On more robust theoretical foundations for legal philosophy

My article, “Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics, and Legal Practice” was published in Libertarian Papers 3, 19 (2011).

"An interesting, provocative analysis...” —Stephan Kinsella, legal theorist, editor of Libertarian Papers, Senior Scholar at the Mises Institute, and director for the Center for the Study of Innovative Freedom

"This piece is striking...” —Allen Mendenhall, editor of the The Literary Lawyer

Flags and the World Cup

I finally saw Flags of our Fathers just now.

1) Clint Eastwood is the master.

2) The state is the definition of Evil.

3) Japan vs. US in the women's World Cup final is about to begin just after the end of the movie.

Surely a better sort of game.

My top six picks out of the 26 books I read in Jan–Jun 2010

In January–June 2010, I read 5,351 pages of books (+1,075 pages more than during the previous six months, July–December 2009) and listened to 124 hours of audiobooks.

My top six picks out the 26 items (paper and audio together), in a tough competition, were as follows:

1. Literature and the Economics of Liberty: Spontaneous Order in Culture
Literary criticism that uses real economics for analysis instead of Marxist reductionism! This is a deep-level game changer.

2. The Economics and Ethics of Private Property [direct PDF link]
Outstanding collection of essays on political philosophy and
economic theory, including Hoppe's eye-opening discourse ethics reasoning, which takes some of Habermas' work in a new direction (Habermas was his dissertation advisor).

3. The Theory of Dynamic Efficiency [direct PDF link]
Economic theory that puts the real life back into economic theory, and puts economic theory back into real life. Identifies and fixes the major departures from reality that mainstream economic theory made.

4. Snow Crash [Link to Audible version, which was outstanding]
Science fiction novel. When I finished listening, I just went back to the start to go through it again without pausing! Even though some of the tech details are a little dated (1992), the book was still that entertaining and interesting.

5. For Good and Evil: The Impact of Taxes on the Course of Civilization
A world history of taxation (hint: it wasn't pretty then or there either).

6. Integral Life Practice
Create a weekly routine that covers all the important bases needed for balanced personal development—exercise, meditation, ethics and more, all in one fully customizable weekly practice model. Helps keep from getting self-sabotaged by leaving out any one major component needed for balance.

The other 20 by category—titles only in no particular order

Political economy
Boundaries of Order: Private Property as a Social System
Memoirs of Ludwig von Mises
The Broken University
How to Win a Cosmic War
Blackwater: The Rise of the World's Most Powerful Mercenary Army
Nuclear Energy in the 21st Century
The Little Book of Bull Moves in Bear Markets [investing]

General philosophy
Inclined to Liberty: The Futile Attempt to Suppress the Human Spirit
The Architecture of Happiness
The One-Two-Three of God
Integral Psychology
Integral Spirituality
Norman Einstein: the Dis-Integration of Ken Wilber

Fiction and fiction related
Learning the World (Sci-fi)
Atlas Shrugged (Novel with social sci-fi aspects)
Pallas (Sci-fi)
Sims (Sci-fi)
Writing the Breakout Novel
The Physics of Star Trek (an analysis of Star Trek sci-tech by a physicist)

Misc.
The Marathon Method

Avatar: Storyworld creation, justice and environmentalism on Pandora and Earth

It may seem that watching Avatar is akin to taking a libertarian pill. True, the libertarian nutrients are rich and of universal appeal. Unfortunately, the pill is also laced with the same bad old drug: anti-technology, anti-business, and pro-primitivism.

(Estimated spoiler risk: Moderate)

Avatar is a beautiful piece of modern visual artistry and it deals reasonably well for a film with several classic science fiction themes (see the postscript for recommended novels). It portrays legitimate defense against military aggression, making a much-needed popular statement of anti-militarism.
The story of a soldier looking for “a single thing worth fighting for” is poignant. How often throughout history has the impulse to defend been manipulated and twisted for unsavory political aims?
Roderick Long said in his review that, “The movie’s most important message may be this: soldiers are responsible, as individuals, for the actions they carry out, and when they’re ordered to do something immoral they have an obligation to disobey.”
Despite the film’s thematic positives, it also encourages some dangerous misconceptions. It identifies as a “corporation” an entity that carries out actions that only states on Earth are known to perform. It also mixes a clear and principled justice issue with a primitivist, anti-technology motif in a bait-and-switch rhetorical move.
We will tease apart these and a few other confusions, clearing a path through the film’s Rousseauian intellectual thicket wide enough to enable us to enjoy the show without compromising our minds. In examining these confusions, it is instructive to reflect on the role of storyworld creators, both those who create science fiction and those who create "message," news, spin, and sometimes even "science."
In enjoying science fiction, we happily hand over to storyworld creators the power to temporarily redefine reality. We must take extra care to take back that ability at the theater exit or upon closing the novel. Other kinds of storytellers await us in the non-fictional world, and their motives do not include providing entertainment.

The justice issue: how the plot could have been made more challenging and why it wasn’t: Stephan Kinsella characterized the dominant plot issue in the film as illegitimate invasion met with legitimate defense. In his review, he writes that Avatar, “was about a group of people (the Na’vi) defending their property rights on the world Pandora from aggressors (the human invaders), and about one of the humans (a soldier named Jake Sully) deciding to join and help the right side.”
This aspect is present and strong. Yet there are also negatives swirled deeply into the mix in ways that will make certain key issues quite difficult for most people to keep straight.
To begin with, the film makes a weak attempt to portray the antagonist entity as a “private corporation.” Kinsella linked to Lester Hunt’s review, which argues powerfully that it has been states throughout history that engage in the practices this “corporation” is shown engaging in. Hunt identifies these practices as: “using military force to invade and conquer foreign lands, slaughtering wholesale numbers of the inhabitants and burning their dwellings, all in order to steal their property.”
From the anti-corporate left-liberal perspective, using fiction to misrepresent a military mini-state as a business corporation may be designed to suggest rhetorically that certain corporations can influence government policy, including military deployments, in pursuit of their own narrow ends. The left liberal seldom realizes, however, that the offending corporations are working to gain special advantages at the expense of everyone else, including other corporations, sometimes especially their own competitors, so this is no basis for criticizing corporations as such, merely the offending ones and only for actual offenses. See Murray Rothbard’s classic article, “Wall Street, Banks, and American Foreign Policy.”
From a libertarian standpoint, the actions of the militarized quasi-corporate entity portrayed in this film clearly place it far outside the realm of acceptable market action, defined by the sphere of mutually consensual exchange of titles to property. In fact, since it attacks property that has clearly long before been homesteaded, it has absolutely no moral or legal leg to stand on. I felt this point was made too simply from a dramatic standpoint, though that simplicity may have been strategic, a point to which we shall shortly return.
The bad guys could have been given at least some shred of plausible claim to right. For example, if the miners failed to persuade the tribe to move, they could have drilled in from a location the tribe did not own. They could have reinforced and later backfilled the mines so the surface would not be affected. Of course, that would be a large added cost of extraction for the miners, but there would be no need to negotiate, and bitter, long-term enemies (another substantial cost and risk item at best) would not be created.
But this would leave no conflict for the film, so the miners in this example, in tunneling from the side, might miss something about the geography or ecosystem. Perhaps they are about to damage the homesteaded tribal village or great tree without realizing it. Now we would have a real conflict. Both sides would have at least a potential claim to right, though possibly mistaken. We would be beyond melodrama.
As portrayed, however, the bad guys are the embodiment of pure wrongdoing, so viewers do not have to trouble their higher brain centers in order to figure out whose side to be on. But perhaps this theme is presented in such simplistic terms because it serves as a sure-fire delivery mechanism for another theme, one that, while supposedly Earth-friendly, stands on shaky ground.

