England's major economic troubles today seem not so much the result of its war losses, appalling as these were, as of its postwar policies. Temporary impoverishment was inevitable, but the postwar series of special crises in coal, food, and dollars was not.

The underlying assumption beneath the present strangling network of economic controls is that a free market and price system is at best a fair-weather system, a luxury a country can afford only when it is already well off. It is the precise function of free prices, however, to allocate production among thousands of different commodities and services and to relieve the most serious shortages most quickly by providing the greatest profit and wage incentives precisely where those shortages exist.FULL ARTICLE

But this analysis would give a cause of action to customers, however, not to the holder of the mark, who is not defrauded. Moreover, it would protect the customer only when there is fraud. For example, neither the customer (nor Rolex) should be able to sue Rolex knock-off companies, because people who buy fake Rolexes for $10 are not being defrauded. They know they are buying a cheap knock-off. But trademark law does give trademark holders--not customers--the right to sue infringers, regardless of whether there is really fraud to the consumer.

So while we can condemn fraudulent sales to customers, this is not what modern trademark law prevents. Modern state-run trademark law is almost as bad as cpoyright and patent, even if it has a less-objectionable core or origin. The fundamental problem with trademark law is that it is state law--it is created and administed by the state, which is a criminal organization. To expect justice from the state is like expecting a cat to bark.]]> Kinsella 2008-07-24T22:40:18-06:00 http://blog.mises.org/archives/008328.asp You scratch our back, we'll scratch yours. As reported on Patently-O:

Outsourcing of Patent Preparation: PTO Says Beware

In a recent notice, the PTO has indicated that it may be illegal to outsource invention information to a foreign county for the purposes preparing a US patent application.
1. A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States.
2. Applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States should contact the Bureau of Industry and Security (BIS) at the Department of Commerce for the appropriate clearances.

Can you just picture thousands of U.S. patent lawyers pumping their fists and collectively hissing Yes!--as the spectre of unscrupulous Indians writing $12,000 patent applications for $1000 recedes... No wonder so many patent lawyers are pro-patent system! The "patent bargain" conventionally refers to the government giving inventors a monopoly in return for their publicly disclosing how the invention works. But I think it has a second meaning.

Futures markets are markets in which people trade the right to specified quantities of a specified commodity to be delivered at some point in the future. For example, one might be able to buy or sell a contract whereby the seller agrees to deliver a barrel of crude petroleum on December 1, 2016 at a price of $150. Traders who believe the price will be below $150 per barrel should sell such a contract. Traders who believe the price will be above $150 per barrel should buy such a contract.

This has important implications for how resources are allocated across time and space. The price of oil today and the price of oil in the future will tend toward equality after we adjust for the time value of money (one dollar today is worth more than one dollar tomorrow, so anyone who wants a dollar tomorrow will have to pay interest). According to what economists call the law of one price, the discounted present value of oil today will equal the discounted present value of oil tomorrow, all other things remaining equal.

It is the fact that all other things do not remain equal that produces profitable opportunities for speculators. People with better information about market conditions can profit from their insight and perform the valuable public service of ensuring adequate oil supplies tomorrow.

Speculation does not interfere with supply and demand. Speculation is part the process by which supply and demand adjust. What Morris and McGann seek to restrict is exactly the kind of behavior that supply-and-demand analysis would predict.

What Morris and McGann deride as "unbridled gambling" is an essential part of the market process. This may be rhetorically effective but it is analytically erroneous. Morris and McGann seem to think of trading in futures markets as being equivalent to spinning a roulette wheel, and if you don't know what you're doing, speculating in futures markets can be just as dangerous. The fact of the matter, however, is that speculators are not gambling in the pure sense of the word. They are acting on the basis of their best understanding of current market conditions and their expectations about future market conditions. They may be incorrect, but they are not "gambling."

Morris and McGann write "(i)f there is any doubt that it is speculation, not the supply and demand for oil, that is driving up the price, look at this week's history of oil prices." He then cites President Bush's executive order to permit offshore drilling and OPEC's statement that oil demand was falling and argues that these were responsible for a $15 price drop even though "(n)o new oil gushed through the system."

This is exactly what supply and demand would predict. If offshore drilling is permitted, this will increase the future supply of oil and drive town the future price. People who were holding oil in anticipation of higher future prices will instead release some of that oil onto the market today, increasing the current supply of oil. Nothing untoward is going on: the supply of oil today is changing in response to traders' revised expectations about the supply of oil in the future. This is literally economics 101: what I have just described is what I teach in my econ 101 lectures on futures markets.

Morris and McGann conclude that "(o)il is just too important strategically and economically to allow that kind of speculation," but speculation is the market mechanism by which price volatility is reduced and future supplies are guaranteed. If oil really is that important, we should be loosening the restraints on futures market speculation rather than tightening them.

