Leading the Revival of Individualism & Self Reliance
Human Action

The Austrian Champion of Laissez-Faire Human Action and the Micro-Economic Decisions of Individuals

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All Poetic Justice Warriors share common character traits, not the least of which is that they are magnificent exponents for human action. But perhaps no one has lionized the ideal of human action more than the Austrian economist, Ludwig von Mises, whose signature publication is his book, Human Action. As economics professor Peter Leeson says about Human Action, “In my opinion it is the most important book on economics of the twentieth century and quite possibly the most important book in economics, period.”

Human Action

Human Action is Mises’ signature achievement. In it, he single-handedly constructs and preserves the so-called Austrian School of free market individual economics in the face of Communism, Socialism, Interventionism and Keynesianism. And economics professor Hans Sennholz continues:

In the world of economic literature, Human Action now holds the position which Adam Smith’s Wealth of Nations used to occupy. It is the science of every kind of human action. It applies to all ends and all means, both material and ideal, the sublime and the base, the noble and ignoble.

In it, Mises built on the foundations of classical and Austrian school economists to expand the science by presenting a general theory of individual choice and individual preference in all human action. But the best megaphone for Mises’ contribution to Western Civilization is Mises himself:

We conceive what incentive induced people not to consider themselves simply as rivals in a struggle for the appropriation of the limited supply of means of subsistence made available by nature. The factor that brought about primitive society and daily works toward its progressive intensification is human action that is animated by the insight into the higher productivity of labor achieved under the division of labor.

Economist Murray Rothbard adds to Mises insight: “Human Action was indeed about everything. The book was a revelation to those of us drenched in modern economics. It provided an entirely new and superb structure of correct economic methodology and theory.” Or as Mises explains, “Economics is life.”

A Life of Reason, Purpose, and Pride

Human Action was published in America in 1949, and like any monumental achievement, it was the result of a lifetime of work and challenges. In his treatise published in 1927 titled Liberalism, Mises compared the instability caused by government economic intervention, the impossibility of socialism, and the ideal of laissez-faire capitalism. And Mises knew of which he spoke, for in the inflationary aftermath of World War I, he was the economic advisor to the Marxist Socialist leader of Austria, Otto Bauer, and Mises dissuaded Bauer from joining the Bolshevik cause that he and his wife were so enamored with. As Mises later put it:

Everyone was so convinced of the inevitability of the coming Bolshevism that they were intent merely on securing for themselves a favorable position in the new order. The Catholic Church and its follower, the Christian Social Party, were ready to welcome Bolshevism with the same ardor that the archbishops twenty years later welcomed Nazism. Bank managers and industrialists hoped to earn a good living under Bolshevism.

Five years prior to Liberalism, Mises published his book titled Socialism and stated,

The advocates of socialism came up with the absurd recommendation of substituting equations of mathematical catallactics, depicting an image from which human action is eliminated, for the monetary calculation in the market economy.

Here Mises made the definitive case that central planning for the allocation of scarce resources was not only inefficient, it was impossible. Only markets can perform this allocation. Ever since Mises – and only because of Mises – all parties have conceded that Socialist economics is impossible to execute, and therefore all Socialist promises, dreams and wishes are false.

By 1934, Mises became aware of the impending Nazi threat to his beloved Austria and accepted a position at the Graduate Institute of International and Development Studies in Switzerland. And when Germany conquered France in 1940, he and his wife Margit left everything behind and arrived in New York City virtually impoverished. During this period, Keynesian economics had been adopted by the American socialists in government and academia, and socialism and Nazism were taking over Europe.

Capitalism, The Unknown Ideal

While destructive wars and accelerating statism were swallowing up 20th century Western Civilization, and the spirit of his free market colleagues, Mises ever remained the Poetic Justice Warrior – a battle that may have seemed hopeless. In 1956 he published a short book, The Anti-Capitalistic Mentality, which is a wonderful and startling defense of capitalism’s economic democracy – startling only to those who vilify economic freedom. Or as Andy Duncan writes:

Via the pages of this book, Mises had told me the truth about life, the universe, and everything. He’d tumbled the monuments in my mind, to Marx, by taking a wrecking ball to them. This book essentially details the societally destructive power of human envy. Like a fine Bossa Nova dancer in perfect tune with his own epistemological theory, Mises slices and slashes at the tenets of Marxism until there’s nothing left but malevolent dust.

What Mises does is ask and answer the basic questions that are rooted in socialist envy, for example:

The greater the amount of capital invested per head of the worker, the more and the better goods can be produced and consumed. This is what capitalism has brought about and brings about daily anew. Yet, most present-day governments and political parties are eager to destroy this system. Why do they all loathe capitalism? Why do they, while enjoying the well-being capitalism bestows upon them?

The sternness of capitalism consists in the fact that it handles everybody according to his contribution to the well-being of his fellow men. To each according to his accomplishments, does not allow of any excuse for personal shortcomings. They loathe capitalism because it has assigned to this other man the position they themselves would like to have. Such is the case with those people who are commonly called the intellectuals.

The Root of Money and Integrity

In 1912 Mises published his first monumental book, The Theory of Money and Credit, which integrated broad market economics and individual human action. As Rothbard explains, “he transformed monetary theory from an unrealistic and distorted concentration on mechanistic relations between aggregates, to one consistent with the theory of individual choice.” Mises’ achievement was to highlight the micro-economic decisions of individuals as being the root cause of wealth creation and economic stability, not government policy and their econometric models.

Prior to this book, Mises published three articles about foreign exchange and the integrity of the gold standard, and he exposed central banker’s preference for inflation, low interest rates, and low exchange rates. He became convinced that fiat currency and monetary inflation were responsible for balance of payments deficits, not the other way around, and that it incentivized graft by policy makers. As Rothbard tells us:

Perhaps, if the public had been informed of the corruption that almost always accompanies government intervention, the activities of the statists and inflationists might have become desanctified, and Mises heroic and life long struggle might have been more successful.

In fact, according to historian Dr. Earlene Craver, Mises was denied professorships because he was a laissez-faire liberal in a world of big government interventionists, and he was unwilling to compromise his principles. Mises’ steadfastness to truth can be found in his motto from Virgil’s Aeneid. “Do not give in to evil but proceed ever more boldly against it.” Spoken like a proud Poetic Justice Warrior.

 

 

A Querulous Economist Asks Eight Questions That Expose The Dubious Assumptions And Inconsistencies Of His Science.

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We favor economics over politics because we feel that, as a discipline, it promotes thought processes based on reason and principle. Professor Don Boudreaux is a prominent economist, who can be quirky and provocative, and is not afraid to confront his discipline with hard questions. The following article is his, except that he labeled the questions simply 1 through 8. We have given them titles. Hopefully, the combination provides food for thought.

