system — of variable quality, to be sure, but all of them far simpler to navigate than America's endlessly mutating fusion of the worst of both worlds. Obamacare stitches together the rear ends of two pantomime horses and attempts to ride it to the sunlit uplands. Good luck with that. But we should remember that this disaster has been a long time incubating. The Democrats' objection to the pre-Obama "private" health system is that Americans wound up spending more than any other country for what they argued were inferior health outcomes. But the more telling number is revealed by Avik Roy elsewhere in this issue: In 2010 (in other words, before Obamacare), U.S. government expenditures on health care were higher than those in all but three other countries in the world. Quick, name a European social democracy full of state-suckled wimpy welfare queens: France? $3,061 per capita in public-health expenditures. Sweden? $3,046 per capita. Belgium? $3,000. In 2010 the United States spent $3,967 in public-health expenditures per person — more than anywhere on the planet except Norway, the Netherlands, and Luxembourg. I am confident that, under Obamacare, we'll be outspending even the Norwegians. But in reality our so-called private system was a public system in all but name.

Chronicling The Decline And Fall Of Entitlement Democracy

Hoping that x times y is less than y

by Bill Frezza

It’s been a week of sober reflection, accompanied by a self-imposed news fast, during which I’ve struggled to understand the deeper meaning of our recent electoral catastrophe. Doing so un-distracted by a thousand voices required strict electronic disengagement. I recommend this as one would take a purgative after eating a batch of bad oysters.

Many of us of the libertarian persuasion who had never previously voted Republican made an exception this time because the stakes were so high. In a purposeful departure from our usual  “pox on both their houses” approach, we waded into the partisan fray naively believing we could make a difference, ignoring the stink on those with whom we made common cause simply because the alternative was so much worse.

All for naught. After approaching it for decades, America has now hurtled past the dependency tipping point. We have scrapped the last vestiges of our constitutionally limited republic of strictly enumerated powers and replaced it with an unconstrained entitlement democracy neither better nor worse than any of the others whose failures have dotted the course of history—all over weighty issues such as who should pay for condoms.

Heeding the cry, Forward!, an electoral majority happily voted for itself unlimited benefits that will supposedly be paid for by a productive minority—even as the nation careens toward bankruptcy and said productive minority starts eyeing the exits. With demographic changes reinforcing a permanent ethnic tribalism that abjures the melting pot, the likelihood that our country will ever recover its founding values has vanished as thoroughly as our respect for the dead white men who pledged their lives, their fortunes, and their sacred honor to make our way of life possible.

So be it. Mourn, if you choose. But when you’re done you still have to pay the rent.

Making one’s way in a country increasingly falling under the spell of slogans used so effectively by Vladimir Lenin and his fellow travelers requires a new strategy, lest one fall into chronic despair. This is necessary because nothing is worse than becoming that one species of ideologue that no one can abide—a bore.

What should that new strategy be?

From Bismark to Schaeuble

The endgame of socialism and central planning is always the same

By Wolfgang Schaeuble’s own admission , Europe has an intractable problem.

“We need to be more successful in our fight against youth unemployment, otherwise we will lose the battle for Europe’s unity,” Schaeuble said.

If U.S. welfare standards were introduced in Europe, “we would have revolution, not tomorrow, but on the very same day,” Schaeuble told a conference in Paris.

Uh, Mr. Schaeuble? Welfare causes unemployment. Its voracious apetite for capital defunds productive enterprise. Its perverse incentive encourages sloth and discourages work. Skyrocketing budget deficits crowd out private borrowers, and force central banks to lower the rate of interest to keep the budget deficit from exploding.

And now you have reached the endgame. You cannot provide employment to the youth. And you will soon fail to be able to provide welfare. The endgame of socialism and central planning is always the same. 

