Comments (15)

• Guilherme

  Great Article and very good explanation about the theory of value.

  About this, visit my blog

  www.libertariantruth.wordpress.com

  Published: December 25, 2006 1:36 PM

• Sam

  Was that article a tad simplistic in some areas? Didn't that articles presume a society where everyone engages in some simple activity that anyone could stop what they were doing and immediately do what someone else does? In other words, in the modern world, isn't there are a great many skills which requires aptitude and training? If someone didn't like the prices charged by the local electrician then it wouldn't be that easy to set themselves up as a competing electrician? Hence the local electrician could enjoy a temporary monopoly until, say, the 5 years it takes to become a good-quality electrician?

  Likewise the presumption of uniform products, that all apples and bread all taste the same? When in reality there are different types of apples and different recipes of bread? People may prefer to pay extra for an extra tasty apple? In a Libertarian society are we to presume if someone has invented a new and tasty type of bread, shoule he then make the recipe public as not to form a monopoly?

  Finally, my great gripe is the presumption in a happy Libertarian is that everyone is presuming born equally capable. In reality people are born in all shapes, sizes, strengths, aptitude and intelligence. Doesn't it mean that society is inevitably going to remain unequal as certain inequalities allows some folks to be extra-productive whilst others are going to barely productive (if at all)?

  The fact that existing (and ancient) societies are anything but Libertarian, people are downtrodden all the time, mean that many people are most certain not born with the ability to defend themselves against those who were born with great strength and ability.

  Published: December 25, 2006 8:43 PM

• Brent

  >In a Libertarian society are we to presume if someone has invented a new and tasty type of bread, shoule he then make the recipe public as not to form a monopoly?

  Sam, "in the real world", monopoly is a meaningless word unless you are talking about an enterprise protected by the government (i.e., a real monopoly). To have the wishy-washy definition of monopoly that neoclassicals accept (and you appear to accept, too), you have to ultimately (if you are to be consistent with your logic) conclude that all private property (including the ownership of your own self) is a (bad) monopoly. This is a ridiculous proposition and, I believe, a very wrong description of the market process and what constitutes a true monopoly.

  Published: December 25, 2006 11:17 PM

• Sam

  But Brent, aren't you presuming a definition of a monopoly as a very large businesses which has complete market share and keeps its monopoly position thanks to government legislation against upstarts?

  I'm thinking of monopoly advantages that can be temporary but nonetheless advantageous. After all, there are market advantages on the grounds that it takes time to create competition. A new buiness that opens with machines and assembly lines would have a temporary monopoly over other businesses that used individual personnel. The turn-around time for other businesses to adopt the new techniques would cost the older business their market share as it is being soaked up by the new business.

  And similarly as I said before a perfectly elastic market presumes every person is equally (or near enough) smart, strong, adventurous, innovative, etc.

  Published: December 25, 2006 11:45 PM

• RogerM

  Sam:"Didn't that articles presume a society where everyone engages in some simple activity that anyone could stop what they were doing and immediately do what someone else does?"

  I think you may be confusing Austrian economics with the mainstream econ you were taught in school. Mainstream econ (neo-Keynesian and neo-Classic) teaches that free markets naturally lead to abusive monopolies. Anti-trust laws were inteded to empower the government to break up such monopolies. But the truth, which also happens to be the Austrian view, is that free markets tend to destroy monopolies and only governments can create real monopolies. If a company manages to achieve near monopoly status in a market, as Microsoft, Boeing and Alcoa Aluminum have, it can do so only by providing the best value to the consumer, so Austrians don't consider those monopolies a problem.

  Also, mainstream econ, not Austrian, reduce all labor to the same level and make all products similar. They do that in order to make their theories more easily understood and converted into math models. Austrians have always claimed such models were unrealistic because all labor is not equal in skill and all products are different.

  Mainstream econ holds to an odd view of competition, too. They think that perfect competition exists only when all products are identical, all labor skills are equal and so many companies compete in a market that no one business can effect prices. Also, no one advertises because all products are identical, so there's nothing special to say about your product. In that case, companies compete only on price.

