Leading the Revival of Individualism & Self Reliance

These Are The Four Anti-Capitalist Characteristics Of Huge Corporations.

/in /by

AT&T has completed its acquisition of Time Warner, in a $81 billion M&A transaction. The deal creates a behemoth dealing in fundamental telecommunications and in both the creation and distribution of popular content. It is quite typical for us to be suspicious of the creation of new corporations of huge size, but why?

There is nothing inherently bad about scale. If scale is a necessary attribute for the efficient delivery of consumer value in telecommunications and content markets, we should welcome the financial engineering that makes efficiency possible.

Unfortunately, efficiency is not all that scale delivers, if it delivers it at all. There are four fundamental anti-capitalist and anti-liberty characteristics of huge corporations.

Drinking From The Government Money Firehose.

The money and credit that government creates in vast quantities does not enter every citizen’s pocket in equal amounts at the same time. It enters the financial system at the point where entities closest to government, with sufficient scale to absorb newly-created money in industrial quantities, have set up mechanisms to receive and process it. These are banks, Wall Street institutions, hedge funds and capital pools eager and willing to be the first recipients of the new money. Having obtained it in vast amounts at extremely low cost, they are eager to redeploy it quickly and profitably. One way is to buy stock and lend M&A funds to the largest corporations. The stock market in large company equities is funded by this huge pool of money, as are M&A deals of the size of the AT&T Time Warner merger. Smaller businesses can only access this money later in the cycle at much higher interest rates. By the time the money reaches consumers, it costs up to 24% on credit cards and more than that on small business working capital loans and consumer payday lending. Giant corporations have, and use, a major competitive advantage in preferred access to the government printing press.

Organizing For Authoritarian Management.

We often refer to these giant entities as organizations. An organization is a transmission device for authority, and specifically for an authority that has its own set of rules. Loyalty to an organization builds up a power hierarchy for the application of those rules. People who work in hierarchical organizations tend to be insulated from the workings of the free market; they deal only in the power politics of the organization they inhabit. A characteristic of those power politics is that there are non-market incentives to grow the size of the internal organization – for example, the number of people reporting to a departmental executive or the size of the departmental budget become sources of prestige. More and more resources are devoted to the administration of the internal organization,  and proportionately fewer to serving the customers and consumers on the outside, and to innovation and consumer value creation. The big company can become unresponsive and unaware of changes in market needs. In the worst cases, they can lose sight of their consumer mission altogether – as when United Airlines personnel dragged a passenger kicking and screaming off one of their planes so that they could use the seat to ferry an employee for organizational travel.

The Managerial Function Is Anti-Entrepreneurial.

One of the functions of the internal bureaucracy at large corporations is management. This term refers to activities aimed at efficiently extracting economic returns from the resources created and assembled by original entrepreneurs. The company founders and original entrepreneurs were the ones who identified a problem in the marketplace that consumers wanted solved, and who either created new resources or re-assembled existing resources, or some combination of both to solve that problem. Henry Ford created a new resource in the affordable automobile, and recombined existing resources of steel and rubber and leather in new ways to implement it. Since then, managers in the automobile industry have done some minor further recombination, but the idea of the internal combustion engine, 4 wheels, seats and a steering wheel has not been innovated out of existence. The job of managers is to consistently extract financial returns from the original innovation. This is a process-based activity, with a focus on accounting, procurement, design, manufacturing efficiencies marketing and sales. It aims at stability and predictability. Innovation and creativity are anathema to management teams because they lead to unpredictability and uncertainty. So they’d prefer not to innovate.

Perceptively, Ludwig von Mises pointed out that the capitalist system is not a managerial system, it is an entrepreneurial system. The emergence of a managerial class was aimed at eliminating the influence of owners and shareholders. The managerial function is entirely different from the entrepreneurial function. Most of what managers do has no cash value in the marketplace. Much of the industry that has grown up around managerial processes, “strategy”, consulting and business school studies is just an accumulation of additional managerial costs and expanded managerial staffing. It’s not particularly profit-oriented. It’s a luxury that original entrepreneurs like Henry Ford would probably eschew.

Merging Corporate And Government Bureaucracies.

The final insult to consumers from the large corporations is the merger of corporate bureaucracies and government bureaucracies in shared activities designed to extend the power of both. Government bureaucracies design forms that require filling and regulatory demands that require an informational response. Corporate bureaucracies love this, because it gives them something to do and justifies their existence. They get to hire more bureaucrats to fill in the forms and more data engineers to provide the information flow to the government, and more supervisors and managers to oversee the activity. Large corporations are happy to hire and add bureaucratic staff in this field of compliance with government regulation, because their large size makes it relatively easier for them to do so, and their market power enables them to pass on the costs to their customers and consumers. Smaller firms in the same industry are highly disadvantaged under these circumstances. They can’t afford the compliance costs because they have less customer revenue across which to amortize. They either exit compliance-heavy businesses or decline to invest in more profitable operations.

In effect, the government is offloading the cost of its internal bureaucracy and regulation to the corporate sector, and the bigger companies are happily embracing the deal because it gives them a crony relation with the government, a more entrenched bureaucracy, and an unfair advantage versus smaller and potentially more nimble competitors.

Justified Suspicion.

Should we be suspicious of large corporations on principle? Yes. They gulp from the government money spigot, they crony up to regulation to gain competitive insulation, and they grow bureaucratic and managerial staff at the expense of innovation and entrepreneurship.

What Puerto Rico Can Teach Us about Minimum Wage Laws

/in /by

Puerto Rico has been put through the ringer lately. But one of the most economically devastating aspects of its economy came about because of minimum wage laws enacted by the United States.

After the 2007 Fair Minimum Wage Act passed, each of the fifty states was required to raise the minimum wage from $5.15 an hour in 2006, to $7.25 by 2009. Few Americans realize that this legislation was also applied to the U.S. territories of Puerto Rico, American Samoa, and the Northern Mariana Islands, who were also forced to raise wages.

