Leading the Revival of Individualism & Self Reliance

Posts

Say’s Law Of Markets Writes The Code Of Moral Justice For We The Living.

/in /by

When political force controls the economic decisions of daily life, a society decivilizes. Muscle cancels minds as the means for creating value, money diminishes as the tool for trading them, prices become perverted, and markets atrophy. In We the Living, Chapter 4, Alexander Argounov agrees to be paid in lard for his handkerchiefs, and in Chapter 5, tenants who are private traders are charged exorbitant rates for being bourgeois.

Arbitrarily condemned as exploiters, the entrepreneurial types integrate their mental with their physical energy, open businesses at Alexandrovsky market in order to survive, and quickly fail because consumers have no money. This downward spiral is a necessary consequence of Say’s Law, aka the law of markets – production creates its own demand. In 1920’s Petrograd, the mind has been neutered by the Revolution, material capital is depreciating quickly, financial capital exists only on the black market, and production has regressed to mindless, medieval standards.

The beginning of Chapter 9 continues, “Argounov’s Navy Soap was a failure. Galina Petrovna’s energy found their next business venture.” Her new patron had instructed, “Remember, eighty seven tablets is all you have to put into a box labeled ‘One Hundred.’ Great future in saccharine.” Galina then instructs, “Sorry, it’s too bad about your studies Kira, but you’ll just have to help. You have to eat, you know.” 

Kira counted the little crystals in the palm of her hand. She tried not to breathe or swallow; when she did, the white powder, seeping through her lips and nostrils, bit her throat with the pain of a piercing, metallic sweetness.

For the benefit of us in 2020 America who can’t comprehend the horror of this, Doctor J explains to our Facebook forum,

The saccharine used back then to replace sugar, and only allowed for the Communist leadership, was rarely found even on the black market. To be found with it was instant death – it would have meant it was stolen from a high ranking official. A little trivia here!

Of course, Alexander and Galina’s daughter Kira is not an economist. Her chosen profession is another applied science – engineering. Yet the great Austrian economist Ludwig von Mises tells us, Economics is Life, and Kira is a lover of her life. Her ability to produce, particularly as a Gen Z female engineer in the 1920’s, required political and economic freedom.

When she meets the love of her life Leo, at the end of Chapter 9, he tells her, “Kira, I am going away, tonight. Forever. To Germany. I’m a fugitive Kira. A counter revolutionary.” She demands, “I’m going with you Leo.” Economic freedom.

Chapter 10 begins with the capture of Leo and Kira aboard a smuggler’s boat escaping the slavery of Soviet Russia. The cap of the Baltfleet sailor who held them in custody bore,“A five-pointed Soviet star. Kira, her eyes glued to the red star, the star that filled her eyes, but could not reach her brain, muttered foolishly, softly, as a child.”

Here, Ayn Rand has exposed to the reader to Kira’s subconscious reaction, which is similar to the fear she sensed when meeting Soviet enforcer Andrei for the second time in Chapter 5. Their first meeting was at the Student Council election a few days earlier. There, she overheard a Soviet speaker named Pavel tell a friend how Communism’s economic slavery would work,

It’s on the internal front that we have to dig our trenches. When our enemies fall, there is no blood, no cry. The world never knows when they were killed. Sometimes, they do not know it themselves.

The larger faction at the election meeting – the Whites who stood for the status quo against the Reds’ tyranny, closed with an old drinking song, ‘Days of Our Life,’ that was,

Born long before the Revolution in the stuffy rooms where they discussed philosophy, and with forced bravado drank cheap vodka to the futility of life. Kira frowned; she did not sing. She noticed the students in leather jackets and red kerchiefs kept silent too.

This was the malevolent universe of chaos and impotence that both Kira and the Communist minority at the election wanted to leave on the dust heap of history. By Chapter 11, millennial Leo had been freed, and with Gen Z’er Kira, had settled in to their new apartment, yet “She had never given much thought to the necessity of keeping alive. She found suddenly that the mere fact of keeping alive had grown into a complicated problem which required many hours of effort.” Home economics.