Environmentalism, real threats, and storyworld creation: The depiction of alternative creatures, plants, and ecosystem is creative, plausible enough to be entertaining and captivating, and beautifully handled. In assessing the environmental statements this film makes, though, one must tread carefully. The film does two things simultaneously: 1) it presents a science-fictional storyworld, the assumptions behind which viewers must accept to enjoy the show and 2) it attempts to make an environmental statement that viewers will take out of the theater with them.
On Pandora, there are verifiable scientific realities in the ecosystem that scientists and other protagonists begin to understand during the film. The militarist mining-intent faction of the humans do not much understand this and most emphatically do not care. These emerging science-fictional facts about Pandora may well influence the lifestyle choices of the natives, making a primitive life close to nature more attractive.
Viewers accept all of this for the purpose of entering and enjoying the story. However, even though these conditions are quite different from the non-fictional facts of Earth, many viewers will emerge from the theater feeling that Earth is like Pandora in more ways than it actually is. Many will mentally check how much they have lately donated to environmental organizations. Indeed, the Sky People (Earthers) are said to have destroyed the whole ecosystem of their own planet!
While the film mercifully refrains from specifying exactly how the humans did this, an average contemporary audience in 2009 and 2010—most of whom will lack the benefit of a warm-up from Richard Lindzen or Lord Monckton—will clearly surmise that this must have been done through some combination of industrial pollution, resource depletion, and catastrophic anthropogenic global climate change.
The problem is that the anthropogenic global climate change hypothesis and associated catastrophe scenarios are themselves largely fictitious (see, for example, Unstoppable Global Warming: Every 1,500 Years). Use of weak science gives science fiction a bad name. Science fiction (as opposed to fantasy) is supposed to strive to extrapolate from real science as much as possible. But what a useful metaphor fictional storyworld is for our real world and its politics. Most people, for example, accept the anthropogenic global warming hypothesis. They accept what the storyworld creators—pseudo-science-fiction writers and producers in government, state-funded academia, some corporations, and the mass media—tell us to believe about the Earth.
Will Avatar, given the general state of logical and scientific thinking these days, help people better distinguish fact from fiction? In most cases, I think it will help blur the lines further because of the prevailing context of opinion into which the film appears.
Unfortunately, there is a real, verifiable way that certain humans could destroy the entire Earth ecosystem—nuclear war. This is an invention of the very class of entity—the state—to which many global-warming hypothesizers seem intent to hand virtually unlimited power. It is only the state that has repeatedly proven itself to engage in mass destruction and pillaging in real life. Nuclear war is a statist activity that has nothing to do with genuine commerce, property rights, mining, energy, tribalism, nature, or any other legitimate value the film treats. Worse, it is not a fictional, hyped threat, but a real one.

Watch out for the bait-and-switch: The story structure of Avatar pulls a classic bait-and-switch move of the kind I identified in my analysis of President Obama’s inauguration address. The plot takes people in with a universal theme of aggression met with justifiable defense. It then thoroughly mixes this theme up with elements of tribal-environmentalist, anti-industry fantasy.
These themes are so thoroughly blended that few viewers will be able to distinguish them. Most viewers are rightfully on the side of those defending their homes and neighbors against aggression. But these same viewers are welcomed to take on in the bargain a vaguely Luddite, pro-hunter-gatherer attitude that is actually an entirely separate matter.
It may seem that watching Avatar is akin to taking a libertarian pill. True, the libertarian nutrients are rich and of universal appeal. Unfortunately, the pill is also laced with the same bad old drug: anti-technology, anti-business, and pro-primitivism. Authentic justice acts as the delivery mechanism for a primitivist hallucinogen. That does not make this a bad movie. It just means that when we walk out of the theater, we have to make an extra effort to separate legitimate principles from vague, primitivist yearnings.
Few contemporary viewers are equipped to do this well, especially with a theme as hallowed as environmentalism. Most are unlikely to realize that tribal or hunter/gatherer life, at least on Earth, is almost always glorified in rich-country portrayals—the disease, unceasing work, cyclical starvation, and early death it entails in real life is rarely portrayed in the fantasy versions (see Rothbard’s “Freedom, Inequality, Primitivism, and the Division of Labor“). The storyworld premises of Avatar could be viewed in the context of a long line of fictional mechanisms for such glorification.
To get his primal energies back, modern man needs to go running, play a sport, or go for a hike, not work to destroy the foundations of civilization by trying to substitute an unreal version of primitive life for the actual social and environmental conditions required for authentic thriving.
Equally important, one must be able to distinguish legitimate productive activity, generally characteristic of businesses, from naked aggression, generally characteristic of states—a distinction that films like this work mightily to obscure.
Overall, I found this an engaging fictional storyworld and fun entertainment. Along with its confusions, it portrays positive values of justice, courage, and discovery. With some reflection, one can tease apart the separate legal and enviro-ethical issues the story so deeply mixes and get on with enjoying the show.
Let’s just be perfectly clear on the backstory, though. How could the Sky People realistically have destroyed their own ecosystem?
Only the state is up to performing at that scope of evil.

Postscript: Novel recommendations

Sci-fi theme 1—Consciousness transfer: Avatar handled the theme of consciousness transfer into another body reasonably well. It has been done in much more depth in novels. Old Man’s War (2005) by John Scalzi depicts consciousness transfer into a cloned and genetically modified version of one’s own body, optimized for military performance (and younger). Forever Peace (1997) by Joe Haldeman, which won a Hugo Award, a Nebula Award, and a Campbell Award—a rare feat—depicts technologies for direct consciousness linkup to remote mechanical fighting machines. It explores the moral dilemmas this entails and is a wonderful metaphor for the modern mechanized soldier.

Sci-fi theme 2—Identification with aliens: It is always an impressive feat when science fiction can invite us to identify with an alien species. Avatar manages it. Two great science fiction novels do it at a deeper level. The creatures into the inner lives of which Vernor Vinge transports us in A Fire Upon the Deep (1992; Hugo Award) and A Deepness in the Sky (1999; another Hugo Award, a Campbell Award, and a Prometheus Award) are not even humanoid, they are structured entirely differently and yet he gives us a sense of what it would be like to be one of them.

2009 H2 reading and audiobook results

In the second half of 2009 (July–December), I read 4,276 pages and listened to 31.5 hours of audio books. Asterisks indicate standouts from the list (though the lack of an asterisk does not necessarily imply non-recommendation). Two asterisks for the top three. For recommendations, click over to statefree-learning.org and explore the Bookfinder.

Books and audiobooks in order consumed:
The Hobbit (BBC Radio Dramatisation)
** Voyage From Yesteryear (Hogan)
Tom Paine Maru
The Lord of the Rings (BBC Radio Dramatisation)
** Investment Banking: Institutions, Politics, and Law
** Techniques of the Selling Writer (Swain)
* Little Brother (Doctorow)
Faith and Liberty: The Economic Thought of the Late Scholastics
Property, Freedom, and Society: Essays in Honor of Hans-Hermann Hoppe
Plot & Structure
Needful Things (King)
The Gods Themselves (Asimov)
* The Greatest Show on Earth (Dawkins)
The Pleasures and Sorrows of Work
A Gift for My Children (Rogers)
* Crashproof 2.0 (Schiff)
* The Death and Life of Great American Cities (Jacobs; first two-thirds only; this has amazing information in it, but is repetitive and begins to drag at some point; the best parts seem to be in about the first half)

Pages read was equal to the first half of 2009 at just over 4,000. Audiobook time was down for two reasons. First, I spent more time writing and note processing. I reviewed, reorganized, and annotated about 70,000 words of notes and ideas that I had recorded over the preceding two years into a journal tool that also made the material much more accessible for future reference. Second, I watched the first five and a half seasons of Star Trek: The Next Generation, as I continue to investigate what has been done so far with the use of science fiction to explore social organization and moral issues. This proved so relevant to the task that I count it as a suitable excuse for the reduction in audiobook time (as an exception!). There was even some entertainment effect (a mere uninvited side-effect for a Vulcan ;-).