In his splendid tribute to the late economist Harold Demsetz, Richard Epstein observed that “the genius of Harold Demsetz did not lie in his finding the definitive answer. It lay in his ability to ask the right questions and to spin a powerful theory for others to expand and criticize.”

Chief among the many traits that made Demsetz one of history’s greatest economists was indeed his ability to ask questions that exposed the inconsistencies and dubious assumptions that are often at the core of theories that appear on the surface to be unassailable. And while few can hope to match Demsetz’s genius at performing the task, economists should devote much more time to asking questions of the sort that he asked.

Because the job has been done so well by Epstein, and also by my colleague Pete Boettke, my purpose here isn’t to review Demsetz’s contributions. Instead, I will pay my respects to Demsetz by offering a list — partial, to be sure — of questions that should be asked more frequently.

Question One: When Economics Decries Monopolies, Why Do We Grant The Federal Reserve The Uniquely Damaging Privilege Of A Monopoly Over The Supply Of Money?

We rely on competitive markets to supply us with “correct” quantities of goods and services ranging in importance from chewing gum to industrial chemicals, and from pedicures to petroleum. So why do we not rely on competitive markets to supply us with the “correct” quantity of money?

Suppose that a politician today were to propose the creation of a Federal Bakery with a nationwide monopoly power to bake bread, and to be in charge of supplying Americans with what a council of expert bakers determines to be optimal quantities of bread. Such a proposal would rightly be dismissed as kooky. Yet too few people question the asserted need for a central bank with monopoly power to supply money. Too few people ask how a handful of political appointees can possibly divine what is the optimal quantity of money.

Question Two: Why Do We Give The Federal Government The Unjustifiable Privilege Of Breaking Up Companies They Dislike Because Of Their Market Position?

History offers not a single instance of a firm, unprotected by government-erected entry barriers, that has used its large size or “dominant” market share to harm consumers. So why do many economists, pundits, and government officials continue to believe that the state must possess the power to regulate, or even to break up, firms simply because some particular firms are today large or “dominant”?

Further, because there is no evidence of consumers ever being harmed when privately owned firms merge with each other horizontally (that is, with rival firms) or vertically (that is, with suppliers or with customers), why do antitrust authorities retain the power to block such mergers?

Question Three: Why Do We Permit The Federal Government To Dictate Both Our Current Income Via Taxes And Our Future Income Via Confiscation For Social Security?

The U.S. government proves repeatedly that it is fiscally imprudent; year after year it spends far more than it receives in revenue. So why do Americans meekly agree to let this reckless spendthrift regularly confiscate a portion of their pay for the alleged purpose of ensuring that each working American saves enough for his or her retirement? If the government cannot keep its own fiscal house in order, why should we trust it to second-guess and to override the fiscal decisions made by each private household?

Question Four: Why Can’t Economics Help Americans Calculate The Benefits Of Legal Immigration And The Detriments Of Illegal Immigration?

No one denies that America is a nation of immigrants, or that immigrants who came to America in the 17th, 18th, 19th, and 20th centuries built a great and prosperous nation. So given that immigration to the U.S. in past centuries was such a boon, why is immigration to the U.S. in the 21st century assumed by so many Americans to be a bust? And if Americans’ fears in the past of new immigrants have always proven to be unwarranted, isn’t it highly likely that such fears today are equally unwarranted?

Question Five: Why Can’t Economics Differentiate Between Immigrants Who Contribute And Those Who Take?

Speaking of immigrants, the U.S. government goes to great lengths to prevent many of them from working. So how credible are expressions of concern that large numbers of immigrants come to the U.S. in order to live at the expense of American taxpayers through the American welfare state?

Question Six: Why Can’t Economics Do A Better Job Of Helping Americans Understand The Benefits Of Free Trade?

We rightly applaud when our neighbor across the street saves his dollars to start a new company in Tempe or Toledo, or to supply resources for improving the operation of a business in Fargo or Fayetteville. So why do we protest — as we do whenever we protest so-called U.S. trade deficits — when our neighbor across the ocean saves her dollars to start a new company in the U.S. or to invest in existing American companies?

We would all look with grateful wonder at a machine called an “amaizer” that turns American-grown corn into goods such as (depending on our particular desires) cars, clothing, and steel. So why do many of us look with ungrateful anxiety at a machine — also one that turns American-grown corn into the likes of cars, clothing, and steel — called a “cargo ship”?

Question Seven: Why Have Economists Permitted The Disease We Call Politics To Infect Economics With The Evil Language Of Winners And Losers?

No one says that the competition of firms in South Carolina with firms in Alabama is socially beneficial only if the “winners” of this competition compensate the “losers.” So why do some economists and pundits assert that the competition of firms in, say, South Korea with firms in America is socially beneficial only if the “winners” compensate the “losers”?

Question Eight: Since Politics Is Clearly The Most Stupid, Wasteful And Mendacious Activity, Why Don’t Economists Do A Better Job Of Pointing That Out?

And finally these questions: How can any person above the age of six listen to the campaign speeches of politicians and not understand that her intelligence has been deeply insulted? How can such a person, upon hearing a homily delivered by the typical political-office seeker, conclude that politicians can run her life and spend her money better than she can?

 

Professor Boudreaux’ article first appeared at aeir.org 1-23-19 with the title Eight Questions We Should Be Asking About Economics.

 

How The Envious, The Ignorant, And The Jealous Try To Ram A Poisoned Stake Into The Heart Of Capitalism.

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Back in 1998, I was working in the filthy world of trade. I’d received this book from Mises.org one morning and had to wait until lunchtime before I could read it. I then sat in my car in a dreary supermarket car park and opened it up. It took less than an hour to get through. However, the clarity, the penetration, the directness, the sheer thrill of all those dense scales falling from my eyes melted my mind. Who was this Mises? And why had he made me feel so very uncomfortable?

Via the pages of this book, Mises had told me the truth about life, the universe, and everything. He’d tumbled the monuments in my mind, to Marx, by taking a wrecking ball to them.

This book essentially details the societally destructive power of human envy. Like a fine Bossa Nova dancer in perfect tune with his own epistemological theory, Mises slices and slashes at the tenets of Marxism until there’s nothing left but malevolent dust.

He begins with the social characteristics of capitalism and the psychological causes of its vilification. Although almost every line on every page could be quoted, Mises first of all defines the wonder of the capitalist system:

The profit system makes those men prosper who have succeeded in filling the wants of the people in the best possible and cheapest way. Wealth can be acquired only by serving the consumers. The capitalists lose their funds as soon as they fail to invest them in those lines in which they satisfy best the demands of the public. In a daily repeated plebiscite in which every penny gives a right to vote the consumers determine who should own and run the plants, shops and farms.