Unemployment in Puerto Rico surged and its GDP per capita declined by almost 7 percent. 

When the minimum wage is increased, the private sector is responsible for finding the means to actually pay for these increases. Though many companies will be forced to raise prices in order to continue operating within their profit margins, some might be left with no choice but to lay off employees or dramatically cut employee hours.

Since minimum wage pay is typically associated with entry-level workers, if employers are forced to let these employees go, they will lack the skills necessary to quickly rebound in the job market. As a result, the unemployment rate begins to rise.

When minimum wage requirements are made at the city or state level, the losses experienced from high unemployment rates are offset in the local economy, since many who are unable to find work often relocate to an area where the minimum wage isn’t as restrictive.

However, for those living in U.S. territories, relocation is not as easy as it is for residents in the continental states. Without the flexibility to relocate, the economic catastrophe that resulted from the 2007 minimum wage increase was felt on a grander scale.

According to the National Review,

The impact on the economies of American Samoa and the Northern Mariana Islands was devastating. In American Samoa, by 2009, after only three of the ten scheduled minimum-wage increases, overall employment dropped 30 percent — 58 percent in the critically important tuna-canning industry. Real per capita GDP in American Samoa fell nearly 10 percent from 2006 levels. In the Northern Mariana Islands, by the end of 2009, employment was down by 35 percent, and real per capita GDP off by 23 percent.

As the situation grew desperate, the governor of American Samoa testified before the U.S. Congress explaining that the new minimum wage policy created, “the real possibility that American Samoa could be left substantially without a private-sector economic base except for some limited visitor industry and fisheries activities.” He continued, “American Samoa’s economic base would then essentially be based solely on federal-government expenditures in the territory.”

Puerto Rico met a similar fate after the new minimum wage rate went into effect. The increase resulted in a minimum wage that was greater than 75 percent of the Puerto Rican median wage. In fact, the situation grew so dire, unemployment in Puerto Rico surged and its GDP per capita declined by almost 7 percent between 2007 and 2013. As a result, many young and able-bodied Puerto Ricans left for the U.S. mainland, creating an imbalance as the old and less motivated were forced to stay behind.

Additionally, foreign investors were turned off from hiring Puerto Ricans, since residents of Jamaica and the Bahamas would only cost half as much to employ.

By raising the minimum wage to as much as $15 an hour, states like California and New York are not just setting an American record for highest minimum wage; they are setting a global record as well. Even France, where socialism thrives, has a minimum wage equivalent to only $10.90 an hour.

In fact, the only time in history that the minimum wage was increased at economic levels comparable to that of New York and California was in 2007, when the U.S. territories implemented the Fair Minimum Wage Act. As we all know how that situation ended, we can only hope that in the future, governments can learn from history and avoid causing economic catastrophes.

Independent Minds Discover The Flexible Fabric of Reality.

/in /by

“When I’m playful I use the meridians of longitude and parallels of latitude for a seine, drag the Atlantic Ocean for whales.” These words are from Mark Twain’s 1883 memoir Life on the Mississippi, and at that time – a whimsical daydream. But according to author Dava Sobel in her book Longitude, “Anyone alive in the 18th century would have known that the longitude problem was the thorniest scientific dilemma of the day – and had been for centuries.”

For all of mankind’s seafaring history, cartography and navigation involved a baffling and complex system – an orbiting and rotating planet. It was a global challenge for the most complex of systems, the neurons and synapses of the human mind.

The Space-Time Continuum

The imaginary fabric of Twain’s net was first presented graphically by the Greco-Roman mathematician and astronomer Ptolemy in 150 AD. And determining latitude was relative child’s play, the laws of nature had revealed the equator as the zero-degree parallel. Yet as Sobel describes, “the zero-degree meridian of longitude shifts like the sands of time.” Ptolemy could put it wherever he liked, and he did, and in the following centuries it became a purely political decision.

It was mathematician and astronomer Galileo, whose land based method using Jupiter’s moons, finally gained acceptance in 1650. As Sobel writes “Renowned astronomers approached the longitude challenge by appealing to the clockwork universe. Palatial observatories were founded in Paris, London, and Berlin for the express purpose of determining longitude by the heavens.” But it was another observation of Galileo’s that changed the course of mankind, despite the political and scientific elites.

While a young medical student sitting in church, Galileo observed the motion of a swinging lamp. He timed its arcs with his own pulse, and discovered that its rate of speed was a function of the length its chain. According to Galileo’s protégé Vincenzo Viviani, “Galileo always intended to put this remarkable observation to work in a pendulum clock, but he never got around to building one.”

What he did, according to Sobel in her book Galileo’s Daughter, while a professor at Pisa in 1589, “he measured the swinging of pendulums; and he rolled bronze balls down inclined planes to derive the rate of acceleration in free fall.” This was a breakthrough discovery. As Galileo was stitching together the flexible fabric of space and time, he was also scratching the surface of the anti-Copernican Edict of 1616. For his efforts he was awarded a conviction by the Holy Offices of the Inquisition in 1633.

The World Wide Web

A century before the Copernican Edict there lived another renegade. His countrymen referred to him as a traitor, but today Lisbon proclaims: He is ours! In middle age this maverick renounced his native land. He then received a commission from King Carlos I of Spain to venture west. His Anglicized name is Ferdinand Magellan, and according to historian William Manchester in his book A World Lit Only by Fire, “he couldn’t even be certain of what he was looking for until he found it, and the fact that he had no clear view of his target makes the fact that he hit it squarely all the more remarkable.”

Like his contemporaries during the Age of Explorers, he was almost always lost. According to Magellan’s scribe Pigafetta, “The captain spends many hours studying the problem of the longitude but the pilots content themselves with the knowledge of the latitude.” A singularity among 16th century men, he rewarded those who performed well and was respected for his supreme competence.