The Gods Themselves and climate-science Orwellianism: Is optimism still possible?

Three years after Isaak Asimov's The Gods Themselves (1972; winner of both Hugo and Nebula awards) first hit the shelves, an April 28, 1975 Newsweek article began,

"There are ominous signs that the Earth’s weather patterns have begun to change dramatically and that these changes may portend a drastic decline in food production – with serious political implications for just about every nation on Earth...To scientists, these seemingly disparate incidents represent the advance signs of fundamental changes in the world’s weather...the Earth’s climate seems to be cooling down."

Asimov's book portrayed power politics within and around academic departments. The interplay between academic views and political priorities operates to suppress important scientific truths in favor of incomplete, semi-scientific stories.

This is a topic right out of recent headlines. Yet we must take care to get straight any analogies between the book's storyverse and issues of our own real world. What is the heroic and suppressed truth? What is the officially sanctioned illusion?

In the real world, there tends to be a complex mixture of suppressed truths and falsehoods and sanctioned truths and falsehoods. The key is that the suppression or the sanction has no direct bearing on whether something is true or not. One must look instead into the science itself. Recognized expert status is also not a reliable indicator. The greater the status of an expert, the more they might know and the higher their vested interests in ongoing research funding might be, so factors may push in opposing directions. An outsider might know less, but also have less of a vested interest in a particular viewpoint.

In the book's storyverse, the antagonists ignore no less than the risk of the potential destruction of the entire solar system. They are on the trail of a nearly costless, clean source of energy and don't want to be obstructed.

I will leave it for readers of the book to discover what the source is, but will only note that the financial and political pressure is on the side of ignoring the underlying reality. A heroic and brilliant scientist who insists on exposing the real risks is marginalized, while a scientist who is either willing to ignore these risks or is not sufficiently insightful to understand them to begin with is elevated to academic star status.

I have run into one analogous example after another in my two decades of self-directed study of economic, historical, and scientific issues. The "global-warming consensus" has been one of these examples to me for years.

In a classic Orwellian twist, the global-warming consensus-making machine uses as a rhetorical tactic the image that the "real truth" is with them, while anthropogenic global warming skeptics are portrayed as cynically ignoring the real evidence that wise people all know about.

As I have read the debate and the science, however, the badge for ignoring and otherwise being selective about evidence clearly goes to promoters of the anthropogenic global warming hypothesis themselves (See my Review: Unstoppable Global Warming: Every 1,500 Years as well as the book itself).

Discussing climate science, MIT Professor of Atmospheric Studies Richard S. Lindzen, in a presentation at Rockhurst University (HT to Stephan Kinsella via Mises Economics Blog), went so far as to say that, "Science has been compromised if not corrupted. For the moment, institutional science is part of the problem rather than part of the solution."

One can say the same about academic economics over at least the past century. There has been incredible pressure to suppress views and approaches that are not in line with consensus, and incidentally, also not in line with the aims and dreams of politicians to construct empires, monuments, and glory using other people's money.

Real economists expose the fallacies in such programs, shining light where it is not welcomed. Pet economists refrain from shining unwelcome light and instead direct their research into hyper-specialized topics or macroeconomic fantasy worlds that are unlikely to get them into much trouble. See my The gutting of economics as an anti-state force by fear of offending the powers.

The current resurgence of causal-realist economics in the tradition of Juan de Mariana, Carl Menger and Ludwig Von Mises has gained its fuel from institutions, such as the Mises Institute, that were established outside of or on the edges of the existing academic edifice.

This is just as one should expect. New paradigms, said Thomas Kuhn, do not grow from within old establishments. They grow on the outside and on the edges until the clearer grasp of reality that they facilitate eventually becomes obvious to enough people that the previous paradigm finally begins to lose force.

Asimov's book is built on a three-part structure labelled with the three parts of the expression from Friedrich Schiller's play, The Maid of Orleans, "Against stupidity, the gods themselves, contend in vain" (Die Jungfrau von Orleans, "Mit der Dummheit kämpfen Götter selbst vergebens").

Yet Asimov substituted a question mark for the pessimistic final period and dedicated his book, "To Mankind: And the hope that the war against folly may someday be won, after all."

Can we join Asimov in this daring touch of optimism?

To learn more on this topic, check the environment page at statefree-learning.org for a few select reading recommendations.

Getting to the Core of the Energy Debate

Despite the volume of reading I try to get in, it is only once or twice a year that I run into something that completely changes my perspective on an important issue of public life then and there. I follow up and check further of course, but there is a certain intuitive sense that one can develop for the kind of things that "everyone knows," which turn out on examination to be Big Lies. The key to the Big Lie is that it is so well accepted as being true that we as humans develop a natural subconscious resistance to challenging it. It must be true because so many people say it! Well, the sad news from thousands of years of human history is that such criteria do not help us know what is actually true. Turn instead to the facts and to reason:

Global Warming? Unstoppable Global Warming by Singer and Avery

Intellectual Property? "Against Intellectual Property" by Kinsella

Democracy? Democracy: The God that Failed by Hoppe

Now the latest big shift for me came through an article on nuclear power.

The article is entitled "Nuclear No-Contest" by James P. Hogan.

http://www.lewrockwell.com/orig9/hogan3.1.1.html

I have finally ceased being shocked at the depth of lies that I have absorbed in my lifetime. It is almost a full-time task to uncover them. This article skims yet another layer off of the lie pie we are all handed just by growing up and listening to standard media hype to form our views of reality.

I think it was Stephan Hayes who used a turn of phrase like "learning to distinguish the ring of truth from the thud of falsehood."

Keep reading, and let it ring!

2009 H1 results

On the Tips page of Statefree-Learning.org, I suggest keeping track of what you have read as a motivational tool. I do, and it is helpful. I track my progress in an excel spreadsheet. Here is a summary for the first half of calendar 2009. Only books are included, not academic articles, etc. Although it takes a lot for a book to make it onto my to-read list to begin with, inclusion on read lists does not necessarily imply recommendation.

Words added to idea journal: 13,844
Pages of paper books read: 4,377
Hours of audio books listened to: 125
All books completed: 23

Titles completed (paper and audio)
Visions of Liberty
The Partner
Defending the Undefendable
Anathem
Politically Incorrect Guide to American History
The Probability Broach
A History of Money and Banking in the United States
Democracy: The God that Failed
The Politically Incorrect Guide to the Constitution
Unweaving the Rainbow
The Dark Cloud
Dark Universe
Against Intellectual Monopoly
Meltdown
The Flight of the Barbarous Relic
Education: Free & Compulsory
The Persistence of Vision
Weapons of Mass Instruction
Economy, Society, and History (Lecture series)
The Cinder Buggy: A Fable in Iron and Steel
Egalitarianism as a Revolt Against Nature and Other Essays
The Ethics of Money Production
Alongside Night
The Pillars of the Earth

Review: The Ethics of Money Production

Business ethics is all the rage. This is the first look—well, the second: the first, as the author points out, was 700 years ago by a French Bishop—at the ethics of the business of making money. Not earning money, but producing money. This was near the last in a series of books I have been reading in a self-designed study unit on money and banking issues: The Case Against the Fed, The Mystery of Banking, Money, Bank Credit, and Economic Cycles and a series of articles on both sides of the fractional reserve vs. 100% reserve debate.