Theory of Interest and Prices in Paper Currency Part V (Falling Cycle)

The falling cycle is a cycle of capital churn

by Keith Weiner

In Part I, we looked at the concepts of nonlinearity, dynamics, multivariate, state, and contiguity. We showed that whatever the relationship may be between prices and the money supply in irredeemable paper currency, it is not a simple matter of rising money supply à rising prices.

In Part II, we discussed the mechanics of the formation of the bid price and ask price, the concepts of stocks and flows, and the central concept of arbitrage. We showed how arbitrage is the key to the money supply in the gold standard; miners add to the aboveground stocks of gold when the cost of producing an ounce of gold is less than the value of one ounce.

In Part III, we looked at how credit comes into existence via arbitrage with legitimate entrepreneur borrowers. We also looked at the counterfeit credit of the central banks, which is not arbitrage. We introduced the concept of speculation in markets for government promises, compared to legitimate trading of commodities. We also discussed the prerequisite concepts of Marginal time preference and marginal productivity, and resonance.

In Part IV, we discussed the rising cycle. The central planners push the rate of interest down, below the marginal time preference and unleash a storm whose ferocious dynamics are more than they bargained for. The hapless subjects of the regime have little recourse but they do have one seeming way out. They can buy commodities. The cycle is a positive feedback loop of rising prices and rising interest rates. Ironically, their clumsy attempt to get lower interest results in rising interest. Alas, the cycle eventually ends. The interest rate and inventory hoards have reached the point where no one can issue more bonds or increase their hoards.

Theory of Interest and Prices in Paper Currency Part IV (Rising Cycle)

What happens if the central bank pushes the rate of interest below the marginal time preference?

by Keith Weiner

In Part I, we looked at the concepts of nonlinearity, dynamics, multivariate, state, and contiguity. We showed that whatever the relationship may be between prices and the money supply in irredeemable paper currency, it is not a simple matter of rising money supply à rising prices.

In Part II, we discussed the mechanics of the formation of the bid price and ask price, the concepts of stocks and flows, and the central concept of arbitrage. We showed how arbitrage is the key to the money supply in the gold standard; miners add to the aboveground stocks of gold when the cost of producing an ounce of gold is less than the value of one ounce.

In PartIII, we looked at how credit comes into existence via arbitrage with legitimate entrepreneur borrowers. We also looked at the counterfeit credit of the central banks, which is not arbitrage. We introduced the concept of speculation in markets for government promises, compared to legitimate trading of commodities. We also discussed the prerequisite concepts of Marginal time preference and marginal productivity, and resonance.

Part III ended with a question: 

“What happens if the central bank pushes the rate of interest below the marginal time preference?”

To my knowledge, Antal Fekete was the first to ask this question[1]. It is now time to explore the answer.

We are dealing with a cycle. It is not a simple or linear relationship between quantity X and quantity Y, much to the frustration of students of economics (and central planners).

The cycle begins when the central bank pushes the rate of interest down, below the rate of marginal time preference. Unlike in the gold standard, under a paper currency, the disenfranchised savers cannot turn to gold. Perhaps it has been made illegal as it was in the U.S. from 1933 to 1975. Or it could merely be taxed and creditors placed under duress to accept repayment in irredeemable paper. Whatever the reason, the saver cannot perform arbitrage between the gold coin and the bond[2], as he could in the gold standard. He is trapped. The irredeemable paper currency is a closed loop system. The saver is not entirely without options, however.

He can buy commodities or finished goods.

Theory of Interest and Prices in Paper Currency Part III (Credit)

We are on a roller-coaster ride plunging the world into zero-velocity of money and into barter

by Keith Weiner

In Part I, we looked at the concepts of nonlinearity, dynamics, multivariate, state, and contiguity. We showed that whatever the relationship may be between prices and the money supply in irredeemable paper currency, it is not a simple matter of rising money supply –> rising prices.

In Part II, we discussed the mechanics of the formation of the bid price and ask price, the concepts of stocks and flows, and the central concept of arbitrage. We showed how arbitrage is the key to the money supply in the gold standard; miners add to the aboveground stocks of gold when the cost of producing an ounce of gold is less than the value of one ounce.