According to Manchester, he was “meticulous, fiercely ambitious, stubborn, driven, secretive, and iron-willed. Magellan possessed an inner vision he shared with no one. He was a man of boundless curiosity, and found reality equally enthralling.” His sense of mission was adventure, but his political sponsors had a different sense of mission – property. He used them to eventually stitch together the world wide web, our flexible fabric of meridians and parallels that cover mountain tops and oceans floors.

Connecting the Dots

Ptolemy defined the problem of longitude, and in 1519 Magellan studied it as if his life depended on it, and it did. Galileo’s celestial solution was useless to navigators, but his idea of pendulums as time pieces was lightning in a bottle. The dilemma, “one that stumped the wisest minds of the world for the better part of human history,” instead led to “accurate determinations of the weight of the earth, the distance to the stars, and the speed of light.” As Sobel continues in Longitude, “what Newton had feared as impossible,” required not a celestial clock, but a mechanical one.

In 1714 the British Parliament passed the Longitude Act. It established prize money for a reliable and repeatable solution, and was worth millions of dollars in today’s money. It was finally awarded to a man “with no formal education or apprenticeship to any watchmaker, he nevertheless constructed a series of virtually friction-free clocks that required no lubrication or cleaning, made from materials impervious to rust.”

In 1773, John Harrison finally collected his prize, despite “decades of political intrigue, the backbiting of academic elites, and scientific revolution.” Sobel concludes Longitude saying “With his marine clocks, John Harrison tested the waters of space-time. He succeeded against all odds, in using the fourth dimension to link points on the three dimensional globe. He wrested the world’s whereabouts from the stars, and locked the secret in a pocket watch.”

The Flexible Fabric of Reality

Ptolemy, Magellan, Galileo, and Harrison shared qualities that make them shining hubs among the countless nodes of the creative human network. Among them are curiosity, reason, vision, ambition, and will. In that order. Hierarchies are only in the way. The rotation of the earth is a concrete. The dark matter of gravity is a concrete. They are everywhere. They are complex systems to be understood and appreciated. The flexible fabric of reality discovered by these renegades belongs to all of us. And like them, the flexible fabric of human action is everywhere, and it is called spontaneous order. It is the incomprehensible network of human activity we call economics.

It’s nodes are countless scientists, entrepreneurs, investors, inventors, artists, and consumers; all engaged in life affirming activity, trading value for value. And they stand ready to defend the only concrete it requires, economic freedom. As economic scientist Ludwig von Mises has discovered, “In a system where there is no market, where the government directs everything, all freedoms are illusory, even if they are made in to laws, and written up in constitutions.”

 

Without Government, Who Will Build the Roads? Domino’s Pizza, Apparently

/in /by

Yesterday, Domino’s Pizza announced that rather than wait for government action, the company would take it upon itself to fix potholes as part of its “Paving for Pizza” campaign.

A lot can happen in the time it takes for your pizza to leave its store of origin and arrive at your door. Sitting helplessly in the front seat, one encounter with a pothole may mean your delicious cheesy pie is delivered in ruins.

We’ve all had the unfortunate experience of opening that square cardboard box after the delivery guy has left, only to find that the cheese and toppings have slid off in what appears to be an act of foul play. Overcome with hanger, you call the pizza store and demand that a new one be sent over. But realistically, between traffic and bake time, you are not going to get that pizza for at least another hour. The struggle is all too real.

This problem is apparently so widespread for Domino’s, they recently launched a pizza insurance program that would allow consumers to insure their pizza in case something happens to it during the delivery. While this was a clever idea, especially to those of us who subscribe to a “private insurance for everything” philosophy, it still didn’t save any pizzas. Insured or not, Domino’s still has to make another pizza if one is ruined.

So how do you, to the best of your ability, prevent pizzas from being destroyed on the road? You attack the root of the problem and fix the roads themselves. And that is exactly what Domino’s plans to do.

While the new program officially launched yesterday, “Paving for Pizza” has already fixed over 50 potholes in California, Texas, and Delaware. The campaign promises to give local municipalities the money needed to fix their crumbling infrastructure should they be selected by the company. Those wanting to cash in on this opportunity need only go online to Domino’s website and nominate their own neighborhood roads for consideration.

Commenting on this unconventional initiative, creative director at CP + B, Kelly McCormick, said:

We know that the carryout experience includes everything from ordering, to getting the pizza home in perfect condition. This forced us to think broader about carryout and meant that we had to consider the drive or walk home, on the pothole-ridden roads and icy sidewalks that we don’t own and can’t control ourselves. So, we decided to go where no other pizza company would go.

And where they’re going, they will most certainly need roads.

Who Will Build the Roads?

Since the dawn of time, libertarians have been routinely bombarded with one infamous question: Without government, who will build the roads? For those hostile towards the freedom philosophy, this question seems like a real “gotcha” weapon. There is no possible way the free market could handle a “public good” as important as roads, thus proving the entire libertarian philosophy to be untenable. Of course, Domino’s is now proving this assertion to be false.

Yet, the “roads” question has taken on a life of its own within the liberty sphere, dominating meme culture and becoming a source of constant frustration for those committed to free-market principles. So tightly woven is this question into the modern freedom movement, historian Tom Woods once said:

“Who will build the roads?” is the question that belongs at the top of every libertarian drinking game. If we didn’t have forced labor, the argument runs, there would be no roads. There’d be a Sears store over there, and your house over here, and everyone involved would just be standing there scratching their heads.

But what our skeptical friends may not fully understand is that where there are roads there is commerce. And in the absence of roads, how could Sears feasibly draw customers into its store? Or, put differently, without properly functioning roads, how could Domino’s deliver your pizza safely to your door?