The only friendly face from the Argounov or Ivanovitch family homes was her cousin Irina, who shared Kira’s love of life. In Chapter 11,

They sat in the shadows and talked about Rembrandt, whom Irina was studying; and the new perfume Vava had received from a smuggler – real French perfume. Irina had cried smelling it.

Mind, body, and spirit as an integrated, human whole, as opposed to the treatment Kira received from her family after taking an apartment with Leo in Chapter 10,

How could you? Have you no conception of shame? Did you stop to think it was a mortal sin? And the Church . . . for centuries . . . all of our Saints have told us that no sin is lower! The Saints who, for our sins . . . Such women should not be allowed to live!”

This medieval mysticism was the disintegration of mind and body that Kira had rejected. It was also the status quo that the Whites, at the election meeting, wanted to preserve. Kira was not political, her life’s goals depended on the economic way of Say’s Law, and its life premise of reason, purpose, and pride.

Starving, Kira and Leo ventured to Petrograd’s train station black market for food in Chapter 12. There, they witness the arrest of a desperate old woman who was accused of being a ‘speculator.” Her life now canceled, the snitch, who was the real ‘speculator,’ approached them, “Here you are citizens. Bread, ham, anything you wish. No trouble. We know our business. The next moment, Kira was running down the street, fleeing wildly, senselessly from a feeling she could not explain.”

Rand has again exposed Kira’s subconscious reaction to the death premise of Marxism – life is chaos and people are impotent. Their demand is submission to the Soviet collective. Last week in 2020 America, you were exposed to chaos in Kenosha WI and Portland OR, and the impotence of police departments who were ordered to stand down in submission to the cancel culture of today’s organized, violent, collectivist, Marxist mobs – BLM and Antifa, CNN and the New York Times. The Democratic party’s muscle canceling your mind.

In Economics, What Matters Is The Level Of Production. Everything Else Is Secondary.

/in /by

Economics is truly a 3rd grade subject, and it would be more broadly viewed as a 3rd grade subject if people broke it down to the individual. Looked at through the prism of the individual, the easy answer for economic growth is always to remove or reduce the tax, regulatory, monetary and tariff barriers that invariably harm individuals.

No doubt there are groups of people who might benefit from taxes, regulations, currency devaluations and import taxes (tariffs) foisted on others, and no doubt there are countless individuals who thrive economically despite heavy taxes, regulations, devalued money and tariffs, but no individual benefits economically if more of his work is penalized, more of his time at work is spent complying with regulations, if the money earned at work is routinely being devalued by the government issuer, and if the imports he truly desires come with a tax.

Broken down to the individual we also know that our capacity to buy what we want is a consequence of our capacity to produce. Who knows when we figure it out, but it doesn’t take a high school, college or post-grad education to alert people to the direct correlation between production and demand. We buy things after we produce, so if we want to have life’s finer things, we must produce.

That’s why it’s always so comical to read about economists obsessing over “demand.” It seems economists know the 3rd grade subject that is economics the least well, and this is probably true because they sought higher education to learn what is so basic.

Why would anyone of sound mind focus on demand when the latter is always and everywhere what’s expressed after supply? There’s no getting around this truth. Underlying all demand for goods and services is production of goods and services, at which point the path to rising demand is a reduction of the barriers that limit supply. Nothing could be simpler.

What about money? Money is just the agreement about value among producers that facilitates the exchange of products for products. Long before state-minted money, producers sought a way to exchange with other producers, and “money” was created by those producers as a common language of sorts enabling exchange. If everyone agreed a seashell, a cigarette or 1/35th of a gold ounce had a market value, then these forms of money would facilitate exchange of products among producers with disparate wants: I have bread and I desperately want to exchange it for your wine, but you only want the butcher’s meat. Money makes it possible for me to get your wine at which point you’ll take my money and buy the butcher’s meat.

Which brings us to debt. Look around the internet in search of financial and economic commentary. If you do, you’ll invariably find all manner of alarmist commentary about “soaring debt,” “debt bubbles” whatever that could mean, and one seen by yours truly the other day about how “The World Is Drowning In Debt.” Such a view misses the basic truth that with all things financial, underlying them is an exchange of products.