However, when capitalism came in, a lot of people hated this new way of doing things, particularly those who’d had feudal sinecures, guild privileges, and so on. Competition can make life painful. Ask anyone who’s lost a prized lover to someone else. It hurts. And so a multi-century war began between those who’d once had landed privileges gifted upon them, and the capitalists, who used free markets to strip away those privileges.

After the feudal age, capitalism produced such plenty and such wealth that many also began to take it for granted. We see this of course today, with gentrified socialists toting iPhones and business class flight tickets to Bali. They lack any idea as to where all this wealth came from. It’s just there when they wake up in the morning and if they do think about it at all, they think it’s just part of nature. However, nature actually used to exist for all of us as dire poverty, with most of us scrabbling around with sticks trying to scare away big cat predators from the remains of hunted carcasses. Vultures used to come before us in nature’s pecking order.

In this this new post-feudal world, people now had to survive on their wits and their merit, but most of all, on their ability to happily satisfy the needs of others. And when you come up short on such abilities, or wish to engage in leisure pursuits rather than serving the needs of others, then you’ll go without. And whose fault is this? Is it you, the worthy and perennial cognoscenti who wishes to dedicate your important life to studying Proust, or is it the fault of the evil capitalists?

Another better man comes along and takes away your business with better products and lower prices. Others love him and you become relatively poorer as a result. Is it because of your failings in comparison to him or is the fault of the evil capitalists?

These uncomfortable questions about your relative failure continue to pour out, but the answer always stays the same. I am perfect. Capitalism is evil.

In this initial section, Mises then moves away from the common man’s experience and explains a ruling elite’s hatred of capitalism:

The wealth of an aristocrat is not a market phenomenon; it does not originate from supplying the consumers and cannot be withdrawn or even affected by any action on the part of the public. It stems from conquest or from largess on the part of a conqueror. It may come to an end through revocation on the part of the donor or through violent eviction on the part of another conqueror, or it may be dissipated by extravagance. The feudal lord does not serve consumers and is immune to the displeasure of the populace.

Mises then cascades through group after group and explains why and how they became anti-capitalistic, including the intellectuals, the limousine liberals, and the politicians, to name but a handful. A fun section bubbles up when he investigates the perennial socialistic attitudes of the entertainment profession, particularly as exemplified by the celebrities of Hollywood, where an eternally fickle market can turn you from a megastar into a former has-been on the strength of one poor box-office performance.

On the surface, it may seem strange why a member of such an outwardly wealthy group can espouse communism from inside a gated palatial mansion, usually while drowning in champagne and dollar bills at the same time. However, Mises explains it beautifully. To summarise, Mises believes envious ignorant jealousy defiantly tries to ram a poisoned stake into the heart of capitalism.

He then moves on to deal with how ordinary people perceive capitalism.

Before doing so, he sets out how capitalism achieved such enormous productivity improvements in global wealth, as compared to the feudal age:

The characteristic feature of the market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes – those saving, those investing the capital goods and those elaborating new methods for the employment of capital goods – to the nonprogressive majority of people.

He points out how most people remain unaware of how wealth generation works. Most simply put it down to inevitable human progress. As basic human nature constantly drives us to be inevitably dissatisfied with even an immediate improvement over a current situation – a state which Mises applauds as being absolutely necessary for constant economic improvement – these dissatisfactions almost invariably get blamed on capitalism.

A man may have a 12-inch black-and-white television. Then he hankers for a 20-inch colour television. He achieves this, but his neighbour instead buys a 48-inch flatscreen, which the first man may feel unable to afford. Obviously, the unworthy hand of evil capitalism has generated this unbearable situation!

Of course, to add to this, the political elite classes, who hate capitalism even more, take this basic societal dissatisfaction and then massage it with all the vindictive tools at their disposal. Or as Mises puts it:

We are all socialists now. But today governments, political parties, teachers and writers, militant anti-theists as well as Christian theologians are almost unanimous in passionately rejecting the market economy and praising the alleged benefits of state omnipotence. The rising generation is brought up in an environment that is engrossed in socialist ideas.

We now move on to what I consider the most interesting part of the book. Here, Mises elaborates upon the mass market for literary products to help further explain how an undercurrent of Marxist cultural subversion has constantly eroded a once fervent general belief in classical liberalism.

For instance, because capitalism gets formed from a crucible of pure evil, the often murderous perpetrator in many detective stories must have made his fortune through decadent evil means too, devilishly exploiting the innocent and the good along the way. Thus, capitalism gets literally equated in such stories with murder. Or as Mises puts it:

The detective story debases the plot and introduces into it the cheap character of the self-righteous sleuth who takes delight in humiliating a man whom all people considered as an impeccable citizen.

While you’re still breathing, Mises then tackles the non-economic objections to capitalism. These intertwine themselves from two completely opposing ideas. The first anti-materialistic one decrees that the products of capitalism, for example, a 48-inch flatscreen television, fail to make people intrinsically happy. Mises acknowledges this. But it’s hardly capitalism’s fault, he says, that people desire such material things, which capitalism then dutifully produces for them. Yes, they may desire a 72-inch flatscreen television as soon as the 48-inch one is delivered, but without capitalism, most people would slave away as serfs in a medieval field picking turnips with a spike.

The second contradicting pro-materialist argument, projects that capitalism encapsulates evil because in a perfect world, a large flatscreen television would get delivered on the same day to everyone in the world. Mises thinks this nonsensical social justice view spins out from a distorted mental impediment:

Changes in human conditions are brought about by the pioneering of the most clever and most energetic men. They take the lead and the rest of mankind follows them little by little. The innovation is first a luxury of only a few people, until by degrees it comes into the reach of the many. It is not a sensible objection to the use of shoes or of forks that they spread only slowly and that even today millions do without them.

After exploring both of these important and totally contradictory hypotheses, Mises then works through the usual religious resistance to capitalism – as exemplified by the current Pope – along with a whole smorgasbord of other related historical and cultural hangovers from the past, most of them gumming up the otherwise smoothly operating gears of capitalism.

In the book’s final section, Mises conclusively writes a passionate defence of both freedom and classical liberal thinking:

In the universe there is never and nowhere stability and immobility. Change and transformation are essential features of life. Each state of affairs is transient; each age is an age of transition. In human life there is never calm and repose. Life is a process, not a perseverance in a status quo. Yet the human mind has always been deluded by the image of an unchangeable existence. The avowed aim of all utopian movements is to put an end to history and to establish a final and permanent calm.