In this third part, we look at how credit comes into existence (via arbitrage, of course) with legitimate entrepreneur borrowers. We also look at the counterfeit credit of the central banks (which is not arbitrage). We introduce the concept of speculation in markets for government promises, compared to legitimate trading of commodities. We also discuss the prerequisite concepts. Marginal time preference and marginal productivity are absolutely essential to the theory of interest and prices. That leads to the last new concept resonance.

Theory of Interest and Prices in Paper Currency Part II (Mechanics)

The withdrawal of the gold bid on the dollar will bring about the collapse of the dollar 

By Keith Weiner

In Part I, we looked at the concepts of nonlinearity, dynamics, multivariate, state, and contiguity. We showed that whatever the relationship may be between prices and the money supply in irredeemable paper currency, it is not a simple matter of rising money supply à rising prices.

Here is a fitting footnote for Part I. I just bought a pair of Levis jeans at Macy’s for $45. I remember buying a pair of Levis Jeans in Macy’s in 1983 for $50. In 30 years, the price of Levis Jeans has fallen by 10%. By any conventional theory based on the money supply, the price should have risen by several hundreds of dollars.

In this part, we look at some mechanics, the understanding of which is a prerequisite to the theory of interest and prices. To truly understand anything, you have to know what happens in reality step by step. This is even more important in an abstract field like monetary science. We discuss stocks vs. flows, how prices are formed in a market, a broad concept of arbitrage, spreads, and how money comes into and goes out of existence.

Let’s drill down into a point I made in passing in Part I.

It is worth noting that money does not go out of existence when one person pays another.  The recipient of money in one trade could use it to pay someone else in another.  Proponents of the linear QTM[1] would have to explain why prices would rise only if the money supply increases.  This is not a trivial question. Prices rise whenever a buyer takes the offer, so no particular quantity of money is necessary for a given price (or all prices) to rise to any particular level.

Theory of Interest and Prices in Paper Currency Part I (Linearity)

“Two ways. Gradually, then suddenly."

By Keith Weiner

Under gold in a free market, the theory of the formation of the rate of interest is straightforward.[1] The rate varies in the narrow range between the floor at the marginal time preference, and the ceiling at the marginal productivity. There is no positive feedback loop that causes it to skyrocket (as it did up until 1981) and subsequently to spiral into the black hole of zero (as it is doing now). It is stable.

In irredeemable paper currency, it is much more complicated. In this first part of a multipart paper presenting my theory, we consider and discuss some of the key concepts and ideas that are prerequisite to building a theory of interest and prices. We begin by looking at the quantity theory of money. In our dissection, we will identify some key concepts that should be part of any economist’s toolbox.

This theory proposes a causal relationship between the quantity of money and consumer prices. It seems intuitive that if the quantity of money[2] is doubled, then prices will double. I do not think it is hyperbole to say that this premise is one of the cornerstones of the Monetarist School of economics. It is also widely accepted among many who identify themselves as adherents of the Austrian School and who write in critique of the Fed and other central banks today.

The methodology is invalid, the theory is untrue, and what it has predicted has not come to pass. I am offering not an apology for the present regime—which is collapsing under the weight of its debts—but the preamble to the introduction of a new theory.

Culture Of Ignorance - Part I

A nation of takers, fakers and blamers will not last long

 By Jim Quinn

“Five percent of the people think; ten percent of the people think they think; and the other eighty-five percent would rather die than think.”- Thomas Edison

The kabuki theater that passes for governance in Washington D.C. reveals the profound level of ignorance shrouding this Empire of Debt in its prolonged death throes. Ignorance of facts; ignorance of math; ignorance of history; ignorance of reality; and ignorance of how ignorant we’ve become as a nation, have set us up for an epic fall. It’s almost as if we relish wallowing in our ignorance like a fat lazy sow in a mud hole. The lords of the manor are able to retain their power, control and huge ill-gotten riches because the government educated serfs are too ignorant to recognize the self-evident contradictions in the propaganda they are inundated with by state controlled media on a daily basis.