These works have been tragically out of print for many years. Together they constitute a complete presentation of Hayekian money and business cycle theory. Even more, they work together as an excellent elucidation of Austrian macroeconomic theory, which is why this book has already been adopted in some classrooms.

The timing could not be better. The entire world economy is now suffering from the effects of bad monetary policy, and with results that Hayek explains in great detail. With "counter-cyclical" policy again revealed as unworkable, and while the politicians plot to make matters worse, the contents of this book has direct bearing on present and future of monetary policy.

Hayek was barely out of his twenties in 1929 when he published the German versions of the first two works in this collection, Monetary Theory and the Trade Cycle and "The Paradox of Saving." The latter article was a long essay that was to become the core of his celebrated book and the third work in this volume, Prices and Production, the publication of which two years later made him a world-renowned economist by the age of thirty-two.

But the young Hayek did not pause to savor his success. He was already hard at work on "Reflections on the Pure Theory of Money of Mr. J.M. Keynes," a lengthy critical review of John Maynard Keynes's two-volume Treatise on Money, which had been published in 1930. Hayek's two-part review appeared in late 1931 and 1932.

There followed within a few years the other three works collected in this volume. "The Mythology of Capital" appeared in 1936 and was a response to Frank Knight's hostile criticisms of the Austrian theory of capital. A short article on "Investment That Raises the Demand for Capital" and the monograph Monetary Nationalism and International Stability were published in 1937.

These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary institutions, which constitute the essential core of Austrian macroeconomics.

These works have profoundly influenced postwar expositions of Austrian or capital-based macroeconomics down to the present day. The creation of such an oeuvre is a formidable intellectual feat over an entire lifetime; it is an absolute marvel when we consider that Hayek had completed it in the span of eight years (1929-1937) and still well shy of his fortieth birthday. Hayek's amazingly precocious intellect and creative genius are on full display in these works.

"The re-publication of these works in a single volume is a magnificent event that fills a yawning gap in the Austrian macroeconomic literature and provides modern Austrians with a model of how to advance economic theory through reasoned debate and criticism." Joseph T. Salerno, from the Introduction

"I congratulate the Ludwig von Mises Institute for bringing back into print Hayek's writings on business cycles. This collection will be a critical touchstone for future thinking in the area." Danny Quah, London School of Economics, from the Preface.

564 Pages, Hardcover, 2008, ISBN 978-1-933550-22-0

The simple answer is fear. As governments continue to expand at all levels throughout the world, the establishment fears there won't be enough new bureaucrats to consume the wealth extracted from the productive members of society. Regulations and mandates don't enforce themselves, after all. Nor will political campaigns continue to generate the same heightened amount of interest in a world where wealth and technology allow people to pursue their own interests without resorting to rent-seeking.

Public schooling is no longer up to the task of producing the next generation of parasitic, wealth-destroying government drones. Something has to be done now or the very fabric of the modern state could start to unravel. "National service" offers today's bureaucrats hope for a better tomorrow. The basic premise is that forcing all young adults to participate in some form of government-directed labor will yield a crop of lifelong bureaucrats. Once the kids realize they don't have to be productive and can rely on taxpayer funds for subsistence, they'll be hooked!

A commenter replying to Jeffrey's post argued that this should be a call to arms: "This is not just another statist evil. This is THE border between an annoyingly big state and outright tyranny." I prefer a more optimistic spin. I see "national service" as a signal of statist desperation. They failed to create their Utopia with government schools, government health care and government management of commerce. So now they're reduced to the gimmick of "make every teenager work for the state for a year" to justify their continued plunder. Honestly, if that's the best the political establishment can come up with, then I think the battle has turned a corner in favor of the pro-freedom, pro-market campaign.

I'd also suggest a simple response to the force labor crowd. Simply declare, "I WILL NOT SERVE." Maybe we can get a petition going.

The problem of evil is a big theme for a movie, and certainly for a movie based on a comic book, but Batman: The Dark Knight deals with it expertly, and with a message that offers profound support to the idea of human liberty.

It does so in two ways: it supports the view that human beings are capable of cooperating toward the social good, and it shows the unpredictable level of evil that state intervention unleashes. Yes, I know it sounds implausible, but please hear me out.

Consider the Joker, who embodies undiluted, unconscionable evil. The evil that drives him is not limited to a particular sin. It is not greed, for example. At one point in the film, he stacks up all the money he has taken control of from the mob he comes to monopolize. He sets it all on fire in front of the mobsters who stare in shocked amazement. He had previously demanded half their money in exchange for killing Batman, but it turns out that he cares nothing for money. He only wanted to give them pain by persuading them to fork it over. This makes him ungodly scary.