He also sticks a finely-tooled Viennese artillery officer’s riding boot into the pampered derriere of our common enemy, the Leftist intellectuals:

The vain arrogance of the literati and the Bohemian artists dismisses the activities of the businessmen as unintellectual money-making. The truth is that the entrepreneurs and promoters display more intellectual faculties and intuition than the average writer and painter. The inferiority of many self-styled intellectuals manifests itself precisely in the fact that they fail to recognize what capacity and reasoning power are required to develop and to operate successfully a business enterprise.

Anyhow, I hope that’s enough to at least provide you with a flavour of this magnificent little book. Unless you’ve done so already, I strongly advise you to download it and to take it out for a quick spin around the block. Though do try to pick somewhere nicer than a supermarket car park to read it. Make it somewhere glorious instead, such as the top of a spine-chilling mountain or a splendid beach-side restaurant in the Mediterranean.

This book forms a quark-condensed version of Mises at his absolute finest!

Andy Duncan is an expert on financial derivatives and lectures on the topic in New York, London, Dubai, and Singapore. This article first appeared at mises.org.

How Much Of Your Economic Freedom Do You Want To Preserve? Democrats Aim To Double The Size Of Government.

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Leading Democrats are pushing an agenda that would more than double the size of the federal government. This comes as a new Gallup Poll finds that the public views government as the most important problem facing the country today.

Gallup regularly asks what are the biggest problems facing the country today. The latest shows “government” well in the lead, with “immigration” No. 2.

Another Gallup poll finds that, despite all the focus on left-wing celebrities like Alexandria Ocasio Cortez, the country remains far more conservative than liberal — with 35% saying they are conservative compared with 26% who are liberal. The rest fall in the middle.

More ‘Socialist’ Than Sweden

Nevertheless, many in the Democratic Party are rushing to embrace policies that would, if enacted, result in government controlling a bigger share of the U.S. economy than “socialist” countries like Sweden or Norway.

There’s no doubt that each of these proposals has a bumper sticker appeal: “Medicare for all,” “universal Pre-K,” “universal free college,” “guaranteed jobs,” “paid family leave,” expanded Social Security benefits, a federal $15 minimum wage. They all poll well, at least.

But the costs to implement any one of them would be staggering. “Medicare for all,” for example, would cost, conservatively, $32 trillion in its first 10 years. The “guaranteed jobs” price tag is about $7 trillion over a decade. Universal Pre-K: $150 billion. Free college: $750 billion. The “Green New Deal” — untold billions.

When the Manhattan Institute added up the cost of this expansive agenda, the price tag totaled $42.5 trillion over 10 years, or roughly $4.2 trillion a year. And that’s likely a lowball estimate, since government programs almost always end up costing far more than expected.

Exactly how big is this tab? Well, consider that in 2018, the federal government spent a grand total of $4.1 trillion.

So, we are talking about more than doubling the size of the federal government.

58% of GDP

It would result in the federal government controlling more than 40% of the nation’s GDP. When you add in state and local spending, the result would be that government would control 58% of the nation’s economy.

That’s a bigger share than supposed socialist role model countries like Finland, where government spending accounts for 57% of that country’s economy, Sweden (49%), Norway (48.8%), the Netherlands (44.5%), or the U.K. (42%).

In fact, this Democratic agenda would, if enacted, result in a bigger government than any of the other 35 industrialized countries in the Organization for Economic Cooperation and Development. So much for Democratic President Bill Clinton’s declaration that “the era of big government is over.”

What would it take to finance a government of this magnitude?

225% Tax Hike

As it stands today, federal tax revenues are about 17% of GDP. That’s about the average since World War II, despite the myriad changes in the tax code over those years.

To pay for those new programs — without adding to the already nearly $1 trillion in annual deficits — would require a 225% increase in federal taxes.

However appealing this agenda might sound. It would constitute economic suicide.

 

This editorial first appeared at Investors Business Daily (https://www.investors.com) on Jan 18th, 2019

To Maintain Economic Progress, We Need More Entrepreneurial Innovation.

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Each of us seeks economic progress, both individually and for society. Economic progress is different than economic growth, even though that’s what the government peddles. Economic growth is a quantitative concept, captured in government accounting as increased consumption. Economic progress is qualitative: a subjective feeling about the quality of life we lead and our anticipation for its future improvement.

America’s new democratic socialists promise more social justice and a higher level of consumption for all. They think that more government intervention, more taxation, more redistribution and more control over business can achieve their goals. The opposite is the case. In order to provide both better living standards and economic progress, entrepreneurial innovation is required.

Among other errors, the democratic socialists make the mistake of believing in a simplified productivity theory of capital: that accumulating savings and investment and a higher capital stock raises future investment yields, no matter whose hands they are in.

But without entrepreneurs, capital is dead. It takes entrepreneurs to bring capital to life and keep it alive. Capital needs to be constantly renewed, to be put to innovative uses that improve lives and achieve the progress we all seek. Our pension savings will not ensure future wealth unless they get into the hands of the entrepreneur who – motivated by profits – can find new productive applications for them. Investing in stocks does not create more real capital. Most stock trades represent merely a rotation of ownership. It is true profit-generating entrepreneurial activity that creates future wealth and income. The future environment for entrepreneurial activity will determine whether savings are put to productive use, and the democratic socialists prefer to suppress, if not destroy, economic activity.

Can we count on our large corporations to deliver the innovation that is needed for economic progress? There is certainly a case to be made that they are constantly testing and marketing new ideas, new devices, new services and new service extensions. Amazon, Google, Uber and Apple and Microsoft and the rest of them are lowering our transaction costs which is an improvement to our lives and represents economic progress.

But there are many curses of bigness, and one of them is an inevitable slowing down of innovation. Bigness tends to lead to defensiveness in the protection of high market shares; corporations become reluctant to innovate with the risk-taking bravado that took them to prominence in the first place, because they begin to fear the destabilization of their own marketplace.

M&A is one way to protect high-share and quasi-monopolistic market positions, and is often defensive in style: bring the innovators in house and control them rather than let them disrupt from outside. And if a company’s large scale was built partially or completely with debt borrowed to make acquisitions (as if often the case with private equity funded firms), then innovation will tend to be even more suppressed, because free cash is diverted from investment in R&D to debt service.

Worse, it is often the case that our large corporations get closer and closer to government, making a deal to accept greater supervision (it keeps bureaucrats in long term jobs) in return for regulation that makes it harder for upstart innovators to enter protected markets.