The Ethics of Money Production has several unique things to offer.

While simply stated, it covers a tremendous breadth, touching on all the key issues in clear form. It also squarely addresses the issues from both ethical and utilitarian angles and clearly distinguishes both. It gives priority to the ethical—if something is just plain wrong, there is no basis for excusing it on some set of utilitarian grounds. Yet as a highly trained economist, the author is in thorough possession of the utilitarian arguments in favor of various forms of what he identifies as unethical money production and he examines each one finding them to be flawed or self-contradictory on purely economic grounds.

He finds that there has been basically no attempt whatsoever to defend unethical monetary practices such as fractional reserve banking and monopolization of note issue on ethical grounds, and indeed, he can find no ethical grounds to support such practices. Moreover, there is substantial reason to condemn them as fraudulent and socially destructive on many levels, from both ethical and purely economic standpoints.

He summarizes the forms that this destruction takes: the continuous loss of value of everyone's money discourages saving, responsibility, and long-term planning and as a result even assists in the break-down of family bonds and other institutions of civil society. The sole beneficiary is the state itself and its closest friends, the banks that help finance its activities beyond what the citizens are willing to pay.

Inflationary financing is essential to state power, to its wars, to its expansion, to the consolidation of its domination of its subjects.

The conclusion of my study unit: money is a central, if not the central, strategic issue in the strength of the state vis-a-vis its ability to dominate its subjects by having for itself a virtually limitless means of financing itself at the expense of its subjects in a way that is hidden from, and quite mysterious to, most of them.

What is new in The Ethics of Money Production?

The author goes even further than his predecessors in imagining the conditions of free market money production. A key weakness in previous formulations was a presumption that only one type of metal would form a circulating monetary unit. It is entirely possible that more than one could function in parallel for different purposes, and there is no need to have an arbitrary "bimetalist" exchange rate established between them. For example, gold for the high-end, silver in the middle, and copper at the low end of types of transactions. He mentions historical precedent for such arrangements where, for brief periods, the state has not banned them. The metal rates would obviously have to float, as all bimetalist disasters and Gresham's Law-generated deflations in history have clearly demonstrated.

Multiple, freely floating monetary metal currencies are also defensive for the monetary order: if one begins to become corrupted or weakened for any reason, it is easy for consumers to switch to another at the margin, preserving monetary stability, tending to mitigate and rebalance speculative value shifts, and preserving for consumers the ability to shift away from problem areas. This is the very consumer power that the state has always sought to take away in order to protect its sad parade of funny money schemes. The essential point is to have total monetary freedom, which means that people are never forced to accept money they do not wish to, and are free to use any money they do wish to.

An important technical point that was new to me was a subtle error in previous monetary standard formulations. Saying that "an ounce of silver" of a certain quantity is the monetary unit is still not clear enough and leads to problems. The unit must be a specified type of coin that contains this amount of metal. It is costly to mint coins. If the unit is not specified as a coin, a debt of 100 ounces could be paid, for example, with 100 oz bar instead of 100 coins, but the former is actually less valuable than the latter because of liquidity differences and minting costs from bullion. The market solution would likely be to make a specified type of coin itself the contractual unit. If someone wanted to pay in bullion, it would have to be discounted so that the value of the 100 oz. bar, for example, would be lower than the value of 100 of the minted coin units, and the balance, essentially a minting discount plus, would be due in addition to the bar.

As I describe this, I realize that it means that the bar is not the money; it is another commodity. Money is an economic rather than a physical concept. The coin, in this example, would be the money, the bar still another commodity in a technical sense.

As the author shows, all such problems arise from the state arrogating to itself the right to set arbitrary "standards," which inevitably have some flaw in them that leads to problems that markets could easily have solved and would not have generated.

But the state does this for a reason: it profits. That it profits at the expense of its population, at the expense of everyone else, should be the first point taught in any exposition of monetary theory. In state-run educational institutions, how much prominence do you think this point is given? It is hidden as well as it can be hidden. The author shines the light on it for all to see and shows a way forward that is more ethical, more economically sound, and truer.

Vaclav Klaus hits the right notes before the European Parliament

What a follow up Vaclav Klaus is to Sarkozy! Read his speech before the EU parliament. He basically says (my liberal paraphrasing), wait a minute, I thought we in Eastern Europe already escaped from that lovely blend of socialism, one-party rule, and economic basket-case-ism. Now we're all marching right back to it under the banner of an EU central planning board!?

His argument that the positive meaning of the EU rests precisely in the taking down of artificial state borders to trade and migration and the facilitation of broader and more integrated free markets across borders is trenchant. The value does not lie in centralized regulation and state control of all economic activity. That is the path back to the exact antithesis of the value of the integration enterprise itself!

Of course, the media will promptly ignore most of what he says, at least relative to its fanboy coverage of Sarkozy and his beloved rock-star pop superstatism.

As it was, superstatist parliamentarians actually walked out during the speech at the moment Klaus was calling for tolerance of dissent and open discussion!

(HT to Tom DiLorenzo at LRC).

The miles per gallon illusion

Here's another fascinating entry on the "miles per gallon illusion" from the energy policy blog, Master Resource. Excerpt:

"it saves more gas to coax people to upgrade from their 10 mpg vehicles into ones that get a still-paltry 15 mpg, than it does to coax people to give up their 25 mpg vehicles and get into Star Trek material that achieves 100 mpg."

Read the full post to get the math on this.

"Enemies of liberty" more accurately located

Congressman Ron Paul writes:

"Proponents of reinstating the draft claim it is needed to protect liberty from enemies abroad. But what about the enemies of liberty right here at home? I am convinced that there are more threats to American liberty within the 10 mile radius of my office on Capitol Hill than there are on the rest of the globe. If we would get our troops off of foreign soil, those perceived enemies of our liberty abroad are much more likely to stand down and let us be. We have more than enough troops to mind our own business and defend ourselves. It is only for world domination that we have a troop shortage."

—From "On Reinstating the Draft"

President Obama's inaugural address—analysis and commentary

First impression: This is an outstanding example of a speech, with many inspiring messages and positive statements. The negatives consist almost entirely of eloquent repetitions of popular fallacies of economic theory and history. We will be forced, then, to leave the overall good feelings aside and examine the content.

I will begin with a summary of key positives and negatives. When I use the words “standard” and “conventional,” below it indicates my impression that these are errors that are not particular to Mr. Obama, but rather ones he shares with a vastly misguided contemporary intellectual consensus.

Positives:

• General tone of friendship and cooperation with other nations
• Inspiring references to values of honesty, responsibility, and hard work
• References to positive values illustrated by standard images of US history
• Tone and style appeared to match content; no obvious contradictions between content and presentation

Negatives:

• Standard failure to understand the meaning of large sections of the Constitution
• Confusion between values as expressed in private, voluntary, or entrepreneurial actions with the values of collective state action expressed through coercively orchestrated government programs.
• The use of the bait-and-switch to rhetorically draw on the good name of the former, and then quickly shift to advocating the latter.
  
• Standard failure to understand the inherent self-defeating effects of government programs (the hubris that government programs actually can accomplish whatever technocrats decide they want to see)
• Implication that those who “sacrificed” in the past thereby justified all of the causes for which they killed and were killed in military adventures, the pure justice of which should in no cases be questioned.
  

Next, I reproduce the full text of the speech and comment on particular passages. In the course of this discussion, I offer links to relevant books.

My fellow citizens:

I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors. I thank President Bush for his service to our nation, as well as the generosity and co-operation he has shown throughout this transition.