All Roads Lead to Commerce

Roads have historically been viewed as a public good, which is defined as a product or service that is provided to citizens exclusively by governments, ensuring use is accessible to all. This has led many to believe that the government is the only entity capable of road management. And even though toll roads and other forms of private thoroughfares exist as living examples, there are many who cling to the government’s monopoly on roads. But there are multiple problems with this viewpoint.

For starters, there is absolutely no proof that the government is well suited to care for the roads. In fact, there is far more evidence in support of the opposite. Government roads are either always in need of repair or heavily congested because some bureaucrat sitting in a desk ordered roadwork to be done during rush hour.

Additionally, the government has no real incentive to care for the roads in the first place.

In the market, private entities hoping to succeed know they must respond to consumer demand, lest they go out of business. A roofing company, for example, would not survive in the marketplace if it promised and then failed to respond promptly to emergency situations time and again. Yet, government roads are constantly in a state of disrepair, and it sometimes takes years before a service request is completed.

Of course, the government doesn’t get fired when it fails to respond to a road issue in a timely manner. Since the state operates by force, consumer satisfaction plays no role in its existence.

The private sector, on the other hand, has a vested interest in properly maintaining local roads as quickly as possible, as Domino’s is now proving.

The decision to launch Paving for Pizza was born out of an unmet demand in the marketplace. The government was failing to meet the needs of drivers on the road, which in turn was inhibiting Domino’s ability to live up to its promise of offering quality products to its consumers.

The Paving for Pizza campaign actually works in Domino’s best interest. Already, the company is having to spend money to replace the pizzas that are being destroyed en route to their final destinations. Additionally, having to remake a ruined pizza means that a Domino’s employee has to shift his or her focus away from another customer’s order. Replacing one pizza ends up costing the company both precious time and money.

But by choosing to invest money into fixing the roads in its many delivery areas, Domino’s is not only attacking the root of the problem, they are also scoring major points with consumers and local communities. Not only does the consumer have a better chance at receiving a beautifully intact pizza, but the entire community also benefits from the improved infrastructure. This, in turn, will result in new Domino’s customers who are drawn to the company as result of the improved roads. Everyone wins in this situation.

But the implications of this are far-reaching. Roads clearly play a vital role in the way Domino’s conducts business. But Domino’s is just one company. Since many establishments rely on roads to bring their customers to them, there is an enormous potential for private companies to lead the way in infrastructure innovation if they follow Domino’s lead.

At the very least, libertarians can now rest easy knowing that the next time we are accosted with the infamous question about roads, we can look to Domino’s as a beacon of free-market innovation of a public good.

How Society Benefits from the Self-Interest of the Individual

/in /by

Each week, a group of individualists in my neighborhood get together for drinks. And each week as I enter the restaurant and approach the host stand, I am greeted with, “Are you with the individualist group?” This always makes me chuckle, “individualist group” seems like a such a contradiction in terms.

Critics like to characterize individualists as hermits, unwilling to work with the rest of society and preoccupied with their own self-interest. To be sure, self-interest does play an integral role in the classical liberal tradition. But this does not make its followers antisocial by any means. In fact, without society, our self-interests could not feasibly be served. And without self-interest, society’s ends could not be met either.

As Dan Sanchez writes:

“The truth is, the self-interest-centered individualism of the centuries-old classical liberal tradition has never been antisocial. Indeed, from the beginning, one of its main objectives has been to explain and promote human communities.”

Echoing this sentiment, economist Peter Boettke says:

“The classical liberal political economists treat the individual not as atomistic, but as embedded within social settings – in families, in communities, in history.”

It is precisely the insights of liberalism that allow us to understand how individuals operate within larger groups, and how self-interest actually serves to benefit society as a whole. Mises touches on this when he discusses the importance of individuals working in societies in his book Liberalism.

We Need Each Other

Mises writes:

“A man living in isolation has no moral rules to follow. He need have no qualms about doing anything he finds it to his advantage to do, for he does not have to consider whether he is not thereby injuring others.”

At first glance, such a lifestyle might sound appealing to some. But in practice, it would be quite miserable. For even though a man living in isolation has to worry about no one but himself, he is also left to worry about meeting all of his needs with no other resources but those he provides on his own.

To avoid such deprivation, we have chosen to join society and engage in specialization and voluntary exchange. By doing so, we are able to exchange the fruits of our own labor.

This social cooperation has allowed us to thrive as individuals and thus, as societies as well.

As Mises writes:

“For the life of the individual in society is possible only by virtue of social cooperation, and every individual would be most seriously harmed if the social organization of life and of production were to break down.”

If I was left with no other option but to forage for my own food, I would quickly go hungry. The hunter-gatherer lifestyle is not my area of expertise. But this goes both ways. Without my demand for sustenance, producers of such would also be unable to provide for other necessities in areas where they do not specialize. Each of us produces for our own benefit, specifically to serve our own self-interest. But by doing so, we also create value for others.

Adam Smith touched on this when he said:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.”

This reliance on others within a society is fueled by our own self-interests. But this encourages us to work together because, to put it simply, it is vital to our own quality of life and in many instances, our own survival.  

SUB

Critics of the classical liberal tradition do not believe that the economy is capable of functioning without government oversight specifically because of individual self-interest. Many think that if an individual has the opportunity to do something terrible to another person, they will. But since the market operates through incentives and feedback, true liberals understand that individuals are capable of self-regulation.

If an individual wishes to be successful in his own field of expertise, he must take the rest of society into account. Doing harm to others only serves to do harm unto himself, especially in market interactions.

As Mises says:

“In requiring of the individual that he should take society into consideration in all his actions, that he should forgo an action that, while advantageous to him, would be detrimental to social life, society does not demand that he sacrifice himself to the interests of others. For the sacrifice that it imposes is only a provisional one: the renunciation of an immediate and relatively minor advantage in exchange for a much greater ultimate benefit.”