Tim Wu, a Columbia law professor who wrote a book called The Curse of Bigness, explains one way in which this sidling up to governments works for big corporations. Let’s say a large corporation wants to make a defensive acquisition to acquire a competitor. They submit the proposal for merger review by the government. The government, in turn, issues a consent decree, which means that permission to make the acquisition is given, with conditions. It is the administration of the conditions of the consent decree that keeps bureaucrats in a job for years, perhaps decades to come. The acquiring company meets the goal of its merger, and the government gets to write more administrative law and to load up the pubic payroll with more bureaucrats. Here’s what Wu said in an interview with ProMarket.

Overall, I think consent decrees appeal to academic economists, but they have a bad track record. One problem with consent decrees is that you have the most talented attorneys and economists negotiating these on the government side, but once they’re done, they’re given to an enforcement bureau which is typically not heavily staffed. And sometimes it can be forgotten, and certainly not enforced with any kind of vigor.

Structural separation is self-executing. The blocking of mergers is self-executing. You don’t have to have the government constantly trying to make sure the thing is working. I think Europe has really gone down the wrong path in that direction.

Capitalism is a dynamic system, alway changing, always adapting, always innovating. That’s because consumers are always changing, always demanding better lives, and insisting on economic progress. Socialism certainly can’t deliver what consumers want, and big companies have a tendency to become defensive in the face of consumers’ unrelenting insistence on improvement. It is the entrepreneur who imagines the better future that consumers wish for, and, in the pursuit of profit, finds a way to deliver it by refreshing capital and putting it to new uses. No other system has this capability.

For more like this, see Why Capital Needs Entrepreneurs at mises.org, which was a source for some of this article.

Now Georgia Is Pursuing a “Netflix Tax” to Cash in on Digital Streaming. Is It Time to Worry?

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As always, the government is seeking to penalize innovation by taxing it rather than celebrating

When the private sector needs to generate more revenue, entrepreneurs innovate and create in order to draw in consumers and raise profits. When the government needs to generate additional revenue, they are left with only one option: Extort through fees and taxation. And after it has taxed everything feasibly within its grasp, it has to get creative.

California lawmakers have sunk so low, there is now a tax on fruit purchased from vending machines. It should be noted that regular fruit purchased at a store is not subject to this tax, only those purchased from a vending machine. Following this line of absurdity, Indiana has an instituted a candy tax on marshmallows. Maine has a fruit tax specifically on blueberries. Unfortunately, Georgia may be the next state to fall victim to absurd government attempts to generate revenue by taxing digital streaming services like Netflix and Hulu.

At the end of last year, California tried to pull a fast one on its residents when local policymakers attempted to levy a 4 percent tax on text messaging. Just weeks prior, Chicago became a target for criticism after PlayStation’s decision to begin enforcing the city’s new 9 percent amusement tax was brought to the public’s attention. While most were aghast at the lengths these states were willing to go to in order to create new taxes, local governments were taking notes.

This week, the Georgia legislature will reconvene for the 2019 legislative season, during which state legislators will discuss the merits of passing and instituting a new 4 percent tax on Netflix and other streaming services. The proposal comes just after Georgia residents saw a cut to their income tax rate. But instead of letting Georgians celebrate keeping more of their hard-earned money, the state has found a new way to use taxpayers to fund new initiatives.

The “digital goods and services” tax, as it is called, is being proposed by the state House’s Rural Development Council. In order to soften the blow to taxpayers, the state has plans to lower its current communications service tax, which levies a tax on cell phone usage as well as cable television services, down to 4 percent. However, between this tax and the new proposed tax on streaming services, this still results in an additional 8 percent tax for residents. And this is only in this one narrow “communications” sphere.

To make matters worse, the proposed tax will apply to a wide range of streaming platforms. It is likely that both video and music streaming services will fall under the new digital goods and services tax, though PlayStation appears to be safe—at least for now. Services like Amazon’s video and music streaming platforms, Spotify, Pandora, and Apple, however, will be included in the new tax.

Unfortunately, Georgia is not the only state to consider instituting a tax on digital services. Florida, North Carolina, Pennsylvania, and Washington have each imposed their own form of streaming tax on digital media, as well. Chicago’s aforementioned amusement tax is currently being fought by Apple on the grounds that it violates the Internet Tax Freedom Act, but it is unclear if the lawsuit will go anywhere.

Since many states, Georgia included, have seen slashes to their income tax rates recently, politicians have been looking for creative ways to make up for the loss in revenue. And since the world is becoming increasingly more digital, it has become pointless for policymakers to attempt to tax physical purchases from brick and mortar establishments. No longer can the government profit from consumers renting movies, for example, since physical movie rental stores are not as plentiful as they used to be. Instead, governments have begun seeking to institute new forms of sales tax—like taxing digital rentals from Amazon or iTunes. And it’s easy to see why they are going after digital streaming.

A CNBC All-American Economic Survey found that 57 percent of the public uses some form of streaming platform, making this a very lucrative area to tax. The same report noted that the increase in streaming helped propel the value of Netflix to $124 billion, up from $63 billion just a year earlier. The surge in valuation occurred even though Amazon emerged to challenge Netflix. Reports suggest that now Walmart is looking to move into the digital streaming space.

The concept of taxing digital platforms might be a brilliant idea, really, if it wasn’t so slimy in nature. A tax on digital streaming is a tax on innovation itself.

Georgia is still largely a fiscally conservative state, so it is unknown as to whether this legislation will pass. However, it does appear to have the backing of House leadership. Senate Finance Committee Chair Chuck Hufstetler (R) told Bloomberg Tax:

It is controversial, but the world is changing. I don’t want that loss of sales tax that we’re seeing to mean a greater income tax. We’ll have to look at the details.

Hufstetler and others assert that instituting this tax would actually allow the state to make further cuts to the income tax rate. But this doesn’t seem to make a whole lot of sense since residents are unlikely to save any money if what they save in income taxes is made up with a higher sales tax. In 2018, the legislature approved cuts that lowered the income tax rates from 6 percent to 5.75 percent. The plan is for the income tax rate to be slashed even further, to 5.5 percent, by 2020.

Last year, a similar digital streaming tax was proposed and ultimately rejected by the state legislature, but that obviously doesn’t mean they haven’t kept trying. House Ways and Means Committee Chair Jay Powell (R) defended the state’s new tax push by saying that it isn’t new at all but rather a reframing of previously instituted taxes:

I think there’s an increasing awareness that we’re really not talking about new taxes. We’re talking about a market that has converted tangible personal property that historically has been subject to sales tax into a digital format.

As always, the government is seeking to penalize innovation by taxing it rather than celebrating it.

Sure, the state of Georgia might think its quest to raise revenue worthy since the money is supposedly going towards rural development, but the road to hell is paved with good intentions.