The 10th word of the speech is "us". This subtly begins to establish the discourse of collective action orchestrated through coercive bureaucracy, and starts establishing the mythology that whatever the administration does in the future will be somehow what you and I “do” ourselves.

Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have remained faithful to the ideals of our forbearers, and true to our founding documents.

While one wants to sympathize with and be inspired by the young President at this point in the speech, this last statement is almost physically painful to people who are able to understand what the Constitution actually says. The founding document has been so thoroughly violated by the Federal Government, the “interpretations” of the Supreme Court, and the outright usurpations of the Office of the President as to be in force virtually in name only.

Antidotes to such delusions include Restoring the Lost Constitution: The Presumption of Liberty and Who Killed the Constitution? The Fate of American Liberty from World War I to George W. Bush.

So it has been. So it must be with this generation of Americans.

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are all great examples of what is wrong. The solutions to these issues are clear. However, the solutions the administration plans to implement do not address the actual causes of these problems and the proposed programs are likely to make each problem worse than it otherwise might have been.

The root of the economic problem is the system of fractional reserve banking, government-orchestrated central planning of money and credit, and cartelization of the banking system. The definitive treatment of this issue is Money, Bank Credit, and Economic Cycles. Shorter treatments include What Has Government Done to Our Money?/Case for a 100 Percent Gold Dollar and The Ethics of Money Production.

As for war, the United States has spent decades, in stark violation of the Constitution and its principles, occupying and otherwise meddling with the countries in which these networks mentioned have developed. See The Revolution: A Manifesto on this issue (as well as good comments on healthcare and many other issues). For educational issues, a good foundation is the classic Education and the State.

These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land - a nagging fear that America's decline is inevitable, and that the next generation must lower its sights.

This is a well-founded fear in view of the state of contemporary economic literacy and the direction of most policy trends. The only question is whether people can manage to continue to prosper in some measure even in the face of massive taxation, inflation, war, strangling regulation, and all the rest that the state does to keep us down.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America - they will be met.

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.

On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics.

Worn-out dogmas is a perfect description of the absurd and ancient economic theories underlying the entire economic program being proposed by the new administration, which is in large part a continuation of the policies of the previous administration with some tweaking. This starts with the idea that “spending” can in any way create prosperity. This is probably one of the oldest and most enduring pieces of non-sense in the history of economic thought. Incredibly, even today, you can read plenty of such material in newspapers each week from prominent "economists."

We remain a young nation, but in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.

In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted - for those who prefer leisure over work, or seek only the pleasures of riches and fame.

Rather, it has been the risk-takers, the doers, the makers of things - some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.

These are nice references. Interestingly, however, when eliciting emotional images of positive values, the speaker refers to people operating on their own initiative in the private sector. We see repeated use of such images in the bait-and-switch style rhetoric that ensues.

For us, they packed up their few worldly possessions and travelled across oceans in search of a new life.

For us, they toiled in sweatshops and settled the West; endured the lash of the whip and ploughed the hard earth.

For us, they fought and died, in places like Concord and Gettysburg; Normandy and Khe Sahn.

Notice the smooth switch from positive, private-sector, individual values and actions to government-orchestrated wars. We start with people migrating to a new country—a country where, at the time, government was far less intrusive and the tax burden far lower than in those countries from which the immigrants left. We end with instances of mass warfare and destruction by military machines that were in all cases staffed at least partly through blatantly unconstitutional programs of involuntary servitude (the draft and much more), and financed through involuntary collection of wealth through taxation, debt, and inflation.

Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction.

Did they see America this way? Is that why they worked hard? The speaker makes a massive empirical historical claim about the motivations of millions of people with the apparent aim of eliciting a certain type of emotion—a collective pride. But is the actual claim true or misleading? What did great, great granddad actually think about what he was doing?

Most migrants migrate because in their opinion at the time, they expect their life and sometimes the lives of their offspring to be better than would have been the case in the country from which they depart. They can leave for any blend of reasons, including perceived income potential, greater religious freedom, ease of starting a business, more space, lower taxes, fewer regulations to hamper productive business, and even better climate. These are all personal reasons, which have little to do with the various collectivist schemes and visions of politicians. See for example the fascinating and sweeping global historical work of Thomas Sowell in Migrations and Cultures: A World View and the four other volumes by him in the series of which it is a part.

This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year.

Our capacity remains undiminished.

These are very nice statements, and true. The “real economy” is not, indeed, the main issue. The issue is the fractional reserve banking system with central planning of money supply and interest rates. It is this system that undermines the efforts of all of us to plan and save. Our savings are depleted by constant currency depreciation due to inflationism. Our long-term business plans are thwarted due to malinvestments made during bubble periods on the basis of false economic signals created by government manipulations of money and credit and the fractional-reserve practices of the government-cartelized banking system.

There is no cause of major recurring economic cycles of boom and bust other than artificial credit expansion unbacked by real savings. The cause is always the same and the result is always the same, even though mainstream economists, like befuddled witch doctors during a plague, seem entirely unable to explain what is happening.

But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions - that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.

For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.

Here is some nice inspiration. Notice that it is based on images of personal work and dedication and metaphors of the bold business venture. But then the bait-and-switch comes through: it soon becomes clear that “we” is not you and I working productively to generate goods and services that other people may value enough to buy, but rather "we" is the coercively financed bureaucratic administration of the state and whatever it will actually do with the money it extracts from hapless citizens.

We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.

I can see a positive note here, in that we are rebelling a bit against a certain primitive anti-scientific irrationalism in the previous administration. However, the negatives quickly prevail. This statement represents the classic hubris of the technocrat, which is to imagine that the state can “do things” with technology through "policy" that will prove economically advantageous for real people as a whole.

However, the only power and capability the state has is to take wealth from some people and give to others. It cannot produce anything. It can only distort and redistribute. It can only advantage some at the expense of others. The issue is always economics; technology is secondary. There is no mechanism by which the state can make economically intelligent decisions about what technologies to adopt, or how, when, where, and to what extend to employ them. This is precisely the error of central planning exposed by Ludwig von Mises most thoroughly in his classic book Socialism.

We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.

Now, there are some who question the scale of our ambitions - who suggest that our system cannot tolerate too many big plans. Their memories are short.

For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

Yet again comes the ever more striking bait-and-switch. Just as before, this method raises positive emotive pictures of what are fundamentally private, individual and entrepreneurial values of hard work, innovation, and creation of better ways of doing things. It switches imperceptibly to the false implication that such values can somehow by applied collectively or encouraged through bureaucratically orchestrated and coercively financed activities. This is sheer delusion.

What the cynics fail to understand is that the ground has shifted beneath them - that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works - whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.

Well put. Unfortunately, in almost every case, government programs harm us, and this emphatically includes harming the very groups that the policies are advertised to help. Perhaps here would be the place to read Henry Hazlitt’s wonderfully accessible classic Economics in One Lesson. This little book demolishes in clear and simple terms one interventionist fallacy after another by showing how government interventions billed has helping people actually harm the very people targeted for “help,” while certainly also harming the rest of us at the same time.

Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account - to spend wisely, reform bad habits, and do our business in the light of day - because only then can we restore the vital trust between a people and their government.

This is just an outstanding sentiment. If only reality were not so unforgiving. Unfortunately, such assessments of "success" are often made by the same bureaucrats and special interests who run these programs. They do not tend to produce reports advocating the termination of their own departments and pet programs. As history has repeatedly shown, this leads to no end of intellectual deception to produce indications of “policy success” and to suppress or systematically ignore evidence of “failure” or of costs outweighing benefits (to the iffy extent that costs and benefits can be calculated at all in the context of bureaucratic operations).