  But as Austrians point out, what mainstream econ calls pure competition is actually pure regimentation. It's more descriptive of production in the old USSR. In real competition, businesses add features and try to make their products unique in order to give themselves a competitive advantage in the marketplace. And they advertise those distinctive features. That's real competition, and yes, it can lead to temporary monopolies, but who cares?

  You can see the differences between the two concepts of competition if you use sports as an analogy. What would pro football look like if every team had to use the same plays, all players and coaches earned the same money, and talent, coaching and player, had to be equally divided among the teams? All games would probably end in a tie. That's what mainstream econ calls competition. But it's actually the opposite of competition.

  Published: December 26, 2006 10:07 AM

• Sam

  But why are some people seem to be arguing that laissez-faire economics would empower everyone escpecially the 'have-nots'. Just as with sporting events, everything goes to the winners, so to those who are smart, strong, innovative, etc., will be enriched in a free economy. Actually I would think that a welfare state (a.k.a. socialist state) is the one that enrich the poor, thanks to forced wealth redistribution. The fact that there are poor people really means there are those who not particularly smart, not particularly strong, not particularly innovative, etc. To say that a free-market would free up resources so that some poor would engage in some sort of self-improvement is bunk. If such people do engage in social mobility (or are held back thanks to government legislation) then it would be argued that these folk were 'broke' but not poor.

  Published: December 26, 2006 7:50 PM

• David White

  "Every voluntary exchange, like the purchase of a loaf of bread, yields a gain to both sides of the exchange. ... Traders on both sides make a profit in every voluntary exchange, due to the spread between their values and the terms of that exchange. By the same reasoning, every compulsory or involuntary exchange, where one person confiscates the goods or services of another or dictates the terms of the exchange under force or the threat of force, entails an economic loss for the unwilling participant. Economically as well as morally, all such transactions are the same as outright theft."

  Never mind that Sam represents the vast multitudes who, even when confronted with the above (though few are, since most of what passes for economics today is pure nonsense), cannot understand (1) that the difference between voluntary and unvoluntary exchange makes ALL the difference and (2) that had the latter not been institutionalized via the state, the econonmic inequality that is so rampant today would long ago have faded into insignificance.

  To maintain otherwise is to reject the efficacy of human liberty and to espouse, however unintentionally, the continued enslavement of the bulk of mankind, precisely as Sam does in his espousal of "forced wealth redistribution" -- i.e., theft.

  Published: December 27, 2006 8:05 AM

• Sam

  Well David White in the last entry I was merely pointing out that people are unequal relative to productivity which results in different levels of income for different people. You seem to presume that every person is equally productive but the Big Bad Governments Of The World prefer some people over others and give the appearance of inequality in an otherwise equal society.

  Whilst there can be situations where this is indeed true such as war: violent killers are rewarded in wartime, but jailed or executed in peacetime. There has be an obvious fact of life that people are born unequal and therefore we would expect to see different levels of productivity. Hence super-productive people become wealthy, whilst very low productive people become poor and will stay poor until they find something that they are very good at producing. I thought my last entry simply stated that equality can only be reasonably attained through Socialist values which is what Libetarians have been saying all along. Or so I thought . . .

  Published: December 27, 2006 8:55 AM

• RogerM

  Sam:"Actually I would think that a welfare state (a.k.a. socialist state) is the one that enrich the poor, thanks to forced wealth redistribution."

  You're right if you focus on just the immediate effects in the short run. Obviously, if we could take half of the income of the wealthiest and give it to the poorest, the poorest would be better off, but only for a short while, only until they had spent the money given to them. Real economists, like Austrians, ask "What then?"

  If socialism truly helped the poor, then the poor in the former USSR nations and China should be wealthier than the poor in the US. Also, the poor in Europe should be wealthier than the poor in the US. But we find that the opposite is true, except for Europe where their poor and our poor are on about the same level, although Europe has twice the unemployment rate of the US.

  Why would the opposite of what socialism teaches be true? Because there are two ways to help the poor: 1) Give them a hand out or 2) Give them a job. When you give the poor a hand out, the benefit lasts until it's consumed. A job lasts much longer. Laissez-faire provides jobs for the poor. It can do so because the wealthy don't consume all of their income; they save most of it, and those savings go into investments in new businesses.