“Any formal attack on ignorance is bound to fail because the masses are always ready to defend their most precious possession – their ignorance.” - Hendrik Willem van Loon

The levels of ignorance are multi-dimensional and diverse, crossing all educational, income, and professional ranks. The stench of ignorance has settled like Chinese toxic smog over our country, as various constituents have chosen comforting ignorance over disconcerting knowledge. The highly educated members, who constitute the ruling class in this country, purposefully ignore facts and truth because the retention and enhancement of their wealth and power are dependent upon them not understanding what they clearly have the knowledge to understand. The underclass wallow in their ignorance as their life choices, absence of concern for marriage or parenting, lack of interest in educating themselves, and hiding behind the cross of victimhood and blaming others for their own failings. Everyone is born ignorant and the path to awareness and knowledge is found in reading books. Rich and poor alike are free to read and educate themselves. The government, union teachers, and a village are not necessary to attain knowledge. It requires hard work and clinging to your willful ignorance to remain stupid.

The youth of the country consume themselves in techno-narcissistic triviality, barely looking up from their iGadgets long enough to make eye contact with other human beings. The toxic combination of government delivered public education, dumbed down socially engineered curriculum, taught by uninspired intellectually average union controlled teachers, to distracted, unmotivated, latchkey kids, has produced a generation of young people ignorant about history, basic mathematical concepts, and the ability or interest to read and write. They have been taught to feel rather than think critically. They have been programmed to believe rather than question and explore. Slogans and memes have replaced knowledge and understanding. They have been lured into inescapable student loan debt serfdom by the very same government that is handing them a $200 trillion entitlement bill and an economy built upon low paying service jobs that don’t require a college education, because the most highly educated members of society realized that outsourcing the higher paying production jobs to slave labor factories in Asia was great for the bottom line, their stock options and bonus pools.

How Indians keep themselves poor

Reality and perception

By Jiwan Kshetry

The Global Slavery Index released by the Walk Free Foundation on October 16 claimed India is home to nearly half the world's modern-day slaves caught headlines. Its unlikely the findings surprised close observes. 

Consider the findings alongside the fact that India is home to estimated one-third of world's poor, with 32.7% of Indians surviving on a meager US$1.25 a day and a 68.7% living on $2 a day, according to a 2010 World Bank report, and an ominous picture of the state emerges. 

How are these statistic possible in a country that see itself as an aspiring world power? How do high GDP growth rates of the past 15 years square with the appalling living conditions of so many? 

The index listed India as the country with by far the most slaves, with an estimated nearly 14 million, followed by China (2.9 million) and Pakistan (2.1 million). The presence of Nepal in fifth place in the ranking makes South Asia the deepest and most recalcitrant pocket of poverty and slavery in the world. 

Amid the persistently high poverty and slavery, it seem the Indian middle and upper classes are living in denial about their role in sustaining the status quo. 

While the people actually suffering from perpetual hunger and misery can't afford to think about lofty things such as India's image abroad, the middle and upper class seem to think of little else. 

Though not exactly balanced, a section of the Indian media has been paying increasing attention to the plight of the poor and the downtrodden. Western media have also robustly covered these issues. A series of documentary films have explored different facets of the life of the poor people of various kinds in India. Movies like the Oscar-winning Slumdog Millionaire, did a lot to present the dark side of India's story. 

America: A threat to liberty?

Voting is the illusion of influence in exchange for the loss of freedom

 by DETLEV SCHLICHTER

“Politics, as hopeful men practice it in the world, consists mainly of the delusion that a change in form is a change in substance,” as the incomparable H.L. Mencken observed more than 80 years ago. His observation applies to the United States of today in two ways. On one level, and the level Mencken intended, it reminds us of the fact that any form of government, whether democratic- republican or monarchical, is ultimately oppressive at heart. Every state is, qua state, a central depository of legalized violence, and thus stands in direct and unending opposition to individual freedom. Or, in the words of Ludwig von Mises: Government is essentially the negation of liberty.