True, a producer could knowingly set out to harm a consumer by providing an unsafe product.

However, by doing so he risks his own reputation and thus, his own wellbeing. Let’s say that by committing harm by not thoroughly inspecting his produce, for example, a farmer saves himself time. But as a result, many consumers become ill and immensely unhappy with him. As a result, the consumers subsequently decide to take their business elsewhere.

Those few extra hours the farmer gained by neglecting to properly inspect his produce have now resulted in a loss of profits. And this loss in profits may continue until he is able to mend his bad reputation with consumers if he is able to do so at all. The farmer doesn’t need government force as an incentive to behave properly. He need only understand how incentives work.

A bad reputation means fewer people wanting to interact with you and voluntarily exchange with you. This is exactly why Mises writes:

“Whoever gives up a momentary advantage in order to avoid imperiling the continued existence of society is sacrificing a lesser gain for a greater one…The continued existence of society as the association of persons working in cooperation and sharing a common way of life is in the interest of every individual.”

But critics cannot seem to see past this idea that self-interest is somehow always immoral. They believe individuals should sacrifice certain whims and desires and become a part of society simply because the act of sacrifice is the essence of true morality. But Mises knows better.

He writes:

“The meaning of this regard for the general social interest has frequently been misunderstood. Its moral value was believed to consist in the fact of the sacrifice itself, in the renunciation of an immediate gratification. One refused to see that what is morally valuable is not the sacrifice, but the end served by the sacrifice, and one insisted on ascribing moral value to sacrifice, to renunciation, in and for itself alone.”

He continues:

“But sacrificing is moral only when it serves a moral end. There is a world of difference between a man who risks his life and property for a good cause and the man who sacrifices them without benefiting society in any way.”

Self-interest keeps the gears of society in motion. It is the reason societies have managed to endure for so long in spite of the vastly different personalities that exist within it. So to call classical liberals atomistic is not only frivolous, it also discounts the pivotal role these individualists play in society as a whole. We don’t have to agree on some of the finer points in life, but so long as we serve our own interest by producing and exchanging with others each member of society benefits. Therein lies the beauty of the free market.

How Pure Economics Will Dethrone Politics.

/in /by

Can we ever separate economics from politics? The two are contradictory yet often confused.

Economics is the private use of skills, knowledge and assets to serve others via market exchange. Entrepreneurs and owners of capital (in the broadest sense – owners of knowledge, skills and experience as well as physical capital goods) are servants of consumers. Economic exchange requires entrepreneurs to ascertain what consumers want, and to assemble resources to provide those wants. If the consumer changes preferences, the entrepreneur must change production in order to continue to receive revenue and profit. The consumer is the boss. The power of entrepreneurs is subject to the choices of their customers, and capital ownership is strictly in the service of consumers.

Carl Menger offered a great example, that’s still very pertinent. A capitalist may own a machine used to produce tobacco products. The machine has value because consumers like to buy and use tobacco products. But should they, suddenly, shed their preference for tobacco products, that machine would have to be sold for scrap. Tobacco companies are re-learning this lesson today.

The Political Way.

Politics, on the other hand, is the diversion, and sometimes confiscation, of economic production by non-producers for their own ends. Politicians have established a hierarchical system of control by government, its administrative departments, its military, and its police forces. While elected politicians are, in some sense, subject to the electoral decisions of voters, that is not the case with the laws they enact (which accumulate and last beyond the duration of electoral periods) and the administrative apparatus they put in place to enforce their laws.  Politicians have a coercive power of control.

The confusion between the economic way and the political way arises in the overlap of economics and politics in people’s minds. Ludwig von Mises said:

All present day political issues concern problems commonly called economic. Everybody thinks of economics whether aware of it or not. As conditions are today, nothing can be more important than economics.

Our own fate and that of our children are at stake, according to the great economist.

Dethroning Politics.

F.A. Hayek’s principle for separating politics from economics was to limit government to the setting of general rules of conduct that apply equally to everyone. These general rules can improve the chances of all by giving everyone the prospect of finding a partner for a transaction favorable to both sides – a win-win. Under these known and reliable rules, a self-organizing citizenry can collaborate, trade and exchange and spontaneously create the economic output that raises the quality of life and standard of living for all.

But politics does not limit itself to this role. It is the struggle to decide “who gets what, where and how”. It is the pitting of one coalition of special interest groups against another in a bruising battle where some must lose so others can win. It is interventionism and regulation to stifle economic activity.

Hayek wanted to “dethrone” politics. Politics, he said, has become much too important, much too costly, much too harmful, and absorbs too much total energy, while at the same time losing the respect of the general public, who regard it as an incurable evil that must be put up with.

Hayek’s solution was to dismantle monolithic governments, and limit the agencies that we could not eliminate to operate under general rules they cannot alter.

Pure Economics.

Franz Oppenheimer was a little more optimistic. He believed that monolithic government is moving through a series of stages of development and has reached a peak in its current form of the administrative state, with its infinity of rules and regulations. He believed that, ultimately, all the giant organizations of the current stage – both government and the crony capitalist companies that integrate themselves with government to benefit from its coercive powers exercised on their behalf – would lose their advantage and wilt away. What would remain is a spontaneous order of individuals engaged in unhampered mutual exchange. He called this condition “pure economics”. That’s a term we can adopt for the goal of separating politics and economics. Keep economics pure.

Per Bylund puts it this way: without the hierarchical power of coercive government, policy-makers would have no policies to make, and there would be no wheeling and dealing with capital owners. The former would need to contribute to the economy rather than be a burden on it, and the latter would be strictly servants of consumers.