  Also, under socialism entrepreneurs have no incentive to create new businesses and workers have little incentive to work. Before the fall of the USSR, the Soviet workers used to tell the joke that the state pretended to pay them (in worthless rubles) and the workers pretended to work.

  Socialism always told us that the state could create jobs as well as entrepreneurs, but the USSR and China proved that to be false. China finally gave up on socialism when it became clear in the 1980's that the entire nation was going to starve to death if they didn't make drastic changes.

  Published: December 27, 2006 9:06 AM

• Sam

  Gee Roger M, I guess I must have skewered my blog before with the a.k.a Socialism bit since you then presumed that I thought the U.S.S.R. was best for the poor. Actually when I used the 'Welfare State' I was referring to Western nations that taxed the 'haves' to give it to the 'have-nots'. In that case then I would stand by my argument since poor people would be better off because of things such as 'free health care', 'subsidised medicine cost', 'baby bonuses', 'welfare cheques', 'public housing', etc. These items are still be provided nowadays and I don't see rich people leaving western nations in droves to escape the Great Crash before it's too late. But as you said it's heaps to do with issues of dependency and 'haves', naturally, seeing why they should support other folks' lifestyles.

  Published: December 27, 2006 10:10 AM

• RogerM

  Sam:"Actually when I used the 'Welfare State' I was referring to Western nations that taxed the 'haves' to give it to the 'have-nots'."

  Actually, I assumed you were referring to Western nations. I only brought in the USSR and China as extreme applications of socialism. Europe is less socialistic than those two, and the US is slightly less socialistic than Europe.

  A true free-market economy of any size doesn't exist. Hong-Kong is the freest, but it's very small and could be unique. We can't compare the present with the past because too many other variables come into play.

  My logic in using the USSR and China as examples of socialism was to demonstrate the results if you applied the logic of socialism fully. The result is extreme poverty. Europe has decided to follow a "third" way, with less socialism that the USSR, but more than a free economy. Europe's thinking seems to be that a little bit socialism is good while a lot might be lethal. But there's nothing in the logic of socialism that suggests that approach. If we can take a little from the rich and make the poor a little better off, why not take everything from the rich and make the poor wealthy?

  Still, even though the differences between Europe and the US are small, it's clear that Europe's poor are no better off than ours. The main difference is that Europe's middle and upper classes are poorer than ours. That's what happens with Europe's milder socialist income re-distribution; the poor are no better off, but the middle and upper classes are poorer. Of course, if envy is your thing, then that outcome would be great.

  Published: December 27, 2006 12:03 PM

• David White

  Sam, on the contrary, rich people ARE leaving in droves -- http://www.actionamerica.org/taxecon/tickfast.shtml -- and their numbers are only going to grow exponentially, as 78 million boomers start retiring 53 weeks from now. So as our massive wefare (and warfare) colossus collapse under its own weight (or rather, the weightlessness of its fiat fraud), count on the number of have-nots to also grow exponentially.

  "Market failure" will take the blame, of course, at least if the politicians have their way, but the bottom line so fare as inequality is concerned isn't that people are unequal in their gifts and talents but that the involuntary exchange you espouse plays into the hands of those with a talent for theft, not work -- i.e., those who prefer what Oppenheimer called "the political means" as opposed to "the economic means:

  http://www.franz-oppenheimer.de/state1.htm

  Published: December 27, 2006 12:10 PM

• Paul Marks

  Of course the United States also has vast Welfare State schemes.

  Government schools and colleges (and subsides to most private colleges), Social Security, Medicare Medicaid....... and so on.

  Even if we are just talking about the Federal government (and ignoring the activities of State and local government)government in America has been active in this area for seventy years.

  Even if one is talking about the relative size of Welfare State schemes government spending in the United States (even as a percentage of G.D.P.) is not vastly smaller than in many Western nations. Certainly Federal Welfare State spending is much greater than military spending (even at this time of war).

  These schemes have grown dramatically - for example Social Security spending in 1935 was tiny and Medicare and Medicaid cost five billion Dollars in 1965 (as opposed to many HUNDREDS OF BILLIONS of Dollars now).