Each time a new tax is proposed, it is justified as going towards helping the “greater good” in one way or another. In California, the text messaging tax, which has since been abandoned due to the FCC’s influence, was supposed to go into a fund that is used to help lower-income earners pay for public utilities. In Seattle, a proposed “tax on jobs” sought to levy a tax on each worker employed by companies like Amazon. The revenue generated from this tax was supposed to go toward fighting homelessness.

Both of these taxes have respectable ends, but taxing anything that moves is not the answer to funding any project or initiative lawmakers might dream up. In Georgia, the push to tax streaming services has been justified through the promise of rural development. Legislators have already said that rural development is to be a focal point of this year’s legislative session, so it is possible that this bill might pass due to the popularity of the issue.

However, before Georgia goes approving any new taxes, legislators should take a closer look at what has happened with other tax increases with noble ends.

In 2015, Atlanta voters agreed to a tax increase of $250 million with the explicit purpose of using that money to fix outdated or broken infrastructure. Since that time, additional taxes have been levied for the same purpose, costing the taxpayers a total of $630 million. However, the government is now saying there is no money to complete the project. Even though taxpayers already paid greatly, the project is still more than 25 percent underfunded, leading many to wonder if the money was mismanaged.

No matter how admirable their many proposed projects and initiatives may be, it does not justify the imposition of new taxes. This is especially true for a state that has already proven itself incapable of managing taxpayer dollars.

The Uniquely American Self-Made Man

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Is there really such a thing as a self-made man or woman? The common wisdom of the progressive left is no, as famously expressed by President Barack Obama when he said “you didn’t build that.” Obama went on to say that anyone’s success is because of the circumstances created by government policy and government spending. This implies that everyone has a duty to government service, and even worse, it implies that successful people have a duty to “give back.” To believe this drivel is to ignore two facts – that self-made men and women pay for everything, and that our government exists by the consent of the governed.

These are the self-made men and women who gave us the most free and comfortable living standards the world has ever known. Yet we owe them no duty, just admiration and gratitude. Frederick Douglass is the Poetic Justice Warrior who epitomizes this, and who created and delivered the Self-Made Men lectures in 1872.

If not ourselves great, we like to explain why others are so. We are stingy in our praise to merit, but generous in our praise to chance. Besides, a man feels himself measurably great when he can point out the precise moment and circumstance which made his neighbor great. He easily fancies that the slight difference between himself and his friend is simply one of luck.

Perhaps no one in American history has a better claim to the title self-made man than the one who escaped slavery to become one of the America’s greatest anti-slavery activists, and an author, lecturer, and diplomat.

The Self-Creation Process

The Self-Made Men lectures celebrated heroic figures who rose from obscurity through their own hard work. Douglass referred to engineers, poets, political revolutionaries, and industrialists. “If they climbed high, they built their own ladders.” But Douglass also acknowledges the role of contemporaries and predecessors in helping everyone create their own fortunes.

Properly speaking, there are in the world no such men as self-made men. We have reaped where others have sown, and that which others have strewn, we have gathered. The brotherhood and inter-dependence of mankind are guarded and defended at all points.

Yet, this does not diminish the idea that everyone has the capacity for self-creation, as this draw my life video demonstrates, and Douglass knew how it was done and what it meant. Self-made men do not accomplish their status through luck or fate. They accomplish it with vision, ingenuity, and perseverance, or as Douglass put it – WORK! WORK!! WORK!!! WORK!!!!

One thing Douglass never told his audience was to follow your dreams. To him, this would encourage passivity and negate self-reliance. While dreams are important, they are the easy part. For Douglass, to have ambition, will, and aspirations is very self-regarding, and this is necessary for self-creation. It has nothing to do with service to your fellow man, that is a natural consequence of living free and with dignity, or what Douglass calls “mutual esteem.” And to Douglass, self-creation has an aesthetic quality:

Art is a special revelation of the higher powers of the human soul. There is in the contemplation of art, an unconscious comparison constantly going on in the mind of the pure forms of beauty and excellence, which are without, to those which are within and native to human heart. It is process of soul-awakening self-revelation. Art is both an expression of ideals, and a means by which we can contemplate those ideals more objectively.

As biographer Timothy Sandefur says about Douglass’ philosophy, “making art plays a role in self-creation and self-definition. The self-made man is like an artist who sculpts his life and his actions to reflect his model of the ideal.”

Asserting One’s Abilities

During the Civil War, Frederick Douglass served as recruiting officer for the Union Army. However, he never urged black Americans to enlist out of service to their country. They owed the country nothing. To Douglass, the United States owed black Americans the right to fight, to be free to assert themselves, to build their sense of self-worth. As he famously said, “citizenship rests on three boxes – the ballot box, the jury box, and the cartridge box.” Douglass was not an advocate of non-violence, but an enemy of those who initiate force. Or as he put it during recruiting speeches, “Who would be free, themselves must strike the blow.” In other words, the threat and use of violence shackles you, don’t depend on others to win your freedom and dignity.

In April 1863, Douglass published a letter encouraging blacks to enlist in the 54th Massachusetts Regiment. In it he gave nine reasons to enlist. The first one was a question of action or inaction. Another reason was that, “every Negro-hated and slavery-lover in the land regards the arming of Negroes as a calamity and is doing its best to prevent it.” Others include the necessity for learning the use of firearms, defending themselves against accusations of cowardice, and taking ownership of their freedom, dignity, and self-respect. The eighth reason was to help prevent America from drifting back into pro-slavery compromise at the end of the war, which was Douglass’ greatest fear.

What Douglass wrote was echoed over 100 years later by Poetic Justice Warrior Ayn Rand in her address to the graduating class at West Point in 1974, “The defense of one’s country means that a man is personally unwilling to live as the conquered slave of any enemy, foreign or domestic.”

The Romantic Manifesto

Douglass was the most photographed American of the 19th century, and someone who delivered lectures on the new science of picture making. He said about asserting one’s self in this gentler context:

Making pictures is one of the most basic aspects of what it means to be human. Picture making is the process by which man is able to posit his own subjective nature outside of himself, so that it becomes the subject of astute observation and contemplation. When we make pictures, we make an abstract ideal concrete.

His portraits are unsmiling, intentionally so. He refused to play into the caricature of the happy, docile slave. Much like early 20th century black leaders such as J. B. Stradford, O. W. Gurley, and W. E. B. DuBois refused to be referred to by their first names by white men. It was a blatant form of condescension in the Jim Crow South. But Douglass’ sense of life was utterly romantic. His favorite authors were Victor Hugo, Alexandre Dumas, and Lord Byron because of their timeless characters of nobility, idealism and strength. Douglass was also a dedicated advocate for women’s suffrage, he understood clearly that female slaves suffered most. As Douglass explains in his autobiography.