The outlines of “pure economics” are beginning to take shape in today’s emerging technologies. Individual entrepreneurs can download computing power, lines of code, algorithms and processes from the cloud. The can use global platforms to set up supply chains, collaborate with others, form teams and conduct work. They can utilize A.I. to augment their individual, team and firm capacity. And they are beginning to be able to disintermediate authorities and institutions using blockchain and cryptography. Oppenheimer put it this way: the individual can now form capital and himself become an employer rather than employee. That was the language of the first decade of the 20thcentury.

In 21stcentury terms, cryptography, bitcoin, entrepreneurship, self-organization and technology will provide the foundation for pure economics, and will dethrone politics.

 

 

 

 

Technology Is Balancing the Scales of Power between Individuals and the State

/in /by

Americans can’t seem to agree on much these days. But even amid all the apparent differences that keep us ideologically separated, everyone hates parking tickets. In many ways, these infractions are the great unifier. Parking tickets are a common annoyance that almost anyone can relate to. But luckily, advances in technology are making legal defense resources more accessible than ever.

Seattle resident Dan Lear was understandably frustrated after returning to his vehicle after running an errand, only to see a ticket placed under his windshield wiper. On any other day, Lear may have chalked this up to bad luck, accepted the ticket, and moved on with his day. However, Lear, who is himself an attorney, felt misled by the signage on the street where he parked, which inspired him to fight the grounds on which the ticket was given.

After doing a bit of research, Lear discovered that there were actually companies dedicated to fighting unjust parking tickets. But by utilizing these services, it doesn’t mean that you have paid to retain a group of attorneys. Instead, “lawyer bots” fight your parking tickets for you.

DoNotPay, WinIt, and TurboAppeal are just a few examples of new businesses that are encouraging individuals to challenge the state when they feel they have been on the receiving end of injustice. By helping people fight back against unjust parking tickets and property tax discrepancies online, more people have now have the ability to challenge government overreach, rather than simply lie down and take it. This is huge when it comes to balancing the scales of power.

While each respective company has their own unique platform, DoNotPay, which Lear used, asks users a series of simple question to gauge rather or not there is grounds for a legal fight. Asking whether a parking sign was easy to read or even if perhaps some of the details on the ticket are incorrect, the site then compiles all the information you provided into a letter. Serving as a formal legal defense that can be mailed or uploaded online, users now have a legitimate case against the state.

As if these services weren’t enough to entice us all to fight the next parking ticket we may receive, the services available through DoNotPay are free of charge, making legal defense readily available to anyone with a wifi connection. Other services, however, do charge a small fee. Already, DoNotPay has helped dismiss over 450,000 parking tickets in the United States and the United Kingdom alone. This accounts for about $13 million in fines that individuals did not have to pay to local governments. In fact, when it comes to the success rate of DoNotPay, their users win their cases more than 50 percent of the time. For those who try and fight their tickets without the use of these types of services, the success rate dropped to around 21 percent in New York City and 35 percent in California.

The creator of DoNotPay, Joshua Browder, is a hero among individualists. However, local governments have started referring to him as the “Robin Hood of the internet” by the BBC. But before anyone starts feeling sorry for the government, Browder is quick to remind us that tickets are, “used as a source of revenue, which is wrong, and something I’m trying to change for the longer term.” He also admitted that when it comes to local governments they “generally don’t like me.”

Browder’s model is so appealing to so many people, that it was able to raise $1.1 million of funding. Currently, the site exists primarily to help users fight parking tickets, but the long-term goal is to expand services into other legal spheres. For example, Browder would like to help users fight property taxes and even file for divorce without having to retain costly attorneys.

What is, perhaps, most fascinating about this project is the decentralization of the legal sphere. In addition to this type of tech, blockchain technology is also getting rid of the need for attorneys. By using algorithms to enforce contracts, blockchain technology is making lawyers in this realm almost entirely irrelevant. But, it is also giving individuals more access to legal tools they may not have been able to afford on the traditional market.

All in all, this technology is allowing individuals to live a more free, decentralized life, which is truly the key to individualism.

Why Self-Improvement and Self-Governance Go Hand in Hand

/in /by

Without individualism, freedom is unobtainable. And one major component of the individualist philosophy is the understanding that we are each solely responsible for our own lives. As William Ernest Henley wrote in his poem, Invictus:

 “I am the master of my fate: I am the captain of my soul.”

And while this may sound quite Randian to some, it is through this focus on self-improvement and self-responsibility that we are better prepared to change the world with our ideological beliefs.

Govern Yourself or Be Governed 

Larry Reed, president of the Foundation for Economic Education, once wrote:

“If you do not govern yourself, you will be governed.”

And Reed is absolutely right. Without the ability to govern ourselves, it leaves an opening for the government to swoop in and assume responsibility for our lives. This might be why so many individualists and liberty-minded people are also deeply interested in the field of self-improvement and personal growth: One of the best ways to teach others that government force is not needed is to show how self-sufficient we can be without it.

Self-improvement author, entrepreneur, and podcast host Tim Ferriss once commented on his surprise that many of his listeners lean in the “libertarian” direction. While Ferriss’ show does focus a lot on entrepreneurship and investment advice, much of it is catered towards personal growth. And for many self-described libertarians, mixing market advice with tools for individual growth is ideal because it allows for voluntary advancement.

By focusing inward and improving ourselves, we set an example that others will want to follow. This is an overarching theme of Ferriss’ show. And when we lead by example, rather than by force, we have a greater impact on the world around us. But if we fail to seek personal growth, or dismiss it as unimportant or secondary to advancing liberty, we not only do a great disservice to the freedom philosophy, but also to ourselves.

As Leonard Read once said:

“There is really nothing that can be done except by an individual. Only individuals can learn. Only individuals can think creatively. Only individuals can cooperate. Only individuals can combat statism.”