  The effects of all this?

  Well Social Security (what other nations call government "old age pensions" an idea that was first put into practice by Otto Von Bismark) has led to the decline of the old American faternity culture (there was a time where "fraternity" did not mean "group of drunken students") amongst other cultural institutions (such as familes). How long this Ponzi scheme (for it is a fraud - as there is nothing but government "I.O.U.s" in the "trustfunds") can last I do not know - but it will collapse one day, and the results for the old people who depend on it will not be good.

  Medicare and Medicaid are some of the many interventions that have driven up costs (others include Doctor licensing - expossed as an A.M.A. con game by Milton Friedman many decades ago, but still going strong - and such things as the vast web of regulations that cover both insurance companies and H.M.O.s, as well as, of course, the absurd distortion of tort law). The costs of medical care are vastly higher than they would be without government intervention (a similar history can be seen with the cost of higher education - the effects of subsidies and regualtions there has seen a similar increase in costs).

  Again how long Medicare and Medicaid can last without creating economic collapse is a moot point (it is an experiment I rather wish were not taking place but,as with Social Security,the United States seems to have chosen the default option of "no reform, let us see just how long this farce can carry on").

  Certainly living standards are vastly LOWER and poverty vastly GREATER than it would have been if these various programs had never been created. A common mistake is to just compare living stardards at two dates (say 1906 and 2006) and then say "well our living standards are higher so the Welfare State can have done no harm" - what is important is what living standards WOULD HAVE BEEN (given the advance of technology and the development of the capital base).

  If one waits till living standards actually start dropping in absolute terms one has waited much too long. The problem with reforming the "entitlement progams" is not only that it gets more expensive every year, but also that the cultural institutions (that make up Civil Scietynd to decay once government has usurped their place - so not only to the cost of reform go up, but the consequences of a collapse of the government schemes (in terms of the suffering of the old, the poor, and the sick) becomes worse.

  My guess (it can be no more than that) is that there will be no real reform, and people will just have to live with the consequnences of eventual collapse, and these consequenses will be terrible.

  Education is the oldest of the big government Welfare State programs.

  Contrary to the (carefully cultivated) myth, government schools were not introuced because vast numbers of people could not read, write or understand basic mathematics. Some people could not (just as some people can not now - indeed levels of ignorance are vastly greater now than they would have been if there had been no government intervention), but reformers like H. Mann had more important concerns.

  Their idea was to make people "good citizens", to make them feel "part of the government" - rather than seeing government as a group of people who stole other folks money and liked ordering them about.

  It has been a very long struggle (in most States government schools remained both controlled and financed by very local school boards till the last few decades) but the structure of State (and increasingly Federal) finance and control (of course "control follows the money") dreamed of by the reformers (and the teaching of the secular religion of "public service" that they believed in) has largely come to pass in the government school system (although, to be fair, the teacher unions have only been blatently political since 1976).

  Almost needless to say, President George Walker Bush has made things worse - both in his adding of new entitlement programs (the Medicare extention) and his support for more Federal spending on,and control of,government education.

  Published: December 27, 2006 12:17 PM

• Sam

  Wow, interesting link D. White!

  It's nice to there are folks ultimately doing a more sensible action: don't go/stay where you are not wanted. Have Libertarians amassed a list of mostly free-market nations to migrate to when the West has all but gone bankrupt?

  However unfair as it is but some welfare could be sustainable just as pigeons don't go extinct when some get taken by cats. The pigeons just manage keep managing to breed ahead of losses.

  Published: December 27, 2006 8:07 PM

• Kenneth R. Gregg

  I'm thrilled to see that you have put this classic by Baldy Harper online. I have long been an admirer of his writings and hope you continue to reprint his fine essays. There are many online at FEE.org due to his early involvement in FEE, but there are many which deserve more recognition.

  You might want to consider his "In Search of Peace" which is an excellent essay of his or "Bullets and Ballots" which also contains a commentary of mine: http://classicalliberalism.blogspot.com/2004_07_01_classicalliberalism_archive.html

  Published: December 27, 2006 11:21 PM