Murder is Murder, Theft is Theft

If I had a euro for every time I heard »yes, your philosophy of libertarianism is all fine and well and the principle of non-aggression sounds good, but we all know that there is in any society a given number of people who will not adhere to these rules and therefore we need government to bring all these people in their place«, I'd probably be building a mansion somewhere in Thailand right now.

Once you get the chance to talk to people and show them how libertarianism is really only based on the principle that a man (and all men) should not initiate violence against a fellow human being and his property, the argument above is probably the most common one. Or, in other words, »yes, your goal seems morally correct but we all know that in practice it is not going to work.« Therefore, the non sequitur argument that we need a coercive government.

Perhaps so and we shall never have a society where aggression against a fellow human being is completely wiped out. But if we concede that this is the goal, then it seems to me that we (i.e. everyone who recognizes this as a correct social norm) should all work tirelessly towards this goal and not, contrary to our recognized ideal, allow in our society a group of people recognized rights to systematically aggress against other people, provided only that they carry the badge of the State. This seems to me so contrary to the purpose of peaceful human cooperation that I can only explain so many people believing this is because most people go through a thorough process of thought-molding called the government schooling system.

The libertarian counter-argument then, correctly stated, would be as follows: »I recognize that the initiation of aggression against people and their property is morally wrong, but I nevertheless want to allow a certain group of people, whom we call government, to have the right to aggress against any and all persons.« And it gets even worse. In our age of democracy everyone is allowed to join this group of people who have recognized rights of legal aggression. And since it is always easier to confiscate what has been produced, rather than produce it yourself, it is quite predictable that this group called government or public employees will continually grow until most people are engaged in direct or indirect expropriation and only a minority remains in production. These kinds of conditions cannot last and always lead to conflict.

Let us draw an analogy. We believe murder is wrong. But some say we must, in the name of erradicating murder, allow a certain group of people, carrying the badge of the State, recoginzed rights to murder others. What will happen is murderers will join the legions of the State to be allowed to murder without repercussions. And all people on the brink, considering murder, might also join the legions of the State since it becomes allowable behavior, provided only you carry the badge of the State. As more and more people engage in murder, this becomes socially acceptable and society disintegrates.

By the same token, we believe theft is wrong. But some say we must, in the name of eradicating theft, allow a certain group of people, carrying the badge of the State, recognized rights to steal from others. What will happen is robbers will join the legions of the State to be allowed to steal without repercussions. And all people on the brink, considering theft, might also join the legions of the State since it becomes allowable behavior, provided only you carry the badge of the State. As more and more people engage in theft, this becomes socially acceptable and society disintegrates.

Matej Avsenak Ogorevc

Did the Free Market Cause the Crisis?

Tom Woods says no. Here is an excerpt out of his recent post:

As I’ve noted elsewhere, the current system is rather far from the Misesian [i.e. the ideal of Ludwig von Mises] ideal; it includes:

(1) a coercively imposed monopoly on the production of money;

(2) monopolistic legal tender laws, which artificially privilege the money issued by the government-established central bank;

(3) a central bank with the monopoly power to create legal-tender money out of thin air, a power granted to it by the government, and with a mandate to manipulate the money supply in the purported service of maximizing output and minimizing unemployment and price inflation;

(4) interest rates influenced by a monopoly monetary authority instead of by the free market;

(5) implicit and explicit bailout guarantees for large financial institutions;

(6) artificially low borrowing costs for large institutions, since the public knows these institutions will be bailed out;

(7) artificial protection of the banks, in the form of government deposit insurance and various Federal Reserve mechanisms, thereby keeping afloat a fractional-reserve system that would be radically different under a free market; under the existing system the banks will therefore create more money out of thin air than they otherwise would.

This is just off the top of my head. A free-market banking system would have no central bank and no “monetary policy.” It would not rely on politicians to print up “interest-free money.” It would not require any guns or badges. It would preserve the purchasing power of people’s money, as it did even under the classical gold standard. It would make entrepreneurial profit-and-loss calculation far easier, without the white noise introduced by the monetary manipulations of the government or its privileged central bank.

 I would tend to agree. You can read his whole post here.

How Much Are You WIlling to Pay?

You go to a bakery and you see a woman working there who has four children. You want her to make more money? Fine, so do I. But the question is not how high her salary should be because she has four children, but rather how much more are you willing to pay for bread baked by a woman with four children. Because if you are buying there, you are the one paying her salary.

No established firm in this world pays salaries to their employees, their customers always do. I say established because in a startup business the investor has to save up money to pay for all the salaries (plus capital equipment and other expenses), sometimes for months and years, before the revenues and profits (if they ever arrive) come in, and in that case the investor is the one paying the salaries. But once a firm is making profits and is therefore able to stay on the market, the customers are always signing every paycheck every month.

Think about the BMW automobile company and imagine that for some reason people completely stopped buying their cars. How many salaries could they pay out? Not many. Maybe they would scrape by for a month or two, maybe not even that. But if the customers stop coming in, the salaries stop going out. I own a business as well and I never pay my employees out of my pocket, it's always our customers. They show up in our stores, they pay for what they find interesting and at the end of the month we use this money to pay out the salaries. If the customers stopped showing up we would have to stop paying out salaries.