But Mencken happened to use the words ‘hopeful’ and ‘change’ in this sentence, and the choice of words brings us quickly to the administration of Barack Obama and his promise – proclaimed particularly noisily for his first term – that his policies would mark a distinct change from the policies of his predecessor, George W. Bush. Assessing the situation now at the start of his second term, there is no escaping the fact that whatever change Obama brought was predominantly in appearances rather than in fundamentals, and that the most worrisome and offensive trend that characterized the Bush administration not only continued under President Obama, it even accelerated.

This trend is the rise of the American leviathan, the rapid expansion of state power and the ubiquitous curtailment of individual rights, whether they are rights to fair and open trial, property rights, or rights to privacy. The trend, everywhere in U.S politics, has been and still is towards big and interventionist government. While the media keep droning on about the apparently insurmountable divisions in US politics, the fact remains that a substantial de-facto consensus exists in Washington when it comes to giving the state more power. The increasingly expansive and expensive warfare-welfare state has been growing under Republican and Democrat presidents alike and is the one project that enjoys vast support across ‘the aisle’. The idea of limited government under the rule of law, historically a defining feature of America’s image of itself, lies dying, critically wounded by Baby Bush and now finished off by Obama. What Americans are destined for is an increasingly unconstrained government largely accountable to nobody but itself.

Leviathan rises

After 9/11, the Bush-Cheney White House considerably expanded the powers of the executive branch, mainly via the Patriot Act, arguing that the nation was now at war and that specific war-powers had to be granted, among them detention without trial and surveillance without warrants. These enlargements of state authority coupled with the hyper-interventionist economic policy that began after the financial crisis hit in 2007, have fundamentally changed the relationship of the American state with its citizenry.

Anatomy of the End Game

Markets cannot arbitrage fiat money, but can repudiate the sovereign debt that backs it

by Martin Sibileau

About a month ago, in the third-quarter report of a Canadian global macro fund, its strategist made the interesting observation that “…Four ideas in particular have caught the fancy of economic policy makers and have been successfully sold to the public…” One of these ideas “…that has taken root, at least among the political and intellectual classes, is that one need not fear fiscal deficits and debt provided one has monetary sovereignty…”. This idea is currently growing, particularly after Obama’s re-election. But it was only after writing our last letter, on the revival of the Chicago Plan (as proposed in an IMF’ working paper), that we realized that the idea is morphing into another one among Keynesians: That because there cannot be a gold-to-US dollar arbitrage like in 1933, governments do indeed have the monetary sovereignty.

Is this true? I will try to show why it is not, and in the process, it will also describe the endgame for the current crisis. Without further ado…

After the fall of the KreditAnstalt in 1931, with the world living under the gold-exchange standard, depositors first in central Europe, and later in France and England, began to withdraw their deposits and buy gold, challenging the reserves of their respective central banks. The leverage that linked the balance sheet of each central bank had been provided by currency swaps, a novelty at the time, which had openly been denounced by Jacques Rueff. One by one, central banks were forced to leave the gold standard (i.e. devalue) until in 1933, it was the Fed’s turn. The story is well known and the reason this process was called an “arbitrage” is simply that there can never be one asset with two prices. In this case, gold had an “official”, government guaranteed price and a market price, in terms of fiat money (i.e. schillings, pounds, francs, US dollars). The consolidated balance sheets of the central bank, financial institutions and non-financial sector looked like this before the run:

The Brilliant but Confused Radicalism of George Orwell

Animal Farm and Nineteen Eighty-four, have earned him a place in the libertarian tradition

by Jeff Riggenbach

Eric Arthur Blair, who is best known under his pseudonym, George Orwell, was born 107 years ago this month in India, where his father was a British civil servant. His father’s job, according to Orwell biographer Gordon Bowker, “was to oversee the growing of opium, mainly for export to China.” Though young Eric’s mother had herself grown up in Burma, the daughter of yet another British civil servant, she had long since tired of Asia; and when her son was only a year old she successfully lobbied her husband to ship her and their two children — Eric and his older sister, Marjorie — back to England. Eric did not see his father again for eight years, until he was nine years old and had come home for Christmas vacation from his “prep school,” St. Cyprian’s.