In fact, one is hard pressed to pin any of the seven deadly sins on this guy. He is not really lustful, gluttonous, slothful, wrathful, envious, or prideful — or rather he is all of these things but none of them quite capture what drives him. What he wants is to observe social chaos — and if that means death and destruction, all the better. In order to bring this about, however, he needs one thing more than anything else: he needs power. He will do anything for it and, then, with it.

Additionally, the Joker has a trait that we tend to see in evil people. He carries around with him a peculiar assumption, never really questioned. He assumes that everyone else is secretly as bad as he is. Anything that appears otherwise, he believes to be a façade. It is a mask that must be ripped off. In seeking confirmation for this assumption, he entertains himself by putting people in impossible situations that will reveal their core corruption. He revels in pushing people who think they are good into embracing their inner evil. Hence his obsession with ripping off Batman's mask. He must show the world that Batman is as bad as he is.

In pursuit of this confirmation, he is as clever as the devil. He has pressed the city government into evacuating people by means of two boats, one with prisoners and another with regular citizens. He gives a detonator device to the drivers of each ship. He says that he is performing a social experiment. The idea is that each detonator blows up the other ship. If you press the button to blow up the other ship, your ship will be saved. If you do not press quickly, your ship will likely be blown up because surely the people on the other ship will press first. So we have here the classic case of the prisoner's dilemma without the mathematics. It is a raw test of the capacity of others to commit unspeakable crimes in their own self-interest.

At first, the social dynamic takes a predictable direction. Neither the citizens on their boat nor the prisoners on the other boat favor murder. But then they think again. What will the people on the other boat do? Surely the criminals on the prisoner boat will think nothing of pushing their button, so should the citizens act first? Meanwhile, the prisoners figure that the people on the other boat will not place much value on the lives of criminals, so they will probably be killed. Shouldn't they kill first?

The debate becomes furious on each boat. On the citizen boat, for example, they decide to take a vote. The option of pushing the button wins (failure of democracy) but no one can find the will to do the deed. On the criminal boat, they just decide to explode the other boat, but the leader can't quite do it. Finally, the clock moves toward the hour that the Joker said the experiment would end. Both sides have finally declined to do the dirty deed. In prisoner's-dilemma terms, they have chosen cooperation over defection. This is not what the Joker expected. And why not? Because he doesn't believe in the capacity of human beings for social cooperation. He assumes that everyone is like himself. And here he is wrong.

I've already mentioned that the mob figures into the plot here. In fact, it is the source of all crime, and the central driving force behind the entire plot. Every time a new person gains public office or position within the police department, he swears to clean up the streets of the mobster-driven crime problem. But each time, the person is either killed or corrupted, leaving it to Batman to do the dirty work.

But can Gotham ever really be cleaned up? At some point, a new district attorney has hundreds of people locked up and the assets of many local banks frozen. Even in this case, the mob money finds safe harbor outside the country. The more that the police try to enforce the law, the worse the crime problem grows and the more powerful the mob becomes. The film offers not the slightest hope that this issue can ever be resolved.

And yet there is a point that is never addressed in the film. Where does organized crime get its money? Bribes, no doubt. Probably business too. Is it gambling, prostitution, drugs, liquor, or something else? Whatever the case may be, the mob is the mob because it deals with black markets in something. The only reason that black markets exist is due to government prohibitions. A free market in gambling would reduce the level of corruption in this industry to the same level that it exists in the market for, for example, hamburgers. That is to say, it would not be a notable feature of the sector. The same is true with all traditional mafia activities. The best way — really the only way — to end its power is to end the prohibitions on peaceful trading of all goods and services.

But that is not what the state does. Instead, it fights these untenable and unwinnable wars against gambling, prostitution, drugs, and the like, and thereby drives them underground, guaranteeing high profits to those willing to take the risk to be part of the market. The riches are then used to bribe public officials and gain a certain amount of protection from the public sector. The cycle continues until the corruption becomes a deeply embedded part of public life. In this case, the prohibitions have unleashed wicked mobsters, but as bad as they are, they seem manageable.

The Joker, however, is not manageable. He is the killer virus unwittingly unleashed by the cure. People like him will always be with us, but they can usually be contained — unless the state is involved to make such people more powerful than they would otherwise be. The implied lesson becomes clear. The Joker is the product of mistaken public policy, the end result of the prohibition of peaceful trade.

The contrast between the peaceful cooperation that people are capable of when they are on their own, even under extreme circumstances, and the evil unleashed by misguided state management of society could not be more palpable.

This is the real message of Batman: The Dark Knight, which, I must say, is one of the most spectacular and profound cinematic explorations of the problem of evil I've ever seen. It is not suitable for young children, but I recommend it very highly, not only for its libertarian theoretical structure but also for its moral power.