This might seem obvious to some people but I write this only because I can assure you that to many it is not. Some will say "let's pass a law raising her salary and making it harder to fire her and that will take care of that." I would reply that these people have not taken the time to study the nature of human action. Such a mandate passed by the government would, as most government decrees do, only make the situation for this woman worse. Raising her salary above the market wage will cause her employment to become unprofitable and thus fewer people will want to hire her. And if you make it harder to fire her, then employers will again be afraid to hire her because the risk of her not being the right employee suddenly becomes much higher. So whereas before she actually had a job which she had chosen among the alternatives that she could choose from, now no one will be willing to hire her and she becomes jobless with four kids.

So then if the capitalists don't employ us but rather we employ each other and thus our wages depend on the number of our customers and the thickness of their wallet, rather than on the "greed" of our employers, how do we get a higher wage for this woman and indeed for everyone in society?

How to get more customers? We allow her employer the freedom to invest and thereby make her work more productive and the products more attractive in order to attract more customers. And how do we make the customers richer? We allow everyone else in society to invest in order to make labor more productive. The fact is that we are (materially - and we all need material things to survive) only as rich as our productiveness allows us to be. And we become more productive only by investing in new and better capital equipment (machines & tools) so that we can produce more with fewer resources. Then things become better and cheaper.

But people will only save and invest if they can expect to receive a profit from their investment. The bigger the share of the savings and profits that is taken away from investors, the less they will invest. The more money a central bank prints, the more this money loses value, the less people will save. Less savings equals less funds available to invest. The more the government taxes profits, the less attractive it is to invest. The more the government taxes wages, the higher the wage cost, the lower the profits. Low profits equals less investment. Less investment means we become poorer.

All the above is of course descriptive of the economic means, i.e. through production and trade, of making profits. There is also the political way, i.e. through extortion and confiscation, of making profits, but that is a whole other subject...



Thanks for the inspiration to Ludwig von Mises and his short book Economic Policy: Thoughts for Today and Tomorrow, which is available online for free here.

Matej Avsenak Ogorevc

How About I Operate on Your Kidney, Sir?

Would you trust me to perform kidney surgery on you? Probably not, and that would be a wise decision too, for I know nothing about kidney surgery. Then why would you trust politicians to make good economic decisions? Or even any good decision whatsoever for you? Why do people want to be in power? Simple, they want power. With very few exceptions, people get into politics because they have what is called libido dominandi, the lust to dominate. With political positions comes power, money, and prestige. In this kind of environment the worst of power mongers succeed and the worst cases of libido dominandi get to the very top. And I don't distinguish between the left and right either. The differences are purely cosmetic and insubstantial.

But back to economics (yay!).

All the above being said, there are a lot of "experts", such as university economists and political advisers, who give advice to all these politicians and surely then these politicians will be well informed and will make good decisions, right? Not so fast. First of all, all these supposed experts, if they are giving advice to politicians, are on their payroll. You should not expect them to give politicians advice they do not want to hear. Rather, their job becomes to invent semi scientific apologies for policies politicians are going to adopt anyway. So don't look for sound economics in the realm of politics and government run and/or funded educational institutions. This is not to say there isn't any. But the odds to find it there are rather against you.

Don't believe me? Let us do a short exercise. We have learned recently that the EU Commission will enact (new) price controls on mobile service providers in the EU for international calls, price controls downwards, of course. Now, which of the following scenarios do you think is more likely to play out: a) the mobile service providing corporations are going to say "oh well, guess our profits are just going to have to be smaller henceforth", or is it b) "since we cannot charge our preferred rates on international calls, we will have to raise our prices on domestic calls and other services in order to maintain our profitability". If you can answer this correctly (I will not be giving out any hints this time), you know more about economics than all the eurocrats combined. And trust me, there are quite a few of them. So in essence, what this move by the Commission does is transfer the cost of international calls to domestic users. In other words, the poorer people who cannot afford to travel as much will now be paying for the international calls of wealthier people when they are traveling. Brilliant institutions we have in our government, no? The excellence of their genius never ceases to amaze me. I do suppose it is also possible that they are aware of the sinister effects of their actions but... That just makes my case that much stronger.

So how would I suggest you read and watch the news then? After all, the saying "How can you tell when politicians are lying - when their lips are moving" is not very far off. My first suggestions would be learn Austrian economics. Short of that, whenever you hear a proposal from a politician, ask yourself where the money is going to come from. Who is going to lose money so that this can be undertaken? What is not going to come to life because this new political project has siphoned off the resources? What productive enterprise will see its funds stolen so that the politicians will have it their way? After all, government doesn't have any money that it didn't first confiscate from private citizens. So in short, when you see a project is being funded through coercive measures of the State, you should not support it. And by that I don't mean growing a mohawk and throwing stones at the parliament. I mean be principled and be against the initiation of force and theft against peaceful people, whether it's called taxation, tariffs, fines or any other euphemism we have become accustomed to.

Matej Avsenak Ogorevc