Conscience is an interior dialogue with the self, and slavery obliterates it. The self-made man who asserts his ability and becomes an independently real person, cannot outsource the functions of conscience. On the contrary, he seeks to bolster his conscience, and exercise it more vigorously over his actions so that the story of his life as whole will be a comprehensive, focused, and rewarding one.

A Poetic Justice Warrior like Douglass would never submit to the unchosen obligations of the social justice warrior who boasts “you didn’t build that.”

 

 

Our Politicians Have Achieved Peak Incompetence So They’ve Delegated Governing To The Administrative State.

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Have the stupidity and pathetic incompetence of our politicians reached the low point where we can just write them off and ignore them? The happy fact is that they can not govern. They can not run their own operation of steal-and-spend.

The government is currently “shut down”, or at least that small portion of it that is not on auto-pilot. Two thirds of government expenditures – the so-called entitlements of welfare, healthcare and retirement benefits – are uncontrolled, unbudgetable, unstoppable. The military is engaged in perpetual wars with no purpose, and continuous “upgrading” of its weaponry with no end in sight. The justice department has become criminal.

Nor can the politicians get anything done when the government is not shut down. According to Dan Henninger of the Wall Street Journal recently, gridlock is the new normal for our political class. Because their instincts are all negative, and because politics is all about losing, the politicos have reached the point where they are against everything and for nothing. They block everything and approve nothing.

Sadly, however, the descent of our politicians into comprehensive incompetence does not make us citizens any freer. In fact, the opposite. For, since the politicians can not govern, they have delegated the task to the administrative state, those departments, agencies and sub-agencies of the federal government. The Federal Register indicates that there are over 430 of them, but no-one truly knows, as there are different numbers provided by The Administrative Conference Of The United States, The Justice Department, The United States Government Manual, and The Federal Register. (cei.org) The politicians actually do not know how many agencies they have created.

However many agencies there are, they employ around 2 million people (hard to say how many exactly when we don’t know who or what they work for) and these are the people who do the real governing.

These are the faceless middle class bureaucrats and apparatchiks who live in and around the Washington DC area in the most prosperous counties in America, and who lord it over us by means of federal regulation. Just as we don’t know the number of government agencies, we also don’t know the number of laws and regulations. The Justice Department once tried to count them but, after two years of effort, gave up.

The apparatchiks consequently have free rein. They are the tax collectors, rule-writers, compliance officers, enforcers and cops who compose the 3000 or so new federal regulations each year, and then take their joy in enforcing them on the hapless citizenry. They govern how you raise and educate your children, how you handle your garbage, how many fish you can catch, how to manage that puddle on your farm that the bureaucrats count as part of The Waters Of The Untied States, what kind of gun or knife you can and can’t have , how your food must be labeled, and how to affix postage stamps to envelopes.

In the book Judicial Fortitude: The Last Chance to Rein In The Administrative State,  Peter J Wallison lays out how the politicians have completely delegated governing to these administrative agencies and the staffers who are the new bureaucratic kings. While it is completely unconstitutional – the Constitution does not permit the delegation of law making by Congress, yet they have done so – it is now so far advanced that only the courts can stop it.

But the courts and the judicial system are the government, too. So, true to form, they also delegated their job to the administrative state. In a 1984 Supreme Court case called Chevron USA Inc vs Natural Resources Defense Council, Inc, the Supreme Court decreed that lower courts must give deference to an administrative agency’s interpretation of any statute or regulation that it administers. In other words, the law is whatever the administrative agency says it is and they are free to make any enforcement rule and design any regulatory interpretation of a statute. Until the so-called “Chevron deference” is reversed, we citizens are completely at the mercy of the Washington DC apparatchiks. These two million bureaucrats are our true rulers.

Can we ignore them, or defy them? Sure we can, with the appropriate risk-reward calculation. We can work for cash and not declare it to the IRS bureaucrats. We can smoke marijuana in defiance of the feds. We can drain a pond and not ask permission from the EPA. The home schooling movement has been built entirely on defying the federal education enforcement troopers and has now grown to the point where it is becoming unstoppable. But the bureaucrats are not as incompetent as the politicians. They will get their man, or woman. They will extract their pound of flesh, plus a fine for late payment. They will spy and surveil, they will threaten and lie in court, they will prosecute and fine. They are now our rulers.

 

Private Investment In Market-Creating Innovations Is What Eliminates Poverty. We Proved It In Nineteenth Century America.

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This week, top-tier business executives and global leaders will gather at the World Economic Forum’s annual meeting in Davos to discuss globalization and the world’s most pressing problems. One of the issues bound to be discussed is global poverty, and how to finally eradicate it.

To best understand how to do so, leaders should study the history of how the U.S. transitioned from poverty to prosperity.

Imagine a country where the average life expectancy is just 45 years old, infant mortality is at a staggering 200 deaths per 1,000 births, and fewer than 5% of people have access to electricity. In this country, the average person spends more than half of their income on food. There’s little help from the government, and corruption is rife at all levels—from local to federal; cronyism, not merit, determines most civil service jobs. What impoverished country would you guess this is?

It’s the United States of America—in the 19th century.

By almost any measure, the U.S. in the 1850s was more impoverished than present-day Angola, Mongolia, or Sri Lanka. Infant mortality was roughly three times worse than sub-Saharan Africa’s infant mortality rate in 2017. American society then, with a lack of stable institutions and infrastructures, looked nothing like it does today.

But that is exactly why the story of America offers hope to poor nations everywhere.

Despite being impoverished, unregulated, and poorly infrastructured, the U.S. became fertile territory for scores of market-creating innovations. These innovations transformed complicated and expensive products into simple and affordable ones so that more people in society could access them. Additionally, the creation of a new market brought about new jobs, profits, and a change in the culture of a region.

Take, for example, the story of Isaac Merritt Singer. Singer may not be the most famous American innovator but he had a significant impact on American prosperity through his mission to make the sewing machine accessible to everyone. With mechanical improvements that made the machine simpler, less expensive, and more reliable, Singer’s sewing machine reduced the average time it took to stitch a shirt from about 14 hours to just one.

Together with his partner Edward Clarke, Singer not only innovated a product, he developed a business model to ensure the company could survive in a challenging business and legal environment. These innovations included creating branch offices, sending out door-to-door sales and service staff, offering lessons to customers on how to use the product, and extending credit to cash-strapped customers.

As a result, sales boomed. In 1873, demand was so high that Singer had to build the U.S.’s largest sewing machine factory, with a manufacturing capacity of 7,000 units per week.