No, no, no, and no. In spite of the apparent troubles of modern capitalism highlighted by E.J. Dionne in a July 12 article, what we need is not more regulation and oversight, but a better and more nuanced understanding of how markets work. The alleged "instability" of capitalism has its foundations not in anything inherent to the market system but in monetary systems whereby banks are able to expand the supply of credit without having to suffer market penalties.
Unchecked expansion of the money supply distorts interest rates and creates tension between investors, who wish to undertake long-run projects in response to lower interest rates, and consumers, who wish to enjoy greater current consumption because lower interest rates mean that the reward for waiting has fallen. More money gives the illusion of a greater supply of real resources--more building supplies, more concrete, more bread, more baubles, more stuff--when in fact money is all that has increased in supply. This theory was originally formulated by Austrian economists Ludwig von Mises and F.A. Hayek, and it has its ablest modern expositor in Auburn University's Roger Garrison.

Dionne argued that international trade has somehow been "monopolized" for the benefit of a select few around the world. I'm not sure that there is any evidence for this. The Chinese economy, which is the poster child for twenty-first century globalization, has grown at robust rates for several decades as the country has liberalized. In addition, Apple has shipped millions upon millions of iPods, which are fundamentally the product of the international division of labor under capitalism. The rapidly-improving quality and rapidly-falling price of rapidly-diffusing gizmos like iPods, iPhones, and competing products from Verizon, Blackberry, Samsung, and others hardly suggests that the benefits of globalization are being shared widely rather than concentrated into the hands of a small global oligarchy.

Research in economic history has also set the record straight on the New Deal, which was a microeconomic disaster that prolonged the Great Depression. Research by acclaimed economic historian Robert Higgs argues that the anti-capitalist rhetoric and anti-market policies of the Roosevelt administration did more harm than good by creating what he calls "regime uncertainty." Uncertainty about the economic institutions that would ultimately emerge cooled off the business climate and reduced investment. Higgs's findings receive further support in a 2007 study by economic historian Frank Steindl, who argues that the policies of the New Deal upset the "endogenous propagation" mechanism that would have brought the U.S. economy out of the Great Depression.

Even the conventional view that "World War II ended the Great Depression" is incorrect, as research by professors Higgs and Steindl shows. The United States emerged from the Great Depression in spite of, rather than because of, government policies that circumvented the market.

A cavalier attitude about government regulation can have disastrous consequences. First, regulation makes it difficult to get into some markets. Thus, today's corrective intervention is tomorrow's source of monopoly power. Second, as 1986 Nobel Laureate James Buchanan has pointed out, people who work for the government are not immune to incentives. Government intervention is an invitation to corruption, and even beyond this, the fact that the incentives facing government are political rather than economic means that it may be extremely difficult to correct today's policy mistakes tomorrow.

Wasteful agricultural subsidies in the United States and Europe suggest that this is the case. Most economists agree that there is no economic justification for agricultural subsidies, and yet they continue to expand.

John Dewey once said that more democracy was the cure for the problems of democracy. Similarly, the cure for economic problems is not more government, but more markets. Unfortunately, reflexive anti-capitalism is all too common in times of economic distress. Rather than eliminate the interventions that caused the problems to begin with, we are likely to adopt further interventions that will create more problems than they solve.

Some selections:

Early on, Shaffer details the rise of trade associations and codes of ethics, which allows for some downright entertaining quotations, a welcome delight for a book concerned with inter-war trade practices. The American Bottlers of Carbonated Beverages, for example, solemnly pledged, "My desire shall not be to undersell my fellow bottlers, but to contend with them for first place in the quality of my products and service I render my patrons" (p. 65). A prominent textile trade association offered a similar exhortation: "Legitimate competition is the life of the industry, but unscrupulous competition is injurious to yourself, to your competitor, and to your industry" (p. 65). However, the doubletalk of these codes pales in comparison to the rhetorical excellence of the American Warehousemen's Association, which framed its proscriptions of price-cutting not as an attempt to strengthen the industry, but to rescue the beleaguered consumer: "Nothing so shakes the confidence of the Public as the knowledge that only through haggling and bargaining can it be sure of obtaining the lowest and presumably fairest rates; nothing is so unfair to the unsuspicious and trusting customer; nothing is so damning to the effort to establish confidence and good-will and to carry on our business legitimately and honestly on a plane of fair dealing with equal advantage to all."

Shaffer explains that these initially voluntary codes and associations failed in their announced purpose to eliminate "unhealthy" pricecutting, and soon turned to government to enforce such "voluntarism." He then offers the single most powerful critique of the predatory pricing bogey that this reviewer has ever seen (pp. 67-68), though it does not quite satisfy the reader acquainted with Game Theory (e.g., even if a big firm is reaping inordinate profits, why would it be strategically wise for any individual upstart to challenge it, if the big firm has the resources to ruin at least the first few such challengers?). Such theoretical concerns aside, Shaffer decisively demonstrates that predatory pricing is not a realistic danger, and that ostensible historical examples of the strategy are dubious.