Here in the States, a “prep school” is a high school; it preps — that is, it prepares — its students for college, which, on this side of the Atlantic is something that comes after high school and comprises, in effect, grades 13 through 16. In the England Eric Blair grew up in, however, a “prep school” was for children 8 to 13. What it was preparing these children for was what we would call “high school,” but what Eric grew up thinking of as “college.” College, in turn, prepared you for university.

Eric was sent to St. Cyprian’s when he was 8 years old and remained there until he was 13, whereupon he transferred for another five years to Eton College — a very famous and very expensive private high school, long favored by the British upper classes. After Eton graduated him in 1921, he never went to school again. Why? Orwell answered that question in an autobiographical essay called “Such, Such Were the Joys,” written in the early 1940s but never published until the early ’50s, a few years after his death, and then only in the United States. It was not published in England until nearly 20 years after his death.

In this essay, Orwell judged the education he had received at St. Cyprian’s to be inferior. “The whole process,” he wrote,

The 1930s All Over Again?

Centralization of powers and the thinning of capital can lead to destruction

Then, as today, societies were uncertain about which model of society to strive for and how to repair monetary systems. Societies bet on the wrong ideas; we may be committing similar mistakes now.

By Reuven Brenner
Many people draw parallels between today and the 1930s, labeling this the Great Recession. They note the high unemployment rate, referring not to the mismeasured, official statistic, but to the number more than double that rate, which also accounts for those who dropped out from the labor force and are no longer counted as “unemployed.” Others worry about the deflationary risk, the dollar devaluation, and the status of the U.S. dollar as reserve currency. Still others worry that the “vital few” — those with high scientific aptitudes and entrepreneurial drive — no longer come to or stay in the United States, but stay in or go back to the many countries whose Iron Curtains have been punctured since 1989.

Yet the most worrying parallel with the 1930s is one that is not discussed. Then, as today, societies were uncertain about the model of society they should strive for and about how to repair domestic and international monetary systems after wildly varying expansions of credit during and after World War I in the different countries. In addressing these two questions, societies ended up betting on the wrong ideas, which had long-term, disastrous consequences. We may be committing similar mistakes now.

Recall the 1920s and 1930s: Germany, Hungary, Austria, and Italy all destroyed their middle classes and financial markets with hyperinflation — a destruction that has always been a recipe for both political instability and predictable centralization of power. After all, once financial markets are destroyed, even if inadvertently, governments and central banks become financial intermediaries — by default.

Action, Time, and the Market

The Market integrates all the factors affecting human action into a systematic whole

by Jeffrey M. Herbener

The wellspring of all economic theory is the reality of the human condition. As a finite being, man makes a distinction between ends and means. He cannot attain his ends by an act of will alone, but must apply means to attain his ends. Man lives in an orderly but finite world. Using means produces only limited effects in attaining ends. Endowed with reason, man is able to perceive the causal connection between the use of means and the attainment of ends. 

Any action toward the attainment of an end requires surrendering the attainment of another end with the same means. And any action using a set of means requires foregoing using another set of means to attain the same end. Action, therefore, requires choice. As a purposeful being, man selects what he perceives to be higher-valued ends to pursue and what he perceives to be lower-valued sets of means to employ. 