And while this quote is beautiful on its own, I would add, “only individuals can better their circumstances.” The state likes to see itself as a benevolent helicopter parent, always there to make sure its people stay on track. But as many millennials have learned, helicopter parenting doesn’t work because it does not allow the individual to truly grow. Instead, they grow out of fear of disobedience, not out of genuine self-growth. For real growth to occur, the change has to be the choice of the individual. No one else can make such a personal decision for others. This is why rehabilitation efforts often fail unless the decision to seek treatment is voluntary.

But individuals can most certainly not achieve great things on a grander scale unless they have first made the decision to look within and better themselves before attempting to combat a beast as ghastly as the state. One of the first steps towards genuine self-improvement is realizing that you must take responsibility for your own actions and understanding that no one else is to blame for your own lot in life. And while this may sound simple, it is something many of us are not doing on a regular basis. 

Don’t Blame Others for Your Suffering

It is much easier to blame other people for our problems than it is to take personal responsibility and actually enact change in our own lives. But blaming other people for our lot in life makes us no better than the ideologues to whom we are opposed. Socialists, for example, frequently take refuge in their despair and misery, blaming capitalists and the wealthy for all of their problems in life.

If their neighbor is successful, these individuals immediately get angry and curse the heavens, blaming others for their own inability to succeed. But rarely do they look in the mirror and ask: “What could I be doing differently?” To even ask the question would be admitting that change was necessary. So instead, they stick to complaining about the treachery of inequality.

As I have written previously:

“According to their zero-sum Marxist mindset, the prosperity of others came at the expense of their own prospects. So they resented anyone more successful than themselves. And they became so preoccupied with dragging other people down that they had little energy left over for lifting themselves up.”

Once a person has determined that their problems are the result and the responsibility of other people, they are essentially throwing their hands up and admitting defeat. Or, put another way, they are refusing to be the masters of their own fate. This is the antithesis of individualism. And by blaming others, a person also stays completely stagnant in their own growth. No matter how badly you may want it, you cannot control the actions of others, so assigning blame and fault is a fruitless endeavor.

The true individualist understands this. He or she knows that even in the event that their neighbor had wronged them in some way, only the individual can better his own situation. If, to provide an extreme example, your neighbor had set your house on fire and then fled the scene, it would only worsen the situation to waste your time casting blame instead of doing all you could to extinguishing the flames.

This means taking responsibility for your own life, and in order to do this a person must stand back and take an honest look at their lives and pose the question, “what can I do to better my situation?” Therein lies the essence of self-improvement and self-government. Without the desire to better ourselves, our quest for self-governance will not be obtained. To create the world we want to live in, one where force is not relied upon to enact policy, we must show that we are capable of self-governance and be an example to others.

How Government Money Destroys Wealth, Health, Nutrition, Education And Civilization.

/in /by

A slow drain of the value of money over time is a slow transfer of wealth from those who hold money to those who produce it. The government produces money, whether printing their pieces of paper or conducting quantitative easing or creating credit at the overnight repo window. They declare their intent to make the money decrease in value by 2% every year. They can print unlimited amounts for themselves and their cronies, while you and I, who can’t produce money but must use it and hold it, face a guaranteed loss of value.

In The Bitcoin Standard, a book about Bitcoin as a decentralized alternative to central banking, Prof Saifedean Ammous starts his argument from this point. Clearly, the government has great power over us when it can rob us of a guaranteed 2% of our money every year. It is as a result of this process that the dollar in our pocket is almost worthless compared to its value in 1913, when the central bank embarked upon this long journey of declared robbery.

But the problem is far worse than the guaranteed annual theft of 2% of our wealth.

Allowing a sovereign the control of the money can only lead to them increasing their control of everyone’s life. Civilized human living itself rests on the integrity of money providing a solid foundation for trade and capital accumulation.

Professor Ammous lists several examples of the cultural, sociological and political depredations due to government money.

Government Control

Government control of money has turned money from being the reward for producing value to the reward for obedience to government officials.  It is impractical for anyone to develop wealth in government money without government acceptance. Government can confiscate depositors’ money from the banking monopolies it controls, inflate the currency to devalue holders’ wealth, and reward it to the most loyal of its subjects, impose draconian taxes and punish those who avoid them, and even confiscate other wealth that citizens hold.

Fiat currencies reduces people’s sovereignty over their wealth and leaves them helpless in the face of the slow erosion of the value of their money as central banks inflate the money supply to fund government operations. It becomes increasingly impractical to accumulate capital and wealth without the permission of the government issuing that money.

It is government’s ability to finance its operations through inflation that allowed for the birth of the heavily interventionist managerial state, with all its associated totalitarian and authoritarian tendencies.

Sound money, not controlled by government, is an essential requirement for individual freedom from despotism and repression, as the ability of a coercive state to create money can give it undue power over its subjects, power which by its very nature will attract the least worthy, and most immoral, to take its reins.

Economic Depressions

The cause of the Great Crash of 1929 was the diversion away from the gold standard in the post WWI years, and the deepening of the depression was caused by the government control and socialization of the economy in the Hoover and FDR years.

Currency manipulation emerged as a tool of trade policy between governments who deserted the gold standard in order to print unlimited amounts of their own money; trade barriers were erected, with disastrous consequences. Loud and violent nationalism followed.

War And Militarism

In Keynesian economics, spending is deemed the driver of the economy, and when consumers are saving too much and not spending enough, in the eyes of the Keynesians, the government must step in and do the spending. All spending is spending, in this naïve economic thinking, and so it does not matter if the spending comes from governments mass murdering foreigners. It all counts in aggregate demand. In fact, Prof Ammous describes government’s standard economic war policy as “violent militant Keynesianism”.

Politics

In the presence of unlimited fiat money to finance government, political differences between parties disappear as politics no longer contains trade-offs, and every candidate can champion every cause.

Democracy becomes a mass delusion of people attempting to override the rules of economics by voting for politicians who promise a free lunch, and being manipulated into violent tantrums against scapegoats whenever the bill for the free lunch arrives via inflation and economic recessions.