Humans do not tend to do well when they are institutionally the judges in their own cases. This is one reason why the most reliable mechanism for weeding out what works from what doesn’t is to allow people who want to use services to purchase them (including purchasing them voluntarily on behalf of others), and preserving for each the freedom to choose not to pay for any service or product. What kind of a system is that? The freedom to buy or not to buy things with your own money? What shall we call this most effective mechanism for promoting the truly useful and helpful and discouraging the less useful and the less helpful?

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control - and that a nation cannot prosper long when it favors only the prosperous.

Ah, the market. However, this "spinning out of control" is not what the market has done. It is rather precisely what the government-cartelized fractional reserve banking system with central planning of money supply and interest rates has done. It is this latter decidedly non-market system that is responsible for economic crises, and which must be eliminated. One of the few fields in which there has emphatically been no semblance of a pure market system is the field of money and banking, which kings and emperors started taking over and manipulating for their own profit centuries ago. Recurring economic booms and crises are due directly to this entire category of inherently corrupt practices and institutions. It is therefore by no means the “market” that has spun out of control; it is precisely the state’s self-financing interventions in money and banking that are the source of both economic cycles and the permanent ongoing devaluation of currencies.

The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart - not out of charity, but because it is the surest route to our common good.

As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience's sake. And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and that we are ready to lead once more.

Outstanding statements and messages—setting a positive and firm tone.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

We are the keepers of this legacy. Guided by these principles once more, we can meet those new threats that demand even greater effort - even greater co-operation and understanding between nations. We will begin to responsibly leave Iraq to its people, and forge a hard-earned peace in Afghanistan.

With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet. We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you.

Nicely put in general. However, as for the warming planet: anthropogenic (man-made) global warming is for the most part a hoax from top to bottom. It is not coincidentally a hoax that is largely fueled by government-funded research. Any research supporting the expansion of state power is naturally quite popular with state institutions and attracts funding and fame, and research that does not support expansions of state power—not so much. Many, many climate scientists do not support the anthropogenic global warming hypothesis and argue that the evidence is much stronger for other interpretations of the evidence. This rarely makes headlines, though.

A nice solid antidote to conventional global warming theology in one book is a review of the scientific evidence regarding climate change research, Unstoppable Global Warming: Every 1,500 Years. In a nutshell, 1) many claims of global warming are systematically exaggerated through biased selection and exclusion of evidence and other flawed data-gathering mechanisms, 2) computerized climate prediction models are largely bogus and fail repeatedly and utterly to predict reality, 3) extremely strong physical geological evidence of numerous overlapping types going back millions of years show a solar-induced warming and cooling cycle of approximately 1,500 years, the continuation of which on trend explains the modest actual global warming that has been scientifically observed, and 4) on balance, global warming is better for the environment of living organisms, including weather stability, than global cooling is.

For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus - and non-believers. We are shaped by every language and culture, drawn from every end of this Earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.

Nice sentiments; well expressed.

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West - know that your people will judge you on what you can build, not what you destroy.

To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist.

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.

The leading changeable causes of poverty are the absence of secure property rights and legal predictability, combined with stifling economic regulations that render productive entrepreneurial activity and trade virtually impossible. Addressing these conditions is the best way to help. Creating them in the advanced countries is the best way to hobble them, as we are seeing. Extracting money from (still) rich-country citizens through taxation and shipping it to prop up corrupt regimes, helping them buy weapons with which to kill their political opponents (so-called foreign aid) is counterproductive. The most helpful policy for developed countries to take with regard to emerging and poor economies is to lift any and all tariffs and all restrictions on trade, in particular, and possibly also on migration. Free trade and interchange with all; entangling alliances with none is the foundational foreign policy of the United States (though one that was not long practiced due to the influence of Hamiltonians, et. al. See Hamilton's Curse: How Jefferson's Archenemy Betrayed the American Revolution--and what it Means for America Today).

As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us, just as the fallen heroes who lie in Arlington whisper through the ages. We honor them not only because they are guardians of our liberty, but because they embody the spirit of service; a willingness to find meaning in something greater than themselves. And yet, at this moment - a moment that will define a generation - it is precisely this spirit that must inhabit us all.

This is an emotional and hallowed topic, rendering it virtually immune to intelligent discussion and honest historical analysis. Many of these people were inducted involuntarily into foreign military adventures that did not actually further the interests and security of the United States. The country’s deceitfully engineered and propaganda-fueled entry into World War I prolonged and worsened a classic European war that was almost over at the time of the US intervention. This widening and extension of the war set up the conditions for a dishonest one-sided post-war economic exploitation of Germany, principally by Britain, which helped set up the disastrous economic conditions and hyperinflation that formed the desperate backdrop to the democratic election of Hitler and the delayed continuation of World War I, which we call World War II.

Read, for example, the collection of essays, The Costs of War: America's Pyrrhic Victories, to get started on the long road to understanding just how deeply we are deceived by glorifying histories of the state’s wars.

For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job, which sees us through our darkest hours. It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child, that finally decides our fate.

Here we go again with the bait-and-switch. These inspiring images are mainly of privately conducted, voluntary actions that the state did not coerce out of its citizens. It is indeed a tribute to the people that they are able to function and succeed at all in the face of all the destruction, distortion, and unfathomably massive taxation and micromanagement that the state inflicts.

Our challenges may be new. The instruments with which we meet them may be new.

The challenges are in no way new. The largest one is just the latest manifestation of ancient problems that date in protean form from the early flirting with fractional reserve banking practices in 14th century Florence. As for the "instruments" now proposed, they are merely the latest variations of policies based on ancient economic superstitions—fallacies that owe their survivability not to their truth, but to their utility in promoting the interests of the state, its favored special interests, and its lapdog “economists” and journalists, at the expense of everyone else.

But those values upon which our success depends - honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism - these things are old. These things are true.

This was a nice moment of the speech in emotional terms. There was some honest recognition of real values from the past—a legacy. If we could only include on this list of values: not taking other people’s money (taxation) and not micromanaging what they can do on threat of imprisonment (regulation), we would be much further along. These latter items don’t fit with the values of fair play, tolerance, or honesty.

They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility - a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

This is the price and the promise of citizenship.

Notice the non-specificity of the “duties” now. I assume that the duties may include continuing to hand over more or less half of our incomes to the state or go to jail. Other duties may include facing additional strangling regulations on workplaces and the operation of productive enterprises, living with the criminalization of the production of incandescent light bulbs, going off to the next state-aggrandizing and new-enemy-manufacturing war of the week, or watching our sons, daughters, and friends do so. What “we” the citizens will actually do is fund a multitude of programs, transfers, and invasions, almost all of which are deeply misguided, wasteful, and blatantly unconstitutional.

This is the source of our confidence - the knowledge that God calls on us to shape an uncertain destiny.

This is the meaning of our liberty and our creed - why men and women and children of every race and every faith can join in celebration across this magnificent mall, and why a man whose father less than 60 years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.

This definitely represents concrete progress. This was a cultural transformation conducted over years. It would have happened much sooner without the state and its enforcement of legally mandated discrimination, and to this day laws that enable bigoted employers to practice arbitrary discrimination without themselves suffering what would otherwise be the natural economic losses that would stem from it. See Walter Block’s new Labor Economics from a Free Market Perspective.

So let us mark this day with remembrance, of who we are and how far we have traveled. In the year of America's birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:

"Let it be told to the future world ... that in the depth of winter, when nothing but hope and virtue could survive ... that the city and the country, alarmed at one common danger, came forth to meet [it]."