Choice, therefore, requires a judgment of the mind. Since attaining the end is the purpose of an action, the value a person attaches to the attainment of the end is primary. A person attaches only derivative value to the means used in action since they are merely aids to the attainment of the end. Means have no value independent of the value a person attaches to the end they help attain. The human mind imputes value to the means according to the aid they render in attaining a valuable end. The technical properties of each of the means that combine to attain an end can be valued differently by different persons or by the same person at different times and, therefore, have no causal impact on choice and action independent of the judgment of the mind.

People Vs Fruit Flies

Malthus and the Assault on Population

by Murray N. Rothbard

One of the first Smithian economists, and, indeed, a man who was for two decades the only professor of political economy in England, was the Rev. Thomas Robert Malthus (1766–1834). Malthus was born in Surrey, the son of a respected and wealthy lawyer and country gentleman. Malthus graduated from Jesus College, Cambridge, in 1788 with honors in mathematics and five years later became a fellow of that college. During that same year, Robert Malthus became an Anglican curate in Surrey, in the parish where he had been born.

Malthus seemed destined to lead the quiet life of a bachelor curate, when, in 1804, at nearly 40, he married and promptly had three children. The year after his marriage, Malthus became the first professor of history and political economy in England, at the new East India College at Haileybury, a post he retained until his death. All his life, Malthus remained a Smithian, and was to become a close friend, though not disciple, of David Ricardo. His only marked deviation from Smithian doctrine, as we shall see, was his proto-Keynesian worry about alleged underconsumption during the economic crisis after the end of the Napoleonic Wars.

But Malthus was, of course, far more than a Smithian academic, and he gained both widespread fame and notoriety while still a bachelor. For "Population" Malthus became known worldwide for his famous assault on human population.

In previous centuries, insofar as writers or economists dealt with the problem at all, they were almost uniformly propopulationists. A large and growing population was considered a sign of prosperity, and a spur to progress. The only exception, as we have seen, was the late-16th-century Italian absolutist theorist Giovanni Botero, the first to warn that population growth is an ever-present danger, tending as it does to increase without limit, while the means of subsistence grows only slowly. But Botero lived at the threshold of great economic growth, of advances in total population as well as standards of living, and so his gloomy views got very short shrift by contemporaries or later thinkers. Indeed, absolutists and mercantilists tended to admire growing population as providing more hands for production on behalf of the state apparatus as well as more fodder for its armies.

Even those 18th century writers who believed that population tended to increase without limit, curiously enough favored that development. This was true of the American Benjamin Franklin (1706–90), in his Observations Concerning the Increase of Mankind and the Peopling of Countries(1751). Similarly, the physiocrat leader Mirabeau, in his famous L'Ami des Hommes ou traité de la population (The Friend of Man or a Treatise on Population) (1756), while comparing human reproduction to that of rats — they would multiply up to the very limit of subsistence like "rats in a barn" — yet advocated such virtually unlimited reproduction.

A large population, said Mirabeau, was a boon and a source of wealth, and it was preciselybecause people will multiply like rats in a barn up to the limit of subsistence that agriculture — and hence the production of food — should be encouraged. Mirabeau had picked up the "rats-in-a-barn" metaphor from Cantillon, but unfortunately did not inherit Cantillon's highly sensible and sophisticated "optimum-population" realization that human beings will flexibly adjust population to standards of living, and that their noneconomic values will help them decide on whatever trade-offs they may choose between a slightly larger population or a smaller population and higher standards of living.

Is This The End Of The Chilean Economic Miracle?

It is about time to take the populist path of Hugo Chavez

By Axel Kaiser

This November, Chile will face what could prove to be the most important presidential and parliamentary election since the one which brought democracy back to the country in 1990. For the first time in more than two decades, the Chilean people will choose between two opposing economic and social projects. On the one hand, the center right candidate Evelyn Matthei promises to continue Chile along the successful economic path of the last decades. And on the other hand, former president Michelle Bachelet’s new socialist platform promises to make radical changes to the current Chilean economic system.