With debt, there’s merely an exchange of existing production for future production. Getting right to the point, the world is drowning in debt because it’s “drowning” in production. People borrow money not to look at it, but because it can be exchanged for real products and services. If debt is soaring, then so by definition is production.

Soaring debt isn’t a flashing red sign of economic carnage as much as it’s the logical result of the exact opposite. When individuals are producing more, there’s logically quite a bit more to borrow.

Crucial here is that borrowing is similarly an exchange of products. In the present the lender has money exchangeable for goods and services, and the lender is willing to pass up accessing those goods and services now in order to get more goods and services in the future; the difference being the cost of borrowing tacked onto the loan (rate of interest) that the lender adds on. Of course the lender doesn’t want to get less in the future, which means the lender seeks a producer seen as a good when it comes to paying the monies borrowed back. Lenders aren’t predators on the weak as financial journalists naively assert, and they aren’t because they once again want to get more goods and services in the future then they’re transferring to the borrower in the here and now. Borrowers are seen as good to pay back their debt precisely because the work they do is seen as worthy of generating the income that will pay the monies borrowed back.

But wait, some will say, governments borrow excessively. Yes they do, and they’re able to do so because their borrowing is backed by the productive people they’re empowered to tax. Governments produce nothing. That’s why it’s so comical when economists claim government borrowing and spending stimulates economic growth. Economists remind us how silly it is to seek a credential in something so 3rd grade. Governments can stimulate nothing. The debt they run up is a consequence of economic growth, not a driver of it. The more that the citizens they tax are producing goods and services exchangeable for goods and services, the more that governments can tax their production. Governments don’t stimulate growth as much as they tax and borrow it, only to mis-allocate it.

Which brings us back to the individual. Individuals produce, and often times those producers delay the consumption of their production with an eye on transferring it to others. This is where debt comes in. It’s a happy result of soaring production, and expected future production that creates willingness on the part of the producer to delay consumption. In short, debt is a consequence of savings, which never harm the individual, and by definition never harm the economy. The alarmists all around us can relax.

 

 

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

Jean-Baptiste Say – The Supply Side Economist Who Wrote the Textbook for Today’s Entrepreneur.

/in /by

Jean-Baptiste Say’s signature achievement, A Treatise on Political Economy, was first published in 1803. One notable aspect of this book is that its title combines two disciplines, economics and politics. And this makes sense if you consider that Say, besides being a gifted economist, was also a renowned philosopher and entrepreneur.

And 200 years later, poetic justice is being served as economists are finally recognizing Say’s wisdom. The PPE (politics, philosophy, and economics) movement in universities is gaining steam. According to Peter Boettke, in Richard Salman’s The Political Economy of Public Debt:

During the 20th century, the process of disciplinary specialization reduced the intersection between economics, philosophy and politics and impoverished our understanding of society. Modern economics in particular has become increasingly mathematical and largely ignores the role of institutions and the contributions of moral philosophy and politics.

Say was skeptical of pure economic statistics because he was more interested in observing facts to draw conclusions. For the average person with a casual interest in economics, his writing is precise and as simple as possible. Say’s goal was to make his ideas understandable and useful in everyday decision making.

Say’s Relative Anonymity

Jean-Baptiste Say began writing publicly in 1789 at the beginning of the French Revolution. From 1794-1800 he edited a periodical that produced works about philosophy, literature, and politics. During this time, Say wrote about the economic doctrines of Adam Smith of Scottish Enlightenment fame. According to Larry Sechrest of the Mises Institute, “Say did explicitly represent his work as being mainly an elaboration and popularization of Adam Smith’s Wealth of Nations for the benefit of continental European readers.” And partly because of that, there is a lack of appreciation for Say’s intellectual achievements.

A more sinister reason for Say being dismissed is because of the dominance of another economist in the early 20th century, John Maynard Keynes. While Say’s work focused on the production side of economic order, Keynes was focused on the consumption side. And since Keynes’ theories gave academic cover to big government economic intruders, Say’s ideas had to be crushed. After all, he had committed the crime of favoring the individual. As Hunter Hastings explains:

Keynes General Theory insists that total consumption drives the economic growth and well-being of a nation. He pulled this notion out of thin air and brought no economic reasoning to support it. And governments gleefully seized on Keynes’s novel theory, recognizing that, by promising people more consumption they could buy themselves votes and popular support.