Education

The academic system is completely corrupted by government money. Government schools become propaganda mills, where the curriculum is not determined through its accordance with reality, but through its accordance with the political agenda of the government funding it.

In academia, professors spend very little time and effort on the teaching and mentoring of students, focusing most of their time on publishing unreadable research to get government grants and lucrative government consulting and projects.

Big Companies, Bad Food

In a world where central banks allocate credit, both directly and through its captive monopoly banks, the larger firm has an advantage in being able to secure funding at a low rate that its smaller competitors cannot get. This helps explain why large-scale food producers proliferate so widely around the world, as their lower interest rates allow them to finance growth and bloat.  The triumph of mass produced, highly processed junk food cannot be understood outside the effects of large scale that government money affords to producers.

Decivilization

Sound money protects value across time, which gives people a bigger incentive to think of their future – to lower their time preference – and to save and invest in order to accumulate capital, increase production and elevate the quality of life for all. The lowering of time preference is what initiates the process of human civilization and allows for humans to co-operate and live in peace.

Government money has the opposite effect. It increases time preference, and lowers incentives to save and invest. It reverses the process of civilization.

Bitcoin Is The Workaround

Friedrich Hayek believed that there will never be good money again until it is taken out of the hands of government. “All we can do is by some sly roundabout way introduce something that they can’t stop.”

Bitcoin.

 

Photo by Pepi Stojanovski on Unsplash

Apps, Devices And The Cloud Transform Static Knowledge Into The Dynamic Practice Of Knowing.

/in /by

What do you know? It’s a fundamental question for each of us as we navigate our way through an uncertain future of work. Until recently, we have tended to view knowledge as an object, a lump of information we carry in our brains. We used to think that the lump of information was mostly assembled during the educational years of our youth, and we carried the lump forward into the world of work. We emerged from that period with certificates to validate our own knowledge lump. Perhaps we added some experience to it over time, but that was polish on the surface more than additions to the core.

Lifelong Learning.

This attitude is undergoing significant change in today’s world. There is increasing recognition of the role of lifelong learning in navigating a career path or an entrepreneurial journey. A large part of the lifelong learning process is self-directed (although there are always experts and intellectuals around to write books and reports to tell you how it should be done). Self-direction is a vital navigational asset; the self-directed individual can make choices to accumulate knowledge in many fields at different points in life, as opposed to following a straight line of development dictated by an employer or professional body or a brick-and-mortar institution.

Technology, of course, is an influencer and enabler. The Web 2.0 concept of multi-sided platforms, user-generated content, dialogue and virtual communities is highly adducive to learning on the go. Online universities, online certification, digital badging and commercial applications like LinkedIn Learning all give testimony to the availability of learning at any time, in any place, and at any point in life.

From Knowledge To Knowing.

But there is one more step to go before we fundamentally change the use of knowledge in society. That is to shift our thinking about knowledge from a static object (albeit available for download at many different times during our life path) to an activity or a service. We have to learn to think not about knowledge but about knowing: knowledge-in-action, typified by continuous real-time knowledge acquisition and knowledge processing in daily life. This is a post-humanist perspective because devices, electronic storage and access / retrieval, as well as algorithmic analytics, change the nature of our relationship with knowledge. Knowledge is everywhere; it’s an ecosystem. It’s shared. Knowing is a practice at which we can each improve our capability. Digital entrepreneurs, through new knowledge practices, are creating new ways of developing, diffusing, and using knowledge and the new ways to generate and promote innovation.

Knowledge In Action.

As consumers of knowledge, we can no longer be passive. We must engage in the practice of knowing as a device-equipped actor. We can share information about ourselves to give the knowledge entrepreneurs more context, and enable them to deliver knowledge that is more meaningful to us. In return, we’ll get more comprehensive situational awareness, we’ll get better contextual knowledge extracted from the cloud of data, we’ll get help in crafting a thoughtful knowledge-in-use experience to clear away ambiguity and pinpoint the truth, and we’ll get help to make timely and informed decisions.

Books As A Service.

Books provide a very simple and basic example. Historically, books have been lumps of knowledge, physically delineated by their form. The printing press was, of course, a wonderful innovation and, combined with transportation, enabled the spreading of ideas across wider geographies and maybe even at faster speeds than had ever been the case before. Books didn’t change their form for hundreds of years, and neither did the practice of extracting knowledge from books.

Today, books are transformed into a knowledge service. They’re available in digital form, which provides infinite reach and open accessibility. They’re searchable, and can be digitally annotated so that the ideas they stimulate can also be captured and shared, and summarized and trended and analyzed. They can be downloaded into Kindle software that runs on multiple devices, and the content, as well as an individual reader’s notes and comments and highlights, can be shared. The written content can be transformed into audio, multiplying the number of times and locations for content consumption and learning.

A simple app like Blinkist opens up more dimensions of freedom to enjoy great books and great content. Blinkist offers a subscription service that enables users to search for books by title, author and theme. You can assemble your own library, start a wishlist, and keep your own highlights in one place. You can read online or buy a physical book or use audio. Blinkist also offers “blinks”, brief summaries of the book’s meaning and impact – why it’s important or useful or entertaining – so that you can assemble some summary “blinks” in your mind while pursuing a broader theme across multiple authors and their works.

Knowledge In The Socio-Technical Era.

These socio-technological innovations – the combination of humanism and technology and devices – are changing the nature of knowledge from knowledge-as-an-object to knowledge-as-a-service. The service is available to us for our entire lives, at every point in time and every place on the planet. Unlimited knowledge awaits us. Lifelong learning is a practice we can all embrace to tap that knowledge.

 

Full disclosure: If you subscribe to Blinkist by clicking the link in this post you should find a $20 off promotion, and you’ll be supporting Center For Individualism.

 

 

Write for CFI