The American revolutionaries fought against the imposition of various piddly taxes of a few percent on a few selected items! They fought against the arbitrary power of an unchecked executive (who was, at the time, called a "King" rather than a "President").

The modern American executive branch, headed now by Mr. Obama himself, has unimaginably vaster powers to tax, regulate, imprison, and kill than King George III would ever have begun to imagine or fathom. The Declaration of Independence provides a list of grievances that are truly small-time whining compared to the comparable modern list of the usurpations and abuses of the United States Federal government.

The only responsible course for a holder of this office who wishes to protect the Constitution and the ideals of the American revolutionaries would be to immediately begin issuing executive orders reversing virtually all assumptions of power taken by past presidents and dismantling most executive branch departments. Congressman Ron Paul laid out precisely such a course in his 2008 campaign for president.

America. In the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children's children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God's grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.

(end)

I found this speech honestly inspiring on a personal level. My role, what I can do, is contribute to economic and historical education in this world. False economic ideas lead well-meaning people to do harm that they do not understand they are doing through their fanciful reliance on the coercive instrument of the state to attempt to “manage” the rest of us.

Open letter to Bloomberg reporters on "economists of all stripes" claim

Since the following letter to two Bloomberg reporters concerning a statement in their article has elicited no response for about two weeks, I will publish a slightly condensed version here as an open letter. I note that the article has gone through two updates since I wrote to these reporters, but the unsupportable claim I pointed out to them remains unaltered.

Dear Ms. Goldman and Mr. Miller,

I sometimes read Bloomberg news articles and come across statements that leave me scratching my head. A few such statements, though, strike me as sufficiently incorrect that I feel an obligation to take a moment to bring them to the attention of their authors.

In your article, "Obama Warns of Prolonged Crisis Without Stimulus Plan," you wrote, "... economists of all stripes agree that aggressive government action is needed."

This is problematic because an entire school of professional economists argue that such government actions as "stimulus" programs will clearly worsen conditions, prolong and deepen the recession, and generate further impoverishment of our society. Many of these same economists also predicted the coming of the financial collapse years in advance of its arrival, and explained why it would occur.

Thus, I suggest amending statements such as the one I quoted to, for example, "most economists, with the notable exception of those of the Austrian school, agree that aggressive government action is needed."

In addition, if you sought comments and opinions directly from economists of "stripes" who do not hold the view you suggest they do, it would offer your readers a more critical and balanced understanding of the issues. From my own studies in political economy, I could recommend many scholars, but two come to mind right now for the combination of the depth of their scholarship in economic history and theory and the incisiveness of their analyses of current issues based on this foundation. They are:

Robert Higgs, senior fellow in political economy at the Independent Institute, and author of many important academic books on economic history, with a particular emphasis on the relationship between government policy and recurring crises.

Joseph Salerno, a senior fellow at the Ludwig von Mises Institute, professor of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics.

I find both of these economists clear communicators with a strong grasp of the relationship between government policy and economic cycles. Beyond them stretches a long and growing list of economists who would be very unlikely to "agree that aggressive government action is needed," certainly not the types of actions now being proposed.

Best regards,

Konrad Graf

Journalism values dead in US MSM, judging from its coverage of Gaza

I just came across a very specific, devastating analysis of US mainstream media coverage of the Gaza invasion over at AlJazeera, entitled, "In the US, Gaza is a different war."

The basic values of journalism are apparently quite dead in the US MSM, and this analysis helps explain in concrete form some of the reasons for my instinctual nausea at MSM coverage. I am finding the AlJazeera coverage, while it of course has its own biases, much more balanced and informative about what is actually happening (remember reality?) as opposed to the story we are supposed to be believe about what is happening.

One is closer to news as the product of journalism in the more traditional sense: collecting and supplying timely information that is weighted by reasonable judgments of newsworthiness. The other is "news" as propaganda, with the clear objective and effect of inculcating and maintaining a carefully packaged political stance on the part of the readership. This is done, if not through outright lying and misinformation, through the careful selection and packaging of what will be said and shown, what will not, and in what way, to create an impression that diverges, at times sharply, from what could be discovered with more investigation and thought to be considerably closer to the truth.

My year by the numbers

While the application of false but popular economic theories continues to wreak havoc on civilization, it is comforting at least to know that there are a lot of people out there who have better ideas than the ideas that have led directly to the need for the current depression (a depression, by the way, which is essential to correct all the damage that was already done during the boom).

I'm trying to do my bit to learn and eventually make a contribution. Just for fun, I thought a short quantitative performance review of my year might be good for New Years' Eve, especially since so much of my work is highly qualitative in nature. So I put together some numbers.

Review of 2008 profession-related achievements by the numbers

313,110
Number of English words of investment research reports translated out of Japanese (this is my "day job," read: the one that generates a current cash flow). This equates to roughly 800 pages of text.

48,226
Number of words of notes, ideas, and observations added to my New Ideas file for future project development.

23
Number of non-fiction books read

14
Number of blog posts published

11
Number of fiction books read (on paper)

9
Number of fiction books listened to (thanks Audible)

[43: Book total]

One of the problems today is people not reading enough books. Even reading a lot of Web pages and blogs on a regular basis, which I also do, cannot equal the systematic development of knowledge and understanding available in books. Blogs are also good for connecting ideas with current events and for discussing new ideas, but systematic understanding is essential, and it is this that is most lacking today. It takes time to read a book. It is an investment. It pays off. Especially if you choose the titles wisely.

2009 Goal
To greatly increase the number of non-fiction books read!

What can one person do?

To start with, one person is the only one who can do anything, ever. So get over it.

This one person is getting toward the end of reading Money, Bank Credit, and Economic Cycles (pdf) by Huerta de Soto.

This book cannot be recommended too highly. For what it's worth, reading this enables one to understand the exact manner in which the financial elite, the state, and their pet money-crank academic economists are entirely responsible for manufacturing economic crises, including the current particularly disastrous one.

They should know better because the economic theories driving current policy in the banking industry have been refuted either decades or centuries ago, depending on the particular issue. It is special interests which have the big stake in maintaining popular falsehoods for their own benefit.

Understanding is the first step in change. If all you can do is understand, do start by doing that please. It's not that hard anymore. Just turn off that non-sense machine, the media, and start reading a decent book.

Admittedly, an easier introduction to start with would be The Mystery of Banking (pdf), but it is also really worth it to take the whole 812-page ride with the Man from Madrid if you can manage it. Another brand new book in this field is The Ethics of Money Production (pdf). Although I have not had the opportunity to get too far into it yet, I'm venturing a guess that it will be going onto my recommended list after I do.

Washington State Constitution: Article I, Section 1

"POLITICAL POWER. All political power is inherent in the people, and governments derive their just powers from the consent of the governed, and are established to protect and maintain individual rights."

Well, that was the ideal once upon a time in America, even when the constitutional convention of Washington State adopted this language in 1889.

A "modern" (and ancient) version better matching contemporary practice might read:

"POLITICAL POWER. All political power is inherent in the government, and the people derive their permitted rights from the consent of the government, and exist to protect and maintain state prerogatives."

How many are left out there who like the old one better? If not enough, we're all going to be stuck with the new (and ancient) version.

They used to call it tyranny, but I guess that was back when people used to learn history.

A formula to help with the "Inevitable Question"

A blog post I took note of the other day over at NoThirdSolution, and elements from a recent conversation with my German teacher congealed into one formula that may help avoid pitfalls for those of us who sometimes face what I will call the Inevitable Question: “(But) How would the purely free market society handle X?”