So wouldn’t it makes sense for free market economic historians to give him greater recognition? Yes, but Sechrest explains, “J.B. Say deserves to be remembered, especially by Austrian economists, as a pivotal figure in the history of economic thought. Yet, one finds him discussed very briefly, if at all.”

The Early Years

Say was born in 1767 France. A time when France was experiencing social upheaval due to war debts and regressive taxes. When he was 22 years old, the feudal system was abolished, the French Revolution began, and the next ten years became the bloodiest debacle in social justice warrior history. Maybe that’s because of the revolution’s impractical theories – rights were derived from the state, equality was conditioned on duty to the state, and some citizens were more equal than others. One repressive regime (monarchy and church) was replaced by another (Jacobins and Girondins), and then another (Napoleon).

Despite the political violence, Say focused on what matters most for human flourishing – economics, philosophy, and entrepreneurship. Or as Say himself said, “nothing can be more idle than the opposition of theory to practice!” Economic principles forged by reality became his armor.

While Say was a student of the Enlightenment in general, and Adam Smith in particular, his writing differs from Smith in several key aspects. For example, Say judges that the value of a good is its ability to satisfy a desire for its owner, known as its utility. On the other hand (we’re talking about economists after all), Smith adhered to the classical labor theory of value – something’s value is determined by the cost of the labor expended to produce it. Say’s selection as our first Poetic Justice Warrior is explained by Sechrest:

With pen and ink, Adam Smith made the entrepreneur invisible. J.B. Say brings him back to life and to the center of the stage. What do these entrepreneurs do? They use their industry to organize and direct the factors of production so as to achieve the satisfaction of human wants. But they are not merely managers. They are forecasters, project appraisers, and risk-takers as well.

By studying essentials, Say discovered that entrepreneurs create value by anticipating what consumers will pay for. The utility theory became widely accepted around 1870 because if a consumer isn’t willing to pay for it, eventually no labor will be expended to produce it. And if no value is being created, wealth will erode for everyone.

The Entrepreneur’s Entrepreneur

In fact, the term ‘entrepreneur’ was actually invented by Jean-Baptiste Say. And not only did he advocate for the producer, he contributed mightily to Austrian school scholarship as it relates to markets, prices, and money. However, he is best known for Say’s Law, which basically says that it is production that creates markets; in other words, there would be no consumers without producers. As political economist Richard Salsman explains, “Say’s Law is the root of all other economic law,” or tongue in cheek, “the supply side is the only side.”

Here is an excerpt from Say’s Treatise in his own words translated into English:

When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus the mere circumstance of creation of one product immediately opens a vent for other products.

Here, Jean-Baptiste Say is teaching us that production is the foundation of peaceful exchange and prosperity. By extension, the right of everyone to act on their own judgment must be protected from the peddlers of envy and guilt.

Pick up the Torch of Say’s Law!

Say’s brilliant analysis links producers to their understanding of money and time. Combined, they are the root causes of prosperity. Or as the Mises Institute explains about Say’s Treatise:

There is always money enough to conduct the circulation and mu­tual interchange of other values, when those val­ues really exist. Should the increase of traffic re­quire more money to facilitate it, the want is easily supplied, and is a strong indication of prosperity — a proof that a great abundance of values has been created, which it is wished to exchange for other values.

While Salsman tells us that Say’s Treatise was the textbook for America’s prosperity in the 19th century, perhaps the greatest endorsement of Jean-Baptiste Say as a Poetic Justice Warrior comes from the French economic philosopher, Frederic Bastiat. As 1830s France was plunging into socialism, Bastiat was heard to proclaim “Pick up the torch of Say’s Law!”

In 21st century America, carrying torches as been replaced by protest signs with mindless slogans. As poetic justice warriors, our torches are productivity, entrepreneurship, cooperation, and limited government.

 

 

 

Write for CFI