The market for sewing machines created markets for a host of other products and industries, including affordable clothing, department stores, and raw materials such as steel, wood, and cotton. With this came jobs, profits, and tax revenues that helped fund much of America’s infrastructure and institutions such as the establishment of the first patent pool and the building of railroadsthat transported the sewing machines.

Singer’s market-creating innovation was just the tip of the iceberg. Generations of American entrepreneurs succeeded, against staggering odds, by pioneering other market-creating innovations.

For instance, Henry Ford—who made the car more affordable so that many more people in America could own one—had more to do with the success of America’s road infrastructure than the U.S. government at the time.

As Ford’s Model T streamlined the car manufacturing process and made it more cost-effective, millions of Americans purchased the car. This, in turn, created a stable source of tax revenue (in the form of sales, gas, and tire taxes) for the government. These revenues further helped develop America’s transportation infrastructure and institutions.

The pattern for breaking out of poverty through innovation is clear. First, comes private investment in market-creating innovations, then public investment in infrastructure and institutions that help a nation become prosperous. Japan and South Korea have followed this path, with economic transformation fueled by their own cultures of market-creating innovations. In the aftermath of their devastating wars, the thought of revitalizing each of those economies seemed almost impossible. Yet within mere decades, Japan and South Korea transformed from impoverished economies to global powerhouses, built largely on companies that created successful market-creating innovations, such as Japan’s Sony and Toyota, and South Korea’s Samsung and Kia.

Clayton M. Christensen is the Kim B. Clark professor of business administration at Harvard Business School. Efosa Ojomo leads the global prosperity research at the Clayton Christensen Institute for Disruptive Innovation. Karen Dillon is a former editor of Harvard Business Review and a senior researcher on global prosperity at the Clayton Christensen Institute for Disruptive Innovation. 

Do You Want To Support Workers? Then Support Entrepreneurial Investors Who Make Work Opportunities Possible.

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Businesses don’t exist to create jobs. If readers doubt this they need only try to raise start-up funds with “creating jobs” listed at the top of their business plan. Lots of luck finding investors when your goal is costs, as opposed to returns.

Crucial here is that the desire for returns among investors is what indirectly leads to copious hiring. Workers enable the returns that entice those with means to delay consumption in favor of the investment without which there are no companies, jobs, and progress.

Still, it’s the investment returns that matter simply because they beget more investment. If you love the worker, you must love much more the investors who make work opportunity possible in the first place.

Which brings us to a recent opinion piece by National Review editor Rich Lowry. Lowry argues that President Trump should forget about the stock market, and focus his attention on the working classes. About NR’s editor, Lowry has few peers as a wordsmith, and arguably fewer when it comes to influencing the political debate. He’s done this while filling the biggest (William F. Buckley) of big shoes. At the same time, his economic analysis has been puzzling of late given his support for national productivity strategies, federal policies focused on wage subsidization (think the odd embrace of Oren Cass among conservatives), and as of last week, policies and rhetoric meant to emphasize the needs of workers over investors. In his critique of Trump, Lowry forgets that the elevation of the investor class is the only way to boost the economic chances of workers.

About Trump, Lowry writes that it’s “a strange disconnect” for “a president who underlined the increasing importance of working-class whites to the GOP coalition and who trampled so much bipartisan economic orthodoxy during the campaign, to be so overtly obsessed with the stock market.” He goes on to say that as opposed to the stock market, working-class “wages” would be a more worthy “new object of his attention.”

Up front, Lowry’s focus on wages is rooted in a surprising conservative belief that compensation has long been stagnant in the U.S. Ok, but if the latter were even remotely true then it would also be true that the U.S. would not presently be showered with imports from around the world. Stated simply, a law of economics (Say’s) embraced by conservatives disproves a popular conservative narrative of the moment. We’re only able to consume insofar as we’re able to produce first. That wages are supposedly stagnant in the U.S. is further evidence that the economic statistics followed by economists and pundits aren’t worth their attention.

The wage narrative is further belied by stock market indices that Lowry would prefer Trump ignore. Since the early ‘80s, and amid major economic liberalization in the U.S. that NR helped provide the intellectual foundation for, U.S. market indices have soared. To believe pay has stagnated over the decades is to believe that liberalization in fact harms the masses, and that businesses prosper through exploitation. Except that they don’t. Lowry knows this. And from his perch at NR he surely knows CEOs who would confirm what he likely knows. The most expensive employees of all are the underpaid ones. Great companies, and the U.S. is full of them, don’t get that way without well-compensated talent. The wage stagnation story is such a non-story. Yet Lowry wants Trump to make it a story.

He calls for Trump to “shift the public conversation” to the supposedly underpaid American worker. Lowry’s advice that Trump focus on workers over investors misses the point. You quite simply cannot have a discussion about wages without talking about investors first. No economic school or theory can get around the previous truth. Investors are always and everywhere the source of jobs, along with the quality of jobs on offer.

Which brings the rich into the discussion. Lowry has lately made clear his belief that tax cuts for them no longer make sense. The problem is that such a view doesn’t square with his desire to improve the lot of the working man. The rich are essential to the wages of workers. While all statistics rate skepticism, the ones available indicate that the richest 1 percent hold roughly 40 percent of all outstanding public U.S. shares, while the richest 10 percent own 84 percent of U.S. shares.

The rich, precisely because they’re rich, have the most unspent wealth after taking care of their own wants and needs. Short of stuffing their unspent wealth under the mattress, they must invest it. That’s why tax cuts not focused on reducing the burden on those with the most (like the well-oversold Trump tax cuts) are largely Keynesian in nature. The ones that truly stimulate progress are the tax cuts that greatly shrink the amount of money the rich must hand over to politicians. That they won’t spend all of what the government doesn’t take explains why. The rich uniquely have the capacity to invest in size fashion, and workers benefit as a result. Lowry implicitly acknowledges this truth.

As he correctly puts it, “Wages are ultimately related to productivity growth.” Of course they are. Important here is that there’s no productivity growth without investment. The rich once again have the means to invest. So if we ignore the long-term wage stagnation falsehood that is belied by the stock market and the hoovering of the world’s plenty by America’s supposedly suffering workforce, the only way to improve on what’s already great is more investment. We know where investment comes from.

Back to Trump, one of the better qualities of a more than uneven president is his focus on the stock market. Unlike the statistics crafted by economists, the stock market tells the truth for it reflecting the views of the bulls, bears, and everyone else. It’s information personified. And if Trump just gets out of the way, history says investors will cheer. If they do, watch the work opportunities for the common man soar.

John Tamny is editor of RealClearMarkets, and Director of the Center for Economic Freedom at FreedomWorks. 

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