The post

The post cited argued that the New Orleans/Katrina fiasco was a result of government intervention. Thus, to the question, “how would the purely free market society handle X?”—X being the flooding of New Orleans—a simple answer would be that no city would likely have been built in a known recurring flood zone without extensive and systematic government subsidization and encouragement. The fact that the city was there and not somewhere else safer may well already have been a creature of government subsidies, regulations (badly distorting the operation of the insurance market), and make-work programs (Army Corp of Engineers building the dikes, etc.).

Thus, the answer to the question, “How would the free market have built those dikes?” may well be, “only a government would have been stupid enough to waste resources on building those dikes and encouraging the growth of a city in a known flood zone.”

One lesson from this hypothetical little interchange is that there is not always a need to struggle to come up with a creative free market scheme for building useless or dangerous structures of the kind that the state might build.

The conversation

The second input to my thought process was a conversation with my German teacher in which the concept of a statefree political philosophy came up in response to a question about my preference for US president (none). She struggled for a moment (since I usually seem like a reasonable sort of fellow) to mentally frame what I had said until her mind hit upon the conventional strawman terms in which we are all taught to consider and dismiss this possibility: “you mean you don’t think there should be any rules.”

I noticed later that even this summation can be easily translated into the form of the Inevitable Question: “How would the purely free market society handle X?” with X in this case being a strawman situation in which there are no rules or enforcement mechanisms in a society: in other words, Hobbesian anarchy, the war of all against all. This meme operates in conventional discourse to immediately and irrefutably discredit the statefree position.

But Hobbesian anarchy is, of course, the exact opposite of the position of advocates of statefree civilization. Advocates of a free civil society argue instead in favor of a small set of very crucial basic rules, for their consistent enforcement, and for their equal application to all human beings.

The state as we know it exempts itself from such consistent rules when it taxes, hands out favors and special privileges, wages war, and so forth, and the result of this is a great deal of unpredictability, chaos, and destruction of life and wealth. Indeed, from this perspective, Hobbesian anarchy may approach a fair description not of a statefree civilization, but of states themselves in action, their employees only modestly checked by a modicum of justice and the rule of law.

Spotting the trick in the Inevitable Question

The first thing to realize about the Inevitable Question is that it presents a stacked deck. This is because X is almost invariably a serious problem, but it is most often a problem that is created by the activities or existence of the state itself. Thus, the Inevitable Question can seem useful in one sense, but in another sense can be dangerously misleading and may even be inherently nonsensical.

At some point during an often long study of history, economics, law, and other disciplines, after wading through endless swamps of misleading history, fanciful economic theories, false conventional wisdom and plain-old propaganda, some of us have eventually reached the stage of advocating shrinking the state, building civil institutions, and moving toward a civilization that is free of the proven and inevitable corruption, interference, and disruptions of the state.

Why? Because, among other reasons, the state creates unending problems in society, such as X.

Thus, one productive approach to the Inevitable Question might well take a general form like this:

“The purely free market would handle X by being the purely free market, in which case X would not be a problem, because X is a problem that is caused by the poisonous influence of the state. This is, in fact, among the very reasons we advocate the purely free market. Thus, a statefree civilization would not have to handle X, by definition. That’s why we recommend it.”

After trying out this formula with a few sample values for X: war, business cycles, inflation, homelessness, unemployment, lack of education, and a surprisingly long list of other possibilities, it seems that it might come in handy in many cases. It might help keep advocates of consistent justice in society from spending valuable time inadvertently defending negative effects of the state that we do not really wish to defend.

Most importantly, it might help keep us from trying in vain to construct ingenious methods by which a purely free market society might successfully build massive and idiotic monuments to the state. Indeed, most of us would probably just say let's skip those.

The perfect crime is the one not detected

Orson Scott Card, in his open letter Would the Last Honest Reporter Please Turn On the Lights? argues that the Community Reinvestment Act and Fannie and Freddie's antics were responsible for the financial crisis due to Democratic party policies.

Card is correct that the deleterious effects of forced and subsidized lending practices helped set up the sub-prime bubble. Unfortunately, the fundamental problem is much broader, much worse, and lies elsewhere. Indeed, it lies well beyond any issues about which Republicans and Democrats differ. The Big Government parties (available in an exciting selection of Blue and Red colors) are united on being unwilling or unable to say a single word about this larger issue.

To place the effect of the CRA in this larger perspective, it may be helpful to imagine the process of overinflating a balloon. The CRA created a weakness at a particular spot on the latex surface of the balloon. When the balloon popped, it naturally popped starting at the weakest point, after which the air proceeded to rush out altogether, deforming the entire balloon.

However, we would not expect the balloon, in the process of being overinflated, to have not popped if only the weakest point on its latex surface had happened to be somewhere else. We would expect it to pop perhaps half a second later, starting in a different place. This is not to advocate or excuse the unending list of nonsensical policies, such as the CRA, that weaken the surface of the balloon, it is rather to argue that the overinflation of the balloon is arguably worse than each and all of these lesser destructive policies.

What few but the Austrian school economists and the Ron Paul movement are currently addressing is the fact that the balloon is quite unlikely to pop at all unless it is being overinflated.

The air pump in this case consists of the fractional reserve banking system pyramiding on top of ever-expanding fiat currency and electronic "deposits" (of nothing) created on central bank computers. The underlying process has, in one form or another, been going on for centuries, becoming ever more refined, effortless, massive, and destructive up to the present day. It exists and persists for a very simple reason. It is the usual reason: the use of state power to channel money. But how does it work and in what direction does the money flow?

The government provides special exemptions to the ordinary rule of law for banks. This allows banks to simultaneously lend out the exact same money that they are supposed to be "safekeeping" on deposit, a form of fraud. Indeed, most of that "money in the bank" that people are lulled into feeling that they have, is not actually in the bank. In return for this special legal treatment of banks, the government, its best friends, and the banks themselves are the first beneficiaries of the new money and loans thus generated fraudulently out of thin air.

The classic question to ask about a policy system such as this is who benefits? Most of the early forms of such fraudulent loans of other people's money went straight from banks to the king for his wars, or to the city for its expanding budget. Of course, the system has come a long way since then.

Today, this process operates as a massive hidden tax that extracts wealth from all the people to whom this money and its effects "trickle down" only late in the process, after the general price level has already been lifted.

In understanding this racket, it is important to realize that creating money out of thin air lifts the price level artificially, but this is a process that takes time, extending out over several months or years. During this period, those who get the money first can spend it before the general price level has been lifted—in other words, when the money still buys more goods and services. Those who get the money later, can only spend it after the general price level has already been lifted—by which time it doesn't buy as much. This is a massive scheme to transfer wealth:

• From the poor, the retired and others on fixed incomes, savers, and those who work in industries farthest removed from government expenditures.

• To bankers, government employees, debtors, government contractors of all kinds, and any other industries and operations (don't forget universities) that are relatively close to the sources of government expenditures and new money creation.
  

And the magical thing is that most people, especially the ones being ripped off most in this process have no clue that it is even happening. Only a few of the most pitiful examples would be granny with her retirement savings and little kids with their special little-kid savings accounts that pay interest at a small fraction of the true rate of inflation.

Indeed, a more perfect criminal scheme has never been devised. It is insanely profitable, its victims are unaware of the source of their losses, and the state not only calls it all legal, but is itself at the top of the pyramid, the biggest player in the game.

It makes for fascinating reading, and once you know about it, perhaps also a certain degree of responsibility to learn more and spread the word. The first step is to find out more.

Books:

1. (Shorter, introductory): The Mystery of Banking (pdf), 2nd ed. by Murray N. Rothbard
Or order a physical copy.

2. (Longer, more detailed): Money, Bank Credit, and Economic Cycles (pdf) by Jesus Huerta de Soto
Or order a physical copy.