The political parties of the the coalition that governed Chile from 1990 to 2010, the Communist party, and other minor left-wing groups merged into Bachelet´s coalition called “Nueva Mayoría.” The Communist party has historically been a destabilizing factor in Chilean politics and has been absent from government since 1973. Fully embedded in the logic of the Cold War, it still considers Fidel Castro´s Cuba the ideal political and economic system. Despite its anti-democratic features and its limited number of supporters, Chilean communists have managed to become increasingly influential in national politics through the massive student movement that brought President Piñera´s government to its knees in 2011 and 2012.

Along with a systematic campaign against the free market economic model by leading progressive intellectuals, the leftist student movement — whose most emblematic leader is a member of the Communist Party — has contributed to an ideological radicalization of the classical left-wing political parties, including the Christian Democrats. As a result of the radicalization, Bachelet´s political platform breaks away from the previous consensus among all major political parties on the need to preserve an economic model based on free market institutions. Questioning this economic consensus hasn’t happened since the return of democracy in 1990. Back then, the Concertación accepted and even deepened the free market economic model created by the military regime of General Augusto Pinochet, which brutally took over power in September 1973 after the disastrous socialist experiment of president Salvador Allende and the Unidad Popular Government.

Why Economic Failure Causes Political Polarization

Getting causality backward

by John Taylor

It is a common view that the shutdown, the debt-limit debacle and the repeated failure to enact entitlement and pro-growth tax reform reflect increased political polarization. I believe this gets the causality backward. Today's governance failures are closely connected to economic policy changes, particularly those growing out of the 2008 financial crisis.

The crisis did not reflect some inherent defect of the market system that needed to be corrected, as many Americans have been led to believe. Rather it grew out of faulty government policies.

In the years leading up to the panic, mainly 2003-05, the Federal Reserve held interest rates excessively low compared with the monetary policy strategy of the 1980s and '90s—a monetary strategy that had kept recessions mild. The Fed's interest-rate policies exacerbated the housing boom and thus the ensuing bust. More generally, extremely low interest rates led individual and institutional investors to search for yield and to engage in excessive risk taking, as Geert Bekaert of Columbia University and his colleagues showed in a study published by the European Central Bank in July.

Meanwhile, regulators who were supposed to supervise large financial institutions, including Fannie Mae and Freddie Mac, allowed large deviations from existing safety and soundness rules. In particular, regulators permitted high leverage ratios and investments in risky, mortgage-backed securities that also fed the housing boom.

After the housing bubble burst the value of mortgage-backed securities plummeted, putting the solvency of the many banks and other financial institutions at risk. The government stepped in, but its ad hoc bailout policy was on balance destabilizing.

Moral Realism vs. Evolutionary Biology?

Moral reasons do not require reduction to something else in order to count as legitimate

by David Gordon

To review Thomas Nagel's new book for the Mises Daily seems at first sight a misplaced endeavor. The book has nothing to say about libertarianism or Austrian economics; moreover, Nagel's own political views are decidedly non-libertarian. He wrote the most influential critical review of Nozick's Anarchy, State, and Utopia, and he rejects Lockean theories of property ownership, instead viewing property rights as conventional.[1]Nevertheless, one chapter in the book raises issues of profound concern to anyone interested in political philosophy, and it is for this reason that I wish to comment on it here.

Suppose one says that it is wrong to initiate force against other people. What does it mean to say that this claim is true? Are moral judgments just personal preferences, or are they more than this? Mises favored the former alternative. We can judge objectively that certain actions are suitable means to achieve a goal, but ultimate value judgments cannot be assessed as rational or irrational.

To apply the concept rational or irrational to the ultimate end chosen is nonsensical. We may call irrational the ultimate given, viz., those things that our thinking can neither analyze nor reduce to other ultimately given things. Then every ultimate end chosen by any man is irrational. It is neither more nor less rational to aim at riches like Croesus than to aim at poverty like a Buddhist monk. (Human Action, p. 880)